item 14 exhibits financial statement schedules reports form 8k 1 index financial statements following consolidated financial statements included 1994 annual report incorporated herein reference pursuant item 8 page exhibit 131 consolidated balance sheets december 31 1994 1993 23 consolidated statements income three years period ended december 31 1994 4 consolidated statements cash flows three years period ended december 31 1994 5 consolidated statements changes stockholders equity three years period ended december 31 1994 6 notes consolidated financial statements 724 report independent public accountants 25 2 index financial statement schedule page form 10k report independent public accountants schedule 9 ii valuation qualifying accounts 10 financial statement schedules omitted required information included consolidated financial statements notes thereto 3 index exhibits listed accompanying index exhibits page 12 report filed incorporated reference part report b reports form 8k reports form 8k filed company last quarter period covered report independent public accountants schedule stockholders board directors biorad laboratories inc audited accordance generally accepted auditing standards consolidated financial statements included bio rad laboratories incs annual report stockholders incor porated reference form 10k issued report thereon dated february 7 1995 audit made purpose forming opinion statements taken whole schedule listed index item 14a2 responsibility companys management presented purposes complying securities exchange commissions rules part basic financial state ments schedule subjected auditing pro cedures applied audit basic financial statements opinion fairly states material respects financial data required set forth therein relation basic financial statements taken whole arthur andersen llp arthur andersen llp san francisco california february 7 1995 biorad laboratories inc schedule ii valuation qualifying accounts years ended december 31 1994 1993 1992 thousands signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized biorad laboratories inc sanford wadler sanford wadler secretary date march 23 1995 pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities dates indicated principal executive officer david schwartz president director march 23 1995 david schwartz principal financial officer thomas l braje vice president thomas l braje chief financial officer march 23 1995 principal accounting officer james r stark corporate controller march 23 1995 james r stark directors james j bennett director march 23 1995 james j bennett albert j hillman director march 23 1995 albert j hillman philip l padou director march 23 1995 philip l padou alice n schwartz director march 23 1995 alice n schwartz norman schwartz director march 23 1995 norman schwartz burton zabin director march 23 1995 burton zabin biorad laboratories inc index exhibits item 14a3 following documents filed part report exhibit 31 restated certificate incorporation september 15 1988 1 32 bylaws registrant amended february 19 1980 2 104 1994 stock option plan 3 105 amended 1988 employee stock purchase plan 4 106 employees deferred profit sharing retirement plan 109 credit agreement dated february 18 1994 among registrant lenders first national bank chicago agent 5 111 computation earnings per share 131 excerpt annual report stockholders fiscal year ended december 31 1994 deemed filed extent required instructions exhibits reports form 10k 211 listing subsidiaries 231 consent independent public accountants 271 financial data schedule 1 incorporated reference exhibits companys form 10k filing fiscal year ended december 31 1992 dated march 26 1993 2 incorporated reference exhibits companys registration statement form s7 registration 266797 became effective april 22 1980 3 incorporated reference exhibits companys form s8 filing dated april 28 1994 4 incorporated reference exhibits companys form s8 filing dated april 28 1994 5 incorporated reference exhibits companys form 10k filing fiscal year endeddecember 31 1993 dated march 24 1994item 14 exhibits financial statement schedules reports form 8k 1 index financial statements following consolidated financial statements included 1995 annual report incorporated herein reference pursuant item 8 page exhibit 131 consolidated balance sheets december 31 1995 1994 23 consolidated statements income three years period ended december 31 1995 4 consolidated statements cash flows three years period ended december 31 1995 5 consolidated statements changes stockholders equity three years period ended december 31 1995 6 notes consolidated financial statements 723 report independent public accountants 24 2 index financial statement schedule page form 10k report independent public accountants schedule 9 ii valuation qualifying accounts 10 financial statement schedules omitted required information included consolidated financial statements notes thereto 3 index exhibits listed accompanying index exhibits pages 12 13 report filed incorporated reference part report b reports form 8k reports form 8k filed company last quarter period covered report independent public accountants schedule stockholders board directors biorad laboratories inc audited accordance generally accepted auditing standards consolidated financial statements included bio rad laboratories incs annual report stockholders incor porated reference form 10k issued report thereon dated february 6 1996 audit made purpose forming opinion statements taken whole schedule listed index item 14a2 responsibility companys management presented purposes complying securities exchange commissions rules part basic financial state ments schedule subjected auditing pro cedures applied audit basic financial statements opinion fairly states material respects financial data required set forth therein relation basic financial statements taken whole arthur andersen llp arthur andersen llp san francisco california february 6 1996 biorad laboratories inc schedule ii valuation qualifying accounts years ended december 31 1995 1994 1993 thousands signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized biorad laboratories inc sanford wadler sanford wadler secretary date march 21 1996 pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities dates indicated principal executive officer david schwartz president director march 21 1996 david schwartz principal financial officer thomas l braje vice president thomas l braje chief financial officer march 21 1996 principal accounting officer james r stark corporate controller march 21 1996 james r stark directors james j bennett director march 21 1996 james j bennett albert j hillman director march 21 1996 albert j hillman philip l padou director march 21 1996 philip l padou alice n schwartz director march 21 1996 alice n schwartz norman schwartz director march 21 1996 norman schwartz burton zabin director march 21 1996 burton zabin biorad laboratories inc index exhibits item 14a3 following documents filed part report exhibit 31 restated certificate incorporation september 15 1988 1 32 bylaws registrant amended february 19 1980 2 104 1994 stock option plan 3 105 amended 1988 employee stock purchase plan 4 106 employees deferred profit sharing retirement plan 5 109 credit agreement dated february 18 1994 among registrant lenders first national bank chicago agent 6 1091 amendment dated september 30 1994 credit agreement dated february 18 1994 among registrant lenders first national bank chicago agent 7 1092 amendment dated may 30 1995 credit agreement dated february 18 1994 among registrant lenders first national bank chicago agent 7 111 computation earnings per share 131 excerpt annual report stockholders fiscal year ended december 31 1995 deemed filed extent required instructions exhibits reports form 10k 211 listing subsidiaries 231 consent independent public accountants 271 financial data schedule 1 incorporated reference exhibits companys form 10k filing fiscal year ended december 31 1992 dated march 26 1993 2 incorporated reference exhibits companys registration statement form s7 registration 266797 became effective april 22 1980 3 incorporated reference exhibits companys form s8 filing dated april 28 1994 4 incorporated reference exhibits companys form s8 filing dated april 28 1994 5 incorporated reference exhibits companys form 10k filing fiscal year ended december 31 1994 dated march 23 1995 6 incorporated reference exhibits companys form 10k filing fiscal year ended december 31 1993 dated march 24 1994 7 incorporated reference exhibits companys september 30 1995 form 10q filing dated november 3 1995item 14 exhibits financial statement schedules reports form 8k 1 index financial statements following consolidated financial statements included 1996 annual report incorporated herein reference pursuant item 8 page exhibit 131 consolidated balance sheets december 31 1996 1995 23 consolidated statements income three years period ended december 31 1996 4 consolidated statements cash flows three years period ended december 31 1996 5 consolidated statements changes stockholders equity three years period ended december 31 1996 6 notes consolidated financial statements 725 report independent public accountants 26 2 index financial statement schedule page form 10k schedule ii valuation qualifying accounts 9 report independent public accountants schedule ii 10 financial statement schedules omitted required information included consolidated financial statements notes thereto 3 index exhibits listed accompanying index exhibits pages 12 13 report filed incorporated reference part report b reports form 8k reports form 8k filed company last quarter period covered report biorad laboratories inc schedule ii valuation qualifying accounts years ended december 31 1996 1995 1994 thousands report independent public accountants schedule ii stockholders board directors biorad laboratories inc audited accordance generally accepted auditing standards consolidated financial statements included biorad laboratories incs annual report stockholders incorportated reference form 10k issued report thereon dated february 4 1997 audit made purpose forming opinion statements taken whole schedule listed index item 14a2 responsibility companys management presented purposes complying securities exchange commissions rules part basic financial statements schedule subjected auditing procedures applied audit basic financial statements opinion fairly states material respects financial data required set forth therein relation basic financial statements taken whole arthur andersen llp arthur andersen llp san francisco california february 4 1997 signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized biorad laboratories inc sanford wadler sanford wadler secretary date march 26 1997 pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities dates indicated principal executive officer david schwartz president director march 26 1997 david schwartz principal financial officer c chesterman chief financial officer march 26 1997 thomas c chesterman principal accounting officer james r stark corporate controller march 26 1997 james r stark directors james j bennett director march 26 1997 james j bennett albert j hillman director march 26 1997 albert j hillman philip l padou director march 26 1997 philip l padou alice n schwartz director march 26 1997 alice n schwartz norman schwartz director march 26 1997 norman schwartz burton zabin director march 26 1997 burton zabin biorad laboratories inc index exhibits item 14a3 following documents filed part report exhibit 31 restated certificate incorporation september 15 1988 1 32 bylaws registrant amended february 19 1980 2 104 1994 stock option plan 3 105 amended 1988 employee stock purchase plan 4 106 employees deferred profit sharing retirement plan 5 109 credit agreement dated february 18 1994 among registrant lenders first national bank chicago agent 6 1091 amendment dated september 30 1994 credit agreement dated february 18 1994 among registrant lenders first national bank chicago agent 7 1092 amendment dated may 30 1995 credit agreement dated february 18 1994 among registrant lenders first national bank chicago agent 7 1093 amendment dated july 10 1996 credit agreement dated february 18 1994 among registrant lenders first national bank chicago agent 8 1010 noncompetition employment continuation agreement james j bennett 111 computation earnings per share 131 excerpt annual report stockholders fiscal year ended december 31 1996 deemed filed extent required instructions exhibits reports form 10k 211 listing subsidiaries 231 consent independent public accountants 271 financial data schedule 1 incorporated reference exhibits companys form 10k filing fiscal year ended december 31 1992 dated march 26 1993 2 incorporated reference exhibits companys registration statement form s7 registration 266797 became effective april 22 1980 3 incorporated reference exhibits companys form s8 filing dated april 28 1994 4 incorporated reference exhibits companys form s8 filing dated april 28 1994 5 incorporated reference exhibits companys form 10k filing fiscal year ended december 31 1994 dated march 23 1995 6 incorporated reference exhibits companys form 10k filing fiscal year ended december 31 1993 dated march 24 1994 7 incorporated reference exhibits companys september 30 1995 form 10q filing dated november 3 1995 8 incorporated reference exhibits companys september 30 1996 form 10q filing dated november 8 1996item 14 exhibits financial statement schedules reports form 8k 1 index financial statements following consolidated financial statements included 1997 annual report incorporated herein reference pursuant item 8 page exhibit 131 consolidated balance sheets december 31 1997 1996 23 consolidated statements income three years period ended december 31 1997 4 consolidated statements cash flows three years period ended december 31 1997 5 consolidated statements changes stockholders equity three years period ended december 31 1997 6 notes consolidated financial statements 726 report independent public accountants 27 2 index financial statement schedule page form 10k schedule ii valuation qualifying accounts 9 report independent public accountants schedule ii 10 financial statement schedules omitted required information included consolidated financial statements notes thereto 3 index exhibits listed accompanying index exhibits pages 12 13 report filed incorporated reference part report b reports form 8k biorad filed form 8k dated december 5 1997 reporting acquisition assets chiron diagnostics corporation chiron corporation biorad laboratories inc schedule ii valuation qualifying accounts years ended december 31 1997 1996 1995 thousands report independent public accountants schedule ii stockholders board directors biorad laboratories inc audited accordance generally accepted auditing standards consolidated financial statements included biorad laboratories incs annual report stockholders incorportated reference form 10k issued report thereon dated february 4 1998 audit made purpose forming opinion statements taken whole schedule listed index item 14a2 responsibility companys management presented purposes complying securities exchange commissions rules part basic financial statements schedule subjected auditing procedures applied audit basic financial statements opinion fairly states material respects financial data required set forth therein relation basic financial statements taken whole arthur andersen llp arthur andersen llp san francisco california february 4 1998 signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized biorad laboratories inc sanford wadler sanford wadler secretary date march 26 1998 pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities dates indicated principal executive officer david schwartz president director march 26 1998 david schwartz principal financial officer c chesterman vice president march 26 1998 thomas c chesterman chief financial officer principal accounting officer james r stark corporate controller march 26 1998 james r stark directors james j bennett director march 26 1998 james j bennett albert j hillman director march 26 1998 albert j hillman philip l padou director march 26 1998 philip l padou alice n schwartz director march 26 1998 alice n schwartz norman schwartz director march 26 1998 norman schwartz burton zabin director march 26 1998 burton zabin biorad laboratories inc index exhibits item 14a3 following documents filed part report exhibit 31 restated certificate incorporation september 15 1988 1 32 bylaws registrant amended february 19 1980 2 104 1994 stock option plan 3 105 amended 1988 employee stock purchase plan 4 106 employees deferred profit sharing retirement plan amended restated effective january 1 1997 5 109 credit agreement dated february 18 1994 among registrant lenders first national bank chicago agent 6 1091 amendment dated september 30 1994 credit agreement dated february 18 1994 among registrant lenders first national bank chicago agent 7 1092 amendment dated may 30 1995 credit agreement dated february 18 1994 among registrant lenders first national bank chicago agent 7 1093 amendment dated july 10 1996 credit agreement dated february 18 1994 among registrant lenders first national bank chicago agent 8 1094 amendment dated june 30 1997 credit agreement february 18 1994 among registrant lenders first national bank chicago agent 5 1010 noncompetition employment continuation agreement james j bennett 9 1011 employment noncompete agreement dr burton zabin 10 131 excerpt annual report stockholders fiscal year ended december 31 1997 deemed filed extent required instructions exhibits reports form 10k 211 listing subsidiaries 231 consent independent public accountants 271 financial data schedule 1 incorporated reference exhibits companys form 10k filing fiscal year ended december 31 1992 dated march 26 1993 2 incorporated reference exhibits companys registration statement form s7 registration 266797 became effective april 22 1980 3 incorporated reference exhibits companys form s8 filing dated april 28 1994 4 incorporated reference exhibits companys form s8 filing dated april 28 1994 5 incorporated reference exhibits companys september 30 1997 form 10q filing dated november 13 1997 6 incorporated reference exhibits companys form 10k filing fiscal year ended december 31 1993 dated march 24 1994 7 incorporated reference exhibits companys september 30 1995 form 10q filing dated november 3 1995 8 incorporated reference exhibits companys september 30 1996 form 10q filing dated november 8 1996 9 incorporated reference exhibits companys form 10k filing fiscal year ended december 31 1996 dated march 26 1997 10 incorporated reference exhibits companys june 30 1997 form 10q filing dated august 6 1997item 14 exhibits financial statement schedules reports form 8k 1 index financial statements following consolidated financial statements included 1998 annual report incorporated herein reference pursuant item 8 page exhibit 131 consolidated balance sheets december 31 1998 1997 23 consolidated statements income three years period ended december 31 1998 4 consolidated statements cash flows three years period ended december 31 1998 5 consolidated statements changes stockholders equity three years period ended december 31 1998 6 notes consolidated financial statements 723 report independent public accountants 24 2 index financial statement schedule page form 10k schedule ii valuation qualifying accounts 8 report independent public accountants schedule ii 9 financial statement schedules omitted required information included consolidated financial statements notes thereto 3 index exhibits listed accompanying index exhibits pages 11 12 report filed incorporated reference part report b reports form 8k reports form 8k filed company last quarter period covered report biorad laboratories inc schedule ii valuation qualifying accounts years ended december 31 1998 1997 1996 thousandsitem 14 exhibits financial statement schedules reports form 8k 1 index financial statements following consolidated financial statements included 1999 annual report incorporated herein reference pursuant item 8 page exhibit 131 consolidated balance sheets december 31 1999 1998 23 consolidated statements income three years period ended december 31 1999 4 consolidated statements cash flows three years period ended december 31 1999 5 consolidated statements changes stockholders equity three years period ended december 31 1999 6 notes consolidated financial statements 723 report independent public accountants 24 2 index financial statement schedule page form 10k schedule ii valuation qualifying accounts 12 report independent public accountants schedule ii 13 financial statement schedules omitted required information included consolidated financial statements notes thereto 3 index exhibits listed accompanying index exhibits pages 15 16 report filed incorporated reference part report b reports form 8k biorad filed form 8k dated october 1 1999 announcing biorad completed acquisition 100 capital stock pasteur sanofi diagnostics sanofisynthelabo sa institut pasteur pursuant terms purchase agreement previously filed exhibit 21 form 8k dated july 15 1999 biorad laboratories inc schedule ii valuation qualifying accounts years ended december 31 1999 1998 1997 thousands valuation arising acquisition psd report independent public accountants schedule ii biorad laboratories inc audited accordance generally accepted auditing standards consolidated financial statements included biorad laboratories incs annual report stockholders incorporated reference form 10k issued report thereon dated february 9 2000 audit made purpose forming opinion statements taken whole schedule listed index item 14a2 responsibility companys management presented purposes complying securities exchange commissions rules part basic financial statements schedule subjected auditing procedures applied audit basic financial statements opinion fairly states material respects financial data required set forth therein relation basic financial statements taken whole arthur andersen llp arthur andersen llp san francisco california february 9 2000 signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized biorad laboratories inc sanford wadler sanford wadler secretary date march 28 2000 pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities dates indicated principal executive officer david schwartz president director march 28 2000 david schwartz principal financial officer c chesterman vice president march 28 2000 thomas c chesterman chief financial officer principal accounting officer james r stark corporate controller march 28 2000 james r stark directors james j bennett director march 28 2000 james j bennett albert j hillman director march 28 2000 albert j hillman philip l padou director march 28 2000 philip l padou alice n schwartz director march 28 2000 alice n schwartz norman schwartz director march 28 2000 norman schwartz burton zabin director march 28 2000 burton zabin biorad laboratories inc index exhibits item 14a3 following documents filed part report exhibit 31 restated certificate incorporation september 15 1988 1 32 bylaws registrant amended february 19 1980 2 41 credit agreement dated september 30 1999 among biorad laboratories inc lenders named therein bank one na administrative agent abn amro bank nv syndication agent union bank california na documentation agent 3 411 amendment dated january 31 2000 credit agreement dated september 30 1999 among biorad laboratories inc lenders named therein bank one na agent 42 senior subordinated credit agreement dated september 30 1999 among biorad laboratories inc lenders named therein bank one capital markets inc agent 3 44 senior subordinated credit agreement dated january 31 2000 among biorad laboratories inc lenders names therein ubs ag stamford branch agent 45 indenture dated february 17 2000 11625 senior subordinated notes due 2007 among biorad laboratories inc issuer norwest bank minnesota na trustee 46 registration rights agreement dated february 17 2000 among biorad laboratories inc warburg dillon reed llc abn amro incorporated 104 1994 stock option plan 4 105 amended restated 1988 employee stock purchase plan 5 106 employees deferred profit sharing retirement plan amended restated effective january 1 1997 6 1010 noncompetition employment continuation agreement james j bennett 7 1011 employment noncompete agreement dr burton zabin 8 1012 split dollar life insurance agreement dated september 17 1999 schwartz irrevocable descendants trust biorad laboratories inc 131 excerpt annual report stockholders fiscal year ended december 31 1999 deemed filed extent required instructions exhibits reports form 10k 211 listing subsidiaries 231 consent independent public accountants 271 financial data schedule 1 incorporated reference exhibits companys form 10k filing fiscal year ended december 31 1992 dated march 26 1993 2 incorporated reference exhibits companys registration statement form s7 registration 266797 became effective april 22 1980 3 incorporated reference exhibits companys form 8k dated october 1 1999 4 incorporated reference exhibits companys form s8 filing dated april 28 1994 5 incorporated reference exhibits companys september 30 1998 form 10q filing dated november 10 1998 6 incorporated reference exhibits companys september 30 1997 form 10q filing dated november 13 1997 7 incorporated reference exhibits companys form 10k filing fiscal year ended december 31 1996 dated march 26 1997 8 incorporated reference exhibits companys june 30 1998 form 10q filing dated august 6 1998item 14 controls procedures within 90 days prior date report company carried evaluation supervision participation companys management including companys chief executive officer companys chief financial officer effectiveness design operation companys disclosure controls procedures based foregoing companys chief executive officer chief financial officer concluded companys disclosure controls procedures effective significant changes companys internal controls factors could significantly affect internal controls subsequent date company completed evaluation part iv item 15item 14 principal accountant fees services information required item incorporated reference section entitled report audit committee board directors 2004 proxy statement part iv item 15item 14 principal accountant fees services information required item incorporated reference section entitled “report audit committee board directors” 2005 proxy statement biorad laboratories inc schedule ii valuation qualifying accounts years ended december 31 2004 2003 2002 thousands reserve doubtful accounts receivable balance beginning year additions charged costs expenses deductions balance end year 12978 2029 621 980 13406 12122 4687 3831 12978 11509 2857 2244 12122 due sale company’s confocal microscopy product line valuation allowance current longterm deferred tax assets balance beginning year additions deductions charged costs expenses b balance end year 21446 1058 4481 18023 17215 4240 9 21446 20337 2783 2571 3334 17215 b valuation arising acquisition psd report independent registered public accounting firm board directors stockholders biorad laboratories inc hercules california audited consolidated financial statements biorad laboratories inc subsidiaries “company” december 31 2004 2003 three years period ended december 31 2004 management’s assessment effectiveness company’s internal control financial reporting december 31 2004 effectiveness company’s internal control financial reporting december 31 2004 issued reports thereon dated march 2 2005 consolidated financial statements report consolidated financial statements included 2004 annual report stockholders incorporated herein reference report relating management’s report effectiveness internal controls financial reporting included herein audits also included consolidated financial statement schedule company listed item 15a2 consolidated financial statement schedule responsibility company’s management responsibility express opinion based audits opinion consolidated financial statement schedule considered relation basic consolidated financial statements taken whole present fairly material respects information set therein deloitte touche llp san francisco california march 2 2005 signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized biorad laboratories inc bys sanford wadler sanford wadler secretary date march 2 2005 pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities dates indicated principal executive officer norman schwartz president director march 2 2005 norman schwartz principal financial officer christine tsingos vice president christine tsingos chief financial officer march 2 2005 principal accounting officer corporate controller march 2 2005 james r stark james r stark directors james j bennett director march 2 2005 james j bennett albert j hillman director march 2 2005 albert j hillman ruediger naumannetienne director march 2 2005 ruediger naumannetienne philip l padou director march 2 2005 philip l padou alice n schwartz alice n schwartz director march 2 2005 david schwartz director march 2 2005 david schwartz biorad laboratories inc index exhibits item 14a3 exhibits 321 322 furnished herewith deemed “filed securities exchange act 1934” exhibit 31 restated certificate incorporation february 8 2002 1 311 certificate amendment restated certificate incorporation biorad laboratories inc may 6 2004 32 bylaws registrant amended february 191980 2 41 credit agreement dated september 9 2003 among biorad laboratories inc lenders bank one na administrative agent wells fargo bank na union bank california na syndication agents abn amro bank nv bnp paribas documentation agents 3 411 amendment 1 credit agreement dated december 8 2004 among biorad laboratories inc lenders referred herein jpmorgan chase bank na successor merger bank one na illinois lender administrative agent wells fargo bank na union bank california na syndication agents abn amro bank nv bnp paribas documentation agents 4 42 pledge amendment dated september 9 2003 among biorad laboratories inc bank one na contractual representative 3 43 security agreement dated september 9 2003 among biorad laboratories inc grantor bank one na administrative agent 3 44 indenture dated august 11 2003 750 senior subordinated notes due 2013 among biorad laboratories inc issuer wells fargo bank na trustee 3 45 exchange registration rights agreement dated august 11 2003 750 senior subordinated notes due 2013 3 46 indenture dated december 21 2004 biorad laboratories inc wells fargo national bank trustee 5 104 1994 stock option plan 6 1041 amendment biorad laboratories inc 1994 stock option plan dated april 28 1998 7 1042 second amendment biorad laboratories inc 1994 stock option plan dated december 6 1999 7 1043 third amendment biorad laboratories inc 1994 stock option plan dated september 19 2000 7 1044 fourth amendment biorad laboratories inc 1994 stock option plan dated april 25 2001 8 105 amended restated 1988 employee stock purchase plan 9 1051 amendment amended 1988 employee stock purchase plan 8 106 employees deferred profit sharing retirement plan amended restated effective january 1 1997 10 107 2003 stock option plan 11 1010 noncompetition employment continuation agreement james j bennett 10 1013 stock purchase agreement dated august 16 2004 company mj geneworks incorporated michael j finney john finney excluding exhibits schedules pursuant regulation sk item 601b2 exhibits schedules agreement filed company agrees furnish supplementally copy omitted exhibits schedules sec upon request company requested confidential treatment certain portions agreement 12 131 excerpt annual report stockholders fiscal year ended december 31 2004 deemed filed extent required instructions exhibits reports form 10k 211 listing subsidiaries 231 consent independent registered public accounting firm 311 certification chief executive officer required rule 13a14a 17 cfr 24013a14a 312 certification chief financial officer required rule 13a14a 17 cfr 24013a14a 321 certification chief executive officer pursuant 18 usc section 1350 adopted pursuant section 906 sarbanesoxley act 2002 322 certification chief financial officer pursuant 18 usc section 1350 adopted pursuant section 906 sarbanesoxley act 2002 1 incorporated reference exhibits companys form 10k filing fiscal year ended december 31 2001 dated march 28 2002 2 incorporated reference exhibits companys registration statement form s7 registration 266797 became effective april 22 1980 3 incorporated reference exhibits companys form s4 dated september 19 2003 4 incorporated reference exhibits company’s form 8k filing dated december 14 2004 5 incorporated reference exhibits company’s form 8k filing dated december 22 2004 6 incorporated reference exhibits companys form s8 filing dated april 28 1994 7 incorporated reference exhibits companys form 10k filing fiscal year ended december 31 2000 dated march 28 2001 8 incorporated reference exhibits companys form 10k filing fiscal year ended december 31 2003 dated march 15 2004 9 incorporated reference exhibits companys september 30 1998 form 10q filing dated november 12 1998 10 incorporated reference exhibits companys september 30 1997 form 10q filing dated november 13 1997 11 incorporated reference exhibits company’s march 31 2003 form 10q filing dated may 13 2003 12 incorporated reference exhibits company’s september 30 2004 form 10q filing dated november 9 2004item 14 principal accounting fees services information required item incorporated reference section entitled report audit committee board directors 2006 proxy statement biorad laboratories inc schedule ii valuation qualifying accounts years ended december 31 2005 2004 2003 thousands reserve doubtful accounts receivable balance beginning year additions charged costs expenses deductions balance end year 13406 1669 1774 13301 12978 2029 621 980 13406 12122 4687 3831 12978 due sale confocal microscopy product line valuation allowance current longterm deferred tax assets balance beginning year additions deductions charged costs expenses balance end year 18023 4590 4876 17737 21446 1058 4481 18023 17215 4240 9 21446 report independent registered public accounting firm board directors stockholders biorad laboratories inc hercules california audited consolidated financial statements biorad laboratories inc subsidiaries “company” december 31 2005 2004 three years period ended december 31 2005 managements assessment effectiveness companys internal control financial reporting december 31 2005 effectiveness companys internal control financial reporting december 31 2005 issued reports thereon dated march 2 2006 consolidated financial statements reports included 2005 annual report stockholders incorporated herein reference audits also included consolidated financial statement schedule company listed item 15a 2 consolidated financial statement schedule responsibility companys management responsibility express opinion based audits opinion consolidated financial statement schedule considered relation basic consolidated financial statements taken whole presents fairly material respects information set forth therein deloitte touche llp san francisco california march 2 2006 signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities dates indicated principal executive officer norman schwartz president director march 2 2006 norman schwartz principal financial officer christine tsingos vice president christine tsingos chief financial officer march 2 2006 principal accounting officer james r stark corporate controller march 2 2006 james r stark directors james j bennett director march 2 2006 james j bennett albert j hillman director march 2 2006 albert j hillman ruediger naumannetienne director march 2 2006 ruediger naumannetienne philip l padou director march 2 2006 philip l padou alice n schwartz director march 2 2006 alice n schwartz david schwartz director march 2 2006 david schwartz 101 amended restated credit agreement dated june 21 2005 among biorad laboratories inc lenders referred therein jpmorgan chase bank na successor merger bank one na main office chicago lender administrative agent wells fargo bank na union bank california na syndication agents abn amro bank nv bnp paribas documentation agents 7 1011 amendment 1 amended restated credit agreement 8 102 amended restated security agreement dated june 21 2005 biorad laboratories inc jpmorgan chase bank na successor merger bank one na main office chicago administrative agent 7 103 amended restated pledge agreement dated june 21 2005 biorad laboratories inc jpmorgan chase bank na successor merger bank one na main office chicago administrative agent 7 104 1994 stock option plan 9 1041 amendment biorad laboratories inc 1994 stock option plan dated april 28 1998 10 1042 second amendment biorad laboratories inc 1994 stock option plan dated december 6 1999 10 1043 third amendment biorad laboratories inc 1994 stock option plan dated september 19 2000 10 1044 fourth amendment biorad laboratories inc 1994 stock option plan dated april 25 2001 11 105 amended restated 1988 employee stock purchase plan 12 1051 amendment amended 1988 employee stock purchase plan 11 106 employees deferred profit sharing retirement plan amended restated effective january 1 1997 13 107 2003 stock option plan 14 1010 noncompetition employment continuation agreement james j bennett 15 1013 stock purchase agreement dated august 16 2004 biorad mj geneworks incorporated michael j finney john finney excluding exhibits schedules pursuant regulation sk item 601b2 exhibits schedules agreement filed agree furnish supplementally copy omitted exhibits schedules sec upon request requested confidential treatment certain portions agreement 16 131 excerpt annual report stockholders fiscal year ended december 31 2005 deemed filed extent required instructions exhibits reports form 10k 211 listing subsidiaries 231 consent independent registered public accounting firm 311 certification chief executive officer required rule 13a14a 17cfr 24013a14a 312 certification chief financial officer required rule 13a14a 17cfr 24013a14a 321 certification chief executive officer pursuant 18 usc section 1350 adopted pursuant section 906 sarbanesoxley act 2002 322 certification chief financial officer pursuant 18 usc section 1350 adopted pursuant section 906 sarbanesoxley act 2002 1 incorporated reference exhibits biorad’s form 10k filing fiscal year ended december 31 2001 dated march 28 2002 2 incorporated reference exhibits biorad’s form 10k filing fiscal year ended december 31 2004 dated march 3 2005 3 incorporated reference exhibits biorad’s registration statement form s7 registration 266797 became effective april 22 1980 4 incorporated reference exhibits biorad’s form s4 dated september 19 2003 5 incorporated reference exhibits biorad’s form 8k filing dated december 14 2004 6 incorporated reference exhibits biorad’s form s8 filing dated december 22 2004 7 incorporated reference exhibits biorad’s form 8k filing dated june 24 2005 8 incorporated reference exhibits biorad’s september 30 2005 10q filing dated november 8 2005 9 incorporated reference exhibits biorad’s form s8 filing dated april 29 1994 10 incorporated reference exhibits biorad’s form 10k filing fiscal year ended december 31 2000 dated march 28 2001 11 incorporated reference exhibits biorad’s form 10k filing fiscal year ended december 31 2003 dated march 15 2004 12 incorporated reference exhibits biorad’s september 30 1998 form 10q filing dated november 12 1998 13 incorporated reference exhibits biorad’s september 30 1997 form 10q filing dated november 13 1997 14 incorporated reference exhibits biorad’s march 31 2003 form 10q filing dated may 13 2003 15 incorporated reference exhibits biorad’s june 30 1997 form 10q filing dated march 27 1997 16 incorporated reference exhibits biorad’s september 30 2004 form 10q filing dated november 9 2004item 14 principal accountant fees services information required furnished item incorporated reference portion 2007 proxy statement “report audit committee board directors” biorad laboratories inc schedule ii valuation qualifying accounts years ended december 31 2006 2005 2004 thousands reserve doubtful accounts receivable balance additions beginning charged costs balance year expenses deductions end year 13301 1931 537 570 15265 13406 1669 1774 13301 12978 2029 621 980 13406 2006 due acquisition 2004 due sale confocal microscopy product line valuation allowance current longterm deferred tax assets balance deductions beginning charged costs balance year additions expenses b end year 17737 6102 1770 4425 26494 18023 4590 4876 17737 21446 1058 4481 18023 b due acquisition report independent registered public accounting firm board directors stockholders biorad laboratories inc hercules california audited consolidated financial statements biorad laboratories inc subsidiaries “company” december 31 2006 2005 three years period ended december 31 2006 managements assessment effectiveness companys internal control financial reporting december 31 2006 effectiveness companys internal control financial reporting december 31 2006 issued reports thereon dated february 28 2007 report financial statements expresses unqualified opinion includes explanatory paragraph concerning adoption new accounting standard 2006 consolidated financial statements reports included 2006 annual report stockholders incorporated herein reference audits also included consolidated financial statement schedule company listed item 15a 2 consolidated financial statement schedule responsibility companys management responsibility express opinion based audits opinion consolidated financial statement schedules considered relation basic consolidated financial statements taken whole presents fairly material respects information set forth therein deloitte touche llp san francisco california february 28 2007 signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities dates indicated principal executive officer norman schwartz president director february 28 2007 norman schwartz principal financial officer christine tsingos vice president christine tsingos chief financial officer february 28 2007 principal accounting officer james r stark corporate controller february 28 2007 james r stark directors james j bennett director february 28 2007 james j bennett albert j hillman director february 28 2007 albert j hillman ruediger naumannetienne director february 28 2007 ruediger naumannetienne alice n schwartz director february 28 2007 alice n schwartz david schwartz director february 28 2007 david schwartz 101 amended restated credit agreement dated june 21 2005 among biorad laboratories inc lenders referred therein jpmorgan chase bank na successor merger bank one na main office chicago lender administrative agent wells fargo bank na union bank california na syndication agents abn amro bank nv bnp paribas documentation agents 7 1011 amendment 1 amended restated credit agreement 8 102 amended restated security agreement dated june 21 2005 biorad laboratories inc jpmorgan chase bank na successor merger bank one na main office chicago administrative agent 7 103 amended restated pledge agreement dated june 21 2005 biorad laboratories inc jpmorgan chase bank na successor merger bank one na main office chicago administrative agent 7 104 1994 stock option plan 9 1041 amendment biorad laboratories inc 1994 stock option plan dated april 28 1998 10 1042 second amendment biorad laboratories inc 1994 stock option plan dated december 6 1999 10 1043 third amendment biorad laboratories inc 1994 stock option plan dated september 19 2000 10 1044 fourth amendment biorad laboratories inc 1994 stock option plan dated april 25 2001 11 105 amended restated 1988 employee stock purchase plan 12 1051 amendment amended 1988 employee stock purchase plan 11 106 employees deferred profit sharing retirement plan amended restated effective january 1 1997 13 107 2003 stock option plan 14 1010 noncompetition employment continuation agreement james j bennett 15 1013 stock purchase agreement dated august 16 2004 biorad mj geneworks incorporated michael j finney john finney excluding exhibits schedules pursuant regulation sk item 601b2 exhibits schedules agreement filed agree furnish supplementally copy omitted exhibits schedules sec upon request requested confidential treatment certain portions agreement 16 131 excerpt annual report stockholders fiscal year ended december 31 2006 deemed filed extent required instructions exhibits reports form 10k 211 listing subsidiaries 231 consent independent registered public accounting firm 311 certification chief executive officer required rule 13a14a 17cfr 24013a14a 312 certification chief financial officer required rule 13a14a 17cfr 24013a14a 321 certification chief executive officer pursuant 18 usc section 1350 adopted pursuant section 906 sarbanesoxley act 2002 322 certification chief financial officer pursuant 18 usc section 1350 adopted pursuant section 906 sarbanesoxley act 2002 1 incorporated reference exhibits biorad’s form 10k filing fiscal year ended december 31 2001 dated march 28 2002 2 incorporated reference exhibits biorad’s form 10k filing fiscal year ended december 31 2004 dated march 3 2005 3 incorporated reference exhibits biorad’s registration statement form s7 registration 266797 became effective april 22 1980 4 incorporated reference exhibits biorad’s form s4 dated september 19 2003 5 incorporated reference exhibits biorad’s form 8k filing dated december 14 2004 6 incorporated reference exhibits biorad’s form 8k filing dated december 22 2004 7 incorporated reference exhibits biorad’s form 8k filing dated june 24 2005 8 incorporated reference exhibits biorad’s september 30 2005 10q filing dated november 8 2005 9 incorporated reference exhibits biorad’s form s8 filing dated april 29 1994 10 incorporated reference exhibits biorad’s form 10k filing fiscal year ended december 31 2000 dated march 28 2001 11 incorporated reference exhibits biorad’s form 10k filing fiscal year ended december 31 2003 dated march 15 2004 12 incorporated reference exhibits biorad’s september 30 1998 form 10q filing dated november 12 1998 13 incorporated reference exhibits biorad’s september 30 1997 form 10q filing dated november 13 1997 14 incorporated reference exhibits biorad’s march 31 2003 form 10q filing dated may 13 2003 15 incorporated reference exhibits biorad’s december 31 1996 form 10k filing dated march 27 1997 16 incorporated reference exhibits biorad’s september 30 2004 form 10q filing dated november 9 2004item 14 principal accountant fees services information required furnished item incorporated reference portion 2008 proxy statement “report audit committee board directors” biorad laboratories inc schedule ii valuation qualifying accounts years ended december 31 2007 2006 2005 thousands reserve doubtful accounts receivable balance additions beginning charged costs balance year expenses deductions end year 15265 3925 3227 5447 21410 13301 1931 537 570 15265 13406 1669 1774 13301 due acquisitions valuation allowance current longterm deferred tax assets balance deductions beginning charged costs balance year additions expenses b end year 26494 9079 5551 1097 31119 17737 6102 1770 4425 26494 18023 4590 4876 17737 b due acquisitions report independent registered public accounting firm board directors stockholders biorad laboratories inc hercules california audited consolidated financial statements biorad laboratories inc subsidiaries company december 31 2007 2006 three years period ended december 31 2007 companys internal control financial reporting december 31 2007 issued report thereon dated february 29 2008 report financial statements expresses unqualified opinion includes explanatory paragraph concerning adoption new accounting standards 2007 2006 report included elsewhere form 10k audits also included consolidated financial statement schedule company listed item 15a2 consolidated financial statement schedule responsibility companys management responsibility express opinion based audits opinion consolidated financial statement schedule considered relation basic consolidated financial statements taken whole presents fairly material respects information set forth therein deloitte touche llp san francisco california february 29 2008 signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities dates indicated principal executive officer norman schwartz president director february 29 2008 norman schwartz principal financial officer christine tsingos vice president christine tsingos chief financial officer february 29 2008 principal accounting officer james r stark corporate controller february 29 2008 james r stark directors james j bennett director february 29 2008 james j bennett louis drapeau director february 29 2008 louis drapeau albert j hillman director february 29 2008 albert j hillman ruediger naumannetienne director february 29 2008 ruediger naumannetienne alice n schwartz director february 29 2008 alice n schwartz david schwartz director february 29 2008 david schwartz 45 exchange registration rights agreement dated august 11 2003 750 senior subordinated notes due 2013 4 46 indenture dated december 21 2004 biorad laboratories inc wells fargo national bank trustee 6 101 amended restated credit agreement dated june 21 2005 among biorad laboratories inc lenders referred therein jpmorgan chase bank na successor merger bank one namain office chicago lender administrative agentwells fargo bank na union bank california na syndication agents abn amro bank nv bnp paribas documentation agents 7 1011 amendment 1 amended restated credit agreement 8 102 amended restated security agreement dated june 21 2005 biorad laboratories inc jpmorgan chase bank na successor merger bank one na main office chicago administrative agent 7 103 amended restated pledge agreement dated june 21 2005 biorad laboratories inc jpmorgan chase bank na successor merger bank one na main office chicago administrative agent 7 104 1994 stock option plan 9 1041 amendment biorad laboratories inc 1994 stock option plan dated april 28 1998 10 1042 second amendment biorad laboratories inc 1994 stock option plan dated december 6 1999 10 1043 third amendment biorad laboratories inc 1994 stock option plan dated september 19 2000 10 1044 fourth amendment biorad laboratories inc 1994 stock option plan dated april 25 2001 11 105 amended restated 1988 employee stock purchase plan 12 1051 amendment amended 1988 employee stock purchase plan 11 106 employees deferred profit sharing retirement plan amended restated effective january 1 1997 13 107 2003 stock option plan 14 1071 amendment 2003 stock option plan biorad laboratories inc 19 108 2007 incentive award plan 21 1010 noncompetition employment continuation agreement james j bennett 15 1013 stock purchase agreement dated august 16 2004 biorad mj geneworks incorporated michael j finney john finney excluding exhibits schedules pursuant regulation sk item 601b2 exhibits schedules agreement filed agree furnish supplementally copy omitted exhibits schedules sec upon request requested confidential treatment certain portions agreement 16 1014 connecticut settlement agreement dated february 9 2006 biorad laboratories inc mj research inc applera corporation applied biosystems group 16 1015 realtime settlement agreement dated february 9 2006 biorad laboratoreis inc mj research inc applera corporation applied biosystems group 16 10151 amendment 1 realtime settlement agreement dated may 4 2007 biorad laboratories inc mj research inc applera corporation applied biosystems group20 1016 amended restated thermal cycler supplier agreement dated february 9 2006 biorad laboratories inc mj research inc applera corporation applied biosystems group 16 1017 realtime instrument patent license agreement dated february 9 2006 biorad laboratories inc mj research inc applera corporation applied biosystems group 16 10171 amendment 1 realtime patent license agreement dated may 4 2007 biorad laboratories inc mj research inc applera corporation applied biosystems group20 131 excerpt annual report stockholders fiscal year ended december 31 2007 deemed filed extent required instructions exhibits reports form 10k 211 listing subsidiaries 231 consent independent registered public accounting firm 311 certification chief executive officer required rule 13a14a 17cfr 24013a14a 312 certification chief financial officer required rule 13a14a 17cfr 24013a14a 321 certification chief executive officer pursuant 18 usc section 1350 adopted pursuant section 906 sarbanesoxley act 2002 322 certification chief financial officer pursuant 18 usc section 1350 adopted pursuant section 906 sarbanesoxley act 2002 1 incorporated reference exhibits biorad’s form 10k filing fiscal year ended december 31 2001 dated march 28 2002 2 incorporated reference exhibits biorad’s form 10k filing fiscal year ended december 31 2004 dated march 3 2005 3 incorporated reference exhibits biorad’s registration statement form s7 registration 266797 became effective april 22 1980 4 incorporated reference exhibits biorad’s form s4 dated september 19 2003 5 incorporated reference exhibits biorad’s form 8k filing dated december 14 2004 6 incorporated reference exhibits biorad’s form 8k filing dated december 22 2004 7 incorporated reference exhibits biorad’s form 8k filing dated june 24 2005 8 incorporated reference exhibits biorad’s september 30 2005 10q filing dated november 8 2005 9 incorporated reference exhibits biorad’s form s8 filing dated april 29 1994 10 incorporated reference exhibits biorad’s form 10k filing fiscal year ended december 31 2000 dated march 28 2001 11 incorporated reference exhibits biorad’s form 10k filing fiscal year ended december 31 2003 dated march 15 2004 12 incorporated reference exhibits biorad’s september 30 1998 form 10q filing dated november 12 1998 13 incorporated reference exhibits biorad’s september 30 1997 form 10q filing dated november 13 1997 14 incorporated reference exhibits biorad’s march 31 2003 form 10q filing dated may 13 2003 15 incorporated reference exhibits biorad’s december 31 1996 form 10k filing dated march 271997 16 incorporated reference exhibits biorad’s march 31 2006 form 10q filing dated may 9 2006 17 incorporated reference exhibits biorad’s may 14 2007 form 8k filing dated may 14 2007 18 incorporated reference exhibits biorad’s september 27 2007 form 8k filing dated october 3 2007 19 incorporated reference exhibits biorad’s march 31 2007 form 10q filing dated may 4 2007 20 incorporated reference exhibits biorad’s june 30 2007 form 10q filing dated august 8 2007 21 incorporated reference exhibits biorad’s s8 filing dated july 30 2007item 14 principal accountant fees services information required furnished item incorporated reference portion 2009 proxy statement “report audit committee board directors” biorad laboratories inc schedule ii valuation qualifying accounts years ended december 31 2008 2007 2006 thousands reserve doubtful accounts receivable balance additions beginning charged costs balance year expenses deductions end year 21410 7602 9472 27 19567 15265 3925 3227 5447 21410 13301 1931 537 570 15265 due acquisitions valuation allowance current longterm deferred tax assets balance deductions beginning charged costs balance year additions expenses b end year 31119 10570 1026 40663 26494 9079 5551 1097 31119 17737 6102 1770 4425 26494 b due acquisitions report independent registered public accounting firm board directors stockholders biorad laboratories inc hercules california audited consolidated financial statements biorad laboratories inc subsidiaries “company” december 31 2008 2007 three years period ended december 31 2008 company’s internal control financial reporting december 31 2008 issued report thereon dated february 25 2009 report financial statements expresses unqualified opinion includes explanatory paragraph concerning adoption new accounting standard 2007 report included elsewhere form 10k audits also included consolidated financial statement schedule company listed item 15a2 consolidated financial statement schedule responsibility company’s management responsibility express opinion based audits opinion consolidated financial statement schedule considered relation basic consolidated financial statements taken whole present fairly material respects information set forth therein deloitte touche llp san francisco california february 25 2009 signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities dates indicated principal executive officer norman schwartz president director february 26 2009 norman schwartz principal financial officer christine tsingos vice president christine tsingos chief financial officer february 26 2009 principal accounting officer james r stark corporate controller february 26 2009 james r stark directors james j bennett director february 26 2009 james j bennett louis drapeau director february 26 2009 louis drapeau albert j hillman director february 26 2009 albert j hillman director ruediger naumannetienne alice n schwartz director february 26 2009 alice n schwartz david schwartz director february 26 2009 david schwartz 45 exchange registration rights agreement dated august 11 2003 750 senior subordinated notes due 2013 4 46 indenture dated december 21 2004 biorad laboratories inc wells fargo national bank trustee 6 101 amended restated credit agreement dated june 21 2005 among biorad laboratories inc lenders referred therein jpmorgan chase bank na successor merger bank one namain office chicago lender administrative agentwells fargo bank na union bank california na syndication agents abn amro bank nv bnp paribas documentation agents 7 1011 amendment 1 amended restated credit agreement 8 102 amended restated security agreement dated june 21 2005 biorad laboratories inc jpmorgan chase bank na successor merger bank one na main office chicago administrative agent 7 103 amended restated pledge agreement dated june 21 2005 biorad laboratories inc jpmorgan chase bank na successor merger bank one na main office chicago administrative agent 7 104 1994 stock option plan 9 1041 amendment biorad laboratories inc 1994 stock option plan dated april 28 1998 10 1042 second amendment biorad laboratories inc 1994 stock option plan dated december 6 1999 10 1043 third amendment biorad laboratories inc 1994 stock option plan dated september 19 2000 10 1044 fourth amendment biorad laboratories inc 1994 stock option plan dated april 25 2001 11 105 amended restated 1988 employee stock purchase plan 12 1051 amendment amended 1988 employee stock purchase plan 11 106 employees’ deferred profit sharing retirement plan amended restated effective january 1 1997 13 107 2003 stock option plan 14 1071 amendment 2003 stock option plan biorad laboratories inc 19 108 2007 incentive award plan 21 1010 noncompetition employment continuation agreement james j bennett 15 1013 stock purchase agreement dated august 16 2004 biorad mj geneworks incorporated michael j finney john finney excluding exhibits schedules pursuant regulation sk item 601b2 exhibits schedules agreement filed agree furnish supplementally copy omitted exhibits schedules sec upon request requested confidential treatment certain portions agreement 16 1014 connecticut settlement agreement dated february 9 2006 biorad laboratories inc mj research inc applera corporation applied biosystems group 16 1015 realtime settlement agreement dated february 9 2006 biorad laboratoreis inc mj research inc applera corporation applied biosystems group 16 10151 amendment 1 realtime settlement agreement dated may 4 2007 biorad laboratories inc mj research inc applera corporation applied biosystems group20 1016 amended restated thermal cycler supplier agreement dated february 9 2006 biorad laboratories inc mj research inc applera corporation applied biosystems group 16 1017 realtime instrument patent license agreement dated february 9 2006 biorad laboratories inc mj research inc applera corporation applied biosystems group 16 10171 amendment 1 realtime patent license agreement dated may 4 2007 biorad laboratories inc mj research inc applera corporation applied biosystems group20 131 excerpt annual report stockholders’ fiscal year ended december 31 2008 deemed filed extent required instructions exhibits reports form 10k 211 listing subsidiaries 231 consent independent registered public accounting firm 311 certification chief executive officer required rule 13a14a 17cfr 24013a14a 312 certification chief financial officer required rule 13a14a 17cfr 24013a14a 321 certification chief executive officer pursuant 18 usc section 1350 adopted pursuant section 906 sarbanesoxley act 2002 322 certification chief financial officer pursuant 18 usc section 1350 adopted pursuant section 906 sarbanesoxley act 2002 1 incorporated reference exhibits biorad’s form 10k filing fiscal year ended december 31 2001 dated march 28 2002 2 incorporated reference exhibits biorad’s form 10k filing fiscal year ended december 31 2004 dated march 3 2005 3 incorporated reference exhibits biorad’s registration statement form s7 registration 266797 became effective april 22 1980 4 incorporated reference exhibits biorad’s form s4 dated september 19 2003 5 incorporated reference exhibits biorad’s form 8k filing dated december 14 2004 6 incorporated reference exhibits biorad’s form 8k filing dated december 22 2004 7 incorporated reference exhibits biorad’s form 8k filing dated june 24 2005 8 incorporated reference exhibits biorad’s september 30 2005 10q filing dated november 8 2005 9 incorporated reference exhibits biorad’s form s8 filing dated april 29 1994 10 incorporated reference exhibits biorad’s form 10k filing fiscal year ended december 31 2000 dated march 28 2001 11 incorporated reference exhibits biorad’s form 10k filing fiscal year ended december 31 2003 dated march 15 2004 12 incorporated reference exhibits biorad’s september 30 1998 form 10q filing dated november 12 1998 13 incorporated reference exhibits biorad’s september 30 1997 form 10q filing dated november 13 1997 14 incorporated reference exhibits biorad’s march 31 2003 form 10q filing dated may 13 2003 15 incorporated reference exhibits biorad’s december 31 1996 form 10k filing dated march 271997 16 incorporated reference exhibits biorad’s march 31 2006 form 10q filing dated may 9 2006 17 incorporated reference exhibits biorad’s may 14 2007 form 8k filing dated may 14 2007 18 incorporated reference exhibits biorad’s september 27 2007 form 8k filing dated october 3 2007 19 incorporated reference exhibits biorad’s march 31 2007 form 10q filing dated may 4 2007 20 incorporated reference exhibits biorad’s june 30 2007 form 10q filing dated august 8 2007 21 incorporated reference exhibits biorad’s s8 filing dated july 30 2007item 14 principal accountant fees services information required furnished item incorporated reference portion 2010 proxy statement “report audit committee board directors” part iv item 15item 14 principal accountant fees services information required furnished item incorporated reference portion 2011 proxy statement “report audit committee board directors” part iv item 15item 14 principal accountant fees services information required furnished item incorporated reference portion 2012 proxy statement “report audit committee board directors” part iv item 15item 14 principal accountant fees services information required furnished item incorporated reference portion 2013 proxy statement “report audit committee board directors” part iv item 15item 14 principal accountant fees services information required furnished item incorporated reference portion 2014 proxy statement “report audit committee board directors” part iv item 15item 14 principal accountant fees services information required furnished item incorporated reference portion 2015 proxy statement “report audit committee board directors” part iv item 15item 14 principal accountant fees services information required furnished item incorporated reference portion 2018 proxy statement “report audit committee board directors” part iv item 15item 14 principal accountant fees services information required furnished item incorporated reference portion 2020 proxy statement “report audit committee board directors” part iv item 15item 14 exhibits financial statement schedules reports form 8k 1 index financial statements following consolidated financial statements included exhibit 131 incorporated herein reference pursuant item 8 page exhibit 131 consolidated balance sheets december 31 2001 2000 23 consolidated statements income three years period ended december 31 2001 4 consolidated statements cash flows three years period ended december 31 2001 5 consolidated statements changes stockholders equity three years period ended december 31 2001 6 notes consolidated financial statements 726 report independent public accountants 27 2 index financial statement schedule page form 10k schedule ii valuation qualifying accounts 10 report independent public accountants schedule ii 11 financial statement schedules omitted required information included consolidated financial statements notes thereto 3 index exhibits listed accompanying index exhibits pages 13 15 report filed incorporated reference part report b reports form 8k none biorad laboratories inc schedule ii valuation qualifying accounts years ended december 31 2001 2000 1999 thousands reserve doubtful accounts receivable additions balance charged balance beginning costs end year expenses deductions year 2001 10255 5200 3946 11509 2000 9582 4298 3625 10255 1999 3629 3123 2449 5279a 9582 valuation allowance deferred tax assets deductions balance charged balance beginning costs end year additions expenses othera year 2001 17020 4059 2793 5484 12802 2000 24131 3431 3680 17020 1999 5342 553 19342 24131 valuation arising acquisition psd report independent public accountants schedule ii biorad laboratories inc audited accordance auditing standards generally accepted united states consolidated financial statements included biorad laboratories incs annual report stockholders incorporated reference form 10k issued report thereon dated february 4 2002 audits made purpose forming opinion statements taken whole schedule listed index item 14a2 responsibility companys management presented purposes complying securities exchange commissions rules part basic financial statements schedule subjected auditing procedures applied audits basic financial statements opinion fairly states material respects financial data required set forth therein relation basic financial statements taken whole arthur andersen llp san francisco california february 4 2002 signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized biorad laboratories inc sanford wadler sanford wadler secretary date march 27 2002 pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities dates indicated principal executive officer david schwartz president director march 27 2002 david schwartz principal financial officer norman schwartz vice president march 27 2002 norman schwartz director principal accounting officer james r stark corporate controller march 27 2002 james r stark directors director march 27 2002 james j bennett albert j hillman director march 27 2002 albert j hillman director march 27 2002 ruediger naumann philip l padou director march 27 2002 philip l padou alice n schwartz director march 27 2002 alice n schwartz biorad laboratories inc index exhibits item 14a3 following documents filed part report exhibit 31 restated certificate incorporation february 8 2002 32 bylaws registrant amended february 19 1980 1 41 credit agreement dated september 30 1999 among biorad laboratories inc lenders named therein bank one na administrative agent abn amro bank nv syndication agent union bank california na documentation agent 2 411 amendment dated january 31 2000 credit agreement dated september 30 1999 among biorad laboratories inc lenders named therein bank one na agent 3 412 amendment dated june 21 2000 credit agreement dated september 30 1999 among biorad laboratories inc lenders named therein banc one na administrative agent abn amro bank nv syndication agent union bank california na documentation agent 4 42 senior subordinated credit agreement dated september 30 1999 among biorad laboratories inc lenders named therein bank one capital markets inc agent 2 44 senior subordinated credit agreement dated january 31 2000 among biorad laboratories inc lenders named therein ubs ag stamford branch agent 3 45 indenture dated february 17 2000 11625 senior subordinated notes due 2007 among biorad laboratories inc issuer norwest bank minnesota na trustee 3 46 registration rights agreement dated february 17 2000 among biorad laboratories inc warburg dillon reed llc abn amro incorporated 3 104 1994 stock option plan 5 1041 amendment biorad laboratories inc 1994 stock option plan dated april 28 1998 6 1042 second amendment biorad laboratories inc 1994 stock option plan dated december 6 1999 6 1043 third amendment biorad laboratories inc 1994 stock option plan dated september 19 2000 6 105 amended restated 1988 employee stock purchase plan 7 106 employees deferred profit sharing retirement plan amended restated effective january 1 1997 9 1010 noncompetition employment continuation agreement james j bennett 9 1012 split dollar life insurance agreement dated september 17 1999 schwartz irrevocable descendants trust biorad laboratories inc 3 131 excerpt annual report stockholders fiscal year ended december 31 2001 deemed filed extent required instructions exhibits reports form 10k 211 listing subsidiaries 221 proxy statement dated january 2 2002 pages 5 10 definitive form filed january 4 2002 incorporated reference 231 consent independent public accountants 1 incorporated reference exhibits companys registration statement form s7 registration 266797 became effective april 22 1980 2 incorporated reference exhibits companys form 8k dated october 1 1999 3 incorporated reference exhibits companys form 10k filing fiscal year ended december 31 1999 dated march 28 2000 4 incorporated reference exhibits companys june 30 2000 form 10q filing dated august 14 2000 5 incorporated reference exhibits companys form s8 filing dated april 28 1994 6 incorporated reference exhibits companys form 10k filing fiscal year ended december 31 2000 dated march 28 2001 7 incorporated reference exhibits companys september 30 1998 form 10q filing dated november 10 1998 8 incorporated reference exhibits companys september 30 1997 form 10q filing dated november 13 1997 8 incorporated reference exhibits companys form 10k filing fiscal year ended december 31 1996 dated march 26 1997item 14 principal accountant fees services information required furnished item incorporated reference portion 2019 proxy statement “report audit committee board directors” part iv item 15item 14 exhibits financial statement schedules reports form 8k 1 index financial statements following consolidated financial statements included 2000 annual report incorporated herein reference pursuant item 8 page exhibit 131 consolidated balance sheets december 31 2000 1999 23 consolidated statements income three years period ended december 31 2000 4 consolidated statements cash flows three years period ended december 31 2000 5 consolidated statements changes stockholders equity three years period ended december 31 2000 6 notes consolidated financial statements 726 report independent public accountants 27 2 index financial statement schedule page form 10k schedule ii valuation qualifying accounts 10 report independent public accountants schedule ii 11 financial statement schedules omitted required information included consolidated financial statements notes thereto 3 index exhibits listed accompanying index exhibits pages 13 15 report filed incorporated reference part report b reports form 8k none biorad laboratories inc schedule ii valuation qualifying accounts years ended december 31 2000 1999 1998 thousands reserve doubtful accounts receivable additions balance charged balance beginning costs end year expenses deductions year 2000 9582 4298 3624 10255 1999 3629 3123 2449 5279a 9582 1998 3374 1616 1361 3629 valuation allowance deferred tax assets deductions balance charged balance beginning costs end year additions expenses year 2000 24131 7111 17020 1999 5342 553 19342a 24131 1998 3285 2057 5342 valuation arising acquisition psd report independent public accountants schedule ii biorad laboratories inc audited accordance generally accepted auditing standards consolidated financial statements included biorad laboratories incs annual report stockholders incorporated reference form 10k issued report thereon dated february 6 2001 audit made purpose forming opinion statements taken whole schedule listed index item 14a2 responsibility companys management presented purposes complying securities exchange commissions rules part basic financial statements schedule subjected auditing procedures applied audit basic financial statements opinion fairly states material respects financial data required set forth therein relation basic financial statements taken whole arthur andersen llp arthur andersen llp san francisco california february 6 2001 signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized biorad laboratories inc sanford wadler sanford wadler secretary date march 28 2001 pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities dates indicated principal executive officer david schwartz president director march 28 2001 david schwartz principal financial officer c chesterman vice president march 28 2001 thomas c chesterman chief financial officer principal accounting officer james r stark corporate controller march 28 2001 james r stark directors james j bennett director march 28 2001 james j bennett albert j hillman director march 28 2001 albert j hillman philip l padou director march 28 2001 philip l padou alice n schwartz director march 28 2001 alice n schwartz norman schwartz director march 28 2001 norman schwartz burton zabin director march 28 2001 burton zabin biorad laboratories inc index exhibits item 14a3 following documents filed part report exhibit 31 restated certificate incorporation september 15 1988 1 32 bylaws registrant amended february 19 1980 2 41 credit agreement dated september 30 1999 among biorad laboratories inc lenders named therein bank one na administrative agent abn amro bank nv syndication agent union bank california na documentation agent 3 411 amendment dated january 31 2000 credit agreement dated september 30 1999 among biorad laboratories inc lenders named therein bank one na agent 4 412 amendment dated june 21 2000 credit agreement dated september 30 1999 among biorad laboratories inc lenders named therein banc one na administrative agent abn amro bank nv syndication agent union bank california na documentation agent 5 42 senior subordinated credit agreement dated september 30 1999 among biorad laboratories inc lenders named therein bank one capital markets inc agent 3 44 senior subordinated credit agreement dated january 31 2000 among biorad laboratories inc lenders names therein ubs ag stamford branch agent 4 45 indenture dated february 17 2000 11625 senior subordinated notes due 2007 among biorad laboratories inc issuer norwest bank minnesota na trustee 4 46 registration rights agreement dated february 17 2000 among biorad laboratories inc warburg dillon reed llc abn amro incorporated 4 104 1994 stock option plan 6 1041 amendment biorad laboratories inc 1994 stock option plan dated april 28 1998 1042 second amendment biorad laboratories inc 1994 stock option plan dated december 6 1999 1043 third amendment biorad laboratories inc 1994 stock option plan dated september 19 2000 105 amended restated 1988 employee stock purchase plan 7 106 employees deferred profit sharing retirement plan amended restated effective january 1 1997 8 1010 noncompetition employment continuation agreement james j bennett 9 1011 employment noncompete agreement dr burton zabin 10 1012 split dollar life insurance agreement dated september 17 1999 schwartz irrevocable descendants trust biorad laboratories inc 4 131 excerpt annual report stockholders fiscal year ended december 31 2000 deemed filed extent required instructions exhibits reports form 10k 211 listing subsidiaries 231 consent independent public accountants 1 incorporated reference exhibits companys form 10k filing fiscal year ended december 31 1992 dated march 26 1993 2 incorporated reference exhibits companys registration statement form s7 registration 266797 became effective april 22 1980 3 incorporated reference exhibits companys form 8k dated october 1 1999 4 incorporated reference exhibits companys form 10k filing fiscal year ended december 31 1999 dated march 28 2000 5 incorporated reference exhibits companys june 30 2000 form 10q filing dated august 14 2000 6 incorporated reference exhibits companys form s8 filing dated april 28 1994 7 incorporated reference exhibits companys september 30 1998 form 10q filing dated november 10 1998 8 incorporated reference exhibits companys september 30 1997 form 10q filing dated november 13 1997 9 incorporated reference exhibits companys form 10k filing fiscal year ended december 31 1996 dated march 26 1997 10 incorporated reference exhibits companys june 30 1998 form 10q filing dated august 6 1998item 14 principal accountant fees services information required furnished item incorporated reference portion 2016 proxy statement “report audit committee board directors” part iv item 15item 14 principal accountant fees services information required furnished item incorporated reference portion 2017 proxy statement “report audit committee board directors” part iv item 15item 14 principal accountant fees services information required furnished item incorporated reference portion 2021 proxy statement “report audit committee board directors” part iv item 15 item 7 managements discussion analysis financial condition results operations section headed managements discussion analysis results operations financial condition appearing pages 26 30 exhibit 131 incorporated herein reference item 8item 7 managements discussion analysis financial condition results operations section headed managements discussion analysis results operations financial condition appearing pages 25 30 exhibit 131 incorporated herein reference item 8item 7 managements discussion analysis financial condition results operations section headed managements discussion analysis results operations financial condition appearing pages 27 31 exhibit 131 incorporated herein reference item 8item 7 managements discussion analysis financial condition results operations section headed managements discussion analysis results operations financial condition appearing pages 28 33 exhibit 131 incorporated herein reference item 8item 7 managements discussion analysis financial condition results operations section headed managements discussion analysis results operations financial condition appearing pages 25 32 exhibit 131 incorporated herein reference item 7aitem 7 managements discussion analysis financial condition results operations section headed managements discussion analysis results operations financial condition appearing pages 25 33 exhibit 131 incorporated herein reference item 7aitem 7 managements discussion analysis financial condition results operations section headed managements discussion analysis results operations financial condition appearing pages 33 41 exhibit 131 incorporated herein reference item 7aitem 7 managements discussion analysis financial condition results operations section headed managements discussion analysis results operations financial condition appearing pages 34 44 exhibit 131 incorporated herein reference item 7aitem 7 managements discussion analysis financial condition results operations section headed managements discussion analysis results operations financial condition appearing pages 35 46 exhibit 131 incorporated herein reference item 7aitem 7 managements discussion analysis financial condition results operations section headed managements discussion analysis results operations financial condition appearing pages 35 47 exhibit 131 incorporated herein reference item 7aitem 7 managements discussion analysis financial condition results operations section headed “managements discussion analysis results operations financial condition” appearing pages 33 44 exhibit 131 incorporated herein reference item 7aitem 7 managements discussion analysis financial condition results operations section headed “managements discussion analysis results operations financial condition” appearing pages 40 52 exhibit 131 incorporated herein reference item 7aitem 7 management’s discussion analysis financial condition results operations section headed “management’s discussion analysis results operations financial condition” appearing pages 36 48 exhibit 131 incorporated herein reference item 7aitem 7 management’s discussion analysis financial condition results operations discussion read conjunction information contained consolidated financial statements accompanying notes integral part statements historical fact statements made annual report include forwardlooking statements respect future financial performance operating results plans objectives involve risk uncertainties forwardlooking statements generally identified use forwardlooking terminology “believe” “expect” “may” “will” “intend” “estimate” “continue” similar expressions negative terms expressions statements involve risks uncertainties could cause actual results vary materially expressed indicated forwardlooking statements based forwardlooking statements current expectations projections future events however actual results may differ materially currently anticipated depending variety risk factors including among things changes general domestic worldwide economic conditions ability successfully develop market new products reliance access necessary intellectual property ability successfully integrate acquired business substantial leverage ability service debt competition government regulation industries operate monetary policies various countries caution place undue reliance forwardlooking statements reflect analysis speak date hereof undertake obligation publicly update revise forwardlooking statements whether result new information future events otherwise except required federal securities law overview multinational manufacturer worldwide distributor life science research clinical diagnostics products business organized two primary segments life science clinical diagnostics mission provide scientists specialized tools needed biological research clinical diagnostics sell 8000 products services diverse client base comprised scientific research healthcare education government customers worldwide manufacture supply customers range reagents apparatus equipment separate complex chemical biological materials identify analyze purify components customers require standardization experiments test results much revenues recurring approximately 32 2009 consolidated net sales united states approximately 68 international locations international sales largely denominated local currencies euros swiss franc japanese yen british sterling result consolidated net sales expressed dollars benefit us dollar weakens suffer us dollar strengthens us dollar strengthens benefit lower cost sales international manufacturing sites well nonus suppliers lower international operating expenses market reagents apparatus remains good growth rates slowed due public private grant funding measured market large capital equipment slowed many pharmaceutical biotechnology customers delayed reduced capital spending biorad generally less impacted trends capital spending lower priced reagents apparatus comprise 70 product sales following shows gross profit expense items percentage net sales intend discussions critical accounting policies estimates recent accounting pronouncements follow assist understanding principles estimates accounting pronouncements affect financial condition results operations well significant factors caused changes financial condition results operations years ended december 31 2009 2008 critical accounting policies estimates accompanying discussion analysis financial condition results operations based upon consolidated financial statements prepared accordance us generally accepted accounting principles gaap preparation financial statements conformity gaap requires management make estimates assumptions affect reported amounts assets liabilities contingencies date financial statements reported amounts revenues expenses reporting periods evaluate estimates ongoing basis base estimates historical experience assumptions believed reasonable circumstances results form basis making judgments carrying values assets liabilities readily apparent sources however future events may cause us change assumptions estimates may require adjustment actual results could differ estimates determined periods reported annual report form 10k following accounting policies estimates critical understanding financial condition results operations accounting income taxes part process preparing consolidated financial statements management required make estimates related income tax provision jurisdictions operate process involves estimating current tax exposure together assessing temporary differences resulting differing treatment items tax accounting purposes differences result deferred tax assets liabilities included within consolidated balance sheets management assesses likelihood deferred tax assets recovered future taxable income extent management believes recovery likely valuation allowance must established extent management establishes valuation allowance increases allowance period increase expense within provision income taxes consolidated statements income may result recognize tax benefit uncertain tax position likely tax position sustained examination taxing authorities based technical merits position tax benefits recognized financial statements particular tax position measured based largest benefit greater 50 likelihood realized upon settlement amount unrecognized tax benefits adjusted appropriate changes facts circumstances significant amendments existing tax law new regulations interpretations taxing authorities new information obtained tax examination resolution examination recognize accrued interest penalties appropriate related unrecognized tax benefits income tax expense significant management judgment required determining provision income taxes deferred tax assets liabilities valuation allowance recorded connection deferred tax assets recorded valuation allowance 379 million 407 million december 31 2009 2008 respectively due uncertainties related ability utilize deferred tax assets primarily consisting certain foreign net operating losses carried forward valuation allowance based management’s current estimates taxable income jurisdictions operate period deferred tax assets recoverable event actual results differ estimates adjusted future periods additional valuation allowance may need established would increase tax provision lowering income impacting financial position realization previously reserved deferred tax assets occur provision income taxes may decrease raising income positively impacting biorad’s financial position valuation goodwill longlived assets goodwill represents excess cost fair value net tangible identifiable intangible assets acquired businesses goodwill amounts assigned reporting units time acquisition adjusted subsequent significant transfers business reporting units assess impairment goodwill annually fourth quarter whenever events changes circumstances indicate carrying value may recoverable perform impairment tests goodwill reporting unit level one level reporting segments goodwill impairment test consists twostep process first step goodwill impairment test used identify potential impairment compares fair value reporting unit carrying value including goodwill fair value reporting unit exceeds carrying amount goodwill reporting unit considered impaired second step impairment test required second step required compares implied fair value reporting unit goodwill carrying amount goodwill fair value reporting unit allocated assets liabilities unit including unrecognized intangible assets reporting unit acquired business combination fair value reporting unit price paid acquire reporting unit carrying amount reporting unit’s goodwill exceeds implied fair value impairment charge recognized amount equal excess use projected discounted cash flow models determine fair value reporting unit discounted cash value projected goodwill may different fair value would result actual transaction willing buyer willing seller projections discounted cash flow models inherently uncertain accordingly actual future cash flows may differ materially projected cash flows management judgment required developing assumptions discounted cash flow model assumptions include revenue growth rates profit margins future capital expenditures working capital needs expected foreign currency rates discount rates terminal values estimate future cash flows using current longterm high level strategic financial forecasts take account current economic environment discount rates used compiled using independent sources current trends similar businesses observable market data changes rates might result material changes valuation determination recoverability goodwill example increase discount rate used discount cash flows decrease computed fair value order evaluate sensitivity fair value calculations goodwill impairment test apply 10 decrease fair value reporting unit validate reasonableness reporting unit fair values reconcile aggregate fair values reporting units enterprise market capitalization including implied control premium performing reconciliation may depending volatility market value stock price use either stock price valuation date average stock price range dates around valuation date compare implied control premium premiums paid observable recent transactions comparable companies determine fair values reporting units reasonable purposes recognition measurement impairment loss longlived asset assets grouped assets liabilities lowest level identifiable cash flows largely independent cash flows assets liabilities assess impairment longlived assets including identifiable intangibles whenever events changes circumstances indicate carrying value may recoverable factors consider important could trigger impairment review include · significant underperformance relative expected historical projected future operating results · significant changes manner use longlived assets intangible assets strategy overall business · current expectation likely longlived asset sold otherwise disposed end previously estimated useful life · significant negative industry legal regulatory economic trends management determines carrying value longlived assets may recoverable based upon existence one indicators impairment test impairment based projected undiscounted cash flow method projected future operating results cash flows asset group used establish fair value used evaluating carrying value longlived intangible assets estimate future cash flows longlived assets using current longterm financial forecasts carrying amount longlived asset recoverable exceeds sum undiscounted cash flows expected result use eventual disposition asset case impairment loss would recognized impairment loss recognized amount carrying amount exceeds fair value 2009 2008 reviews indicated impairment charges 38 million 16 million respectively related developed technology intangible assets certain product lines acquired 2006 also 2008 review indicated impairment charge 272 million related goodwill 1999 acquisition goodwill impairment caused primarily continuing decline bse bovine spongiform encephalopathy product line impairment losses recorded 2007 valuation inventories value inventory lower actual cost purchase andor manufacture inventory current estimated realizable value inventory review inventory quantities hand reduce cost basis excess obsolete inventory based primarily estimated forecast product demand production requirements quality efficacy potency raw materials review done quarterly basis warranted circumstances frequently addition industry characterized technological change frequent new product development product obsolescence could result increase amount obsolete inventory quantities hand estimates future product demand may prove inaccurate high may overstated carrying value inventory future inventory determined overvalued would required write value inventory market recognize costs cost goods sold time determination therefore although make efforts ensure accuracy forecasts future product demand perform procedures safeguard overall inventory quality significant unanticipated changes demand technological developments regulations storage conditions environment factors affecting biological materials could significant impact value inventory reported results operations valuation investments regularly review investments factors may indicate decline fair value investment carrying value otherthantemporary factors considered evaluating whether decline fair value otherthantemporary include ability intent retain investment period time sufficient allow recovery value duration extent fair value less cost financial condition prospects issuer reviews inherently uncertain value investment may fully recover may decline future periods resulting realized losses warranty reserves warrant certain equipment defects design materials workmanship generally period one year upon delivery acceptance equipment establish part cost goods sold provision expected costs warranty repairs based historical experience specific warranty terms customer feedback review performed quarterly basis assess adequacy warranty reserve adjusted necessary warranty reserve based actual experience expected future costs incurred realized costs higher expected costs cost goods sold would lower period estimation higher realized allowance doubtful accounts maintain allowance doubtful accounts estimated losses resulting collectibility customer accounts amount allowance determined analyzing known uncollectible accounts age receivables economic conditions customers’ country industry historical losses customers’ general creditworthiness amounts later determined specifically identified uncollectible charged written allowance uncertainty current economic environment prolonged could result greater amounts becoming uncollectible future estimates losses higher actual uncollectible accounts would report lower profitability estimates made higher profitability receivable collected litigation accruals record liabilities consolidated balance sheets estimated amounts claims probable reasonably estimated likelihood material change estimated reserves dependent possible outcome settlement negotiations regulatory judicial review development facts circumstances extended litigation could change claims assessments amount range loss outstanding litigation uncertain disclose footnotes financial statements unable make reasonable estimate material liability could result unfavorable outcomes litigation events occur assess potential liability related pending litigation revise estimates revisions could materially impact results operations corporate results sales gross margins expenses net sales increased 11 2009 17842 million compared 2008 excluding impact foreign currency 2009 sales increased approximately 55 compared 2008 currency neutral sales growth generated primarily regions asia pacific united states developing emerging markets eastern europe latin america also contributing sales growth diamed holding ag diamed distributors acquired late 2008 early 2009 life science segment sales decreased 19 2009 compared 2008 08 increase currency neutral basis decline sales bse bovine spongiform encephalopathy products continued 2009 product prices eroded governmentmandated tests declined excluding impact bse product line life science segment grew 13 2009 compared 2008 product groups showing growth include realtime pcr instruments reagents proteontm protein interaction analysis system biotechnology explorertm program sales growth life science segment primarily asia pacific latin america us european sales represented majority declining sales clinical diagnostics segment achieved sales growth 30 2009 compared 2008 excluding impact foreign currency sales increased 85 compared 2008 clinical diagnostics major products showed sales growth bioplex 2200 systems quality controls blood virus products decline sales contract manufacturing contracts renewed regional basis currency neutral sales growth primarily provided asia pacific united states emerging markets including latin america partially offset sales declines europe net sales increased 208 2008 17644 million compared 2007 included sales related fourth quarter 2007 acquisition diamed 2008 impact foreign exchange translation contributed sales growth approximately three percent incremental sales additional nine months 2008 attributable diamed accounted approximately 13 annual growth life science segment achieved sales growth 46 2008 compared 2007 aided impact foreign exchange translation 32 excluding decline bse product line segment grew 66 increased sales result growth pcr chemicals instruments bioplex suspension array system protean instruments sales united states emerging markets asia pacific drivers sales growth clinical diagnostics segment achieved sales growth 330 2008 compared 2007 includes sales growth acquisition diamed incremental sales additional nine months diamed operations provided 228 clinical diagnostics sales growth impact foreign exchange clinical diagnostics segment sales growth added approximately 29 total segment sales clinical diagnostics segment experienced growth across wide range product offerings bioplex 2200 system quality controls clinical microbiology strongest growth geographically drivers sales growth excluding diamed acquisition united states europe asia pacific consolidated gross margins 560 2009 compared 546 2008 life science segment gross margins improved 2009 compared 2008 01 improvement result better manufacturing overhead absorption reduction costs move new products cost efficient offshore manufacturing sales mix favoring higher margin reagents rather instruments typically lower margin clinical diagnostics segment gross margins improved approximately 22 2009 compared 2008 improvements included lower royalty payments paid licensors result expiration patents blood virus immunohematology products increased margin acquisition diamed distributors reduction impact diamed preacquisition inventory subject purchase accounting rules additionally bioplex 2200 margins improved greater placements higher test volume 2008 consolidated gross margin 546 represented increase 04 2007 life science segment gross margins increased 20 541 result decreasing factory costs overhead areas improved production planning reduced quality defects improved sales mix clinical diagnostics segment gross margins decreased 08 2008 compared 2007 result including additional nine months diamed operations diamed gross margins included amortization manufacturing related purchased intangibles effect higher inventory values workinprocess inventory compliance purchase accounting requirements consolidated selling general administrative expense sga represented 337 net sales 2009 compared 335 net sales 2008 growth absolute sga spending proportional sales clinical diagnostics segment grew sga slightly lower rate growth sales life science segment’s reduced rate spending sga larger decline sales absolute dollar increases sga primarily employeerelated expenses purchased intangibles amortization partially offset lower travel costs professional services consolidated sga 2008 335 net sales compared 348 2007 decline 2007 mainly attributable inclusion diamed overall lower percentage sga relative net sales growth absolute sga spending proportional sales life science segment’s sga growing faster sales growth clinical diagnostics segment grew slightly lower rate excluding impact diamed approximately half increase sga related personnel costs including compensation travel remaining increases attributable agent commissions technology infrastructure cost professional services provision bad debts product research development expense 1636 million 2009 92 sales compared 90 sales 2008 life science segment development efforts directed towards genomics proteomics process chromatography applications clinical diagnostics segment development efforts focused expanded tests bioplex 2200 testing platform well enhancements existing automation reagents used immunohematology clinical microbiology blood virus diagnostic tests additional quality control products absolute dollars increase clinical diagnostic segment partially offset decrease life science segment product research development expense 2008 declined 90 net sales compared 96 net sales 2007 areas development life science segment amplification proteomics protein function food safety process chromatography clinical diagnostics segment research development focused additional assays bioplex 2200 testing platform well investments automation diamed line blood typing instruments reagents product line extensions diabetes infectious disease quality control software offerings absolute dollars increase rd almost exclusively clinical diagnostics segment corporate results nonoperating interest expense 2009 increased 464 470 million compared 2008 additional 300 million 80 senior subordinated notes issued may 2009 increasing indebtedness 7426 million december 31 2009 increasing interest expense additional principal debt obligations 2003 2004 senior subordinated notes totaling 4250 million carry fixed rates interest 75 6125 due august 2013 december 2014 respectively interest expense increased 05 million 2008 compared 2007 increase reflected higher average borrowings local lines credit increased interest capital leases foreign currency exchange gains losses consist foreign currency transaction gains losses intercompany net receivables payables change fair value forward foreign exchange contracts used manage foreign currency exchange risk foreign currency exchange losses 2009 2008 2007 50 million 76 million 26 million respectively 2009 exchange loss attributable greater market volatility higher costs hedge result estimating process inherent timing shipments payments intercompany debt 2008 loss reflected number unhedged european based intercompany loans denominated euros british sterling swiss francs arose part acquisitions december 2008 significant volatility december 2008 resulted approximate 3 million noncash loss accounts additionally recorded 2008 loss 16 million unhedged intercompany payables brazilian subsidiaries historically hedged due high cost years affected economic hedging program employ hedge intercompany receivables payables income expense net 2009 includes investment dividend income generally interest income cash equivalents shortterm investments long term marketable securities income net 2009 69 million compared expense net 04 million 2008 2009 income net included relief 46 million foreign nonincome based tax obligation higher interest dividend income lower charges impairment investments compared 2008 would also include category gains losses associated sale disposal surplus manufacturing equipment productive assets expense net 04 million 2008 comprised interest investment income 106 million cash shortterm investments 2008 impaired 96 million marketable equity securities marketable fixed income securities longterm investments case market value securities declined significantly december 31 2008 recovery foreseeable future could anticipated income net 198 million 2007 principally comprised 215 million investment income interest cash equivalents shortterm investments partially offset impairment investments biorad’s consolidated effective tax rate 20 31 22 2009 2008 2007 respectively effective tax rate decreased approximately 11 percentage points 2009 compared 2008 decrease primarily related completion fourth quarter 2009 us income tax examination covering years 2001 2005 favorable tax rates associated higher earnings operations lowertax jurisdictions throughout world reduction balance unrecognized tax benefits due lapses statutes 2009 2008 2007 effective tax rates reflected tax rate benefits 4 5 respectively nontaxable dividend income 7 9 8 respectively tax credits 2009 2008 2007 effective tax rates also reflected benefits difference us foreign taxes 7 4 2 respectively 2008 tax rate reflected rate detriment 7 respect goodwill impairments 2007 tax rate reflected rate benefit 3 removal valuation allowance related canadian deferred tax assets effective tax rate may impacted future either favorably unfavorably many factors including limited statutory tax rates changes tax laws regulations tax audits settlements generation tax credits liquidity capital resources biorad operates conducts business globally primarily subsidiary companies established markets trade goods manufactured small number locations shipped local distribution facilities around globe product mix diversified certain products compete largely product efficacy others compete price gross margins generally sufficient exceed normal operating costs funding research development new products well routine outflows capital expenditure tax expense covered cash flow operations cash flow operations also sufficient make interest payments addition annual positive cash flow operating activities additional liquidity readily available via sale shortterm investments continuing financial economic developments may adversely affect future results operations demand products services could change dramatically previous years based activity support levels government universities hospitals private industry including diagnostic laboratories slowdown global economy including united states caused many governments announce stimulus packages often promote support healthcare research efforts materialize could offset declines business date unable conclude dramatically global economic recession stimulus activity impact us december 31 2009 available 7448 million cash equivalents shortterm investments domestic international lines credit 2570 million available borrowing december 31 2009 82 million reserved standby letters credit issued banks guarantee obligations various companies included lines credit 2000 million revolving credit facility terminates june 21 2010 unless renewed management believes availability together cash flow operations adequate meet current objectives operations research development capital additions manufacturing distribution plant equipment information technology systems future acquisitions deteriorated condition credit markets along financial service industry experiencing upheavals characterized bankruptcy foreclosures collapse government intervention could impact ability customer’s ability access necessary capital acquisition equipment technology modernization financing inventory receivables without crucial intermediary function manufacturers end users may renegotiate existing arrangements sharing additional costs reducing activity levels seeking business partners cash flow operations net cash provided operations 3251 million 1914 million 1916 million 2009 2008 2007 respectively net change 2009 2008 1337 million represented 1219 million improvement net change cash received customers cash paid suppliers largest item contributed increase cash flows primarily due decrease inventory levels provided approximately 36 million cash inflows 2009 expiration patents slower payment patterns reduced royalty payments moderation growth headcount reduction sga costs contributed improved cash flow additionally experienced reduction taxes paid 114 million small net change 2008 2007 result increase net cash collections reduced supplier employee payments offset income tax payments lower investment income miscellaneous operating receipts 2008 increase inventory compared 2007 concentrated life science segment quality control product line clinical diagnostics segment quality control products characterized long lead times life science segment inventories grew meet anticipated sales delayed cancelled economic activities declined fourth quarter 2008 regularly review allowance uncollectible receivables believe net accounts receivable fully realizable also routinely review inventory impact obsolescence changes market prices caused introduction new products technologies government reimbursement policies expect first quarter 2010 cash flows operations lower biorad historically makes larger payments royalties fourth quarter sales commissions third parties employee annual bonuses period cash flow investing activities net cash used investing activities including capital expenditures 1760 million 1461 million 2544 million 2009 2008 2007 respectively 2007 acquired 8596 outstanding shares diamed holding ag “diamed” 2008 2009 paid cash acquisition additional diamed noncontrolling shares two distributors brought ownership diamed 997 acquisition noncontrolling shares accounted equity transaction although 997 diamed still outstanding noncontrolling interests certain subsidiaries acquired part diamed acquisition capital expenditures 2009 totaled 668 million compared 848 million 606 million 2008 2007 respectively capital expenditures represent addition replacement production machinery research equipment ongoing manufacturing facility additions expansions regulatory environmental compliance leasehold improvements also included capital expenditures investments business systems data communication upgrades enhancements periods included equipment placed clinical diagnostics segment customers contract purchase reagents use subsequent yearend january 6 2010 biorad acquired certain diagnostic businesses biotest ag 45 million euros approximately 654 million cash integrating acquired portion biotests diagnostic businesses biorads product portfolio expected broaden offering area immunohematology provide biorad access us markets range products continue review possible acquisitions expand life science clinical diagnostics segments routinely meet principals brokers subject companies evaluating additional acquisitions preliminary basis certain transactions advance beyond preliminary stages completed cash flow financing activities net cash provided financing activities 2939 million 63 million 2009 2008 net cash used financing activities 75 million 2007 net cash provided financing activities 2009 primarily due biorad issuing 3000 million principal amount senior subordinated 8 notes may 2009 yielded net proceeds 2948 million effective rate 83 net proceeds used working capital general corporate purposes may include acquisitions net cash provided financing activities 2008 principally reflected cash flow exercise stock options receipts employee stock purchase plan transactions partially offset payments longterm debt represented reduction acquired diamed debt net cash used financing activities 2007 principally reflected payments longterm debt represented reduction acquired diamed debt partially offset cash flow exercise stock options receipts employee stock purchase plan transactions 2000 million revolving credit facility secured substantially personal property assets domestic subsidiaries 65 capital stock certain foreign subsidiaries guaranteed existing future material domestic subsidiaries expires june 2010 board directors authorized repurchase 18 million biorad’s common stock indefinite period time 33 million remaining credit agreements restrict ability repurchase stock share repurchases made 2009 2008 2007 offbalance sheet arrangements offbalance sheet arrangements reasonably likely current future material effect financial condition results operations liquidity contractual obligations following summarizes certain contractual obligations december 31 2009 effect obligations expected cash flows future periods millions recent financial accounting standards january 2010 financial accounting standards board fasb issued standard improve disclosures fair value measurements specifically standard requires entities disclose amounts significant transfers level 1 level 2 fair value hierarchy reasons transfers reasons transfers level 3 information reconciliation recurring level 3 measurements purchases sales issuances settlements gross basis standard effective interim period ending march 31 2010 except requirement disclose information purchases sales issuances settlements reconciliation recurring level 3 measurements gross basis disclosures effective interim period ending march 31 2011 standard effect consolidated financial statements disclosure purposes october 2009 fasb issued guidance regard multipledeliverable revenue arrangements guidance regard certain arrangements include software elements guidance regard multipledeliverable revenue arrangements requires entities allocate revenue arrangement using estimated selling prices delivered goods services based selling price hierarchy guidance eliminates residual method revenue allocation requires revenue allocated using relative selling price method guidance regard certain arrangements include software elements removes tangible products scope software revenue guidance provides guidance determining whether software deliverables arrangement includes tangible product covered scope software revenue guidance two new issuances applied prospective basis revenue arrangements entered materially modified effective interim period ending march 31 2011 early adoption permitted expect adopt early effect adopting two new issuances review management june 2009 fasb established fasb accounting standards codification fasb codification source authoritative us gaap recognized fasb applied nongovernmental entities fasb codification explicitly recognizes rules interpretive releases securities exchange commission sec authority federal securities laws sources authoritative gaap sec registrants fasb codification became effective interim period ended september 30 2009 adoption fasb codification impact consolidated financial statements may 2009 adopted general standards accounting disclosure subsequent events occur balance sheet date financial statements issued available issued adoption standard material impact consolidated financial statements january 1 2009 adopted enhanced disclosures regarding fair value measurements nonfinancial assets liabilities measured recognized fair value nonrecurring basis addition april 2009 adopted following new general standards intended provide additional application guidance enhance disclosures regarding fair value measurements impairments securities new general standard regard determining fair value volume level activity asset liability significantly decreased identifying transactions orderly provides additional guidance estimating fair value volume level activity asset liability significantly decreased general standard also provides guidance identifying circumstances indicate transaction orderly effect new general standard material impact consolidated financial statements new general standard regard interim disclosures fair value financial instruments requires disclosures fair value financial instruments interim reporting periods publicly traded companies previously required disclosed annual financial statements general standard amends disclosure requirements fair value financial instruments interim periods adoption general standard affect financial condition results operations cash flows new general standard regard recognition presentation otherthantemporary impairments amends current otherthantemporary impairment guidance debt securities make guidance operational improve presentation disclosure otherthantemporary impairments debt equity securities financial statements general standard amend existing recognition measurement guidance related otherthantemporary impairments equity securities adoption general standard material impact consolidated financial statements january 1 2009 adopted new standard regard noncontrolling interests consolidated financial statements standard establishes new accounting reporting standards noncontrolling interest subsidiary deconsolidation subsidiary clarifies noncontrolling interest subsidiary minority interest ownership interest consolidated entity reported equity consolidated financial statements separate parent company’s equity statement also requires disclosure face consolidated statements income amounts consolidated net income attributable parent noncontrolling interest disclosure requirements applied retrospectively periods presented adoption standard impacted certain captions previously used consolidated statements income largely identifying net income including noncontrolling interests net income attributable biorad certain captions consolidated balance sheets consolidated statements cash flows also changed january 1 2009 adopted new guidance regard determining whether instruments granted sharebased payment transactions participating securities guidance concluded unvested sharebased payment awards contain nonforfeitable rights dividends dividend equivalents whether paid unpaid participating securities shall included computation earnings per share eps pursuant twoclass method adoption guidance material impact eps data 2009 eps prior periods item 7aitem 7 management’s discussion analysis financial condition results operations discussion read conjunction information contained consolidated financial statements accompanying notes integral part statements historical fact statements made annual report include forwardlooking statements respect future financial performance operating results plans objectives involve risk uncertainties forwardlooking statements generally identified use forwardlooking terminology “believe” “expect” “may” “will” “intend” “estimate” “continue” similar expressions negative terms expressions statements involve risks uncertainties could cause actual results vary materially expressed indicated forwardlooking statements based forwardlooking statements current expectations projections future events however actual results may differ materially currently anticipated depending variety risk factors including among things changes general domestic worldwide economic conditions ability successfully develop market new products reliance access necessary intellectual property ability successfully integrate acquired business substantial leverage ability service debt competition government regulation industries operate monetary policies various countries caution place undue reliance forwardlooking statements reflect analysis speak date hereof undertake obligation publicly update revise forwardlooking statements whether result new information future events otherwise except required federal securities law overview multinational manufacturer worldwide distributor life science research clinical diagnostics products business organized two primary segments life science clinical diagnostics mission provide customers specialized tools needed biological research clinical diagnostics sell 8000 products services diverse client base comprised scientific research healthcare industry education government customers worldwide manufacture supply customers range reagents apparatus equipment separate complex chemical biological materials identify analyze purify components customers rely consistency experiments test results believe 70 revenue considered recurring continue build upon worldwide reputation quality innovative products wellrecognized brand names within industry reach global currently provide products services 85000 customers 130 countries worldwide approximately 31 2010 consolidated net sales united states approximately 69 international locations international sales largely denominated local currencies euros swiss franc japanese yen singapore dollar british sterling result consolidated net sales expressed dollars benefit us dollar weakens suffer us dollar strengthens us dollar strengthens benefit lower cost sales international manufacturing sites well nonus suppliers lower international operating expenses january 6 2010 acquired certain diagnostic businesses biotest ag biotest 45 million euro approximately 649 million acquisition broadened product offering area immunohematology provided access us markets products following shows cost goods sold gross profit expense items net income percentage net sales intend discussions critical accounting policies estimates recent accounting pronouncements follow assist understanding principles estimates accounting pronouncements affect financial condition results operations well significant factors caused changes financial condition results operations years ended december 31 2010 2009 critical accounting policies estimates accompanying discussion analysis financial condition results operations based upon consolidated financial statements prepared accordance us generally accepted accounting principles gaap preparation financial statements conformity gaap requires management make estimates assumptions affect reported amounts assets liabilities contingencies date financial statements reported amounts revenues expenses reporting periods evaluate estimates ongoing basis base estimates historical experience assumptions believed reasonable circumstances results form basis making judgments carrying values assets liabilities readily apparent sources however future events may cause us change assumptions estimates may require adjustment actual results could differ estimates determined periods reported annual report form 10k following accounting policies estimates critical understanding financial condition results operations accounting income taxes management required make estimates related income tax provision jurisdictions operate process involves estimating current tax exposure together assessing temporary differences resulting differing treatment items tax accounting purposes differences result deferred tax assets liabilities included within consolidated balance sheets management assesses likelihood deferred tax assets recovered future taxable income extent management believes recovery likely valuation allowance must established extent management establishes valuation allowance increases allowance period increase expense within provision income taxes consolidated statements income may result recognize tax benefit uncertain tax position likely tax position sustained examination taxing authorities based technical merits position tax benefits recognized financial statements particular tax position measured based largest benefit greater 50 likelihood realized upon settlement amount unrecognized tax benefits adjusted appropriate changes facts circumstances significant amendments existing tax law new regulations interpretations taxing authorities new information obtained tax examination resolution examination recognize accrued interest penalties appropriate related unrecognized tax benefits income tax expense significant management judgment required determining provision income taxes deferred tax assets liabilities valuation allowance recorded connection deferred tax assets recorded valuation allowance 370 million 379 million december 31 2010 2009 respectively due uncertainties related ability utilize deferred tax assets primarily consisting certain foreign net operating losses carried forward valuation allowance based management’s current estimates taxable income jurisdictions operate period deferred tax assets recoverable event actual results differ estimates adjusted future periods additional valuation allowance may need established would increase tax provision lowering income impacting financial position realization previously reserved deferred tax assets occur provision income taxes may decrease raising income positively impacting biorad’s financial position valuation goodwill longlived assets goodwill represents excess cost fair value net tangible identifiable intangible assets acquired businesses goodwill amounts assigned reporting units time acquisition adjusted subsequent significant transfers business reporting units assess impairment goodwill annually fourth quarter whenever events changes circumstances indicate carrying value may recoverable perform impairment tests goodwill reporting unit level one level reporting segments goodwill impairment test consists twostep process first step goodwill impairment test used identify potential impairment compares fair value reporting unit carrying value including goodwill fair value reporting unit exceeds carrying amount goodwill reporting unit considered impaired second step impairment test required second step required compares implied fair value reporting unit goodwill carrying amount goodwill fair value reporting unit allocated assets liabilities unit including unrecognized intangible assets reporting unit acquired business combination fair value reporting unit price paid acquire reporting unit carrying amount reporting unit’s goodwill exceeds implied fair value impairment charge recognized amount equal excess use projected discounted cash flow models determine fair value reporting unit discounted cash value projected goodwill may different fair value would result actual transaction willing buyer willing seller projections discounted cash flow models inherently uncertain accordingly actual future cash flows may differ materially projected cash flows management judgment required developing assumptions discounted cash flow model assumptions include revenue growth rates profit margins future capital expenditures working capital needs expected foreign currency rates discount rates terminal values estimate future cash flows using current longterm high level strategic financial forecasts take account current economic environment discount rates used compiled using independent sources current trends similar businesses observable market data changes rates might result material changes valuation determination recoverability goodwill example increase discount rate used discount cash flows decrease computed fair value order evaluate sensitivity fair value calculations goodwill impairment test apply 10 decrease fair value reporting unit validate reasonableness reporting unit fair values reconcile aggregate fair values reporting units enterprise market capitalization including implied control premium performing reconciliation may depending volatility market value stock price use either stock price valuation date average stock price range dates around valuation date compare implied control premium premiums paid observable recent transactions comparable companies determine fair values reporting units reasonable purposes recognition measurement impairment loss longlived asset assets grouped assets liabilities lowest level identifiable cash flows largely independent cash flows assets liabilities assess impairment longlived assets including identifiable intangibles whenever events changes circumstances indicate carrying value may recoverable factors consider important could trigger impairment review include · significant underperformance relative expected historical projected future operating results · significant changes manner use longlived assets intangible assets strategy overall business · current expectation likely longlived asset sold otherwise disposed end previously estimated useful life · significant negative industry legal regulatory economic trends management determines carrying value longlived assets may recoverable based upon existence one indicators impairment test impairment based projected undiscounted cash flow method projected future operating results cash flows asset group used establish fair value used evaluating carrying value longlived intangible assets estimate future cash flows longlived assets using current longterm financial forecasts carrying amount longlived asset recoverable exceeds sum undiscounted cash flows expected result use eventual disposition asset case impairment loss would recognized impairment loss recognized amount carrying amount exceeds fair value 2009 2008 reviews indicated impairment charges 38 million 16 million respectively related developed technology intangible assets certain product lines acquired 2006 also 2008 review indicated impairment charge 272 million related goodwill 1999 acquisition goodwill impairment caused primarily continuing decline bse bovine spongiform encephalopathy product line impairment losses recorded 2010 valuation inventories value inventory lower actual cost purchase andor manufacture inventory current estimated realizable value inventory review inventory quantities hand reduce cost basis excess obsolete inventory based primarily estimated forecast product demand production requirements quality efficacy potency raw materials review done quarterly basis warranted circumstances frequently addition industry characterized technological change frequent new product development product obsolescence could result increase amount obsolete inventory quantities hand estimates future product demand may prove inaccurate high may overstated carrying value inventory future inventory determined overvalued would required write value inventory market recognize costs cost goods sold time determination therefore although make efforts ensure accuracy forecasts future product demand perform procedures safeguard overall inventory quality significant unanticipated changes demand technological developments regulations storage conditions environment factors affecting biological materials could significant impact value inventory reported results operations valuation investments regularly review investments factors may indicate decline fair value investment carrying value otherthantemporary factors considered evaluating whether decline fair value otherthantemporary include ability intent retain investment period time sufficient allow recovery value duration extent fair value less cost financial condition prospects issuer reviews inherently uncertain value investment may fully recover may decline future periods resulting realized losses warranty reserves warrant certain equipment defects design materials workmanship generally period one year upon delivery acceptance equipment establish part cost goods sold provision expected costs warranty repairs based historical experience specific warranty terms customer feedback review performed quarterly basis assess adequacy warranty reserve adjusted necessary warranty reserve based actual experience expected future costs incurred realized costs higher expected costs cost goods sold would lower period estimation higher realized allowance doubtful accounts maintain allowance doubtful accounts estimated losses resulting collectibility customer accounts amount allowance determined analyzing known uncollectible accounts age receivables economic conditions customers’ country industry historical losses customers’ general creditworthiness amounts later determined specifically identified uncollectible charged written allowance uncertainty current economic environment prolonged could result greater amounts becoming uncollectible future estimates losses higher actual uncollectible accounts would report lower profitability estimates made higher profitability receivable collected litigation accruals record liabilities consolidated balance sheets estimated amounts claims probable reasonably estimated likelihood material change estimated reserves dependent possible outcome settlement negotiations regulatory judicial review development facts circumstances extended litigation could change claims assessments amount range loss outstanding litigation uncertain disclose footnotes financial statements unable make reasonable estimate material liability could result unfavorable outcomes litigation events occur assess potential liability related pending litigation revise estimates revisions could materially impact results operations corporate results sales gross margins expenses net sales net sales 2010 increased 80 193 billion 178 billion 2009 biotest contributing approximately 561 million growth sales foreign currency minimal impact total sales growth excluding additional sales biotest acquisition 2010 sales grew 48 currency neutral basis currency neutral sales growth excluding biotest achieved regions primarily driven growth asia pacific eastern europe latin america life science segment sales 2010 6481 million increase 26 22 currency neutral basis compared 2009 sales growth primarily attributed realtime pcr products new product line tc 10tm automated cell counter partially offset general market weakness especially europe currency neutral sales growth life science segment primarily asia pacific eastern europe latin america north america european sales declined clinical diagnostics segment reported sales 2010 127 billion increase 110 compared 2009 biotest contributing approximately 49 sales growth currency neutral basis sales 2010 increased 113 including biotest compared 2009 clinical diagnostics realized growth quality controls product line immunohematology inclusion biotest diabetes bioplex® 2200 instruments reagents sales growth primarily asia pacific eastern europe latin america lesser extent north america net sales increased 11 2009 178 billion compared 2008 excluding impact foreign currency 2009 sales increased approximately 55 compared 2008 currency neutral sales growth generated primarily regions asia pacific united states developing emerging markets eastern europe latin america diamed holding ag diamed distributors acquired late 2008 early 2009 also contributed sales growth life science segment sales decreased 19 2009 compared 2008 currency neutral basis sales increased 08 decline sales bse bovine spongiform encephalopathy products continued 2009 product prices governmentmandated tests declined excluding impact bse product line life science segment grew 13 2009 compared 2008 product groups showed growth included realtime pcr instruments reagents proteontm protein interaction analysis system biotechnology explorertm program sales growth life science segment primarily asia pacific latin america us european sales represented majority declining sales clinical diagnostics segment achieved sales growth 30 2009 compared 2008 excluding impact foreign currency sales increased 85 compared 2008 clinical diagnostics major product lines showed sales growth bioplex 2200 systems quality controls blood virus products decline sales contract manufacturing contracts renewed regional basis currency neutral sales growth primarily provided asia pacific united states emerging markets including latin america partially offset sales declines europe gross margin consolidated gross margins 566 2010 compared 560 2009 life science segment gross margins 2010 improved 2009 approximately 24 increase primarily due improved manufacturing overhead absorption reduction costs favorable product mix toward higher margin products clinical diagnostics segment gross margins 2010 decreased approximately 04 2009 biotest acquisition negative impact clinical diagnostics segment gross margins due higher inventory values resulting purchase accounting overall lower margins historically achieved segment partially offsetting decrease gross margins favorable settlement intellectual property disputes lower royalty expenses consolidated gross margins 560 2009 compared 546 2008 life science segment gross margins improved 2009 compared 2008 01 improvement result better manufacturing overhead absorption reduction costs move new products cost efficient offshore manufacturing sales mix favoring higher margin reagents rather instruments typically lower margin clinical diagnostics segment gross margins improved approximately 22 2009 compared 2008 improvements included lower royalty payments paid licensors result expiration patents blood virus immunohematology products increased margin acquisition diamed distributors reduction impact diamed preacquisition inventory subject purchase accounting rules additionally bioplex 2200 margins improved greater placements higher test volume selling general administrative expense consolidated selling general administrative expense sga represented 330 sales 2010 compared 337 sales 2009 growth rate absolute sga spending less rate sales growth moderation spending employee related costs third party commissions lowered rate sga spending sales absolute dollar increases sga primarily employeerelated costs travel related costs professional services consolidated sga represented 337 net sales 2009 compared 335 net sales 2008 growth absolute sga spending proportional sales clinical diagnostics segment grew sga slightly lower rate growth sales life science segment’s reduced rate spending sga larger decline sales absolute dollar increases sga primarily employeerelated expenses purchased intangibles amortization partially offset lower travel costs professional services research development expense research development expense 1723 million 2010 89 sales compared 92 sales 2009 life science clinical diagnostics segments research development expense increased absolute dollars however percent sales clinical diagnostics segment expense decreased 2009 life science segment efforts concentrated genomics proteomics process chromatography food diagnostics applications majority clinical diagnostics segment increase related additional emphasis diabetes monitoring clinical microbiology expanded blood virus diagnostic tests improved automation research development expense 1636 million 2009 92 sales compared 90 sales 2008 life science segment development efforts directed towards genomics proteomics process chromatography applications clinical diagnostics segment development efforts focused expanded tests bioplex 2200 testing platform well enhancements existing automation reagents used immunohematology clinical microbiology blood virus diagnostic tests additional quality control products absolute dollars increase clinical diagnostic segment partially offset decrease life science segment corporate results nonoperating interest expense interest expense 2010 increased 355 637 million compared 2009 increase interest expense 2010 2009 primarily due payment call premium expensing unamortized debt issuance costs redemption 2000 million 6125 senior subordinated notes december 2010 interest associated 300 million 80 senior subordinated notes due 2016 issued may 2009 principal debt obligation 2250 million 75 senior subordinated notes redeemed january 2011 interest expense 2009 increased 464 470 million compared 2008 additional 3000 million 80 senior subordinated notes issued may 2009 increased indebtedness 7426 million december 31 2009 increased interest expense 2009 compared 2008 foreign currency exchange gains losses foreign currency exchange gains losses consist foreign currency transaction gains losses intercompany net receivables payables change fair value forward foreign exchange contracts used manage foreign currency exchange risk net foreign currency exchange losses 2010 2009 2008 39 million 50 million 76 million respectively 2010 2009 net foreign currency exchange losses attributable greater market volatility costs hedge result estimating process inherent timing shipments payments intercompany debt 2008 net loss reflected number unhedged european based intercompany loans denominated euros british sterling swiss francs arose part acquisitions december 2008 significant volatility december 2008 resulted approximate 3 million noncash loss accounts additionally recorded 2008 loss 16 million unhedged intercompany payables brazilian subsidiaries historically hedged due high cost years affected economic hedging program employ hedge intercompany receivables payables income expense net income expense net 2010 includes investment dividend income generally interest income cash equivalents shortterm investments long term marketable securities income net 2010 39 million compared 69 million 2009 decrease primarily resulted nonrecurring income 46 million 2009 related relief foreign nonincome based tax obligation partially offset higher otherthantemporary impairment investments 2009 2010 income net 2009 69 million compared expense net 04 million 2008 2009 income net included relief 46 million foreign nonincome based tax obligation higher interest dividend income lower charges impairment investments compared 2008 effective tax rate effective tax rate 15 20 2010 2009 respectively effective tax rates 2010 2009 reflected tax benefits nontaxable dividend income research development tax credits differences us foreign rates lower effective tax rate 2010 primarily due benefit approximately 224 million related us foreign tax credits associated 1639 million distribution earnings foreign affiliates us effective tax rate 20 31 2009 2008 respectively decrease primarily related completion fourth quarter 2009 us income tax examination covering years 2001 2005 favorable tax rates associated higher earnings operations lowertax jurisdictions throughout world reduction balance unrecognized tax benefits due lapses statutes effective tax rate may impacted future either favorably unfavorably many factors including limited statutory tax rates changes tax laws regulations tax audits settlements generation tax credits liquidity capital resources biorad operates conducts business globally primarily subsidiary companies established markets trade goods manufactured small number locations shipped local distribution facilities around world product mix diversified certain products compete largely product efficacy others compete price gross margins generally sufficient exceed normal operating costs funding research development new products well routine outflows capital expenditures interest tax expense covered cash flow operations addition annual positive cash flow operating activities additional liquidity readily available via sale shortterm investments access 2000 million amended restated credit agreement credit agreement entered june 2010 borrowings credit agreement revolving basis used make acquisitions working capital general corporate purposes outstanding borrowings credit agreement december 31 2010 credit agreement expires june 21 2014 continuing slow economic growth developed nations may adversely affect future results operations demand products services could change dramatically previous years based activity support levels government universities hospitals private industry including diagnostic laboratories need certain sovereign nations large annual deficits curtail spending could lead slower growth even decline business sovereign nations either delaying payment goods services renegotiating debts could impact liquidity december 31 2010 10252 million cash equivalents shortterm investments taking consideration cash needed redeem 750 senior subordinated notes january 2011 available 7906 million cash equivalents shortterm investments domestic international lines credit 2511 million available borrowing december 31 2010 139 million reserved standby letters credit issued banks guarantee obligations various companies management believes availability together cash flow operations adequate meet current objectives operations research development capital additions manufacturing distribution plant equipment information technology systems future acquisitions instability credit markets along inadequate capitalization parts financial services industry could impact ability customer’s ability access necessary capital acquisition equipment technology modernization financing inventory receivables without crucial intermediary function manufacturers end users may renegotiate existing arrangements reduce activity levels seek business partners cash flow operations net cash provided operations 2259 million 3251 million 1914 million 2010 2009 2008 respectively net decrease 2010 2009 992 million primarily represented increase cash paid suppliers including royalty payments covering multiple years payments settle intellectual property disputes higher payments income taxes higher interest payments primarily call premium redemption 2000 million 6125 senior subordinated notes december 2010 interest associated 300 million 80 senior subordinated notes due 2016 issued may 2009 partially offsetting decrease increase cash received customers compared 2009 however cash received customers slower rate expected 2010 due slowdown cash collections many governments especially europe address need deficit reductions sovereign borrowings continue stress cash flow global companywide goal net change 2009 2008 1337 million represented 1219 million improvement net change cash received customers cash paid suppliers largest item contributed increase cash flows primarily due decrease inventory levels provided approximately 36 million cash inflows 2009 expiration patents slower payment patterns reduced royalty payments moderation growth headcount reduction sga costs contributed improved cash flow additionally experienced reduction taxes paid 114 million regularly review allowance uncollectible receivables believe net accounts receivable fully realizable also routinely review inventory impact obsolescence changes market prices caused introduction new products technologies government reimbursement policies expect first quarter 2011 cash flows operations lower biorad historically makes larger payments royalties fourth quarter sales commissions third parties employee annual bonuses period cash flow investing activities net cash used investing activities including capital expenditures 2165 million 1760 million 1461 million 2010 2009 2008 respectively capital expenditures 2010 totaled 873 million compared 668 million 848 million 2009 2008 respectively capital expenditures represent addition replacement production machinery research equipment ongoing manufacturing facility additions expansions regulatory environmental compliance leasehold improvements also included capital expenditures investments business systems data communication upgrades enhancements anticipate accelerating expenditures future periods expand ecommerce platform internationally implementation globally single instance erp platform committed purchase software december 2010 estimated global implementation cost could reach approximately 150 million estimated take approximately five years implement periods included equipment placed clinical diagnostics segment customers contract purchase reagents use january 6 2010 acquired certain diagnostic businesses biotest ag 45 million euros approximately 649 million cash september 2010 acquired remaining noncontrolling interests diamed france sa 102 million euros approximately 129 million cash 2010 2009 2008 acquired remaining shares diamed holding ag diamed approximately 14 million 300 million 336 million respectively 2008 also paid cash acquisition two distributors approximately 17 million acquisitions included clinical diagnostics segment anticipate purchase 2011 remaining noncontrolling interests two diamed subsidiaries estimate cost approximately 5 million continue review possible acquisitions expand life science clinical diagnostics segments including independent distributors diamed product line routinely meet principals brokers subject companies evaluating additional acquisitions preliminary basis certain transactions advance beyond preliminary stages completed cash flow financing activities net cash provided financing activities 2287 million 2939 million 63 million 2010 2009 2008 respectively cash provided 2010 primarily due biorad issuing 4250 million principal amount 4875 senior notes december 2010 yielded net proceeds 4226 million effective rate 4946 december 2010 2043 million net proceeds used redeem 2000 million 6125 senior subordinated notes including call premium january 2011 remaining proceeds together cash hand used redeem 2250 million 750 senior subordinated notes 2346 million including call premium refinancing lower interest expense going forward net cash provided financing activities 2009 primarily due biorad issuing 300 million 8 senior subordinated notes may 2009 yielded net proceeds 2948 million effective rate 83 net proceeds used working capital general corporate purposes may include acquisitions net cash provided financing activities 2008 principally reflected cash flow exercise stock options receipts employee stock purchase plan transactions partially offset payments longterm debt represented reduction acquired diamed debt credit agreement entered june 2010 secured substantially personal property assets domestic subsidiaries 65 capital stock certain foreign subsidiaries guaranteed existing future material domestic subsidiaries expires june 2014 board directors authorized repurchase 18 million biorad’s common stock indefinite period time 33 million yet repurchased credit agreement indenture governing 80 senior subordinated notes restrict ability repurchase stock repurchase shares common stock 2010 2009 2008 offbalance sheet arrangements offbalance sheet arrangements reasonably likely current future material effect financial condition results operations liquidity contractual obligations following summarizes certain contractual obligations december 31 2010 effect obligations expected cash flows future periods millions recent financial accounting standards january 2010 financial accounting standards board fasb issued standard improve disclosures fair value measurements specifically standard requires entities disclose amounts significant transfers level 1 level 2 fair value hierarchy reasons transfers reasons transfers level 3 information reconciliation recurring level 3 measurements purchases sales issuances settlements gross basis standard effective interim period ended march 31 2010 except requirement disclose information purchases sales issuances settlements reconciliation recurring level 3 measurements gross basis disclosures effective interim period ending march 31 2011 standard effect expected effect consolidated financial statements item 7aitem 7 management’s discussion analysis financial condition results operations discussion read conjunction information contained consolidated financial statements accompanying notes integral part statements historical fact statements made annual report include forward looking statements respect future financial performance operating results plans objectives involve risk uncertainties forwardlooking statements generally identified use forwardlooking terminology “believe” “expect” “may” “will” “intend” “estimate” “continue” similar expressions negative terms expressions statements involve risks uncertainties could cause actual results vary materially expressed indicated forwardlooking statements based forward looking statements current expectations projections future events however actual results may differ materially currently anticipated depending variety risk factors including among things changes general domestic worldwide economic conditions ability successfully develop market new products reliance access necessary intellectual property ability successfully integrate acquired business substantial leverage ability service debt competition government regulation industries operate monetary policies various countries caution place undue reliance forwardlooking statements reflect analysis speak date hereof undertake obligation publicly update revise forward looking statements whether result new information future events otherwise except required federal securities law overview multinational manufacturer worldwide distributor life science research clinical diagnostics products business organized two primary segments life science clinical diagnostics mission provide scientists specialized tools needed biological research clinical diagnostics sell 8000 products services diverse client base comprised scientific research healthcare education government customers worldwide manufacture supply customers range reagents apparatus equipment separate complex chemical biological materials identify analyze purify components customers require standardization experiments test results much revenues recurring impacted support many governments research healthcare current global economic outlook becoming increasingly uncertain need control government social spending many governments limits opportunities growth approximately 30 2011 consolidated net sales derived united states approximately 70 derived international locations international sales largely denominated local currencies euros swiss franc japanese yen singapore dollar british sterling result consolidated net sales expressed dollars benefit us dollar weakens suffer dollar strengthens us dollar strengthens benefit lower cost sales international manufacturing sites well nonus suppliers lower international operating expenses october 2011 acquired issued outstanding stock quantalife inc quantalife fair value consideration acquisition date 1794 million comprised 1503 million paid cash closing date 50 million holdback cash completion certain postclosing matters 241 million contingent consideration potentially payable quantalife shareholders contingent consideration could reach 48 million upon achievement certain sales development milestones pretax loss operations quantalife 70 million period acquisition october 4 2011 december 31 2011 results operations quantalife included results operations life science segment transaction accounted acquisition business integrating acquired quantalife business biorad expected expand current stateoftheart methods quantitative polymerase chain reaction pcr believe complement biorads existing amplification business determination fair value net assets acquired quantalife based upon valuation information estimates assumptions available october 4 2011 still finalizing analysis limited number acquired tax attributes could affect fair values certain deferred tax assets goodwill result december 31 2011 accounting acquisition preliminary january 2012 purchased certain assets current raw materials supplier approximately 155 million asset acquisition included clinical diagnostics segments results operations acquisition date accounted business combination believe acquisition allow us secure supply critical raw materials lower overall costs clinical diagnostics segment following shows cost goods sold gross profit expense items net income percentage net sales intend discussions critical accounting policies estimates recent accounting pronouncements follow assist understanding principles estimates accounting pronouncements affect financial condition results operations well significant factors caused changes financial condition results operations years ended december 31 2011 2010 critical accounting policies estimates accompanying discussion analysis financial condition results operations based upon consolidated financial statements prepared accordance us generally accepted accounting principles gaap preparation financial statements conformity gaap requires management make estimates assumptions affect reported amounts assets liabilities contingencies date financial statements reported amounts revenues expenses reporting periods evaluate estimates ongoing basis base estimates historical experience assumptions believed reasonable circumstances results form basis making judgments carrying values assets liabilities readily apparent sources however future events may cause us change assumptions estimates may require adjustment actual results could differ estimates determined periods reported annual report form 10k following accounting policies estimates critical understanding financial condition results operations accounting income taxes management required make estimates related income tax provision jurisdictions operate process involves estimating current tax exposure together assessing temporary differences resulting differing treatment items tax accounting purposes differences result deferred tax assets liabilities included within consolidated balance sheets management assesses likelihood deferred tax assets recovered future taxable income extent management believes recovery likely valuation allowance must established extent management establishes valuation allowance increases allowance period increase expense within provision income taxes consolidated statements income may result recognize tax benefit uncertain tax position likely tax position sustained examination taxing authorities based technical merits position tax benefits recognized financial statements particular tax position measured based largest benefit greater 50 likelihood realized upon settlement amount unrecognized tax benefits adjusted appropriate changes facts circumstances significant amendments existing tax law new regulations interpretations taxing authorities new information obtained tax examination resolution examination recognize accrued interest penalties appropriate related unrecognized tax benefits income tax expense significant management judgment required determining provision income taxes deferred tax assets liabilities valuation allowance recorded connection deferred tax assets recorded valuation allowance 489 million 370 million december 31 2011 2010 respectively due uncertainties related ability utilize deferred tax assets primarily consisting certain foreign net operating losses carried forward valuation allowance based management’s current estimates taxable income jurisdictions operate period deferred tax assets recoverable event actual results differ estimates adjusted future periods additional valuation allowance may need established would increase tax provision lowering income impacting financial position realization deferred tax assets valuation allowance provided occur provision income taxes may decrease raising income positively impacting biorad’s financial position valuation goodwill longlived assets goodwill represents excess cost fair value net tangible identifiable intangible assets acquired businesses goodwill amounts assigned reporting units time acquisition adjusted subsequent significant transfers business reporting units assess impairment goodwill annually fourth quarter whenever events changes circumstances indicate carrying value may recoverable perform impairment tests goodwill reporting unit level one level reporting segments goodwill impairment test consists twostep process first step goodwill impairment test used identify potential impairment compares fair value reporting unit carrying value including goodwill fair value reporting unit exceeds carrying amount goodwill reporting unit considered impaired second step impairment test required second step required compares implied fair value reporting unit goodwill carrying amount goodwill fair value reporting unit allocated assets liabilities unit including unrecognized intangible assets reporting unit acquired business combination fair value reporting unit price paid acquire reporting unit carrying amount reporting units goodwill exceeds implied fair value impairment charge recognized amount equal excess use projected discounted cash flow model determine fair value reporting unit discounted cash value method determining goodwill may different fair value would result actual transaction willing buyer willing seller projections discounted cash flow models inherently uncertain accordingly actual future cash flows may differ materially projected cash flows management judgment required developing assumptions discounted cash flow model assumptions include revenue growth rates profit margins future capital expenditures working capital needs expected foreign currency rates discount rates terminal values estimate future cash flows using current longerterm high level financial forecasts take account current economic environment discount rates used compiled using independent sources current trends similar businesses observable market data changes rates might result material changes valuation determination recoverability goodwill example increase discount rate used discount cash flows decrease computed fair value order evaluate sensitivity fair value calculations goodwill impairment test apply 10 decrease fair value reporting unit validate reasonableness reporting unit fair values reconcile aggregate fair values reporting units enterprise market capitalization including implied control premium performing reconciliation may depending volatility market value stock price use either stock price valuation date average stock price range dates around valuation date compare implied control premium premiums paid observable recent transactions comparable companies determine accumulated fair values reporting units reasonable purposes recognition measurement impairment loss longlived asset assets grouped assets liabilities lowest level identifiable cash flows largely independent cash flows assets liabilities assess impairment longlived assets including identifiable intangibles whenever events changes circumstances indicate carrying value may recoverable factors consider important could trigger impairment review include • significant underperformance relative expected historical projected future operating results • significant changes manner use longlived assets intangible assets strategy overall business • current expectation likely longlived asset sold otherwise disposed end previously estimated useful life • significant negative industry legal regulatory economic trends management determines carrying value longlived assets may recoverable based upon existence one indicators impairment test impairment based projected undiscounted cash flow method projected future operating results cash flows asset group used establish fair value used evaluating carrying value longlived intangible assets estimate future cash flows longlived assets using current longterm financial forecasts carrying amount longlived asset recoverable exceeds sum undiscounted cash flows expected result use eventual disposition asset case impairment loss would recognized impairment loss recognized amount carrying amount exceeds fair value 2009 reviews indicated impairment charge 38 million related developed technology intangible assets certain product lines acquired 2006 impairment losses recorded 2011 2010 valuation inventories value inventory lower actual cost purchase andor manufacture inventory current estimated net realizable value inventory review inventory quantities hand reduce cost basis excess obsolete inventory based primarily estimated forecast product demand production requirements quality efficacy potency raw materials review done quarterly basis warranted circumstances frequently addition industry characterized technological change frequent new product development product obsolescence could result increase amount obsolete inventory quantities hand estimates future product demand may prove inaccurate high may overstated carrying value inventory future inventory determined overvalued would required write value inventory market recognize costs cost goods sold time determination therefore although make efforts ensure accuracy forecasts future product demand perform procedures safeguard overall inventory quality significant unanticipated changes demand technological developments regulations storage conditions economic environmental factors affecting biological materials could significant impact value inventory reported results operations valuation investments regularly review investments factors may indicate decline fair value investment carrying value otherthantemporary factors considered evaluating whether decline fair value otherthantemporary include ability intent retain investment period time sufficient allow recovery value duration extent fair value less cost financial condition prospects issuer reviews inherently uncertain value investment may fully recover may decline future periods resulting realized losses warranty reserves warrant certain equipment defects design materials workmanship generally period one year upon delivery acceptance equipment establish part cost goods sold provision expected costs warranty repairs based historical experience specific warranty terms customer feedback review performed quarterly basis assess adequacy warranty reserve adjusted necessary warranty reserve based actual experience expected future costs incurred realized costs higher expected costs cost goods sold would lower period estimation higher realized allowance doubtful accounts maintain allowance doubtful accounts estimated losses resulting collectability customer accounts amount allowance determined analyzing known uncollectible accounts age receivables economic conditions customers’ country industry historical losses customers’ general creditworthiness amounts later determined specifically identified uncollectible charged written allowance uncertainty current economic environment prolonged could result greater amounts becoming uncollectible future estimates losses higher actual uncollectible accounts would report lower profitability estimates made higher profitability receivable collected litigation accruals record liabilities consolidated balance sheets estimated amounts claims probable reasonably estimated likelihood material change estimated reserves dependent possible outcome settlement negotiations regulatory judicial review development facts circumstances extended litigation could change claims assessments amount range loss outstanding litigation uncertain disclose footnotes financial statements unable make reasonable estimate material liability could result unfavorable outcomes litigation events occur assess potential liability related pending litigation revise estimates revisions could materially impact results operations results operations sales gross margins expenses net sales net sales 2011 increased 207 billion 193 billion 2010 sales increase 76 excluding impact foreign currency 2011 sales increased approximately 31 compared 2010 currency neutral sales growth achieved many regions except europe life science segment sales 2011 6947 million increase 72 compared 2010 currency neutral basis sales increased 34 compared 2010 product groups showing growth included process chromatography media imaging systems amplification electrophoresis currency neutral sales growth life science segment primarily us latin america pacific rim many developed countries constraints government budgets limited sales growth opportunities clinical diagnostics segment sales 2011 136 billion increase 78 compared 2010 currency neutral basis sales increased 29 compared 2010 clinical diagnostics product lines generating growth immunohematology quality controls bioplex 2200 diabetes monitoring clinical microbiology currency neutral sales growth primarily pacific rim partially offset weaker sales europe due spending constraints several countries national healthcare systems sales 2010 increased 80 193 billion 178 billion 2009 biotest contributing approximately 561 million growth sales foreign currency minimal impact total sales growth excluding additional sales biotest acquisition 2010 sales grew 48 currency neutral basis currency neutral sales growth excluding biotest achieved regions primarily driven growth pacific rim eastern europe latin america life science segment sales 2010 6481 million increase 26 22 currency neutral basis compared 2009 sales growth primarily attributed realtime pcr products new product line tc 10™ automated cell counter partially offset general market weakness especially europe currency neutral sales growth life science segment primarily pacific rim eastern europe latin america north america european sales declined clinical diagnostics segment reported sales 2010 127 billion increase 110 compared 2009 biotest contributing approximately 49 sales growth currency neutral basis sales 2010 increased 113 including biotest compared 2009 clinical diagnostics realized growth quality controls product line immunohematology inclusion biotest diabetes bioplex® 2200 instruments reagents sales growth primarily pacific rim eastern europe latin america lesser extent north america gross margin consolidated gross margins 568 2011 compared 566 2010 relatively unchanged life science segment clinical diagnostics segment consolidated gross margins 566 2010 compared 560 2009 life science segment gross margins 2010 improved 2009 approximately 24 increase primarily due improved manufacturing overhead absorption reduction costs favorable product mix toward higher margin products clinical diagnostics segment gross margins 2010 decreased approximately 04 2009 biotest acquisition negative impact clinical diagnostics segment gross margins due higher inventory values resulting purchase accounting overall lower margins historically achieved segment partially offsetting decrease gross margins favorable settlement intellectual property disputes lower royalty expenses selling general administrative expense consolidated selling general administrative expenses sga represented 336 sales 2011 compared 330 sales 2010 growth sga greater rate sales growth increases primarily driven employeerelated costs largest cost professional services bad debt provisions primarily associated public agencies southern europe facilities travel information technology marketing consolidated sga represented 330 sales 2010 compared 337 sales 2009 growth rate absolute sga spending less rate sales growth moderation spending employee related costs third party commissions lowered rate sga spending sales absolute dollar increases sga primarily employeerelated costs travel related costs professional services research development expense research development expense increased 1864 million 90 sales 2011 compared 1723 million 89 sales 2010 life science segment research development expense increased 2011 2010 part due acquisition quantalife october 2011 life science segment efforts concentrated genomics proteomics process chromatography applications clinical diagnostics segment research development expense increased 2011 2010 efforts concentrated diabetes immunohematology focused mainly development cost reduction instruments research development expense 1723 million 2010 89 sales compared 1636 million 92 sales 2009 life science clinical diagnostics segments research development expense increased absolute dollars however percent sales clinical diagnostics segment expense decreased 2009 life science segment efforts concentrated genomics proteomics process chromatography food diagnostics applications majority clinical diagnostics segment increase related additional emphasis diabetes monitoring clinical microbiology expanded blood virus diagnostic tests improved automation results operations nonoperating interest expense interest expense 2011 decreased 166 531 million compared 2010 primarily due refinancing portion debt december 2010 january 2011 lowering overall borrowing rate interest rates current borrowings 3000 million 80 senior subordinated notes fixed 2016 80 4250 million 4875 senior notes fixed 2020 4875 interest expense 2010 increased 355 637 million compared 2009 increase interest expense 2010 2009 primarily due payment call premium expensing unamortized debt issuance costs redemption 2000 million 6125 senior subordinated notes december 2010 interest associated 3000 million 80 senior subordinated notes issued may 2009 principal debt obligation 2250 million 75 senior subordinated notes redeemed january 2011 foreign currency exchange gains losses foreign currency exchange gains losses consist foreign currency transaction gains losses intercompany net receivables payables change fair value forward foreign exchange contracts used manage foreign currency exchange risk net foreign currency exchange losses 2011 2010 2009 138 million 39 million 50 million respectively 2011 2010 2009 net foreign currency exchange losses attributable market volatility increasing costs hedge result estimating process inherent timing shipments payments intercompany debt addition approximately 46 million 2011 loss attributable entering larger forward foreign exchange contracts required years affected economic hedging program employ hedge intercompany receivables payables income expense net income expense net includes investment dividend income generally interest income cash equivalents shortterm investments long term marketable securities income expense net 2011 increased 76 million income compared 39 million income 2010 increase primarily due higher investment income included dividend income holdings sartorius ag whose dividends almost doubled 2010 settlement legal dispute third quarter 2010 partially offset higher otherthantemporary impairment losses certain investments 2011 2010 income net 2010 39 million compared 69 million 2009 decrease primarily resulted nonrecurring income 46 million 2009 related relief foreign nonincome based tax obligation partially offset higher otherthantemporary impairment investments 2009 2010 effective tax rate effective tax rate 24 15 2011 2010 respectively effective tax rates periods lower us statutory rate due tax benefits nontaxable dividend income research development tax credits differences us foreign statutory tax rates discrete events recorded period lower effective tax rate 2010 primarily due benefit approximately 224 million related us foreign tax credits associated 1639 million distribution earnings foreign affiliates us effective tax rate 15 20 2010 2009 respectively effective tax rates 2010 2009 reflected tax benefits nontaxable dividend income research development tax credits differences us foreign rates lower effective tax rate 2010 primarily due benefit approximately 224 million related us foreign tax credits associated 1639 million distribution earnings foreign affiliates us effective tax rate may impacted future either favorably unfavorably many factors including limited changes statutory tax rates changes tax laws regulations tax audits settlements generation tax credits liquidity capital resources biorad operates conducts business globally primarily subsidiary companies established markets trade goods manufactured small number locations shipped local distribution facilities around world product mix diversified certain products compete largely product efficacy others compete price gross margins generally sufficient exceed normal operating costs funding research development new products well routine outflows capital expenditure interest taxes addition annual positive cash flow operating activities additional liquidity readily available via sale shortterm investments access 2000 million amended restated credit agreement credit agreement entered june 2010 borrowings credit agreement revolving basis used make acquisitions working capital general corporate purposes outstanding borrowings credit agreement december 31 2011 credit agreement expires june 21 2014 continuing slow economic growth developed nations may adversely affect future results operations demand products services could change dramatically previous years based activity funding reimbursement constraints support levels government universities hospitals private industry including diagnostic laboratories need certain sovereign nations large annual deficits curtail spending could lead slower growth even decline business sovereign nations either delaying payment goods services renegotiating debts could impact liquidity situation sovereign nations continuously developing greater knowledge situation reported media december 31 2011 accounts receivable net allowance doubtful accounts spain italy greece portugal 813 million december 31 2011 available 8131 million cash equivalents shortterm investments domestic international lines credit 2205 million available borrowing december 31 2011 126 million reserved standby letters credit issued banks guarantee obligations mostly meet deductible amount insurance policies benefit management believes availability together cash flow operations adequate meet current objectives operations research development capital additions manufacturing distribution plant equipment information technology systems acquisition reasonable proportion existing total available capital instability credit markets along inadequate capitalization parts financial services industry could impact ability customer’s ability access necessary capital acquisition equipment technology modernization financing inventory receivables without crucial intermediary function manufacturers end users may renegotiate existing arrangements reduce activity levels seek business partners cash flows operations net cash provided operations 2598 million 2259 million 3251 million 2011 2010 2009 respectively net increase 2011 2010 339 million primarily represented higher cash received customers due higher sales decline interest expense due refinancing portion debt december 2010 january 2011 decline income taxes paid caused timing differences partially offset increase amount paid suppliers employees second quarter 2010 biorad made large payment 226 million euros certain licensor covering royalties multiple years continue focus cash flow improvements global companywide goal net decrease 2010 2009 992 million primarily represented increase cash paid suppliers including royalty payments covering multiple years payments settle intellectual property disputes higher payments income taxes higher interest payments primarily call premium redemption 2000 million 6125 senior subordinated notes december 2010 interest associated 3000 million 80 senior subordinated notes issued may 2009 partially offsetting decrease increase cash received customers compared 2009 however cash received customers slower rate expected 2010 due slowdown cash collections many governments especially europe addressed need deficit reductions sovereign borrowings regularly review allowance uncollectible receivables believe net accounts receivable fully realizable also routinely review inventory impact obsolescence changes market prices caused introduction new products technologies government reimbursement policies expect first quarter 2012 cash flows operations lower fourth quarter 2011 biorad historically makes larger payments royalties fourth quarter sales commissions third parties annual employee bonuses period cash flows investing activities net cash used investing activities including capital expenditures 3834 million 2165 million 1760 million 2011 2010 2009 respectively capital expenditures 2011 totaled 1029 million compared 885 million 680 million 2010 2009 respectively capital expenditures represent addition replacement production machinery research equipment ongoing manufacturing facility additions expansion regulatory environmental compliance also included capital expenditures investments business systems data communication upgrades enhancements periods include equipment placed clinical diagnostics segment customers contract purchase reagents use capital expenditures increased anticipate continue increase future periods due implementation global single instance enterprise resource planning erp platform expand ecommerce platform internationally erp software purchased december 2010 estimated global implementation cost single instance erp platform could reach approximately 150 million estimated take approximately four years implement october 2011 acquired issued outstanding stock quantalife total consideration 1794 million comprised 1503 million cash 50 million holdback cash completion certain postclosing matters contingent consideration potentially payable quantalife shareholders contingent consideration recognized estimated fair value 241 million could reach 48 million upon achievement certain sales development milestones transaction accounted acquisition business operating results quantalife included life science segment acquisition date integrating acquired quantalife business biorad expected expand current stateoftheart methods quantitative pcr believe complement biorads existing amplification business january 2012 purchased certain assets current raw materials supplier approximately 155 million asset acquisition included clinical diagnostics segments results operations acquisition date accounted business combination believe acquisition allow us secure supply critical raw materials lower overall costs clinical diagnostics segment june 2011 acquired remaining outstanding shares diamed sea limited diamed thailand multiple noncontrolling shareholders approximately 02 million cash february 2011 acquired additional 39 distribuidora de analitica para medicina ibérica sa diamed spain multiple noncontrolling shareholders increasing ownership diamed spain 90 approximately 25 million euros approximately 34 million cash september 2010 acquired remaining noncontrolling interests diamed france sa 102 million euros approximately 129 million cash january 2010 acquired certain diagnostic businesses biotest ag 45 million euros approximately 649 million cash october 2007 began acquiring outstanding shares diamed holding ag final shares purchased february 2010 total consideration years 4643 million 86 outstanding shares payment october 2007 acquisitions included clinical diagnostics segment january 2010 acquired certain diagnostic businesses biotest ag biotest 45 million euros approximately 649 million cash operating results businesses included clinical diagnostics segment continue review possible acquisitions expand life science clinical diagnostics segments routinely meet principals brokers subject companies certain discussions advance beyond preliminary stages completion time cash flows financing activities net cash used financing activities 2136 million 2011 net cash provided financing activities 2287 million 2939 million 2010 2009 respectively cash used 2011 attributable redemption january 2011 2250 million 75 senior subordinated notes including call premium 28 million recorded interest expense consolidated statements income cash provided 2010 primarily due issuing 4250 million senior notes used retire 2014 bonds 2013 bonds december 2010 january 2011 respectively net cash provided financing activities 2009 primarily due biorad issuing 3000 million 80 senior subordinated notes may 2009 yielded net proceeds 2948 million effective rate 83 outstanding senior notes 4250 million senior subordinated notes 3000 million due 2020 2016 respectively credit agreement entered june 2010 secured substantially personal property assets domestic subsidiaries 65 capital stock certain foreign subsidiaries guaranteed existing future material domestic subsidiaries expires june 2014 board directors authorized repurchase 18 million biorads common stock indefinite period time 33 million yet repurchased credit agreement indenture governing 80 senior subordinated notes restrict ability repurchase stock repurchase shares common stock 2011 2010 2009 offbalance sheet arrangements offbalance sheet arrangements reasonably likely current future material effect financial condition results operations liquidity contractual obligations following summarizes certain contractual obligations december 31 2011 effect obligations expected cash flows future periods millions recent accounting standards updates may 2011 financial accounting standards board fasb issued guidance regard fair value measurement new guidance results consistent definition fair value common requirements measurement disclosure fair value gaap international financial reporting standards ifrs guidance effective interim annual periods beginning december 15 2011 anticipate adoption guidance material impact consolidated financial statements june 2011 fasb issued guidance regard presentation comprehensive income new guidance entity option present total comprehensive income components net income components comprehensive income either single continuous statement comprehensive income two separate consecutive statements december 2011 fasb deferred new requirement present components reclassifications comprehensive income face income statement guidance effective fiscal years interim periods within years beginning december 15 2011 biorad currently evaluating alternative presentations however adoption guidance material impact consolidated financial statements relates required disclosures presentation september 2011 fasb issued guidance regard goodwill impairment new guidance intended reduce cost complexity annual goodwill impairment test providing entities option performing qualitative assessment determine whether impairment testing necessary entity choose perform qualitative assessment none reporting units moreover entity bypass qualitative assessment reporting unit period proceed directly step one impairment test perform qualitative assessment subsequent period new guidance effective annual interim goodwill impairment tests performed fiscal years beginning december 15 2011 adopted expect guidance material impact consolidated financial statements item 7aitem 7 management’s discussion analysis financial condition results operations discussion read conjunction information contained consolidated financial statements accompanying notes integral part statements historical fact statements made annual report include forward looking statements respect future financial performance operating results plans objectives involve risk uncertainties forwardlooking statements generally identified use forwardlooking terminology “believe” “expect” “may” “will” “intend” “estimate” “continue” similar expressions negative terms expressions statements involve risks uncertainties could cause actual results vary materially expressed indicated forwardlooking statements based forwardlooking statements current expectations projections future events however actual results may differ materially currently anticipated depending variety risk factors including among things changes general domestic worldwide economic conditions ability successfully develop market new products reliance access necessary intellectual property ability successfully integrate acquired business substantial leverage ability service debt competition government regulation industries operate monetary policies various countries caution place undue reliance forwardlooking statements reflect analysis speak date hereof undertake obligation publicly update revise forward looking statements whether result new information future events otherwise except required federal securities law announced february 26 2012 preliminary unaudited results fourth quarter year ended december 31 2012 results included accrual royalties third party related interest since announcement reviewed developments relating royalties increased accrual royalties related interest consolidated financial statements included annual report form 10k year ended december 31 2012 reflect increased accrual royalties interest well related impact provision income taxes overview multinational manufacturer worldwide distributor life science research clinical diagnostics products business organized two primary segments life science clinical diagnostics mission provide scientists specialized tools needed biological research clinical diagnostics sell 8000 products services diverse client base comprised scientific research healthcare education government customers worldwide disclose quantitative information different products services impractical based primarily numerous products services sell global markets serve manufacture supply customers range reagents apparatus equipment separate complex chemical biological materials identify analyze purify components customers require standardization experiments test results much revenues recurring impacted support many governments research healthcare current global economic outlook becoming increasingly uncertain need control government social spending many governments limits opportunities growth approximately 32 2012 consolidated net sales derived united states approximately 68 derived international locations international sales largely denominated local currencies euros swiss franc japanese yen china yuan british sterling result consolidated net sales expressed dollars benefit us dollar weakens suffer dollar strengthens us dollar strengthens benefit lower cost sales international manufacturing sites well nonus suppliers lower international operating expenses january 2013 acquired abd serotec division morphosys ag approximately 53 million euros approximately 70 million cash acquisition included life science segments results operations acquisition date accounted business combination believe abd serotecs comprehensive catalog antibodies able offer customers total assay solutions validated many research platforms western blotting multiplex protein expression elisa cell sorting august 2012 acquired propel labs inc new cell sorting system automated easytouse benchtop cell sorting flow cytometer asset acquisition accounted business combination included life science segments results operations acquisition date fair value consideration acquisition date 496 million included 50 million paid cash closing date 446 million contingent consideration related achievement certain development sales milestones valued 199 million 247 million respectively could potentially payable propel labs shareholders contingent consideration recognized estimated fair value 446 million december 31 2012 fair values net assets acquired propel labs inc acquisition date determined 174 million goodwill 321 million definitelived intangible assets 01 million net tangible assets acquired cell sorting system fits well biorads existing life science segment product offerings may offer researchers greater access technology july 2012 acquired outstanding shares diamed benelux 46 million euros approximately 56 million cash acquisition accounted business combination included clinical diagnostics segments results operations acquisition date acquired net tangible liabilities fair value 23 million fair values assets acquired acquisition date determined 30 million goodwill 49 million definitelived intangible assets diamed benelux became exclusive distributor certain biorad immunohematology products benelux market result 2007 acquisition diamed holding ag distributor acquisition consistent stated objective control distribution products services january 2012 purchased cash certain assets raw material supplier approximately 125 million asset acquisition accounted business combination included clinical diagnostics segments results operations acquisition date fair value assets acquired acquisition date determined 63 million net tangible assets 51 million intangible assets 11 million goodwill addition paid 20 million employment agreements incentive certain employees acquired business remain biorad amount expensed next two years recorded prepaid expenses taxes current assets consolidated balance sheet believe acquisition allow us secure supply critical raw materials lower overall costs clinical diagnostics segment october 2011 acquired issued outstanding stock quantalife inc quantalife fair value consideration acquisition date 1794 million comprised 1503 million paid cash closing date 50 million holdback cash completion certain postclosing matters 241 million contingent consideration potentially payable quantalife shareholders december 31 2012 fair value contingent consideration 80 million could potentially reach 37 million upon achievement remaining sales development milestones operating results business included results operations life science segment acquisition date integrating acquired quantalife business biorad expected expand current portfolio products amplification study dna believe complement biorads existing business determination fair value net assets acquired quantalife based upon valuation information estimates assumptions available october 4 2011 second quarter 2012 finalized determination fair value certain acquired tax attributes adjusted preliminary carrying values goodwill certain assets liabilities order reflect final information received resulting overall reduction goodwill 06 million measurement period adjustments impact results operations year ended december 31 2012 final fair values net assets acquired acquisition date determined 1055 million goodwill 947 million intangible assets 208 million net tangible liabilities first quarter 2012 identified error consolidated financial statements years 2007 2011 related foreign supplemental tax associated social benefits incorrectly interpreted applied local statutes circumstances accrued 61 million foreign supplemental taxes including penalties interest first quarter 2012 paid foreign supplemental tax related penalties interest deductible income tax purposes error impact biorads provision income taxes evaluated materiality error qualitative quantitative perspective based evaluation concluded accumulation error significant threemonth period ended march 31 2012 correction material individual prior period year ended december 31 2012 effect trend financial results taking account requirements securities exchange commission sec staff accounting bulletin 108 considering effects prior year misstatements quantifying misstatements current year financial statements sab 108 following shows cost goods sold gross profit expense items net income percentage net sales intend discussions critical accounting policies estimates recent accounting pronouncements follow assist understanding principles estimates accounting pronouncements affect financial condition results operations well significant factors caused changes financial condition results operations years ended december 31 2012 2011 critical accounting policies estimates accompanying discussion analysis financial condition results operations based upon consolidated financial statements prepared accordance us generally accepted accounting principles gaap preparation financial statements conformity gaap requires management make estimates assumptions affect reported amounts assets liabilities contingencies date financial statements reported amounts revenues expenses reporting periods evaluate estimates ongoing basis base estimates historical experience assumptions believed reasonable circumstances results form basis making judgments carrying values assets liabilities readily apparent sources however future events may cause us change assumptions estimates may require adjustment actual results could differ estimates determined periods reported annual report form 10k following accounting policies estimates critical understanding financial condition results operations accounting income taxes management required make estimates related income tax provision jurisdictions operate process involves estimating current tax exposures well making judgments regarding recoverability deferred tax assets jurisdiction deferred tax assets liabilities reflect tax effects losses credits temporary differences carrying amounts assets liabilities financial reporting purposes amounts used income tax purposes management assesses likelihood deferred tax assets recovered future taxable income extent management believes recovery likely valuation allowance must established extent management establishes valuation allowance increases allowance period increase expense within provision income taxes consolidated statements income may result recorded valuation allowance 529 million 489 million december 31 2012 2011 respectively due uncertainties related ability utilize deferred tax assets primarily consisting certain foreign net operating losses carried forward valuation allowance based management’s current estimates taxable income jurisdictions operate period deferred tax assets recoverable event actual results differ estimates adjusted future periods additional valuation allowance may need established would increase tax provision lowering income impacting financial position realization deferred tax assets valuation allowance provided occur provision income taxes may decrease raising income positively impacting biorad’s financial position recognize tax benefit uncertain tax position likely tax position sustained examination taxing authorities based technical merits position tax benefits recognized financial statements particular tax position measured based largest benefit greater 50 likelihood realized upon settlement amount unrecognized tax benefits adjusted appropriate changes facts circumstances significant amendments existing tax law new regulations interpretations taxing authorities new information obtained tax examination resolution examination recognize accrued interest penalties appropriate related unrecognized tax benefits income tax expense overall effective tax rate subject fluctuations changes geographic mix earnings changes statutory tax rates tax laws impact various tax audits assessments well generation tax credits valuation goodwill longlived assets goodwill represents excess cost fair value net tangible identifiable intangible assets acquired businesses goodwill amounts assigned reporting units time acquisition adjusted subsequent significant transfers business reporting units assess impairment goodwill annually fourth quarter whenever events changes circumstances indicate carrying value may recoverable perform impairment tests goodwill reporting unit level one level reporting segments goodwill impairment test consists twostep process first step goodwill impairment test used identify potential impairment compares fair value reporting unit carrying value including goodwill fair value reporting unit exceeds carrying amount goodwill reporting unit considered impaired second step impairment test required second step required compares implied fair value reporting unit goodwill carrying amount goodwill fair value reporting unit allocated assets liabilities unit including unrecognized intangible assets reporting unit acquired business combination fair value reporting unit price paid acquire reporting unit carrying amount reporting units goodwill exceeds implied fair value impairment charge recognized amount equal excess use projected discounted cash flow model determine fair value reporting unit discounted cash value method determining goodwill may different fair value would result actual transaction willing buyer willing seller projections discounted cash flow models inherently uncertain accordingly actual future cash flows may differ materially projected cash flows management judgment required developing assumptions discounted cash flow model assumptions include revenue growth rates profit margins future capital expenditures working capital needs expected foreign currency rates discount rates terminal values estimate future cash flows using current longerterm high level financial forecasts take account current economic environment discount rates used compiled using independent sources current trends similar businesses observable market data changes rates might result material changes valuation determination recoverability goodwill example increase discount rate used discount cash flows decrease computed fair value order evaluate sensitivity fair value calculations goodwill impairment test apply 10 decrease fair value reporting unit validate reasonableness reporting unit fair values reconcile aggregate fair values reporting units enterprise market capitalization including implied control premium performing reconciliation may depending volatility market value stock price use either stock price valuation date average stock price range dates around valuation date compare implied control premium premiums paid observable recent transactions comparable companies determine accumulated fair values reporting units reasonable purposes recognition measurement impairment loss longlived asset assets grouped assets liabilities lowest level identifiable cash flows largely independent cash flows assets liabilities assess impairment longlived assets including identifiable intangibles whenever events changes circumstances indicate carrying value may recoverable factors consider important could trigger impairment review include • significant underperformance relative expected historical projected future operating results • significant changes manner use longlived assets intangible assets strategy overall business • current expectation likely longlived asset sold otherwise disposed end previously estimated useful life • significant negative industry legal regulatory economic trends management determines carrying value longlived assets may recoverable based upon existence one indicators impairment test impairment based projected undiscounted cash flow method projected future operating results cash flows asset group used establish fair value used evaluating carrying value longlived intangible assets estimate future cash flows longlived assets using current longterm financial forecasts carrying amount longlived asset recoverable exceeds sum undiscounted cash flows expected result use eventual disposition asset case impairment loss would recognized impairment loss recognized amount carrying amount exceeds fair value impairment losses recorded 2012 2011 2010 valuation inventories value inventory lower actual cost purchase andor manufacture inventory current estimated net realizable value inventory review inventory quantities hand reduce cost basis excess obsolete inventory based primarily estimated forecast product demand production requirements quality efficacy potency raw materials review done quarterly basis warranted circumstances frequently addition industry characterized technological change frequent new product development product obsolescence could result increase amount obsolete inventory quantities hand estimates future product demand may prove inaccurate high may overstated carrying value inventory future inventory determined overvalued would required write value inventory market recognize costs cost goods sold time determination therefore although make efforts ensure accuracy forecasts future product demand perform procedures safeguard overall inventory quality significant unanticipated changes demand technological developments regulations storage conditions economic environmental factors affecting biological materials could significant impact value inventory reported results operations valuation investments regularly review investments factors may indicate decline fair value investment carrying value otherthantemporary factors considered evaluating whether decline fair value otherthantemporary include ability intent retain investment period time sufficient allow recovery value duration extent fair value less cost financial condition prospects issuer reviews inherently uncertain value investment may fully recover may decline future periods resulting realized losses warranty reserves warrant certain equipment defects design materials workmanship generally period one year upon delivery acceptance equipment establish part cost goods sold provision expected costs warranty repairs based historical experience specific warranty terms customer feedback review performed quarterly basis assess adequacy warranty reserve adjusted necessary warranty reserve based actual experience expected future costs incurred realized costs higher expected costs cost goods sold would lower period estimation higher realized allowance doubtful accounts maintain allowance doubtful accounts estimated losses resulting collectability customer accounts amount allowance determined analyzing known uncollectible accounts age receivables economic conditions customers’ country industry historical losses customers’ general creditworthiness amounts later determined specifically identified uncollectible charged written allowance uncertainty current economic environment prolonged could result greater amounts becoming uncollectible future estimates losses higher actual uncollectible accounts would report lower profitability estimates made higher profitability receivable collected litigation accruals record liabilities consolidated balance sheets estimated amounts claims probable reasonably estimated likelihood material change estimated liabilities dependent possible outcome settlement negotiations regulatory judicial review development facts circumstances extended litigation could change claims assessments amount range loss outstanding litigation uncertain disclose footnotes financial statements unable make reasonable estimate material liability could result unfavorable outcomes litigation events occur assess potential liability related pending litigation revise estimates revisions could materially impact results operations results operations sales gross margins expenses net sales net sales 2012 relatively unchanged 207 billion compared 2011 excluding impact foreign currency 2012 sales increased approximately 36 compared 2011 currency neutral sales growth achieved regions however europe grew less 1 percent life science segment sales 2012 6884 million decrease 09 compared 2011 currency neutral basis sales increased 15 compared 2011 currency neutral sales increase primarily laboratory separation process chromatography well increased sales droplet digital pcr product line associated quantalife acquisition life science segment currency neutral sales increased north america latin america europe asia clinical diagnostics segment sales 2012 137 billion increase 01 compared 2011 currency neutral basis sales increased 47 compared 2011 clinical diagnostics product lines generating growth quality controls diabetes microbiology blood virus bioplex® 2200 2011 sales impacted onetime blood typing equipment sale approximately 8 million currency neutral sales growth achieved pacific rim americas emerging markets currency neutral sales declined western europe sales 2011 increased 207 billion 193 billion 2010 sales increase 76 excluding impact foreign currency 2011 sales increased approximately 31 compared 2010 currency neutral sales growth achieved many regions except europe life science segment sales 2011 6947 million increase 72 compared 2010 currency neutral basis sales increased 34 compared 2010 product groups showing growth included process chromatography media imaging systems amplification electrophoresis currency neutral sales growth life science segment primarily us latin america pacific rim many developed countries constraints government budgets limited sales growth opportunities clinical diagnostics segment sales 2011 136 billion increase 78 compared 2010 currency neutral basis sales increased 29 compared 2010 clinical diagnostics product lines generating growth immunohematology quality controls bioplex® 2200 diabetes monitoring clinical microbiology currency neutral sales growth primarily pacific rim partially offset weaker sales europe due spending constraints several countries national healthcare systems gross margin consolidated gross margins 558 2012 compared 568 2011 life science segment gross margins 2012 decreased 2011 approximately 33 primarily due amortization expense 100 million related droplet digital pcr products cell sorting system acquisitions incremental royalty accrual related dispute third party well 38 million soil remediation expense associated manufacturing plant clinical diagnostics segment gross margins 2012 relatively unchanged 2011 reflecting increase 01 beginning 2013 patient protection affordable health care health care education reconciliation acts 2010 among initiatives legislation provides 23 annual excise tax sales certain medical devices us biorad required pay excise tax us clinical diagnostic sales estimate effect gross margins less 025 consolidated gross margins 568 2011 compared 566 2010 relatively unchanged life science segment clinical diagnostics segment selling general administrative expense consolidated selling general administrative expenses sga represented 330 sales 2012 compared 336 sales 2011 decreases sga relative sales primarily driven 2012 adjustments fair value quantalife contingent consideration 161 million decline third party commissions compared 2011 lower bad debt expense provision compared 2011 primarily spain approximately 86 million associated large payments made june 2012 public agencies represented spanish balances significantly past due partially offset increase incentive compensation professional fees compared 2011 decrease contingent consideration liability quantalife primarily due achieving first three shortterm milestones result recent weakening funding research development markets longer sales cycle new technology causing revision sales forecasts remaining sales milestone contractual period ending march 2014 consolidated sga represented 336 sales 2011 compared 330 sales 2010 growth sga greater rate sales growth increases primarily driven employeerelated costs largest cost professional services bad debt provisions primarily associated public agencies southern europe facilities travel information technology marketing research development expense research development expense increased 2140 million 103 sales 2012 compared 1864 million 90 sales 2011 primarily life science segment life science segment research development expense increased 2012 2011 primarily related droplet digital pcr products cell sorting system acquisitions high research development costs relative sales new products clinical diagnostics segment research development expense increased 2012 2011 primarily due increased investment enhanced product offerings blood typing quality controls diabetes blood virus product lines research development expense increased 1864 million 90 sales 2011 compared 1723 million 89 sales 2010 life science segment research development expense increased 2011 2010 part due acquisition quantalife october 2011 life science segment efforts concentrated genomics proteomics process chromatography applications clinical diagnostics segment research development expense increased 2011 2010 efforts concentrated diabetes immunohematology focused mainly development cost reduction instruments results operations nonoperating interest expense interest expense 2012 decreased 38 511 million compared 2011 primarily due refinancing portion debt completed january 2011 lowering overall borrowing costs interest rates current borrowings fixed 3000 million senior subordinated notes 2016 80 4250 million senior notes 2020 4875 interest expense 2011 decreased 166 531 million compared 2010 primarily due refinancing portion debt december 2010 january 2011 lowering overall borrowing rate foreign currency exchange gains losses foreign currency exchange gains losses consist foreign currency transaction gains losses intercompany net receivables payables change fair value forward foreign exchange contracts used manage foreign currency exchange risk net foreign currency exchange losses 2012 2011 2010 50 million 138 million 39 million respectively 2012 2011 2010 net foreign currency exchange losses attributable market volatility increasing costs hedge result estimating process inherent timing shipments payments intercompany debt addition approximately 46 million 2011 loss attributable entering larger forward foreign exchange contract required years affected economic hedging program employ hedge intercompany receivables payables income expense net income expense net includes investment dividend income generally interest income cash equivalents shortterm investments long term marketable securities income expense net 2012 increased 219 million income compared 76 million income 2011 increase primarily due higher realized gains sale equity investments 2012 80 million compared 2011 2012 gain 43 million sale building clinical diagnostics segment income expense net 2011 increased 76 million income compared 39 million income 2010 increase primarily due higher investment income included dividend income holdings sartorius ag whose dividends almost doubled 2010 settlement legal dispute third quarter 2010 partially offset higher otherthantemporary impairment losses certain investments 2011 2010 effective tax rate effective tax rate 27 24 15 2012 2011 2010 respectively effective tax rate 2012 reflected tax benefit related adjustment fair value quantalife contingent consideration american taxpayer relief act 2012 enacted january 2 2013 retroactively reinstated federal research development credit january 1 2012 december 31 2013 effect change tax law related 2012 estimated 27 million 3 million recognized benefit income tax expense first quarter fiscal 2013 quarter law enacted effective tax rate 2011 reflected tax benefits nontaxable dividend income release tax liabilities lower effective tax rate 2010 due 220 million foreign tax credit benefit related 1640 million distribution foreign affiliates us effective tax rates three periods lower us statutory rate primarily due tax benefits differences us foreign statutory tax rates research development tax credits foreign income earned primarily france switzerland switzerlands statutory tax rate significantly lower us statutory tax rate 35 effective tax rates also significantly reduced french tax incentives related research development activities effective tax rate may impacted future either favorably unfavorably many factors including limited changes statutory tax rates changes tax laws regulations tax audits settlements generation tax credits liquidity capital resources biorad operates conducts business globally primarily subsidiary companies established markets trade goods manufactured small number locations shipped local distribution facilities around world product mix diversified certain products compete largely product efficacy others compete price gross margins generally sufficient exceed normal operating costs funding research development new products well routine outflows capital expenditure interest taxes addition annual positive cash flow operating activities additional liquidity readily available via sale shortterm investments access 2000 million amended restated credit agreement credit agreement entered june 2010 borrowings credit agreement revolving basis used make acquisitions working capital general corporate purposes outstanding borrowings credit agreement december 31 2012 credit agreement expires june 21 2014 december 31 2012 available 9211 million cash equivalents shortterm investments approximately 30 foreign subsidiaries believe holdings cash equivalents shortterm investments us foreign subsidiaries sufficient meet current longterm needs global operations amount funds held united states fluctuate due timing receipts payments ordinary course business due reasons businessdevelopment activities part ongoing liquidity assessments regularly monitor mix domestic foreign cash flows inflows outflows repatriation overseas funds result additional us federal state income tax payments general practice intention reinvest cash generated foreign subsidiaries foreign subsidiaries operations domestic international lines credit 2268 million available borrowing december 31 2012 116 million reserved standby letters credit issued banks guarantee obligations mostly meet deductible amount insurance policies benefit management believes availability together cash flow operations adequate meet current objectives operations research development capital additions manufacturing distribution plant equipment information technology systems acquisition reasonable proportion existing total available capital continuing slow economic growth developed nations may adversely affect future results operations demand products services could change dramatically previous years based activity funding reimbursement constraints support levels government universities hospitals private industry including diagnostic laboratories need certain sovereign nations large annual deficits curtail spending could lead slower growth even decline business sovereign nations either delaying payment goods services renegotiating debts could impact liquidity situation sovereign nations continuously evolving greater knowledge situation publicly reported december 31 2012 december 31 2011 accounts receivable net allowance doubtful accounts spain italy greece portugal 648 million 821 million respectively decrease december 31 2011 primarily due payments made june 2012 approximately 21 million public agencies spain represented spanish balances significantly past due instability credit markets along inadequate capitalization parts financial services industry could impact ability customer’s ability access necessary capital acquisition equipment technology modernization financing inventory receivables without crucial intermediary function manufacturers end users may renegotiate existing arrangements reduce activity levels seek business partners cash flows operations net cash provided operations 2789 million 2598 million 2259 million 2012 2011 2010 respectively net increase 2012 2011 191 million primarily represented higher cash received customers part reflected improved payments 2012 southern european customers decline interest paid due refinancing portion debt completed january 2011 partially offset higher income tax payments 2011 included income tax refund approximately 25 million also affecting cash flows operations enterprise resource planning erp project considered preliminary project stage 2011 requires internal labor costs expensed whereas 2012 application development stage requires internal labor costs capitalized currently included cash flows investing activities continue focus cash flow improvements global companywide goal net increase 2011 2010 339 million primarily represented higher cash received customers due higher sales decline interest expense due refinancing portion debt december 2010 january 2011 decline income taxes paid caused timing differences income tax refund 2011 partially offset increase amount paid suppliers employees second quarter 2010 biorad made large payment 226 million euros certain licensor covering royalties multiple years regularly review allowance uncollectible receivables believe net accounts receivable fully realizable also routinely review inventory impact obsolescence changes market prices caused introduction new products technologies government reimbursement policies expect first quarter 2013 cash flows operations lower fourth quarter 2012 biorad historically made larger payments royalties fourth quarter sales commissions third parties annual employee bonuses period cash flows investing activities net cash used investing activities including capital expenditures 4128 million 3834 million 2165 million 2012 2011 2010 respectively capital expenditures 2012 totaled 1524 million compared 1029 million 885 million 2011 2010 respectively capital expenditures represent addition replacement production machinery research equipment ongoing manufacturing facility additions expansion regulatory environmental compliance also included capital expenditures investments business systems data communication upgrades enhancements periods include equipment placed clinical diagnostics segment customers contract purchase reagents use capital expenditures increased anticipate continue remain historically higher next three four years due implementation global single instance erp platform expand ecommerce platform erp software purchased december 2010 estimated global implementation cost single instance erp platform could reach 200 million estimated take approximately four years fully implement august 2012 acquired propel labs inc new cell sorting system automated easytouse benchtop cell sorting flow cytometer business acquisition included life science segments results operations acquisition date fair value consideration acquisition date 496 million included 50 million paid cash closing date 446 million contingent consideration related achievement certain development sales milestones valued 199 million 247 million respectively could potentially payable propel labs shareholders contingent consideration recognized estimated fair value 446 million december 31 2012 fair values net assets acquired propel labs inc acquisition date determined 174 million goodwill 321 million definitelived intangible assets 01 million net tangible assets acquired cell sorting system fits well biorads existing life science segment product offerings may offer researchers greater access technology july 2012 acquired outstanding shares diamed benelux 46 million euros approximately 56 million cash acquisition accounted business combination included clinical diagnostics segments results operations acquisition date acquired net tangible liabilities fair value 23 million fair values assets acquired acquisition date determined 30 million goodwill 49 million definitelived intangible assets diamed benelux became exclusive distributor certain biorad immunohematology products benelux market result 2007 acquisition diamed holding ag distributor acquisition consistent stated objective control distribution products services january 2012 purchased cash certain assets raw material supplier approximately 125 million asset acquisition accounted business combination included clinical diagnostics segments results operations acquisition date fair value assets acquired acquisition date determined 63 million net tangible assets 51 million intangible assets 11 million goodwill addition paid 20 million employment agreements incentive certain employees acquired business remain biorad amount expensed next two years recorded prepaid expenses taxes current assets consolidated balance sheet believe acquisition allow us secure supply critical raw materials lower overall costs clinical diagnostics segment october 2011 acquired issued outstanding stock quantalife total consideration 1794 million comprised 1503 million cash 50 million holdback cash completion certain postclosing matters contingent consideration potentially payable quantalife shareholders december 31 2012 fair value contingent consideration 80 million could potentially reach 37 million upon achievement remaining sales development milestones transaction accounted acquisition business operating results quantalife included life science segment acquisition date integrating acquired quantalife business biorad expected expand current portfolio products amplification study dna believe complement biorads existing business june 2011 acquired remaining outstanding shares diamed sea limited diamed thailand multiple noncontrolling shareholders approximately 02 million cash february 2011 acquired additional 39 distribuidora de analitica para medicina ibérica sa diamed spain multiple noncontrolling shareholders increasing ownership diamed spain 90 approximately 25 million euros approximately 34 million cash september 2010 acquired remaining noncontrolling interests diamed france sa 102 million euros approximately 129 million cash january 2010 acquired certain diagnostic businesses biotest ag 45 million euros approximately 649 million cash october 2007 began acquiring outstanding shares diamed holding ag final shares purchased february 2010 total consideration years 4643 million 86 outstanding shares payment october 2007 acquisitions included clinical diagnostics segment january 2013 acquired abd serotec division morphosys ag approximately 53 million euros approximately 70 million cash acquisition included life science segments results operations acquisition date accounted business combination believe abd serotecs comprehensive catalog antibodies able offer customers total assay solutions validated many research platforms western blotting multiplex protein expression elisa cell sorting continue review possible acquisitions expand life science clinical diagnostics segments routinely meet principals brokers subject companies certain discussions advance beyond preliminary stages completion time cash flows financing activities net cash provided financing activities 126 million 2287 million 2012 2010 respectively net cash used financing activities 2136 million 2011 cash provided 2012 primarily proceeds issuance common stock cash used 2011 attributable redemption january 2011 2250 million 75 senior subordinated notes including call premium 28 million recorded interest expense consolidated statements income cash provided 2010 primarily due issuing 4250 million senior notes used retire 2014 bonds 2013 bonds december 2010 january 2011 respectively outstanding senior notes 4250 million senior subordinated notes 3000 million due 2020 2016 respectively credit agreement entered june 2010 secured substantially personal property assets domestic subsidiaries 65 capital stock certain foreign subsidiaries guaranteed existing future material domestic subsidiaries expires june 2014 board directors authorized repurchase 180 million biorads common stock 33 million yet repurchased open market december 31 2012 amended restated credit agreement credit agreement indenture governing 80 senior subordinated notes due 2016 limit ability repurchase stock accordance terms awards 2007 incentive award plan june 2012 withheld 122 shares class common stock 917 shares class b common stock satisfy tax obligations due upon vesting restricted stock certain employees considered repurchase stock repurchases stock 2012 2011 2010 2013 estimate repurchasing approximately 1000 shares satisfy tax obligations due upon vesting restricted stock certain employees offbalance sheet arrangements offbalance sheet arrangements reasonably likely current future material effect financial condition results operations liquidity contractual obligations following summarizes certain contractual obligations december 31 2012 effect obligations expected cash flows future periods millions recent accounting standards updates march 2013 financial accounting standards board fasb issued guidance regard parents accounting upon derecognition certain subsidiaries groups assets within foreign entity investment foreign entity guidance specifies cumulative translation adjustment cta released earnings entity ceases controlling financial interest subsidiary group assets within consolidated foreign entity sale transfer results complete substantially complete liquidation foreign entity sales equity method investment foreign entity pro rata portion cta attributable investment would recognized earnings upon sale investment entity sells either part investment consolidated foreign entity cta would recognized earnings sale results parent longer controlling financial interest foreign entity cta would recognized earnings business combination achieved stages ie step acquisition guidance effective prospectively annual interim reporting periods beginning december 15 2013 expect adoption guidance material impact consolidated financial statements july 2012 fasb issued guidance regard testing indefinitelived intangible assets impairment new guidance provides entities option performing qualitative assessment determine whether existence events circumstances indicates likely indefinitelived asset impaired hence testing necessary entity also option bypass qualitative assessment indefinitelived intangible asset period proceed directly performing quantitative impairment test entity able resume performing qualitative assessment subsequent period guidance effective annual interim impairment tests performed fiscal years beginning september 15 2012 expected material impact consolidated financial statements june 2011 fasb issued guidance regard presentation comprehensive income new guidance entity option present total comprehensive income components net income components comprehensive income either single continuous statement comprehensive income two separate consecutive statements adopted guidance using two separate consecutive statements january 1 2012 february 2013 fasb issued guidance requiring companies present either single note parenthetically face financial statements effect significant amounts reclassified component accumulated comprehensive income based source income statement line items affected reclassification component required reclassified net income entirety companies would instead cross reference related footnote additional information guidance effective annual interim reporting periods beginning december 15 2012 may 2011 fasb issued guidance regard fair value measurement new guidance results consistent definition fair value common requirements measurement disclosure fair value gaap international financial reporting standards ifrs adopted guidance january 1 2012 material impact results operations financial position item 7aitem 7 management’s discussion analysis financial condition results operations discussion read conjunction information contained consolidated financial statements accompanying notes integral part statements historical fact statements made annual report include forward looking statements respect future financial performance operating results plans objectives involve risk uncertainties forwardlooking statements generally identified use forwardlooking terminology “believe” “expect” “may” “will” “intend” “estimate” “continue” similar expressions negative terms expressions statements involve risks uncertainties could cause actual results vary materially expressed indicated forwardlooking statements based forwardlooking statements current expectations projections future events however actual results may differ materially currently anticipated depending variety risk factors including among things changes general domestic worldwide economic conditions ability successfully develop market new products reliance access necessary intellectual property ability successfully integrate acquired business substantial leverage ability service debt competition government regulation industries operate monetary policies various countries caution place undue reliance forwardlooking statements reflect analysis speak date hereof undertake obligation publicly update revise forward looking statements whether result new information future events otherwise except required federal securities law overview multinational manufacturer worldwide distributor life science research clinical diagnostics products business organized two primary segments life science clinical diagnostics mission provide scientists specialized products needed biological research clinical diagnostics sell 8000 products services diverse client base comprised scientific research healthcare education government customers worldwide disclose quantitative information different products services impractical based primarily numerous products services sell global markets serve manufacture supply customers range reagents apparatus equipment separate complex chemical biological materials identify analyze purify components customers require standardization experiments test results much revenues recurring impacted support many governments research healthcare current global economic outlook becoming increasingly uncertain need control government social spending many governments limits opportunities growth approximately 32 2013 consolidated net sales derived united states approximately 68 derived international locations europe largest region overall international sales largely denominated local currencies euro swiss franc japanese yen china yuan british sterling result consolidated net sales expressed dollars benefit us dollar weakens suffer dollar strengthens us dollar strengthens benefit lower cost sales international manufacturing sites well nonus suppliers lower international operating expenses latter half 2013 accrued aggregate 350 million associated initial efforts resolve investigations us department justice doj securities exchange commission sec relating united states foreign corrupt practices act fcpa 300 million expensed selling general administrative expenses 50 expensed interest expense september 2013 redeemed 3000 million 80 senior subordinated notes 3120 million including call premium 120 million expensed remaining original issuance bond discount 25 million unamortized bond issuance costs 11 million included interest expense condensed consolidated statements income third quarter 2013 identified errors consolidated financial statements years 2011 2012 interim periods therein unaudited interim condensed consolidated financial statements three month periods ended march 31 2013 june 30 2013 related valuation finished goods inventory life science segment inappropriately expensing inventory amounts greater actual costs nonsales transactions primarily related inventory used demonstration purposes product samples recorded selling general administrative expense addition life science segment inventory error affected cost goods sold relieved inventory higher cost incurred limited sales third parties produced nonus manufacturing facility effect correcting errors 2011 2012 consolidated financial statements increases net income 08 million 17 million respectively third quarter 2013 revised classification one item periods presented “provision income taxes” “research development expense” consolidated statements income conform current year presentation item reclassified pertains refundable french rd tax credit reclassification reduces research development expense believe presentation appropriate required taxable income order earn credits effect reclassifications provision income taxes research development expense 2011 2012 88 million 48 million respectively management evaluated materiality errors described qualitative quantitative perspective based evaluation concluded accumulation errors significant three months ended september 30 2013 correction would material individual prior period effect trend financial results taking account requirements sec staff accounting bulletin 108 considering effects prior year misstatements quantifying misstatements current year financial statements sab 108 accordingly correcting errors every affected period 2013 consolidated financial statements included form 10k january 2013 acquired 100 outstanding shares abd serotec division morphosys ag total consideration 622 million net cash received 73 million acquisition accounted business combination included life science segments results operations acquisition date final fair values net assets acquired consist definitelived intangible assets 440 million goodwill 149 million net tangible assets 33 million amounts include certain immaterial measurement period adjustments recorded second quarter 2013 believe abd serotecs comprehensive catalog antibodies able offer customers total assay solutions validated many research platforms western blotting multiplex protein expression elisa cell sorting august 2012 acquired propel labs inc new cell sorting system automated easytouse benchtop cell sorting flow cytometer asset acquisition accounted business combination included life science segments results operations acquisition date fair value consideration acquisition date 496 million included 50 million paid cash closing date 446 million contingent consideration related achievement certain development sales milestones valued 199 million 247 million respectively could potentially payable propel labs shareholders development milestones achieved payments totaling 20 million made 2013 contingent consideration revalued net reduction 38 million 2013 selling general administrative expense estimated fair value 208 million december 31 2013 fair values net assets acquired propel labs inc acquisition date determined 174 million goodwill 321 million definitelived intangible assets 01 million net tangible assets acquired cell sorting system fits well biorads existing life science segment product offerings july 2012 acquired outstanding shares diamed benelux 46 million euros approximately 56 million cash acquisition accounted business combination included clinical diagnostics segments results operations acquisition date acquired net liabilities fair value 23 million fair values assets acquired acquisition date determined 30 million goodwill 49 million definitelived intangible assets diamed benelux became exclusive distributor certain biorad immunohematology products benelux market result 2007 acquisition diamed holding ag distributor acquisition consistent stated objective control distribution products services january 2012 purchased cash certain assets raw material supplier approximately 125 million asset acquisition accounted business combination included clinical diagnostics segments results operations acquisition date fair value assets acquired acquisition date determined 63 million net tangible assets 51 million intangible assets 11 million goodwill addition paid 20 million employment agreements incentive certain employees acquired business remain biorad amount expensed two years date acquisition believe acquisition allow us secure supply critical raw materials lower overall costs clinical diagnostics segment first quarter 2012 identified error consolidated financial statements years 2007 2011 related foreign supplemental tax associated social benefits incorrectly interpreted applied local statutes circumstances accrued 61 million foreign supplemental taxes including penalties interest first quarter 2012 paid foreign supplemental tax related penalties interest deductible income tax purposes error impact biorads provision income taxes evaluated materiality error qualitative quantitative perspective based evaluation concluded accumulation error significant threemonth period ended march 31 2012 correction material individual prior period year ended december 31 2012 effect trend financial results taking account requirements sab 108 fourth quarter 2011 recognized contingent consideration liability upon acquisition quantalife related potential future payments due upon achievement certain sales development milestones contingent consideration initially recognized estimated fair value 241 million based probabilityweighted income approach acquisition date october 4 2011 total contingent consideration could originally reached maximum 48 million upon achievement sales milestones development milestone development milestone met december 31 2012 resulting payment 60 million january 2013 2012 first three shortterm sales milestones met therefore fair value contingent consideration lowered 161 million credited selling general administrative expense 2013 expect remaining sales milestones would met therefore 20 million remaining contingent consideration liability credited selling general administrative expense critical accounting policies estimates accompanying discussion analysis financial condition results operations based upon consolidated financial statements prepared accordance us generally accepted accounting principles gaap preparation financial statements conformity gaap requires management make estimates assumptions affect reported amounts assets liabilities contingencies date financial statements reported amounts revenues expenses reporting periods evaluate estimates ongoing basis base estimates historical experience assumptions believed reasonable circumstances results form basis making judgments carrying values assets liabilities readily apparent sources however future events may cause us change assumptions estimates may require adjustment actual results could differ estimates determined periods reported annual report form 10k following accounting policies estimates critical understanding financial condition results operations accounting income taxes management required make estimates related income tax provision jurisdictions operate process involves estimating current tax exposures well making judgments regarding recoverability deferred tax assets jurisdiction deferred tax assets liabilities reflect tax effects losses credits temporary differences carrying amounts assets liabilities financial reporting purposes amounts used income tax purposes management assesses likelihood deferred tax assets recovered future taxable income extent management believes recovery likely valuation allowance must established extent management establishes valuation allowance increases allowance period increase expense within provision income taxes consolidated statements income may result recorded valuation allowance 640 million 529 million december 31 2013 2012 respectively due uncertainties related ability utilize deferred tax assets primarily consisting certain foreign net operating losses carried forward valuation allowance based management’s current estimates taxable income jurisdictions operate period deferred tax assets recoverable event actual results differ estimates adjusted future periods additional valuation allowance may need established would increase tax provision lowering income impacting financial position realization deferred tax assets valuation allowance provided occur provision income taxes may decrease raising income positively impacting biorad’s financial position recognize tax benefit uncertain tax position likely tax position sustained examination taxing authorities based technical merits position tax benefits recognized financial statements particular tax position measured based largest benefit greater 50 likelihood realized upon settlement amount unrecognized tax benefits adjusted appropriate changes facts circumstances significant amendments existing tax law new regulations interpretations taxing authorities new information obtained tax examination resolution examination recognize accrued interest penalties appropriate related unrecognized tax benefits income tax expense overall effective tax rate subject fluctuations changes geographic mix earnings changes statutory tax rates tax laws impact various tax audits assessments well generation tax credits valuation goodwill longlived assets goodwill represents excess cost fair value net tangible identifiable intangible assets acquired businesses goodwill amounts assigned reporting units time acquisition adjusted subsequent significant transfers business reporting units assess impairment goodwill annually fourth quarter whenever events changes circumstances indicate carrying value may recoverable perform impairment tests goodwill reporting unit level one level operating segments goodwill impairment test consists twostep process first step goodwill impairment test used identify potential impairment compares fair value reporting unit carrying value including goodwill fair value reporting unit exceeds carrying amount goodwill reporting unit considered impaired second step impairment test required second step required compares implied fair value reporting unit goodwill carrying amount goodwill fair value reporting unit allocated assets liabilities unit including unrecognized intangible assets reporting unit acquired business combination fair value reporting unit price paid acquire reporting unit carrying amount reporting units goodwill exceeds implied fair value impairment charge recognized amount equal excess use projected discounted cash flow model determine fair value reporting unit discounted cash value method determining goodwill may different fair value would result actual transaction willing buyer willing seller projections discounted cash flow models inherently uncertain accordingly actual future cash flows may differ materially projected cash flows management judgment required developing assumptions discounted cash flow model assumptions include revenue growth rates profit margins future capital expenditures working capital needs expected foreign currency rates discount rates terminal values estimate future cash flows using current longerterm high level financial forecasts take account current economic environment discount rates used compiled using independent sources current trends similar businesses observable market data changes rates might result material changes valuation determination recoverability goodwill example increase discount rate used discount cash flows decrease computed fair value order evaluate sensitivity fair value calculations goodwill impairment test apply 10 decrease fair value reporting unit validate reasonableness reporting unit fair values reconcile aggregate fair values reporting units enterprise market capitalization including implied control premium performing reconciliation may depending volatility market value stock price use either stock price valuation date average stock price range dates around valuation date compare implied control premium premiums paid observable recent transactions comparable companies determine accumulated fair values reporting units reasonable purposes recognition measurement impairment loss longlived asset assets grouped assets liabilities lowest level identifiable cash flows largely independent cash flows assets liabilities assess impairment longlived assets including identifiable intangibles whenever events changes circumstances indicate carrying value may recoverable factors consider important could trigger impairment review include • significant underperformance relative expected historical projected future operating results • significant changes manner use longlived assets intangible assets strategy overall business • current expectation likely longlived asset sold otherwise disposed end previously estimated useful life • significant negative industry legal regulatory economic trends management determines carrying value longlived assets may recoverable based upon existence one indicators impairment test impairment based projected undiscounted cash flow method projected future operating results cash flows asset group used establish fair value used evaluating carrying value longlived intangible assets estimate future cash flows longlived assets using current longterm financial forecasts carrying amount longlived asset recoverable exceeds sum undiscounted cash flows expected result use eventual disposition asset case impairment loss would recognized impairment loss recognized amount carrying amount exceeds fair value impairment losses recorded 2013 2012 2011 valuation inventories value inventory lower actual cost purchase andor manufacture inventory current estimated net realizable value inventory review inventory quantities hand reduce cost basis excess obsolete inventory based primarily estimated forecast product demand production requirements quality efficacy potency raw materials review done quarterly basis warranted circumstances frequently addition industry characterized technological change frequent new product development product obsolescence could result increase amount obsolete inventory quantities hand estimates future product demand may prove inaccurate high may overstated carrying value inventory future inventory determined overvalued would required write value inventory market recognize costs cost goods sold time determination therefore although make efforts ensure accuracy forecasts future product demand perform procedures safeguard overall inventory quality significant unanticipated changes demand technological developments regulations storage conditions economic environmental factors affecting biological materials could significant impact value inventory reported results operations valuation investments regularly review investments factors may indicate decline fair value investment carrying value otherthantemporary factors considered evaluating whether decline fair value otherthantemporary include ability intent retain investment period time sufficient allow recovery value duration extent fair value less cost financial condition prospects issuer reviews inherently uncertain value investment may fully recover may decline future periods resulting realized losses warranty reserves warrant certain equipment defects design materials workmanship generally period one year upon delivery acceptance equipment establish part cost goods sold provision expected costs warranty repairs based historical experience specific warranty terms customer feedback review performed quarterly basis assess adequacy warranty reserve adjusted necessary warranty reserve based actual experience expected future costs incurred realized costs higher expected costs cost goods sold would lower period estimation higher realized allowance doubtful accounts maintain allowance doubtful accounts estimated losses resulting collectability customer accounts amount allowance determined analyzing known uncollectible accounts age receivables economic conditions customers’ country industry historical losses customers’ general creditworthiness amounts later determined specifically identified uncollectible charged written allowance uncertainty current economic environment prolonged could result greater amounts becoming uncollectible future estimates losses higher actual uncollectible accounts would report lower profitability estimates made higher profitability receivable collected litigation accruals record liabilities consolidated balance sheets estimated amounts claims probable reasonably estimated likelihood material change estimated liabilities dependent possible outcome settlement negotiations regulatory judicial review development facts circumstances extended litigation could change claims assessments amount range loss outstanding litigation uncertain disclose footnotes financial statements unable make reasonable estimate material liability could result unfavorable outcomes litigation events occur assess potential liability related pending litigation revise estimates revisions could materially impact results operations results operations sales gross margins expenses following shows cost goods sold gross profit expense items net income percentage net sales net sales net sales 2013 213 billion compared 207 billion 2012 excluding impact foreign currency 2013 sales increased approximately 39 compared 2012 currency neutral sales growth reflected regions primarily americas emerging markets eastern europe pacific rim currency neutral sales western europe decreased life science segment sales 2013 7100 million increase 31 compared 2012 currency neutral basis sales increased 45 compared 2012 sales increase primarily driven sales newly acquired abd serotec droplet digital™ pcr cell biology product lines currency neutral sales increased europe americas asia declined government austerity program slowed japanese market growth clinical diagnostics segment sales 2013 141 billion increase 31 compared 2012 currency neutral basis sales increased 36 compared 2012 clinical diagnostics growth across product lines currency neutral basis notably quality controls diabetes bioplex® 2200 system currency neutral sales growth primarily eastern europe china asia pacific americas currency neutral sales western europe declined sales 2012 relatively unchanged 207 billion compared 2011 excluding impact foreign currency 2012 sales increased approximately 36 compared 2011 currency neutral sales growth achieved regions however europe grew less 1 percent life science segment sales 2012 6884 million decrease 09 compared 2011 currency neutral basis sales increased 15 compared 2011 currency neutral sales increase primarily laboratory separation process chromatography well increased sales droplet digital pcr product line associated quantalife acquisition life science segment currency neutral sales increased north america latin america europe asia clinical diagnostics segment sales 2012 137 billion increase 01 compared 2011 currency neutral basis sales increased 47 compared 2011 clinical diagnostics product lines generating growth quality controls diabetes microbiology blood virus bioplex® 2200 system 2011 sales impacted onetime blood typing equipment sale approximately 8 million currency neutral sales growth achieved pacific rim americas emerging markets currency neutral sales declined western europe gross margin beginning 2013 patient protection affordable health care health care education reconciliation acts 2010 among initiatives provided 23 annual excise tax sales certain medical devices us biorad required pay excise tax us clinical diagnostic sales accounted period cost goods sold consolidated gross margins 553 2013 compared 558 2012 life science segment gross margins 2013 increased 2012 approximately 05 percentage points primarily due incremental royalty accrual related dispute third party well 38 million soil remediation expense associated manufacturing plant occurred 2012 increase partially offset increase costs related inventory sold higher cost due purchase accounting increase purchased intangibles amortization expense 61 million primarily related abd serotec cell sorting system acquisitions clinical diagnostics segment gross margins 2013 decreased 2012 approximately 12 percentage points primarily due large low margin government tenders less favorable product mix increase obsolescence charges gross margins also decreased approximately 036 due excise tax sales certain medical devices us went effect 2013 clinical diagnostics segment lower gross margins partially offset foreign supplemental tax associated social benefits 41 million occurred 2012 06 million french competitiveness tax credit recorded 2013 consolidated gross margins 558 2012 compared 569 2011 life science segment gross margins 2012 decreased 2011 approximately 32 percentage points primarily due amortization expense 100 million related droplet digital pcr products cell sorting system acquisitions incremental royalty accrual related dispute third party well 38 million soil remediation expense associated manufacturing plant clinical diagnostics segment gross margins 2012 relatively unchanged 2011 reflecting increase 01 percentage points selling general administrative expense consolidated selling general administrative expenses sga represented 374 sales 2013 compared 329 sales 2012 increases sga expense relative sales primarily driven • increase 436 million employeerelated expenses largest cost associated increase headcount included acquisitions • accrual 300 million connection initial efforts resolve sec doj investigations relating fcpa recorded latter half 2013 • increase professional services 217 million primarily related first phase global single instance erp system placed service legal accounting services • favorable impact 2012 revaluation fair value quantalife contingent consideration 161 million • increase 96 million software amortization primarily due first phase erp platform placed service • increase 65 million facilities primarily due expansion southern california facility acquisition abd serotec • increase 57 million 2012 benefited lower bad debt expense primarily spain due large sum payments public agencies causing us revise estimate allowance doubtful accounts partially offset • decrease valuation cell sorting system contingent consideration 38 million 2013 consolidated selling general administrative expenses sga represented 329 sales 2012 compared 336 sales 2011 decreases sga relative sales primarily driven 2012 adjustments fair value quantalife contingent consideration 161 million decline third party commissions compared 2011 lower bad debt expense provision compared 2011 primarily spain approximately 86 million associated large payments made june 2012 public agencies represented spanish balances significantly past due partially offset increase incentive compensation professional fees compared 2011 decrease contingent consideration liability quantalife primarily due achieving first three shortterm milestones result recent weakening funding research development markets longer sales cycle new technology causing revision sales forecasts remaining sales milestone contractual period ending march 2014 research development expense research development expense increased 2110 million 99 sales 2013 compared 2092 million 101 sales 2012 life science segment research development expense decreased 2013 2012 primarily due projects nearing completion clinical diagnostics segment research development expense increased 2013 2012 primarily due lower refundable french rd tax credits broadening ongoing development across wider range products research development expense increased 2092 million 101 sales 2012 compared 1776 million 86 sales 2011 primarily life science segment life science segment research development expense increased 2012 2011 primarily related droplet digital pcr products cell sorting system acquisitions high research development costs relative sales new products clinical diagnostics segment research development expense increased 2012 2011 primarily due increased investment enhanced product offerings blood typing quality controls diabetes blood virus product lines results operations nonoperating interest expense interest expense 2013 increased 199 613 million compared 2012 primarily due early redemption 80 notes september 30 2013 resulting 156 million expense redemption included call premium 120 million expensing 25 million remaining original issuance bond discount expensing unamortized debt issuance costs 11 million addition interest expense included expense 50 million interest expense associated initial efforts resolve doj sec investigations relating fcpa recorded latter half 2013 increase partially offset estimated interest expense 12 million included first quarter 2012 associated foreign supplemental tax related social benefits interest back royalties 2012 interest expense 2012 decreased 38 511 million compared 2011 primarily due refinancing portion debt completed january 2011 lowering overall borrowing costs foreign currency exchange gains losses foreign currency exchange gains losses consist foreign currency transaction gains losses intercompany net receivables payables change fair value forward foreign exchange contracts used manage foreign currency exchange risk net foreign currency exchange losses 2013 2012 2011 86 million 50 million 138 million respectively 2013 2012 2011 net foreign currency exchange losses attributable market volatility increasing costs hedge result estimating process inherent timing shipments payments intercompany debt addition approximately 46 million 2011 loss attributable entering larger forward foreign exchange contract required years affected economic hedging program employ hedge intercompany receivables payables income expense net income expense net includes investment dividend income generally interest income cash equivalents shortterm investments long term marketable securities income expense net 2013 decreased 128 million income compared 219 million income 2012 decrease primarily due higher realized gains associated sale equity investments 2012 compared realized losses 2013 2012 gain 43 million sale building clinical diagnostics segment sales investments 2013 used provide cash redeem 3000 million 80 senior subordinated notes income expense net 2012 increased 219 million income compared 76 million income 2011 increase primarily due higher realized gains sale equity investments 2012 80 million compared 2011 2012 gain 43 million sale building clinical diagnostics segment effective tax rate effective tax rate 31 28 27 2013 2012 2011 respectively effective tax rate 2013 included significant tax benefit related 2012 us federal research credit retroactively reinstated january 2 2013 effective tax rate 2013 higher 2012 primarily due increase tax liabilities audit settlements foreign jurisdictions lower domestic production activities deduction result lower us taxable income 2013 effective tax rates 2013 2012 reflected tax benefits related adjustments fair value quantalife contingent consideration effective tax rate 2011 reflected tax benefits nontaxable dividend income release tax liabilities effective tax rates three periods lower us statutory rate primarily due tax benefits differences us foreign statutory tax rates research development tax credits foreign income earned primarily france switzerland switzerlands statutory tax rate significantly lower us statutory tax rate 35 effective tax rates also significantly reduced french tax incentives related research development activities effective tax rate may impacted future either favorably unfavorably many factors including limited changes statutory tax rates changes tax laws regulations tax audits settlements generation tax credits liquidity capital resources biorad operates conducts business globally primarily subsidiary companies established markets trade goods manufactured small number locations shipped local distribution facilities around world product mix diversified certain products compete largely product efficacy others compete price gross margins generally sufficient exceed normal operating costs funding research development new products well routine outflows capital expenditure interest taxes addition annual positive cash flow operating activities additional liquidity readily available via sale shortterm investments access 2000 million amended restated credit agreement credit agreement entered june 2010 borrowings credit agreement revolving basis used make acquisitions working capital general corporate purposes outstanding borrowings credit agreement december 31 2013 credit agreement expires june 21 2014 december 31 2013 available 6089 million cash equivalents shortterm investments approximately 39 held foreign subsidiaries believe holdings cash equivalents shortterm investments us foreign subsidiaries sufficient meet current longterm needs global operations amount funds held united states fluctuate due timing receipts payments ordinary course business due reasons businessdevelopment activities part ongoing liquidity assessments regularly monitor mix domestic foreign cash flows inflows outflows repatriation overseas funds result additional us federal state income tax payments general practice intention reinvest cash generated foreign subsidiaries foreign subsidiaries operations domestic international lines credit 2188 million available borrowing december 31 2013 82 million reserved standby letters credit issued banks guarantee obligations mostly meet deductible amount insurance policies benefit management believes availability together cash flow operating activities adequate meet current objectives operations research development capital additions manufacturing distribution plant equipment information technology systems acquisition reasonable proportion existing total available capital continuing slow economic growth developed nations including sequestration us may adversely affect future results operations demand products services could change dramatically previous years based activity funding reimbursement constraints support levels government universities hospitals private industry including diagnostic laboratories need certain sovereign nations large annual deficits curtail spending could lead slower growth even decline business sovereign nations either delaying payment goods services renegotiating debts could impact liquidity situation sovereign nations continuously evolving greater knowledge situation publicly reported december 31 2013 december 31 2012 accounts receivable net allowance doubtful accounts spain italy greece portugal 660 million 648 million respectively instability credit markets along inadequate capitalization parts financial services industry could impact ability customer’s ability access necessary capital acquisition equipment technology modernization financing inventory receivables without crucial intermediary function manufacturers end users may renegotiate existing arrangements reduce activity levels seek business partners cash flows operations net cash provided operations 1755 million 2760 million 2627 million 2013 2012 2011 respectively net decrease 2013 2012 1005 million primarily resulted • higher cash paid employees mostly due increase headcount included acquisitions • increase outside services placed service second quarter 2013 first phase global single instance enterprise resource planning erp platform moving expense postimplementationoperation stage capitalizing application development stage prior year period • 2012 benefited approximately 21 million payment multiple years spanish receivables • increase interest paid primarily due early redemption 3000 million 80 senior subordinated notes september 30 2013 • payment settlement royalties audit 12 million second quarter 2013 • slightly offset lower income tax payments higher customer receipts 2014 begun another phase global single instance erp platform application development stage therefore expect lower associated expenses 2013 qualified expenses capitalized expenses reflected cash flows investing activities net increase 2012 2011 133 million primarily represented higher cash received customers part reflected improved payments 2012 southern european customers decline interest paid due refinancing portion debt completed january 2011 partially offset higher income tax payments 2011 included income tax refund approximately 25 million also affecting cash flows operations enterprise resource planning erp project considered preliminary project stage 2011 requires internal labor costs expensed whereas 2012 application development stage requires internal labor costs capitalized currently included cash flows investing activities continue focus cash flow improvements global companywide goal regularly review past due receivables assess allowance doubtful accounts believe net accounts receivable fully realizable also routinely review inventory impact obsolescence changes market prices caused introduction new products technologies government reimbursement policies expect first quarter 2014 cash flows operations lower fourth quarter 2013 biorad historically made larger payments royalties fourth quarter sales commissions third parties annual employee bonuses period cash flows investing activities net cash used investing activities including capital expenditures 54 million 4099 million 3863 million 2013 2012 2011 respectively capital expenditures 2013 totaled 1130 million compared 1524 million 1029 million 2012 2011 respectively capital expenditures represent addition replacement production machinery research equipment ongoing manufacturing facility additions expansion regulatory environmental compliance also included capital expenditures investments business systems data communication upgrades enhancements periods include payments made equipment placed clinical diagnostics segment customers contract purchase reagents use capital expenditures lower 2013 compared 2012 placed service first phase global single instance erp platform 2013 began expense costs capitalized application development stage 2012 capital expenditures higher 2012 2011 first phase global single instance erp platform nearing completion 2012 however continue implement phases erp platform expand ecommerce platform expect capital expenditures increase continue remain historically higher next four years current estimated global implementation cost single instance erp platform could exceed 250 million estimated take approximately four years fully implement purchases marketable securities investments 2013 lower 2012 2011 primarily due reallocating funds proceeds sale marketable securities investments higher 2013 prior years primarily provide cash redeem 3000 million 80 senior subordinated notes investment objective maintain liquidity meet anticipated operational corporate requirements consistent risk tolerance level payments acquisitions net cash received longterm investments higher prior year period primarily due following • january 2013 acquired 100 outstanding shares abd serotec division morphosys ag total consideration 622 million net cash received 73 million • august 2012 acquired propel labs inc new cell sorting system included 50 million cash closing date • july 2012 acquired outstanding shares diamed benelux 46 million euros approximately 56 million cash • january 2012 purchased cash certain assets raw material supplier approximately 125 million • october 2011 acquired issued outstanding stock quantalife included 1503 million cash closing date • june 2011 acquired remaining outstanding shares diamed sea limited diamed thailand multiple noncontrolling shareholders approximately 02 million cash • february 2011 acquired additional 39 distribuidora de analitica para medicina ibérica sa diamed spain multiple noncontrolling shareholders increasing ownership diamed spain 90 approximately 25 million euros approximately 34 million cash continue review possible acquisitions expand life science clinical diagnostics segments routinely meet principals brokers subject companies certain time discussions involving material significant acquisitions advance completion cash flows financing activities net cash used financing activities 3117 million 2136 million 2013 2011 respectively net cash provided financing activities 126 million 2012 net cash used financing activities 2013 primarily due early redemption 3000 million 80 senior subordinated notes september 30 2013 also 2013 200 million paid propel labs shareholders contingent consideration 199 million associated valuation 2012 acquisition date remainder recognized cash flows operations additionally 2013 60 million paid quantalife contingent consideration 56 million associated valuation 2011 acquisition date remainder recognized cash flows operations net cash provided 2012 primarily proceeds issuance common stock net cash used 2011 attributable redemption january 2011 2250 million 75 senior subordinated notes including call premium 28 million recorded interest expense consolidated statements income outstanding senior notes 4250 million due 2020 credit agreement entered june 2010 secured substantially personal property assets domestic subsidiaries 65 capital stock certain foreign subsidiaries guaranteed existing future material domestic subsidiaries expires june 2014 currently evaluating options renewing credit agreement similar arrangements board directors authorized repurchase 180 million biorads common stock 33 million yet repurchased december 31 2013 credit agreement limits ability repurchase stock accordance terms awards 2007 incentive award plan june 2012 withheld 122 shares class common stock 917 shares class b common stock satisfy tax obligations due upon vesting restricted stock certain employees considered repurchase stock restricted stock vested december 31 2013 therefore anticipate repurchasing shares purpose repurchases stock 2013 2012 2011 offbalance sheet arrangements offbalance sheet arrangements reasonably likely current future material effect financial condition results operations liquidity contractual obligations following summarizes certain contractual obligations december 31 2013 effect obligations expected cash flows future periods millions item 7aitem 7 management’s discussion analysis financial condition results operations discussion read conjunction information contained consolidated financial statements accompanying notes integral part statements overview multinational manufacturer worldwide distributor life science research clinical diagnostics products business organized two primary segments life science clinical diagnostics mission provide scientists specialized products needed biological research clinical diagnostics sell 8000 products services diverse client base comprised scientific research healthcare education government customers worldwide disclose quantitative information different products services impractical based primarily numerous products services sell global markets serve manufacture supply customers range reagents apparatus equipment separate complex chemical biological materials identify analyze purify components customers require standardization experiments test results much revenues recurring impacted support many governments research healthcare current global economic outlook still uncertain need control government social spending many governments limits opportunities growth approximately 32 2014 consolidated net sales derived united states approximately 68 derived international locations europe largest region overall international sales largely denominated local currencies euro swiss franc japanese yen chinese yuan british sterling result consolidated net sales expressed dollars benefit us dollar weakens suffer dollar strengthens us dollar strengthens benefit lower cost sales international manufacturing sites well nonus suppliers lower international operating expenses previously disclosed may 2010 voluntarily disclosed us department justice doj securities exchange commission sec certain likely potential violations us foreign corrupt practices act fcpa effective november 3 2014 entered nonprosecution agreement npa doj consented entry order sec order actions resolve doj sec investigations result settlements doj sec fourth quarter 2014 paid total 551 million included penalty 144 million 351 million disgorgement 56 million interest april 2014 acquired 100 issued outstanding stock gnubio inc gnubio acquisition accounted business combination included clinical diagnostics segments results operations acquisition date excess purchase consideration fair value net tangible identifiable intangible assets acquired recorded goodwill fair values assigned tangible identifiable intangible assets acquired liabilities assumed based management’s estimates assumptions fourth quarter 2014 finalized determination fair values certain acquired tax attributes adjusted preliminary carrying values goodwill certain assets liabilities order reflect final information received finalization certain tax returns resulting overall reduction goodwill 17 million measurement period adjustments impact results operations year ending december 31 2014 final fair values net assets acquired gnubio acquisition date determined 464 million indefinitelived intangible assets specifically inprocess research development iprd 135 million goodwill 95 million net tangible liabilities fair value consideration acquisition date 504 million included 397 million paid cash closing date 107 million contingent consideration potentially payable gnubios shareholders contingent consideration based probabilityweighted income approach could reach 700 million upon achievement developmentregulatory sales milestones contingent consideration developmentregulatory milestones valued 107 million based assumptions regarding probability achieving milestones amounts discounted present value fourth quarter 2014 contingent consideration related developmentregulatory milestones revalued fair value 100 million december 31 2014 contingent consideration sales milestones acquisition date determined negligible using riskneutral probability money based blackscholes framework believe gnubios innovative dna workflow wellsuited clinical diagnostics sequencing market leverage leadership role area droplet digital pcr january 2013 acquired 100 outstanding shares abd serotec division morphosys ag total consideration 622 million net cash received 73 million acquisition accounted business combination included life science segments results operations acquisition date final fair values net assets acquired consist definitelived intangible assets 440 million goodwill 149 million net tangible assets 33 million believe abd serotecs comprehensive catalog antibodies able offer customers total assay solutions validated many research platforms western blotting multiplex protein expression elisa cell sorting september 2013 redeemed 3000 million 80 senior subordinated notes 3120 million including call premium 120 million expensed remaining original issuance bond discount 25 million unamortized bond issuance costs 11 million included interest expense condensed consolidated statements income third quarter 2014 identified errors consolidated balance sheet december 31 2013 consolidated statements cash flows years ended december 31 2013 2012 interim periods therein unaudited condensed consolidated balance sheets statements cash flows three months ended march 31 2014 three six months ended june 30 2014 related recorded amounts inventories property plant equipment net periods inappropriately reduced inventories intercompany profit intercompany transactions related certain equipment however portion profit reduced capital additions reflected property plant equipment net equipment biorad product provided customers reagent rental agreements whereby biorad retains ownership equipment charges customer test kits purchased use equipment depreciation calculated correctly impact net income period presented effect correcting errors increase total inventories decrease property plant equipment net december 31 2013 150 million result adjustment 53 million prepaid income taxes included prepaid expenses consolidated balance sheet december 31 2013 reclassified shortterm longterm assets overall effect adjustments total inventories prepaid expenses increased total current assets 96 million adjustments change total assets associated reclassification entries within statements cash flows increase cash paid suppliers employees decrease capital expenditures 63 million 95 million years ended december 31 2013 2012 respectively reclassifications resulted decrease net cash provided operating activities decrease net cash used investing activities 63 million 95 million years ended december 31 2013 2012 respectively change net increase decrease cash equivalents period presented management evaluated materiality errors described qualitative quantitative perspective accordance requirements securities exchange commission sec staff accounting bulletin 99 materiality sab 99 based evaluation concluded errors significant periods impacted correction would material individual prior period effect financial results accordingly correcting errors every affected period consolidated financial statements third quarter 2012 recognized contingent consideration liability 446 million upon acquisition new cell sorting system propel labs inc fair value contingent consideration based probabilityweighted income approach related achievement certain development sales milestones development milestone achieved paid 2013 third quarter 2014 first sales milestone reached cell sorting system purchase orders resulting payment 24 million fourth quarter 2014 effective december 31 2014 amended certain key terms impacting future payment contingent consideration acquisition new cell sorting system propel labs inc include clarification performance period include additional four months seller agreeing support expansion offerings address request customers customization amended sales milestones range 39 annual invoices 2015 2016 annual calendar year performance periods 40 extended september 1 2013 december 31 2014 performance period contingent consideration revalued net reduction 07 million 2014 selling general administrative expense estimated fair value 177 million december 31 2014 critical accounting policies estimates accompanying discussion analysis financial condition results operations based upon consolidated financial statements prepared accordance us generally accepted accounting principles gaap preparation financial statements conformity gaap requires management make estimates assumptions affect reported amounts assets liabilities contingencies date financial statements reported amounts revenues expenses reporting periods evaluate estimates ongoing basis base estimates historical experience assumptions believed reasonable circumstances results form basis making judgments carrying values assets liabilities readily apparent sources however future events may cause us change assumptions estimates may require adjustment actual results could differ estimates determined periods reported annual report form 10k following accounting policies estimates critical understanding financial condition results operations accounting income taxes management required make estimates related income tax provision jurisdictions operate process involves estimating current tax exposures well making judgments regarding recoverability deferred tax assets jurisdiction deferred tax assets liabilities reflect tax effects losses credits temporary differences carrying amounts assets liabilities financial reporting purposes amounts used income tax purposes management assesses likelihood deferred tax assets recovered future taxable income extent management believes recovery likely valuation allowance must established extent management establishes valuation allowance increases allowance period increase expense within provision income taxes consolidated statements income may result recorded valuation allowance 586 million 640 million december 31 2014 2013 respectively due uncertainties related ability utilize deferred tax assets primarily consisting certain foreign net operating losses carried forward valuation allowance based management’s current estimates taxable income jurisdictions operate period deferred tax assets recoverable event actual results differ estimates adjusted future periods additional valuation allowance may need established would increase tax provision lowering income impacting financial position realization deferred tax assets valuation allowance provided occur provision income taxes may decrease raising income positively impacting biorad’s financial position recognize tax benefit uncertain tax position likely tax position sustained examination taxing authorities based technical merits position tax benefits recognized financial statements particular tax position measured based largest benefit greater 50 likelihood realized upon settlement amount unrecognized tax benefits adjusted appropriate changes facts circumstances significant amendments existing tax law new regulations interpretations taxing authorities new information obtained tax examination resolution examination recognize accrued interest penalties appropriate related unrecognized tax benefits income tax expense overall effective tax rate subject fluctuations changes geographic mix earnings changes statutory tax rates tax laws impact various tax audits assessments well generation tax credits valuation goodwill longlived assets goodwill represents excess cost fair value net tangible identifiable intangible assets acquired businesses goodwill amounts assigned reporting units time acquisition adjusted subsequent significant transfers business reporting units assess impairment goodwill annually fourth quarter whenever events changes circumstances indicate carrying value may recoverable perform impairment tests goodwill reporting unit level one level operating segments goodwill impairment test consists twostep process first step goodwill impairment test used identify potential impairment compares fair value reporting unit carrying value including goodwill fair value reporting unit exceeds carrying amount goodwill reporting unit considered impaired second step impairment test required second step required compares implied fair value reporting unit goodwill carrying amount goodwill fair value reporting unit allocated assets liabilities unit including unrecognized intangible assets reporting unit acquired business combination fair value reporting unit price paid acquire reporting unit carrying amount reporting units goodwill exceeds implied fair value impairment charge recognized amount equal excess use projected discounted cash flow model determine fair value reporting unit discounted cash flow method determining goodwill may different fair value would result actual transaction willing buyer willing seller projections discounted cash flow models inherently uncertain accordingly actual future cash flows may differ materially projected cash flows management judgment required developing assumptions discounted cash flow model assumptions include revenue growth rates profit margins future capital expenditures working capital needs expected foreign currency rates discount rates terminal values estimate future cash flows using current longerterm high level financial forecasts take account current economic environment discount rates used compiled using independent sources current trends similar businesses observable market data changes rates might result material changes valuation determination recoverability goodwill example increase discount rate used discount cash flows decrease computed fair value identified events lead us believe goodwill impaired however impairment tests highly sensitive changes assumptions minor changes assumptions could result impairment losses forecasts utilized 2014 impairment test assumed among things sales growth executing sales marketing programs new product introductions successful product development timely registration products required controlling costs addition external factors currency inflation rates cost capital could affect determination fair value business units impairment tests resulted excessive fair value book value ranging 17 200 various business units two business units excess 17 28 respectively initiatives mentioned achieve desired results external factors change detrimentally future impairment losses may occur validate reasonableness reporting unit fair values reconcile aggregate fair values reporting units enterprise market capitalization performing reconciliation may depending volatility market value stock price use either stock price valuation date average stock price range dates around valuation date purposes recognition measurement impairment loss longlived asset assets grouped assets liabilities lowest level identifiable cash flows largely independent cash flows assets liabilities assess impairment longlived assets including identifiable intangibles whenever events changes circumstances indicate carrying value may recoverable factors consider important could trigger impairment review include • significant reporting unit underperformance relative expected historical projected future operating results • significant changes manner use longlived assets intangible assets strategy overall business • current expectation likely longlived asset sold otherwise disposed end previously estimated useful life • significant negative industry legal regulatory economic trends management determines carrying value longlived assets may recoverable based upon existence one indicators impairment test impairment based projected undiscounted cash flow method projected future operating results cash flows asset group used establish fair value used evaluating carrying value longlived intangible assets estimate future cash flows longlived assets using current longterm financial forecasts carrying amount longlived asset recoverable exceeds sum undiscounted cash flows expected result use eventual disposition asset case impairment loss would recognized impairment loss recognized amount carrying amount exceeds fair value impairment losses recorded 2013 2012 2014 impaired licenses discontinued product line amount 64 million impairment charge included 58 million cost goods sold 06 million research development expense accompanying consolidated statements income valuation inventories value inventory lower actual cost purchase andor manufacture inventory current estimated net realizable value inventory review inventory quantities hand reduce cost basis excess obsolete inventory based primarily estimated forecast product demand production requirements quality efficacy potency raw materials review done quarterly basis warranted circumstances frequently addition industry characterized technological change frequent new product development product obsolescence could result increase amount obsolete inventory quantities hand estimates future product demand may prove inaccurate high may overstated carrying value inventory future inventory determined overvalued would required write value inventory market recognize costs cost goods sold time determination therefore although make efforts ensure accuracy forecasts future product demand perform procedures safeguard overall inventory quality significant unanticipated changes demand technological developments regulations storage conditions economic environmental factors affecting biological materials could significant impact value inventory reported results operations valuation investments regularly review investments factors may indicate decline fair value investment carrying value otherthantemporary factors considered evaluating whether decline fair value otherthantemporary include ability intent retain investment period time sufficient allow recovery value duration extent fair value less cost financial condition prospects issuer reviews inherently uncertain value investment may fully recover may decline future periods resulting realized losses warranty reserves warrant certain equipment defects design materials workmanship generally period one year upon delivery acceptance equipment establish part cost goods sold provision expected costs warranty repairs based historical experience specific warranty terms customer feedback review performed quarterly basis assess adequacy warranty reserve adjusted necessary warranty reserve based actual experience expected future costs incurred realized costs higher expected costs cost goods sold would lower period estimation higher realized allowance doubtful accounts maintain allowance doubtful accounts estimated losses resulting collectability customer accounts amount allowance determined analyzing known uncollectible accounts age receivables economic conditions customers’ country industry historical losses customers’ general creditworthiness amounts later determined specifically identified uncollectible charged written allowance uncertainty current economic environment prolonged could result greater amounts becoming uncollectible future estimates losses higher actual uncollectible accounts would report lower profitability estimates made higher profitability receivable collected litigation accruals record liabilities consolidated balance sheets estimated amounts claims probable reasonably estimated likelihood material change estimated liabilities dependent possible outcome settlement negotiations regulatory judicial review development facts circumstances extended litigation could change claims assessments amount range loss outstanding litigation uncertain disclose footnotes financial statements unable make reasonable estimate material liability could result unfavorable outcomes litigation events occur assess potential liability related pending litigation revise estimates revisions could materially impact results operations results operations sales gross margins expenses following shows cost goods sold gross profit expense items net income percentage net sales net sales net sales 2014 218 billion increase 20 compared 213 billion 2013 excluding impact foreign currency 2014 sales increased approximately 33 compared 2013 currency neutral sales growth reflected regions primarily united states emerging markets eastern europe china currency neutral sales japan decreased life science segment sales 2014 7283 million increase 26 compared 2013 currency neutral basis sales increased 40 compared 2013 currency neutral sales increase reflected across product lines except protein separations products currency neutral sales growth primarily north america europe china partially offset decreased sales rest asia clinical diagnostics segment sales 2014 143 billion increase 17 compared 2013 currency neutral basis sales increased 29 compared 2013 clinical diagnostics growth across product lines currency neutral basis notably quality control products blood typing sales growth partially offset lower sales infectious disease serology product line primarily due laboratory consolidation pricing pressure europe north america currency neutral sales growth primarily eastern europe china partially offset decreased sales western europe net sales 2013 213 billion compared 207 billion 2012 excluding impact foreign currency 2013 sales increased approximately 39 compared 2012 currency neutral sales growth reflected regions primarily americas emerging markets eastern europe pacific rim currency neutral sales western europe decreased life science segment sales 2013 7100 million increase 31 compared 2012 currency neutral basis sales increased 45 compared 2012 sales increase primarily driven sales newly acquired abd serotec droplet digital™ pcr cell biology product lines currency neutral sales increased europe americas asia declined government austerity program slowed japanese market growth clinical diagnostics segment sales 2013 141 billion increase 31 compared 2012 currency neutral basis sales increased 36 compared 2012 clinical diagnostics growth across product lines currency neutral basis notably quality controls diabetes bioplex® 2200 system currency neutral sales growth primarily eastern europe china asia pacific americas currency neutral sales western europe declined gross margin consolidated gross margins 542 2014 compared 553 2013 life science segment gross margins 2014 decreased 2013 approximately 01 percentage points essentially flat compared 2013 lower margins reflected protein separation products approximately 17 million costs associated closing small manufacturing plant almost entirely offset higher margins process chromatography droplet digital™ pcr food testing products clinical diagnostics segment gross margins 2014 decreased 2013 approximately 15 percentage points decrease primarily reflected approximately 83 million associated discontinuance product line 2014 coupled increase inventory reserves writedown licenses specific technology decrease also due continued pricing pressure approximately 16 million associated closing consolidating two small manufacturing plants 2014 increased scrap obsolete products beginning 2013 patient protection affordable health care health care education reconciliation acts 2010 among initiatives provided 23 annual excise tax sales certain medical devices us biorad required pay excise tax us clinical diagnostic sales accounted period cost goods sold consolidated gross margins 553 2013 compared 558 2012 life science segment gross margins 2013 increased 2012 approximately 05 percentage points primarily due incremental royalty accrual related dispute third party well 38 million soil remediation expense associated manufacturing plant occurred 2012 increase partially offset increase costs related inventory sold higher cost due purchase accounting increase purchased intangibles amortization expense 61 million primarily related abd serotec cell sorting system acquisitions clinical diagnostics segment gross margins 2013 decreased 2012 approximately 12 percentage points primarily due large low margin government tenders less favorable product mix increase obsolescence charges gross margins also decreased approximately 036 due excise tax sales certain medical devices us went effect 2013 clinical diagnostics segment lower gross margins partially offset foreign supplemental tax associated social benefits 41 million occurred 2012 06 million french competitiveness tax credit recorded 2013 selling general administrative expense consolidated selling general administrative expenses sga represented 372 sales 2014 compared 374 sales 2013 decreases sga expense relative sales primarily driven • accrued lower expense 195 million 2014 compared accrual 300 million 2013 connection reaching final settlement sec doj investigations relating fcpa • lower external marketing advertising expense professional fees • decrease bad debt expense 40 million primarily russia due distributor bad debt 2013 spain due payments received approximately 11 million public agencies addition improved collections us implementing first phase new erp system partially offsetting decreased costs • increase employeerelated expenses largest cost primarily due increase employee compensation comprised incentive plans including related fringe benefits commissions temporary help associated erp implementation • 14 million 2014 net decrease estimated fair value contingent considerations cell sorting system gnubio compared 58 million 2013 net decrease estimated fair value contingent consideration cell sorting system writeoff remaining quantalife contingent consideration liability resulting overall increase contingent consideration 44 million • increase third party commissions facilities • increase software costs primarily associated erp implementation consolidated selling general administrative expenses sga represented 374 sales 2013 compared 329 sales 2012 increases sga expense relative sales primarily driven • increase 436 million employeerelated expenses largest cost associated increase headcount included acquisitions • accrual 300 million connection initial efforts resolve sec doj investigations relating fcpa recorded latter half 2013 • increase professional services 217 million primarily related first phase global single instance erp system placed service legal accounting services • favorable impact 2012 revaluation fair value quantalife contingent consideration 161 million • increase 96 million software amortization primarily due first phase erp platform placed service • increase 65 million facilities primarily due expansion southern california facility acquisition abd serotec • increase 57 million 2012 benefited lower bad debt expense primarily spain due large sum payments public agencies causing us revise estimate allowance doubtful accounts partially offset • decrease valuation cell sorting system contingent consideration 38 million 2013 research development expense research development expense increased 2203 million 101 sales 2014 compared 2110 million 99 sales 2013 life science segment research development expense decreased slightly 2014 2013 primarily due projects nearing completion clinical diagnostics segment research development expense increased 2014 2013 primarily due continued investments diagnostic applications using recently acquired droplet digital pcr technology new instrument platforms assays increase also reflected approximately 31 million associated discontinuance product line 2014 included contractual costs writedown equipment licenses research development expense increased 2110 million 99 sales 2013 compared 2092 million 101 sales 2012 life science segment research development expense decreased 2013 2012 primarily due projects nearing completion clinical diagnostics segment research development expense increased 2013 2012 primarily due lower refundable french rd tax credits broadening ongoing development across wider range products results operations nonoperating interest expense interest expense 2014 decreased 639 221 million compared 2013 primarily due absence interest expense 187 million 156 million associated call premium expensing remaining original bond discount unamortized debt issuance costs associated 3000 million principal amount senior subordinated notes 80 notes redeemed september 30 2013 addition interest expense connection reaching final settlement sec doj investigations relating fcpa 06 million 2014 compared 50 million 2013 interest expense 2013 increased 199 613 million compared 2012 primarily due early redemption 80 notes september 30 2013 resulting 156 million expense redemption included call premium 120 million expensing 25 million remaining original issuance bond discount expensing unamortized debt issuance costs 11 million addition interest expense included expense 50 million interest expense associated initial efforts resolve doj sec investigations relating fcpa recorded latter half 2013 increase partially offset estimated interest expense 12 million included first quarter 2012 associated foreign supplemental tax related social benefits interest back royalties 2012 foreign currency exchange gains losses foreign currency exchange gains losses consist foreign currency transaction gains losses intercompany net receivables payables change fair value forward foreign exchange contracts used manage foreign currency exchange risk net foreign currency exchange losses 2014 2013 2012 93 million 86 million 50 million respectively 2014 2013 2012 net foreign currency exchange losses attributable market volatility increasing costs hedge result estimating process inherent timing shipments payments intercompany debt years affected economic hedging program employ hedge intercompany receivables payables income expense net income expense net includes investment dividend income generally interest income cash equivalents shortterm investments long term marketable securities income expense net 2014 increased 130 million income compared 128 million income 2013 increase primarily due higher dividends 2013 realized gains 2014 compared realized losses 2013 partially offset lower interest investment income 2013 sales investments 2013 used provide cash redeem 3000 million 80 senior subordinated notes income expense net 2013 decreased 128 million income compared 219 million income 2012 decrease primarily due higher realized gains associated sale equity investments 2012 compared realized losses 2013 2012 gain 43 million sale building clinical diagnostics segment sales investments 2013 used provide cash redeem 3000 million 80 senior subordinated notes effective tax rate effective tax rate 32 31 28 2014 2013 2012 respectively effective tax rates 2014 2013 approximately effective tax rate 2014 includes lower tax benefit research tax credits effective tax rate 2013 included significant tax benefit related 2012 us federal research credit retroactively reinstated january 2 2013 additional tax benefit research credits 2013 offset increase tax liabilities unrecognized tax benefits audit settlements foreign jurisdictions effective tax rates three periods lower us statutory rate primarily due tax benefits differences us foreign statutory tax rates research development tax credits foreign income earned primarily switzerland france jurisdictions operate statutory tax rates significantly lower us statutory tax rate 35 include switzerland russia uk singapore effective tax rate may impacted future either favorably unfavorably many factors including limited changes statutory tax rates changes tax laws regulations tax audits settlements generation tax credits liquidity capital resources biorad operates conducts business globally primarily subsidiary companies established markets trade goods manufactured small number locations shipped local distribution facilities around world product mix diversified certain products compete largely product efficacy others compete price gross margins generally sufficient exceed normal operating costs funding research development new products well routine outflows capital expenditures interest taxes addition annual positive cash flow operating activities additional liquidity readily available via sale shortterm investments access 2000 million unsecured credit agreement entered june 2014 borrowings credit agreement revolving basis used make permitted acquisitions working capital general corporate purposes outstanding borrowings credit agreement december 31 2014 however 50 million utilized domestic standby letters credit reduced borrowing availability credit agreement matures june 2019 december 31 2014 available 6976 million cash equivalents shortterm investments approximately 43 held foreign subsidiaries believe holdings cash equivalents shortterm investments us foreign subsidiaries sufficient meet current longterm needs global operations amount funds held united states fluctuate due timing receipts payments ordinary course business due reasons businessdevelopment activities part ongoing liquidity assessments regularly monitor mix domestic foreign cash flows inflows outflows repatriation overseas funds result additional us federal state income tax payments general practice intention indefinitely reinvest cash generated foreign subsidiaries foreign subsidiaries operations domestic international lines credit 2333 million available borrowing december 31 2014 reduced 76 million utilized standby letters credit issued banks support obligations mostly meet deductible amount insurance policies benefit management believes availability together cash flow operations adequate meet current objectives operations research development capital additions manufacturing distribution plant equipment information technology systems acquisition reasonable proportion existing total available capital economic growth somewhat improving instability still exists developed nations us may adversely affect future results cash flows demand products services could change dramatically previous years based activity funding reimbursement constraints support levels government universities hospitals private industry including diagnostic laboratories need certain sovereign nations large annual deficits curtail spending could lead slower growth even decline business sovereign nations either delaying payment goods services renegotiating debts could impact liquidity situation sovereign nations continuously evolving greater knowledge situation publicly reported december 31 2014 december 31 2013 accounts receivable net allowance doubtful accounts spain italy greece portugal 454 million 660 million respectively approximately 120 million decrease december 31 2013 currency addition customer payments notably spain approximately 11 million public agencies first quarter 2014 cash flows operations net cash provided operations 2733 million 1691 million 2665 million 2014 2013 2012 respectively net increase 2014 2013 1042 million primarily resulted • higher cash received customers primarily due improved collections particular spain approximately 11 million public agencies first quarter 2014 us implementing first phase new erp system • decrease income taxes paid primarily due federal income tax quick refund 20 million french income tax refund approximately 11 million related 2013 received 2014 5 million federal income tax extension payment 2013 • absence interest paid 250 million 120 million 2013 associated call premium primarily due early redemption 3000 million 80 senior subordinated notes september 30 2013 • settlement payment royalties audit 12 million second quarter 2013 partially offset • payment 551 million settlement sec doj associated fcpa net decrease 2013 2012 973 million primarily resulted • higher cash paid employees mostly due increase headcount included acquisitions • increase outside services placed service second quarter 2013 first phase global single instance enterprise resource planning erp platform moving expense postimplementationoperation stage capitalizing application development stage prior year period • 2012 benefited approximately 21 million payment multiple years spanish receivables • increase interest paid primarily due early redemption 3000 million 80 senior subordinated notes september 30 2013 • payment settlement royalties audit 12 million second quarter 2013 • partially offset lower income tax payments higher customer receipts regularly review past due receivables assess allowance doubtful accounts believe net accounts receivable fully realizable also routinely review inventory impact obsolescence changes market prices caused introduction new products technologies government reimbursement policies expect first quarter 2015 cash flows operations lower fourth quarter 2014 biorad historically made larger payments royalties fourth quarter sales commissions third parties annual employee bonuses period cash flows investing activities net cash used investing activities 1905 million 4004 million 2014 2012 respectively net cash provided investing activities 09 million 2013 purchases marketable securities investments proceeds sales marketable securities investments lower 2014 2013 primarily due sales securities provide cash redeem 3000 million 80 senior subordinated notes therefore expected purchases decline markedly year due reduced amounts cash invest addition purchased longer dated securities take advantage higher returns investments therefore experienced additional decline maturities redemptions securities purchases marketable securities investments 2013 lower 2012 primarily due reallocating funds proceeds sale marketable securities investments higher 2013 2012 primarily provide cash redeem 3000 million 80 senior subordinated notes investment objective maintain liquidity meet anticipated operational corporate requirements capital preserved increased investing low risk high quality securities commensurate returns consistent risk tolerance level purchases intangible assets higher 2014 2013 2012 primarily due purchases licenses payments acquisitions net cash received longterm investments 2014 2013 2012 primarily due following • april 2014 acquired 100 issued outstanding stock gnubio total consideration 504 million includes 397 million paid cash closing date 107 million contingent consideration potentially payable gnubios shareholders • january 2013 acquired 100 outstanding shares abd serotec division morphosys ag total consideration 622 million net cash received 73 million • august 2012 acquired propel labs inc new cell sorting system included 50 million cash closing date • july 2012 acquired outstanding shares diamed benelux 46 million euros approximately 56 million cash • january 2012 purchased cash certain assets raw material supplier approximately 125 million continue review possible acquisitions expand life science clinical diagnostics segments routinely meet principals brokers subject companies certain time discussions involving material significant acquisitions advance completion capital expenditures 2014 totaled 1210 million compared 1067 million 1429 million 2013 2012 respectively capital expenditures represent addition replacement production machinery research equipment ongoing manufacturing facility additions expansion regulatory environmental compliance also included capital expenditures investments business systems data communication upgrades enhancements periods include equipment placed clinical diagnostics segment customers contract purchase reagents use capital expenditures higher 2014 2012 development stages costs capitalized implementing second first phases respectively global single instance erp platform april 2013 implemented first phase global single instance erp platform hence remainder 2013 costs longer capitalized continue implement phases erp platform expand ecommerce platform expect capital expenditures continue remain historically higher next four years current estimated global implementation cost single instance erp platform exceed 300 million estimated take approximately four years fully implement capital expenditures lower 2013 2012 placed service first phase global single instance erp platform 2013 2012 largely capitalizing development costs throughout year cash flows financing activities net cash provided financing activities 117 million 126 million 2014 2012 respectively net cash used financing activities 3117 million 2013 net cash provided financing activities 2014 primarily proceeds issuance common stock net cash provided financing activities 2014 partially offset payment 24 million propel labs shareholders contingent consideration sales milestone associated valuation 2012 acquisition date payment shortterm borrowing net cash used financing activities 2013 primarily due early redemption 3000 million 80 senior subordinated notes september 30 2013 also 2013 200 million paid propel labs shareholders contingent consideration 199 million associated valuation 2012 acquisition date remainder recognized cash flows operations additionally 2013 60 million paid quantalife contingent consideration 56 million associated valuation 2011 acquisition date remainder recognized cash flows operations net cash provided 2012 primarily proceeds issuance common stock outstanding senior notes 4250 million due 2020 indicated redeemed senior subordinated notes 300 million september 30 2013 believe current cash sufficient meet normal operating costs funding research development new products well routine outflows capital expenditures interest taxes board directors authorized repurchase 180 million biorads common stock 33 million yet repurchased december 31 2014 credit agreement may limit ability repurchase stock accordance terms awards 2007 incentive award plan june 2012 withheld 122 shares class common stock 917 shares class b common stock satisfy tax obligations due upon vesting restricted stock certain employees considered repurchase stock restricted stock vested december 31 2013 therefore anticipate repurchasing shares purpose repurchases stock 2014 2013 2012 offbalance sheet arrangements offbalance sheet arrangements reasonably likely current future material effect financial condition results operations liquidity contractual obligations following summarizes certain contractual obligations december 31 2014 effect obligations expected cash flows future periods millions item 7aitem 7 management’s discussion analysis financial condition results operations discussion read conjunction information contained consolidated financial statements accompanying notes integral part statements overview multinational manufacturer worldwide distributor life science research clinical diagnostics products business organized two primary segments life science clinical diagnostics mission provide scientists specialized products needed biological research clinical diagnostics sell 9000 products services diverse client base comprised scientific research healthcare education government customers worldwide disclose quantitative information different products services impractical based primarily numerous products services sell global markets serve manufacture supply customers range reagents apparatus equipment separate complex chemical biological materials identify analyze purify components customers require standardization experiments test results much revenues recurring impacted support many governments research healthcare current global economic outlook still uncertain need control government social spending many governments limits opportunities growth adding uncertainty referendum united kingdom withdraw european union change us executive branch government approximately 37 2017 consolidated net sales derived united states approximately 63 derived international locations europe largest international region international sales largely denominated local currencies euro swiss franc japanese yen chinese yuan british sterling result consolidated net sales expressed dollars benefit us dollar weakens suffer dollar strengthens us dollar strengthens benefit lower cost sales international manufacturing sites well nonus suppliers lower international operating expenses regularly discuss changes revenue expense categories terms changing foreign exchange rates terms currency neutral basis notable explain impact currency results upon implementation global single instance enterprise resource planning erp platform europe second quarter 2017 105 million assets france misclassified equipment reported buildings leasehold improvements periods prior 2017 reclassification 2016 balance conforms correct balance sheet presentation december 31 2017 impact consolidated statements income cash flows 2016 2015 three different misstatements associated income taxes first misstatement related second implementation global single instance erp platform us third quarter 2015 part data migrated reconciled timely resulting double counting deferred tax asset consequence deferred income taxes 2016 understated 24 million provision income taxes understated 24 million 2015 second misstatement related misapplication tax rule related foreign dividend income consequence retained earnings overstated 14 million 2015 tax liabilities noncurrent reported longterm liabilities understated 46 million 2016 provision income taxes understated 19 million 13 million 2016 2015 respectively third misstatement related design deficiency associated transfer pricing consequence retained earnings overstated 02 million 2015 tax liabilities noncurrent reported longterm liabilities understated 06 million 2016 provision income taxes understated 02 million 2016 2015 management evaluated materiality errors described qualitative quantitative perspective based evaluation concluded material individual prior period effect trend financial results taking account requirements securities exchange commission sec staff accounting bulletin 108 considering effect prior year misstatements quantifying misstatements current year financial statements sab 108 accordingly correcting errors every affected period 2015 2016 consolidated financial statements included form 10k fourth quarter 2017 identified errors unaudited interim condensed consolidated financial statements three months ended september 30 2017 identified error recording deferred revenue acquired acquisition raindance see note 2 acquisitions resulted overstatement revenue recorded third quarter 2017 09 million corrected fourth quarter 2017 addition identified error estimated employee benefit expense resulted understatement expenses reported cost goods sold selling general administrative expense research development expense net third quarter 2017 38 million corrected fourth quarter 2017 finally identified error reconciliation various inventory accounts resulted understatement cost goods sold third quarter 2017 35 million corrected fourth quarter 2017 impact errors resulted overstatement provision income taxes reported third quarter 2017 29 million corrected fourth quarter 2017 management evaluated materiality errors described previous paragraph qualitative quantitative perspective based evaluation concluded material individual prior period effect trend financial results taking account requirements sab 108 accordingly correcting errors financial statements quarter ended september 30 2017 included form 10k 2017 impaired goodwill associated 1999 acquisition pasteur sanofi diagnostics sa 2013 acquisition abd serotec amounts 28 million 87 million respectively impairment pasteur sanofi diagnostics sa included clinical diagnostics segments results operations impairment abd serotec included life science segments results operations see note 4 consolidated financial statements december 2017 announced termination infectious disease research development project included clinical diagnostics segments results operations result recorded restructuring charges related severance employee benefits 110 million asset writeoffs exit costs 101 million year ended december 31 2017 amounts recorded reflected cost goods sold 23 million selling general administrative expense 33 million research development expense 155 million consolidated statements income year ended december 31 2017 liability 141 million december 31 2017 consisted 111 million recorded accrued payroll employee benefits 30 million recorded current liabilities consolidated balance sheets see note 15 consolidated financial statements 2014 acquired gnubio inc gnubio business acquisition included clinical diagnostics segment’s results operations division primarily based massachusetts september 2017 announced closing gnubio research program facilities massachusetts result recorded restructuring charges september 2017 related severance employee benefits 29 million asset writeoffs 55 million amounts recorded reflected selling general administrative expense 08 million research development expense 76 million consolidated statements income year ended december 31 2017 liability balance december 31 2017 14 million recorded accrued payroll employee benefits consolidated balance sheets expect remainder paid early 2018 see note 15 consolidated financial statements february 2017 acquired issued outstanding stock raindance technologies inc raindance approximately 727 million cash payments closing 729 million addition cash payment 100 million preexisting condition concurrent acquisition recorded cost goods sold acquisition included life science segment’s results operations acquisition date accounted business combination raindances foundational intellectual property portfolio product lines encompass wide range biological reactions droplets potential applications life science research clinical research genomic tools provide ultrasensitive detection genetic variations cancer well inherited infectious diseases enabling research areas noninvasive liquid biopsy believe raindances dropletbased solutions extend reach nextgeneration sequencing applications strengthen position area droplet digital™ pcr offering customers solutions wide range nucleic acid detection applications final allocation payments 729 million 376 million definitelived intangibles 02 million acquired net assets 262 million goodwill deferred tax liability 136 million primarily related purchased intangibles deferred tax asset 225 million primarily related acquired net operating losses final allocation payments reflect effects correcting error recorded fourth quarter 2017 corrections reduced goodwill deferred revenue deferred tax assets 19 million 33 million 14 million respectively significant impact consolidated statements income see note 2 consolidated financial statements fourth quarter 2016 fully impaired goodwill inprocess research development amounts 135 million 464 million respectively associated 2014 acquisition gnubio inc second quarter 2016 impaired intellectual property license associated research development project 24 million see note 4 consolidated financial statements may 2016 announced would take certain actions europe geographic region designed better align expenses revenue gross margin profile position us improved operating performance actions aligned creation evolution organization structure coordinated implementation global single instance enterprise resource planning erp platform expected incurred 2019 result recorded approximately 05 million 125 million restructuring charges related severance employee benefits years ended december 31 2017 2016 respectively liability 63 million december 31 2017 consisted 62 million recorded accrued payroll employee benefits 01 million recorded longterm liabilities consolidated balance sheets amounts recorded reflected cost goods sold 02 million 21 million selling general administrative expense 07 million 104 million consolidated statements income years ended december 31 2017 2016 respectively see note 15 consolidated financial statements january 2016 acquired high performance analytical flow cytometer platform propel labs propel enable advanced novice users perform basic multiparameter cytometry wide range applications chemistries asset acquisition accounted business combination included life science segments results operations acquisition date fair values net assets acquired propel acquisition date determined 327 million definitelived intangible assets 01 million goodwill fair value consideration acquisition date 328 million included 95 million paid cash closing date 233 million contingent consideration potentially payable propel amount contingent consideration determined based probabilityweighted income approach related achievement sales milestones recognized estimated fair value 167 million december 31 2017 see notes 2 3 consolidated financial statements critical accounting policies estimates accompanying discussion analysis financial condition results operations based upon consolidated financial statements prepared accordance us generally accepted accounting principles gaap preparation financial statements conformity gaap requires management make estimates assumptions affect reported amounts assets liabilities contingencies date financial statements reported amounts revenues expenses reporting periods evaluate estimates ongoing basis base estimates historical experience assumptions believed reasonable circumstances results form basis making judgments carrying values assets liabilities readily apparent sources however future events may cause us change assumptions estimates may require adjustment actual results could differ estimates determined periods reported annual report form 10k following accounting policies estimates critical understanding financial condition results operations accounting income taxes management required make estimates related income tax provision jurisdictions operate process involves estimating current tax exposures well making judgments regarding recoverability deferred tax assets jurisdiction deferred tax assets liabilities reflect tax effects losses credits temporary differences carrying amounts assets liabilities financial reporting purposes amounts used income tax purposes management assesses likelihood deferred tax assets recovered future taxable income extent management believes recovery likely valuation allowance must established extent management establishes valuation allowance increases allowance period increase expense within provision income taxes consolidated statements income may result recorded valuation allowance 664 million december 31 2017 2016 due uncertainties related ability utilize deferred tax assets primarily consisting certain foreign net operating losses carried forward certain state research development credits valuation allowance based management’s current estimates taxable income jurisdictions operate period deferred tax assets recoverable event actual results differ estimates adjusted future periods additional valuation allowance may need established would increase tax provision lowering income impacting financial position realization deferred tax assets valuation allowance provided occur provision income taxes may decrease raising income positively impacting biorad’s financial position recognize tax benefit uncertain tax position likely tax position sustained examination taxing authorities based technical merits position tax benefits recognized financial statements particular tax position measured based largest benefit greater 50 likelihood realized upon settlement amount unrecognized tax benefits adjusted appropriate changes facts circumstances significant amendments existing tax law new regulations interpretations taxing authorities new information obtained tax examination resolution examination recognize accrued interest penalties appropriate related unrecognized tax benefits income tax expense overall effective tax rate subject fluctuations changes geographic mix earnings changes statutory tax rates tax laws impact various tax audits assessments well generation tax credits december 22 2017 us enacted comprehensive tax legislation “tax act” new legislation contains significant tax provisions affect us including onetime mandatory deemed repatriation tax certain unrepatriated foreign earnings transition tax reduction corporate income tax rate 35 21 effective january 1 2018 change worldwide tax system modified territorial system required recognize effect tax law changes period enactment computation transition tax remeasurement us deferred tax assets liabilities well reassessment net realizability deferred tax assets liabilities subsequent enactment tax act sec staff issued staff accounting bulletin 118 income tax accounting implications tax cuts jobs act sab 118 provides guidance accounting tax effects tax act sab 118 provides measurement period extend beyond one year tax act enactment date companies complete accounting standards codification asc 740 income taxes accordance sab 118 company must reflect income tax effects aspects tax act accounting asc 740 complete extent company’s accounting certain income tax effects tax act incomplete reasonable estimate determined company must record provisional estimate financial statements year ended december 31 2017 recorded amounts accounting complete able make reasonable estimates provisional estimates transition tax remeasurement deferred tax assets liabilities adjusted additional information guidance become available valuation business acquisitions goodwill longlived assets upon consummation business combination use multiple analyses determine fair market value consideration assets acquired liabilities assumed fair market value acquired business determined residual value fair market value consideration defined goodwill represents excess cost fair value net tangible identifiable intangible assets acquired businesses could include contingent consideration contingent consideration obligation acquirer transfer additional assets equity interest former owners acquiree part exchange control acquiree specified future events occur conditions met contingent consideration reported fair value reporting period contingency resolved changes fair value recognized earnings could become volatile time depending facts circumstances goodwill amounts assigned reporting units time acquisition adjusted subsequent significant transfers business reporting units assess impairment goodwill annually fourth quarter whenever events changes circumstances indicate carrying value may recoverable perform impairment tests goodwill reporting unit level one level operating segments january 1 2017 adopted accounting standards update 201704 simplifying test goodwill impairment goodwill impairment amount reporting units carrying value exceeds fair value exceed carrying amount goodwill use projected discounted cash flow model determine fair value reporting unit discounted cash flow method determining goodwill may different fair value would result actual transaction willing buyer willing seller projections discounted cash flow models inherently uncertain accordingly actual future cash flows may differ materially projected cash flows management judgment required developing assumptions discounted cash flow model assumptions include revenue growth rates profit margins future capital expenditures working capital needs expected foreign currency rates discount rates terminal values estimate future cash flows using current longerterm financial forecasts take account current economic environment discount rates used compiled using independent sources current trends similar businesses observable market data changes rates might result material changes valuation determination recoverability goodwill example increase discount rate used discount cash flows decrease computed fair value impairment tests highly sensitive changes assumptions minor changes assumptions could result impairment losses forecasts utilized 2017 impairment test assumed among things sales growth executing sales marketing programs new product introductions successful product development timely registration products required controlling costs addition external factors currency inflation rates cost capital forecasted tax rates could affect determination fair value reporting units aside pasteur sanofi diagnostics sa abd serotec reporting units reflected carrying value exceeded fair value impairment tests resulted excessive fair value book value ranging 8 400 various reporting units one reporting unit consists mainly 2010 acquisition biotest ag 2007 2009 acquisitions diamed holding ag excess fair value book value 8 december 31 2017 goodwill amount 2636 million allocated reporting unit december 31 2017 initiatives mentioned achieve desired results external factors change detrimentally future impairment losses may occur validate reasonableness reporting unit fair values reconcile aggregate fair values reporting units enterprise market capitalization performing reconciliation may depending volatility market value stock price use either stock price valuation date average stock price range dates around valuation date purposes recognition measurement impairment loss longlived asset assets grouped assets liabilities lowest level identifiable cash flows largely independent cash flows assets liabilities assess impairment longlived assets including identifiable intangibles whenever events changes circumstances indicate carrying value may recoverable factors consider important could trigger impairment review include • significant reporting unit underperformance relative expected historical projected future operating results • significant changes manner use longlived assets intangible assets strategy overall business • current expectation likely longlived asset sold otherwise disposed end previously estimated useful life • significant negative industry legal regulatory economic trends management determines carrying value longlived assets may recoverable based upon existence one indicators impairment test impairment based projected undiscounted cash flow method projected future operating results cash flows asset group used establish fair value used evaluating carrying value longlived intangible assets estimate future cash flows longlived assets using current longterm financial forecasts carrying amount longlived asset recoverable exceeds sum undiscounted cash flows expected result use eventual disposition asset case impairment loss would recognized impairment loss recognized amount carrying amount exceeds fair value 2017 impaired goodwill associated 1999 acquisition pasteur sanofi diagnostics sa 2013 acquisition abd serotec amounts 28 million 87 million respectively impairments based upon revision level 3 valuation inputs ie expected future cash flows 2016 fully impaired goodwill inprocess research development amounts 135 million 464 million respectively associated 2014 acquisition gnubio inc impairments based upon revision level 3 valuation inputs ie expected future cash flows also 2016 impaired intellectual property amount 24 million associated termination research development project impairment losses recorded 2015 valuation inventories value inventory lower actual cost purchase andor manufacture inventory current estimated net realizable value inventory review inventory quantities hand reduce cost basis excess obsolete inventory based primarily estimated forecast product demand production requirements quality efficacy potency raw materials review done quarterly basis warranted circumstances frequently addition industry characterized technological change frequent new product development product obsolescence could result increase amount obsolete inventory quantities hand estimates future product demand may prove inaccurate high may overstated carrying value inventory future inventory determined overvalued would required write value inventory market recognize costs cost goods sold time determination therefore although make efforts ensure accuracy forecasts future product demand perform procedures safeguard overall inventory quality significant unanticipated changes demand technological developments regulations storage conditions economic environmental factors affecting biological materials could significant impact value inventory reported results operations adopted asu 201511 simplifying measurement inventory january 1 2017 requires inventory measurement lower cost net realizable value see note 1 consolidated financial statements valuation investments regularly review investments factors may indicate decline fair value investment carrying value otherthantemporary factors considered evaluating whether decline fair value otherthantemporary include ability intent retain investment period time sufficient allow recovery value duration extent fair value less cost financial condition prospects issuer reviews inherently uncertain value investment may fully recover may decline future periods resulting realized losses allowance doubtful accounts maintain allowance doubtful accounts estimated losses resulting collectability customer accounts amount allowance determined analyzing known uncollectible accounts age receivables economic conditions customers’ country industry historical losses customers’ general creditworthiness amounts later determined specifically identified uncollectible charged written allowance uncertainty current economic environment prolonged could result greater amounts becoming uncollectible future estimates losses higher actual uncollectible accounts would report lower profitability estimates made higher profitability receivable collected results operations sales gross margins expenses following shows cost goods sold gross profit expense items net income percentage net sales net sales net sales 2017 216 billion increase 44 compared 207 billion 2016 excluding impact foreign currency exchange rate fluctuations 2017 sales increased approximately 35 compared 2016 currency neutral sales growth reflected regions life science segment sales 2017 7852 million increase 75 compared 2016 currency neutral basis sales increased 68 compared 2016 currency neutral sales increase primarily driven growth droplet digital™ pcr gene expression product lines addition sales acquisition raindance 2017 currency neutral sales increase primarily reflected regions except latin america mostly due government imposed spend control clinical diagnostics segment sales 2017 136 billion increase 28 compared 2016 currency neutral basis sales increased 16 compared 2016 currency neutral sales increase primarily attributable growth across quality control immunohematology diabetes immunology partially offset lower sales infectious disease geographic view currency neutral sales increases 2017 primarily reflected asia pacific excluding japan latin america partially offset lower sales north america japan net sales 2016 207 billion increase 24 compared 202 billion 2015 excluding impact foreign currency 2016 sales increased approximately 40 compared 2015 currency neutral sales growth primarily reflected regions except europe life science segment sales 2016 7307 million increase 51 compared 2015 currency neutral basis sales increased 65 compared 2015 currency neutral sales increase primarily droplet digital™ pcr process media products currency neutral sales increase regions clinical diagnostics segment sales 2016 132 billion increase 10 compared 2015 currency neutral basis sales increased 26 compared 2015 currency neutral sales increase primarily attributable growth quality control immunology blood typing diabetes product lines geographic view currency neutral sales 2016 increased notably americas asia sales declined europe gross margin consolidated gross margins 550 2017 compared 550 2016 life science segment gross margins 2017 increased 2016 approximately 12 percentage points primarily due higher margins gene expression digital biology businesses largely due decline royalty expense license agreements relating amplification reagents addition gross margins impacted legal matters reduced cost goods sold approximately 104 million gross margin improvements partially offset 100 million preexisting condition higher acquisition intangible amortization associated raindance acquisition clinical diagnostics segment gross margins 2017 decreased approximately 08 percentage points compared 2016 primarily due lower margin sales termination infectious disease research development project effected cost goods sold cost 23 million 2017 partially offset lower amortization intangibles licenses fees favorable manufacturing variances compared 2016 beginning 2013 patient protection affordable care act amended health care education reconciliation act ppaca among initiatives provided 23 annual excise tax sales certain medical devices us biorad paying excise tax us clinical diagnostic sales accounted period cost goods sold however consolidated appropriations act 2016 pub l 114113 signed law december 18 2015 included two year moratorium medical device excise tax january 22 2018 moratorium medical device excise tax extended january 1 2020 consolidated gross margins 550 2016 compared 555 2015 life science segment gross margins 2016 decreased 2015 approximately 07 percentage points primarily due lower margins protein quantification cell biology higher service costs higher acquisition intangible amortization 07 million restructuring costs partially offset higher margins droplet digital™ pcr process media products antibody products clinical diagnostics segment gross margins 2016 decreased 2015 approximately 05 percentage points decrease compared 2015 primarily driven sales mix pricing pressures along higher period expenses 14 million restructuring costs partially offset suspension medical device tax selling general administrative expense consolidated selling general administrative expenses sga decreased 8089 million 374 sales 2017 compared 8167 million 395 sales 2016 decreases sga primarily due 210 million various legal matters 2016 occur 2017 including wadler judgment discussed note 13 consolidated financial statements compared legal matters 2017 reduced sga approximately 07 million 104 million restructuring costs associated european reorganization announced june 2016 see note 15 occur 2017 compared restructuring costs 2017 approximately 85 million also note 15 addition reduction force activities lower contingent consideration 197 million lower third party commissions 25 million numerous net costs 121 million increases sga primarily included employeerelated expenses excluding restructuring costs 170 million facilities 122 million software 77 million bad debt expense 54 million advertising 35 million taxes 33 million travel 30 million purchase accounting amortization 10 million increased costs associated transition took place new european operating model supported european erp implementation inclusion raindance closure costs gnubio research program facilities termination infectious disease research development project occurred 2017 consolidated sga increased 8167 million 395 sales 2016 compared 7620 million 377 sales 2015 increases sga primarily included employeerelated expenses largest cost also included 104 million restructuring costs 210 million various legal matters including wadler judgment professional fees software revaluation contingent consideration primarily associated cell sorting system lesser extent analytical flow cytometer platform travel facilities recruitmentrelocation decreases sga 2016 primarily included bad debt expense onetime distributor cost 2015 research development expense research development expense increased 2503 million 116 sales 2017 compared 2059 million 100 sales 2016 life science segment research development expense increased 2017 2016 primarily due higher milestone expenses 55 million associated 2016 propel platform acquisition increased project activities included recent raindance acquisition clinical diagnostics segment research development expense increased 2017 2016 primarily driven termination infectious disease research development project 155 million see note 15 consolidated financial statements asset purchase early stage diagnostic device 75 million closure costs 76 million included severance impairment equipment leasehold improvements gnubio research program occurred 2017 partially offset lower spending due timing projects research development expense increased 2059 million 100 sales 2016 compared 1930 million 96 sales 2015 life science segment research development expense increased 2016 2015 primarily due increased project activities droplet digital™ pcr protein quantification cell biology clinical diagnostics segment research development expense increased 2016 2015 primarily increased spending associated gnubio business impairment losses goodwill longlived assets 2017 impaired goodwill associated 1999 acquisition pasteur sanofi diagnostics sa 2013 acquisition abd serotec amounts 28 million 87 million respectively impairment pasteur sanofi diagnostics sa included clinical diagnostics segments results operations impairment abd serotec included life science segments results operations fourth quarter 2016 fully impaired goodwill inprocess research development amounts 135 million 464 million respectively associated 2014 acquisition gnubio inc second quarter 2016 impaired intellectual property license associated research development project 24 million results operations nonoperating interest expense interest expense 2017 unchanged 219 million 2016 increased slightly 2016 compared 217 million 2015 foreign currency exchange gains losses foreign currency exchange gains losses consist foreign currency transaction gains losses intercompany net receivables payables change fair value forward foreign exchange contracts used manage foreign currency exchange risk net foreign currency exchange losses 2017 2016 2015 91 million 45 million 102 million respectively 2017 2016 2015 net foreign currency exchange losses attributable market volatility costs hedge result estimating process inherent timing shipments payments intercompany debt intercompany movement assets capital new european operating model 2017 decision reclassify large percentage intercompany receivable brazil longterm 2015 years affected economic hedging program employ hedge intercompany receivables payables income expense net income expense net includes investment dividend income generally interest income cash equivalents shortterm investments long term marketable securities income expense net 2017 decreased 122 million income compared 149 million income 2016 decrease primarily due 64 million higher otherthantemporary impairment losses investments 2017 2016 light continuing declines investment market prices investees financial conditions time partially offset 12 million higher dividend income 2017 2016 ordinary preferred shares investment sartorius ag higher investment income expense net 2016 increased 149 million income compared 111 million income 2015 increase primarily due higher dividend income 2016 ordinary preferred shares investment sartorius ag higher investment income effective tax rate december 22 2017 us enacted comprehensive tax legislation “tax act” tax act made broad complex changes us tax code affect 2017 financial statements including among changes imposition onetime mandatory deemed repatriation tax “transition tax” certain earnings accumulated offshore since 1986 reduction corporate tax rate 35 21 us taxable income resulting onetime remeasurement us federal deferred tax assets liabilities effective tax rate 25 37 25 2017 2016 2015 respectively prior year effective tax rates revised see note 1 consolidated financial statements result tax act recognized provisional estimate transition tax remeasurement deferred taxes assets liabilities decreased provision income taxes 2017 approximately 70 million effective tax rates 2016 2015 included tax benefits repatriation foreign earnings effective tax rate 2016 included additional tax liabilities unrecognized tax benefits related nondeductibility interest expense foreign jurisdictions effective tax rate may impacted future either favorably unfavorably many factors including limited changes statutory tax rates changes tax laws regulations tax audits settlements generation tax credits income tax returns audited us federal state foreign tax authorities currently examination many tax authorities differing interpretations tax laws regulations result significant disputes may arise tax authorities involving issues timing amount deductions allocations income among various tax jurisdictions evaluate exposures associated tax filing positions quarterly basis record liabilities unrecognized tax benefits related uncertain tax positions believe resolution uncertain tax positions material adverse effect consolidated financial statements although adverse resolution one uncertain tax positions period may material impact results operations period december 31 2017 based expected outcome certain examinations result expiration statutes limitation certain jurisdictions believe within next twelve months reasonably possible previously unrecognized tax benefits could decrease approximately 23 million substantially amounts impact effective income tax rate liquidity capital resources biorad operates conducts business globally primarily subsidiary companies established markets trade goods manufactured small number locations shipped local distribution facilities around world product mix diversified certain products compete largely product efficacy others compete price gross margins generally sufficient exceed normal operating costs funding research development new products well routine outflows capital expenditures interest taxes addition annual positive cash flow operating activities additional liquidity readily available via sale shortterm investments access domestic 2000 million unsecured credit agreement lesser extent international lines credit borrowings 2014 credit agreement available revolving basis used make permitted acquisitions working capital general corporate purposes outstanding borrowings credit agreement december 31 2017 however 05 million utilized domestic standby letters credit reduced borrowing availability credit agreement matures june 2019 total domestic international lines credit standby letters credit guarantee arrangements approximately 2084 million available borrowing usage december 31 2017 reduced approximately 42 million utilized standby letters credit guarantee arrangements issued banks support obligations management believes availability together cash flow operations adequate meet current objectives operations research development capital additions manufacturing distribution plant equipment information technology systems acquisition reasonable proportion existing total available capital december 31 2017 available 7550 million cash equivalents shortterm investments approximately 23 held foreign subsidiaries believe holdings cash equivalents shortterm investments us foreign subsidiaries sufficient meet current longterm needs global operations amount funds held united states fluctuate due timing receipts payments ordinary course business due reasons businessdevelopment activities part ongoing liquidity assessments regularly monitor mix domestic foreign cash flows inflows outflows certain foreign subsidiary earnings subject us taxation tax act also repeals us taxation subsequent repatriation earnings generally intention repatriate foreign earnings extent repatriations restricted local laws accounting rules substantial incremental costs currently estimate repatriation earnings would trigger material costs estimates provisional still evaluating full impact potential repatriations accordance sab 118 demand products services could change dramatically previous years based activity funding reimbursement constraints support levels government universities hospitals private industry including diagnostic laboratories need certain sovereign nations large annual deficits curtail spending could lead slower growth even decline business sovereign nations either delaying payment goods services renegotiating debts could impact liquidity december 31 2017 december 31 2016 accounts receivable net allowance doubtful accounts spain italy greece portugal 410 million 327 million respectively economic growth improving geographical locations instability still exists developed nations less dependable rate growth chinese economy emerging markets especially oil producing countries affected decline oil prices may adversely affect future cash flows cash flows operations net cash provided operations 1039 million 2164 million 1862 million 2017 2016 2015 respectively net decrease 2017 2016 1125 million primarily resulted • cash paid suppliers primarily related increased inventory higher employee related costs primarily merit increases asset purchase early stage diagnostic device 75 million 100 million raindance preexisting condition higher value added taxes part due european reorganization • higher net payments 2017 compared 2016 forward foreign exchange contracts primarily associated timing product shipments intercompany debt payments intercompany movement assets capital new european operating model • lower income tax refunds 2017 compared 2016 partially offset • higher cash received customers 2017 primarily due higher sales partially offset higher accounts receivable balances due part implementation matters associated european erp system • higher investment income received net increase 2016 2015 302 million primarily resulted • higher cash received customers 2016 primarily due lower us collections second half 2015 delays associated second phase erp implementation • higher investment income received partially offset • cash paid suppliers employees primarily related higher payments inventory suppliers payments delayed latter part 2015 mostly associated second deployment erp system higher annual performancebased compensation payments 2016 higher legal professional fees • higher net income tax payments 2015 • net payments 2016 compared net cash received 2015 forward foreign exchange contracts regularly review past due receivables assess allowance doubtful accounts believe net accounts receivable fully realizable also routinely review inventory impact obsolescence changes market prices caused introduction new products technologies government reimbursement policies cash flows operations first quarter historically larger payments royalties fourth quarter sales commissions third parties annual employee bonuses expect pattern recur first quarter 2018 cash flows investing activities net cash used investing activities 1756 million 2139 million 1669 million 2017 2016 2015 respectively proceeds sales maturities net purchases marketable securities investments combined 171 million 2017 compared net purchases 2016 582 million purchases net sales maturities marketable securities investments combined overall decrease 132 million 2016 compared 2015 primarily due decrease maturities securities sales partially offset decrease purchases shortterm restricted investments 56 million 46 million 42 million 2017 2016 2015 respectively represent money market fund collateral secures workers compensation general liability insurance investment income accrues us recorded investment proceeds miscellaneous receipts net consolidated statements cash flows investment objective maintain liquidity meet anticipated operational corporate requirements capital preserved increased investing low risk high quality securities commensurate returns consistent risk tolerance level purchases intangible assets 2017 primarily due 38 million payment acquired technology knowhow expand product offerings 2016 2015 primarily due purchases licenses payments acquisitions net cash received longterm investments 2017 2016 primarily due following • february 2017 acquired issued outstanding stock raindance approximately 727 million including certain assumed net liabilities cash payments closing 729 million • january 2016 acquired high performance analytical flow cytometer platform propel total consideration 328 million included 95 million paid cash closing date 233 million contingent consideration potentially payable propel effects calculation revision reflected fourth quarter 2016 continue review possible acquisitions expand life science clinical diagnostics segments routinely meet principals brokers subject companies currently discussion assessing possible acquisitions expect current reported cash equivalents sufficient cash consideration possible acquisitions however certain time discussions involving material significant acquisitions advance completion capital expenditures 2017 totaled 1113 million compared 1414 million 1120 million 2016 2015 respectively capital expenditures represent addition replacement production machinery research equipment ongoing manufacturing facility additions expansion regulatory environmental compliance also included capital expenditures investments business systems data communication upgrades enhancements periods include equipment placed clinical diagnostics segment customers contract purchase reagents use implement remaining smaller phases erp platform expect capital expenditures decline next couple years capital expenditures lower 2017 2016 implementation costs higher 2016 third phase erp platform implemented april 2017 capital expenditures lower 2015 compared 2016 second phase erp system implemented july 2015 third phase ramped 2016 current estimated future project cost global implementation single instance erp platform projected 140 million estimated take approximately next 3 4 years fully implement cash flows financing activities net cash provided financing activities 03 million 90 million 86 million 2017 2016 2015 respectively primarily sourced proceeds issuance common stock 2017 2016 2015 payments 37 million 35 million 30 million respectively propel labs shareholders contingent consideration sales milestones associated valuations 2016 2012 acquisition dates addition repurchased common stock repurchase program described outstanding senior notes 4250 million due 2020 believe current cash sufficient meet normal operating costs funding research development new products well routine outflows capital expenditures interest taxes november 28 2017 announced board directors authorized new share repurchase program granting biorad authority repurchase discretionary basis 250 million outstanding shares common stock new authorization superseded prior authorization 180 million biorads common stock second third quarters 2017 made open market purchases 13200 shares class common stock september 2017 used 12740 repurchased shares connection vesting restricted stock units 2007 incentive award plan order obtain tax deduction foreign entities credit agreement may limit ability repurchase stock accordance terms awards 2007 incentive award plan june 2012 withheld 122 shares class common stock 917 shares class b common stock satisfy tax obligations due upon vesting restricted stock certain employees considered repurchase stock repurchases stock 2017 2016 2015 offbalance sheet arrangements offbalance sheet arrangements reasonably likely current future material effect financial condition results operations liquidity contractual obligations following summarizes certain contractual obligations december 31 2017 effect obligations expected cash flows future periods millions recent accounting standards updates february 2018 financial accounting standards board “fasb” issued accounting standards update “asu” 201803 technical corrections improvements financial instruments recognition measurement financial assets financial liabilities asu 201803 amends certain items asu 201601 see equity securities without readily determinable fair value asu 201803 clarifies entity uses measurement alternative equity securities without readily determinable fair values change measurement approach fair value made election irrevocable entity measures equity securities without readily determinable fair values fair value must record cumulativeeffect adjustment retained earnings beginning fiscal year guidance adopted asu 201803 effective fiscal years beginning december 15 2017 interim periods within years beginning june 15 2018 early adoption permitted december 31 2017 accounted investment ordinary shares sartorius ag cost fair value readily determinable stock thinly traded see note 3 consolidated financial statements asu 201601 see account ordinary shares sartorius ag cost less impairment plus minus subsequent adjustments observable price changes anticipate material transaction would provide observable price change ordinary shares sartorius ag based current ownership interests sartorius family trust sartorius family members biorad laboratories inc february 2018 fasb issued asu 201802 reclassification certain tax effects accumulated comprehensive income asu 201802 gives entities option reclassify retained earnings tax effects related items accumulated comprehensive income oci fasb refers stranded accumulated oci result tax act early adopted asu 201802 period adoption tax act fourth quarter 2017 elected reclassify income tax effects tax act remeasurement deferred tax liabilities related availableforsale equity securities including preferred shares sartorius ag increasing oci decreasing retained earnings 1201 million may 2017 fasb issued asu 201709 scope modification accounting asu 201709 clarifies changes terms conditions sharebased payment award must accounted modifications asu 201709 allow companies make certain changes awards vesting conditions without accounting modifications change accounting modifications asu 201709 applied prospectively awards modified adoption date early adopted asu 201709 second quarter 2017 affected consolidated financial statements march 2017 fasb issued asu 201707 improving presentation net periodic pension cost net periodic postretirement benefit cost asu 201707 change employers sponsor defined benefit pension andor postretirement benefit plans present net periodic benefit cost comprised several components income statement asu 201707 employers present service cost component net periodic benefit cost income statement line items employee compensation costs arising services rendered period costs eligible capitalization employers present components separately line items includes service cost outside subtotal income operations asu 201707 effective fiscal years beginning december 15 2017 interim periods within years employers apply guidance presentation components net periodic benefit cost income statement retrospectively expect asu 201707 material impact financial statements january 2017 fasb issued asu 201704 simplifying test goodwill impairment asu 201704 removes step 2 goodwill impairment test required hypothetical purchase price allocation goodwill impairment amount reporting unit’s carrying value exceeds fair value exceed carrying amount goodwill asu 201704 provides streamlined approach evaluating goodwill impairment early adopted january 1 2017 prospective basis change accounting principle see note 4 consolidated financial statements update goodwill impairment january 2017 fasb issued asu 201701 clarifying definition business asu 201701 changes definition business assist entities evaluating set transferred assets activities business substantially fair value concentrated single asset group similar assets acquired set business met entity evaluates whether set meets requirement business include minimum input substantive process together significantly contribute ability create outputs determining whether set constitutes business critical accounting business combination differs significantly asset acquisition early adopted asu 201701 january 1 2017 prospective basis material impact consolidated financial statements november 2016 fasb issued asu 201618 restricted cash asu 201618 requires entities show changes total cash equivalents restricted cash restricted cash equivalents statement cash flows result entities longer present transfers cash equivalents restricted cash restricted cash equivalents statement cash flows asu 201618 applied retrospectively effective fiscal years beginning december 15 2017 interim periods within years expect asu 201618 material impact financial statements impact statements cash flows presentation october 2016 fasb issued asu 201616 intraentity transfers assets inventory asu 201616 requires immediate recognition income tax consequences intercompany asset transfers inventory transfers existing gaap prohibits recognition income tax consequences intercompany asset transfers whereby seller defers net tax effect buyer prohibited recognizing deferred tax asset difference newly created tax basis asset tax jurisdiction financial statement carrying amount reported consolidated financial statements asu 201616 specifically excludes scope intercompany inventory transfers whereby recognition tax consequences take place inventory sold third parties asu 201616 effective fiscal years beginning december 15 2017 interim periods within fiscal years asu 201616 applied modified retrospective basis cumulativeeffect adjustment directly retained earnings beginning period adoption estimate impact cumulativeeffect decrease retained earnings predominately decrease assets approximately 17 million august 2016 fasb issued asu 201615 classification certain cash receipts cash payments asu 201615 intended reduce diversity practice certain transactions classified statement cash flows asu 201615 effective fiscal years beginning december 15 2017 interim periods within fiscal years expect asu 201615 material impact statements cash flows june 2016 fasb issued asu 201613 measurement credit losses financial instruments asu 201613 replace current incurred loss approach expected loss model instruments measured amortized cost require entities record allowances availableforsale debt securities rather reduce carrying amount current otherthantemporary impairment model asu 201613 effective fiscal years beginning december 15 2019 interim periods within fiscal years early adoption permitted entities annual periods beginning december 15 2018 interim periods therein currently evaluating effect asu 201613 consolidated financial statements march 2016 fasb issued asu 201609 improvements employee sharebased payment accounting asu 201609 requires income tax effects awards recognized income statement awards vest settled also allows employer repurchase employee’s shares permitted today tax withholding purposes without triggering liability accounting make policy election account forfeitures occur adopted asu 201609 prospectively change accounting principle january 1 2017 prior periods adjusted addition made policy election account forfeitures occur asu 201609 also requires present excess tax benefits operating activity statement cash flows rather financing activity result adopting asu 201609 january 1 2017 cumulative effect change retained earnings decreased 03 million increased additional paidin capital deferred tax assets 04 million 01 million respectively consolidated balance sheet march 2016 fasb issued asu 201607 simplifying transition equity method accounting eliminates requirement retrospectively apply equity method previous periods investor initially obtains significant influence investee current guidance investor consolidate investment initially accounts method equity method required retrospectively apply equity method prior periods held investment subsequently obtained significant influence adopted asu 201607 january 1 2017 prospective basis currently affected consolidated financial statements february 2016 fasb issued asu 201602 leases require among items lease accounting recognize leases assets liabilities balance sheet qualitative quantitative disclosures enhanced better understand amount timing uncertainty cash flows arising leases asu 201602 effective fiscal years beginning december 15 2018 interim periods within fiscal years early adoption permitted plan early adopt asu 201602 adopted modified retrospective basis elective reliefs requires application asu 201602 periods presented currently gathering documenting analyzing lease agreements related asu anticipate material additions balance sheet rightofuse assets offset associated liabilities january 2016 fasb issued asu 201601 recognition measurement financial assets financial liabilities amendments asu 201601 among items require equity investments unconsolidated entities accounted using equity method accounting generally measured fair value earnings longer availableforsale classification changes fair value reported comprehensive income equity securities readily determinable fair values equity investments without readily determinable fair values cost method also eliminated however entities able elect record equity investments without readily determinable fair values cost less impairment plus minus subsequent adjustments observable price changes basis equity investments reported current earnings asu 201601 effective fiscal years beginning december 15 2017 interim periods within fiscal years equity securities would affected asu 201601 see availableforsale investments table note 3 consolidated financial statements primarily consists investment sartorius ag preferred shares expect impact adoption may material consolidated statement income addition affected securities per note 3 ordinary voting stock sartorius ag accounted investment cost method effective january 1 2018 201601 account investment ordinary shares sartorius ag cost less impairment plus minus subsequent adjustments observable price changes july 2015 fasb issued asu 201511 “simplifying measurement inventory” current guidance entity subsequently measures inventory lower cost market defined replacement cost net realizable value nrv less normal profit margin entity uses current replacement cost provided nrv ie ceiling nrv less “approximately normal profit margin” ie floor asu 201511 eliminates analysis requires entities measure inventory “at lower cost nrv” prospectively adopted asu 201511 change accounting principle january 1 2017 material impact consolidated financial statements may 2014 fasb issued asu 201409 “revenue contracts customers” requires entity recognize amount revenue expects entitled transfer promised goods services customers asu 201409 replace existing revenue recognition guidance gaap becomes effective december 2016 fasb issued asu 201620 technical corrections improvements topic 606 revenue contracts customers affect narrow aspects guidance issued asu 201409 may 2016 fasb issued asu 201612 narrowscope improvements practical expedients amends clarifies certain aspects asu 201409 include collectability presentation sales taxes collected customers noncash consideration contract modifications completed contracts transition april 2016 fasb issued asu 201610 identifying performance obligations licensing amends guidance asu 201409 accounting licenses intellectual property identifying performance obligations march 2016 fasb issued asu 201608 principal versus agent considerations reporting revenue gross versus net amends principal versus agent guidance asu 201409 standards applied retrospectively permit use either retrospective cumulative effect transition method use cumulative effect transition method adopt asus 201409 201620 201612 201610 201608 january 1 2018 upon adoption recognize cumulative effect adopting guidance adjustment opening balance retained earnings prior periods retrospectively adjusted completed preliminary assessment individual contracts identify performance obligations asu’s compared deliverables separate units accounting previously identified current us gaap based preliminary assessment identified material changes timing revenue recognition could result significant transition adjustment upon adoption new accounting standard january 1 2018 accounting costs incurred obtain contract immaterial however still process following assessing impact accounting reagent agreements determine differences timing revenue recognition finalizing required changes accounting policies systems internal control financial reporting assessing new disclosure requirements implemented upon adoption new standard item 7aitem 7 management’s discussion analysis financial condition results operations discussion read conjunction information contained consolidated financial statements accompanying notes integral part statements overview multinational manufacturer worldwide distributor life science research clinical diagnostics products business organized two primary segments life science clinical diagnostics mission provide scientists specialized tools needed biological research clinical diagnostics sell 9000 products services diverse client base comprised scientific research healthcare education government customers worldwide disclose quantitative information different products services impractical based primarily numerous products services sell global markets serve manufacture supply customers range reagents apparatus equipment separate complex chemical biological materials identify analyze purify components customers require standardization experiments test results much revenues recurring impacted support many governments research healthcare current global economic outlook still uncertain need control government social spending many governments limits opportunities growth adding uncertainty referendum united kingdom withdraw european union approximately 39 2019 consolidated net sales derived united states approximately 61 derived international locations europe largest international region international sales largely denominated local currencies euro swiss franc japanese yen chinese yuan british sterling result consolidated net sales expressed dollars benefit us dollar weakens suffer dollar strengthens us dollar strengthens benefit lower cost sales international manufacturing sites well nonus suppliers lower international operating expenses regularly discuss changes revenue expense categories terms changing foreign exchange rates terms currency neutral basis notable explain impact currency results cyberattack previously disclosed december 9 2019 form 8k filed securities exchange commission sec detected cyberattack network evening december 5 2019 pst immediately took affected systems offline part comprehensive response contain activity “december 2019 cyberattack” virus targeted windowsbased systems attack global erp system sap nonwindowsbased systems critical systems back online within days incident part indepth investigation incident engaged outside cyber security experts assist us investigation remediation efforts date found evidence unauthorized transfer misuse personal data indication point customer systems affected anticipate ongoing expenses relating incident continue first half 2020 insurance coverage costs resulting cyberattacks time expect losses incident exceed insurance coverage recorded estimated proceeds resulting insurance claim regarding incident since covered expenses result incident still yet quantified case disputes extent insurance coverage claims uncommon pay ransom connection incident acquisitions october 2019 acquired issued outstanding shares foreign distributor approximately 42 million included cash payments closing net closing cash 36 million 06 million contingent consideration potentially payable sellers addition recorded net gain 04 million settlement preexisting conditions concurrent acquisition recorded selling general administrative expense acquisition included clinical diagnostics segments results operations acquisition date accounted business combination december 31 2019 preliminary allocation payments 34 million customer relationships definitelived intangible 02 million deferred tax asset 08 million deferred tax liability related purchased intangible 14 million acquired net assets august 2019 acquired issued outstanding membership interests exact diagnostics llc approximately 600 million cash payments closing net closing cash 597 million acquisition included clinical diagnostics segments results operations acquisition date accounted business combination final allocation payments 268 million purchased intangibles consisting primarily customer relationships developed product technology tradenames 42 million acquired net assets 287 million goodwill believe acquisition accelerate market penetration areas quality controls assay verification panels clinical diagnostics operations march 2019 completed acquisition issued outstanding stock small us private company approximately 200 million cash payments net closing cash consisted 40 million paid november 2018 remaining 160 million paid march 2019 acquisition included life science segments results operations acquisition date accounted business combination final allocation payments 156 million goodwill included workforce timetomarket advantage 55 million definitelived intangibles 02 million inprocess research development indefinitelived intangible asset deferred tax liability 13 million related purchased intangibles believe acquisition expand reagents suite offerings life science operations acquisitions immaterial biorad taken whole periods presented restructuring costs european north american reorganization november 2019 announced strategydriven restructuring plan expect significant portion net savings resulting restructuring plan repurposed alignment portfolio strategy restructuring plan includes workforce reduction europe united states canada expected incurred 2020 recorded 253 million expense restructuring charges related severance employee benefits year ended december 31 2019 liability 253 million december 31 2019 recorded accrued payroll employee benefits consolidated balance sheets amounts recorded reflected cost goods sold 48 million selling general administrative expense 144 million research development expense 61 million consolidated statements income year ended december 31 2019 restructuring costs termination diagnostics research development project facility closures december 2018 announced closure small manufacturing facility outside paris france recorded restructuring charges adjustments related severance employee benefits 01 million 39 million exit costs zero 02 million years ended december 31 2019 2018 respectively december 2018 december 31 2019 total expenses 40 million june 2018 announced closure small manufacturing operation munich germany recorded restructuring charges adjustments related severance employee benefits 03 million 17 million years ended december 31 2019 2018 respectively june 2018 december 31 2019 total expenses 14 million restructuring plan completed november 2019 critical accounting policies estimates accompanying discussion analysis financial condition results operations based upon consolidated financial statements prepared accordance us generally accepted accounting principles gaap preparation financial statements conformity gaap requires management make estimates assumptions affect reported amounts assets liabilities contingencies date financial statements reported amounts revenues expenses reporting periods evaluate estimates ongoing basis base estimates historical experience assumptions believed reasonable circumstances results form basis making judgments carrying values assets liabilities readily apparent sources however future events may cause us change assumptions estimates may require adjustment actual results could differ estimates determined periods reported annual report form 10k following accounting policies estimates critical understanding financial condition results operations accounting income taxes management required make estimates related income tax provision jurisdictions operate process involves estimating current tax exposures well making judgments regarding recoverability deferred tax assets jurisdiction deferred tax assets liabilities reflect tax effects net operating losses tax credits temporary differences carrying amounts assets liabilities financial reporting purposes amounts used income tax purposes management assesses likelihood deferred tax assets recovered future taxable income extent management believes recovery likely valuation allowance must established extent management establishes valuation allowance increases allowance period increase expense within provision income taxes consolidated statements income may result december 31 2019 2018 recorded valuation allowance 672 million 708 million respectively due uncertainties related ability utilize deferred tax assets jurisdictions valuation allowance based management’s current estimates taxable income jurisdictions operate period deferred tax assets recoverable event actual results differ estimates adjusted future periods additional valuation allowance may need established would increase tax provision lowering income impacting financial position realization deferred tax assets valuation allowance provided occur provision income taxes may decrease raising income positively impacting biorad’s financial position recognize tax benefit uncertain tax position likely tax position sustained examination taxing authorities based technical merits position tax benefits recognized financial statements particular tax position measured based largest benefit greater 50 likelihood realized upon settlement amount unrecognized tax benefits adjusted appropriate changes facts circumstances significant amendments existing tax law new regulations interpretations taxing authorities new information obtained tax examination resolution examination recognize accrued interest penalties appropriate related unrecognized tax benefits income tax expense overall effective tax rate subject fluctuations changes geographic mix earnings changes statutory tax rates tax laws impact various tax audits assessments well generation tax credits december 22 2017 us enacted comprehensive tax legislation “tax act” tax act made broad complex changes us tax code including imposition onetime mandatory deemed repatriation tax “transition tax” certain earnings accumulated offshore since 1986 reduction corporate tax rate 35 21 us taxable income resulting onetime remeasurement us federal deferred tax assets liabilities 2017 recorded income tax benefit 70 million related transition tax remeasurement us federal deferred tax assets liabilities completed accounting tax act staff accounting bulletin 118 income tax accounting implications tax cuts jobs act “sab 118” 2018 resulted additional income tax benefit 49 million valuation business acquisitions goodwill longlived assets upon consummation business combination use multiple analyses determine fair market value consideration assets acquired liabilities assumed fair market value acquired business determined residual value fair market value consideration defined goodwill represents excess cost fair value net tangible identifiable intangible assets acquired businesses could include contingent consideration contingent consideration obligation acquirer transfer additional assets equity interest former owners acquiree part exchange control acquiree specified future events occur conditions met contingent consideration reported fair value reporting period contingency resolved changes fair value recognized earnings could become volatile time depending facts circumstances goodwill amounts assigned reporting units time acquisition adjusted subsequent significant transfers business reporting units assess impairment goodwill annually fourth quarter whenever events changes circumstances indicate carrying value may recoverable perform impairment tests goodwill reporting unit level one level operating segments goodwill impairment amount reporting units carrying value exceeds fair value exceed carrying amount goodwill use projected discounted cash flow model determine fair value reporting unit discounted cash flow method determining goodwill may different fair value would result actual transaction willing buyer willing seller projections discounted cash flow models inherently uncertain accordingly actual future cash flows may differ materially projected cash flows management judgment required developing assumptions discounted cash flow model assumptions include revenue growth rates profit margins discount rates addition diagnostic units supply reagent rental equipment capital expenditures significant impact estimate future cash flows using current longerterm financial forecasts take account current economic environment discount rates used compiled using independent sources current trends similar businesses observable market data changes rates might result material changes valuation determination recoverability goodwill example increase discount rate used discount cash flows decrease computed fair value impairment tests highly sensitive changes assumptions minor changes assumptions could result impairment losses forecasts utilized 2019 impairment test assumed among things sales growth executing sales marketing programs new product introductions successful product development timely registration products required controlling costs manufacture service equipment customer site addition external factors competitive pricing market currency inflation rates cost capital forecasted tax rates could affect determination fair value reporting units impairment tests resulted excessive fair value book value ranging 75 400 various reporting units initiatives mentioned achieve desired results external factors change detrimentally future impairment losses may occur validate reasonableness reporting unit fair values reconcile aggregate fair values reporting units enterprise market capitalization performing reconciliation may depending volatility market value stock price use either stock price valuation date average stock price range dates around valuation date purposes recognition measurement impairment loss longlived asset assets grouped assets liabilities lowest level identifiable cash flows largely independent cash flows assets liabilities assess impairment longlived assets including identifiable intangibles whenever events changes circumstances indicate carrying value may recoverable addition required quantitative review also review quarterly qualitative factors consider important could trigger impairment review include • significant reporting unit underperformance relative expected historical projected future operating results • significant changes manner use longlived assets intangible assets strategy overall business • current expectation likely longlived asset sold otherwise disposed end previously estimated useful life • significant negative industry legal regulatory economic trends management determines carrying value longlived assets may recoverable based upon existence one indicators impairment test impairment based projected undiscounted cash flow method projected future operating results cash flows asset group used establish fair value used evaluating carrying value longlived intangible assets estimate future cash flows longlived assets using current longterm financial forecasts carrying amount longlived asset recoverable exceeds sum undiscounted cash flows expected result use eventual disposition asset case impairment loss would recognized impairment loss recognized amount carrying amount exceeds fair value conjunction annual valuation goodwill impairment losses 2019 2018 impaired goodwill associated 1999 acquisition pasteur sanofi diagnostics sa 2007 2012 acquisitions diamed holding ag diamed fennica oy diamed gb limited diamed benelux collectively diamed 2010 acquisition biotest ag 2013 acquisition abd serotec amounts 181 million 2472 million 108 million 59 million respectively goodwill diamed biotest ag abd serotec fully impaired december 31 2018 impaired developed product technology fully impaired covenants compete amounts 88 million 17 million respectively associated 2012 acquisition cell sorting system propel labs inc 2017 impaired goodwill associated 1999 acquisition pasteur sanofi diagnostics sa 2013 acquisition abd serotec amounts 28 million 87 million respectively impairments based upon revision level 3 valuation inputs ie expected future cash flows revenue recognition recognize revenue operations sale products services rental instruments revenue contracts customers recognized upon transfer control promised products services customers amount reflects consideration expect receive exchange products services enter contracts include various combinations products services generally accounted distinct performance obligations revenue recognized net taxes collected customers sales tax value added tax etc subsequently remitted government authorities contracts customers often include promises transfer multiple products services customer determining whether products services considered distinct performance obligations accounted separately versus together may require significant judgment may impact timing revenue recognition revenue associated equipment requires factory installation recorded installation complete customer acceptance required occurred certain equipment requires installation due fact instruments operated clinicallaboratory environment installation services could result modification equipment order ensure instruments working according specifications customer subject validation tests upon completion installation arrangements require factory installation delivery equipment installation separate performance obligations recognize transaction price allocated equipment upon customer acceptance transfer control occurred relation equipment point time customer ability direct use obtain substantially remaining benefits asset transaction price allocated installation services also recognized upon completion services without completion installation services related customer acceptance customer cannot receive benefits service time revenue recognized provision recognized estimated product returns right considered variable consideration accordingly product revenues recognized transaction price reduced estimated amount product returns service revenues extended warranty contracts recognized ratably life service agreement standready performance obligation arrangements include combination products services transaction prices allocated performance obligations based standalone selling prices method used determine standalone selling prices service revenues based observable prices services sold separately reagent rental agreements diagnostic industry sales method provides use instrument consumables reagents customer per test basis agreements may also include maintenance underlying instruments retained customer locations well initial training initially determine reagent rental arrangement contains lease commencement determined arrangement contains lease next must ascertain lease classification purposes applying appropriate accounting treatment operating salestype direct financing lease addition purposes determining lease term used performing lease classification test include noncancellable period lease together periods covered option extend lease customer reasonably certain exercise option periods covered option terminate lease customer reasonably certain exercise option periods covered option extend terminate lease exercise option controlled company reagent rental arrangements contain either option lessee extend andor cancel period contract enforceable short period therefore lease term limited noncancellable period furthermore historically rare arrangements contain option lessee purchase underlying asset valuation inventories value inventory lower actual cost purchase andor manufacture inventory current estimated net realizable value inventory review inventory quantities hand reduce cost basis excess obsolete inventory based primarily estimated forecast product demand production requirements quality efficacy potency raw materials review done quarterly basis warranted circumstances frequently addition industry characterized technological change frequent new product development product obsolescence could result increase amount obsolete inventory quantities hand estimates future product demand may prove inaccurate high may overstated carrying value inventory future inventory determined overvalued would required write value inventory market recognize costs cost goods sold time determination therefore although make efforts ensure accuracy forecasts future product demand perform procedures safeguard overall inventory quality significant unanticipated changes demand technological developments regulations storage conditions economic environmental factors affecting biological materials could significant impact value inventory reported results operations results operations sales gross margins expenses incorporating reference results operations sales gross margins expenses annual report form 10k fiscal year ended december 31 2018 following shows cost goods sold gross profit expense items net income percentage net sales net sales net sales 2019 231 billion increase 10 compared 229 billion 2018 excluding impact foreign currency exchange rate fluctuations 2019 sales increased approximately 33 compared 2018 currency neutral sales increased regions life science segment sales 2019 8859 million increase 28 compared 2018 currency neutral basis sales increased 46 compared 2018 currency neutral sales increase primarily driven growth droplet digital™ pcr food safety process media product lines currency neutral sales increases occurred mostly americas europe sales asia impacted december 2019 cyberattack clinical diagnostics segment sales 2019 141 billion relatively flat compared 2018 currency neutral basis sales increased 28 compared 2018 currency neutral sales 2018 benefited onetime 60 million receipt resolution dispute involving licensed patent excluding onetime receipt last year saw currency neutral sales growth across three regions primarily americas asia product lines contributed growth included quality controls blood typing immunology diabetes management expects sales growth europe continue challenging due government initiatives contain healthcare spending along increased competition gross margin consolidated gross margins 544 2019 compared 534 2018 life science segment gross margins 2019 increased compared 2018 approximately 27 percentage points primarily due 74 million 15 million cost sales benefits 2019 escrow releases related 2011 2017 acquisitions within life science group respectively product mix well decrease service costs clinical diagnostics segment gross margins 2019 flat compared 2018 unfavorable manufacturing costs included restructuring costs lower absorption higher service costs primarily associated larger installed base costs primarily offset lower excess obsolete inventory related costs logistics costs royalty expenses gross margin 2018 benefited onetime receipt 60 million resolution dispute involving licensed patent partially offset restructuring charge related manufacturing facility closure selling general administrative expense consolidated selling general administrative expenses sga decreased 8246 million 357 sales 2019 compared 8348 million 365 sales 2018 overall decrease 102 million decreases sga primarily related lower professional fees 277 million lower bad debt 146 million lower travel 86 million decreases sga partially offset primarily increases employee related expenses 408 million included higher expenses associated restructuring plans 2019 compared 2018 research development expense research development expense increased 2027 million 88 sales 2019 compared 1992 million 87 sales 2018 life science segment research development expense increased 2019 2018 primarily driven additional spending personnel outside consultants supplies related new product innovation within droplet digital pcr product line clinical diagnostics segment research development expense decreased 2019 2018 primarily lower spending due timing projects led lower outside professional services expense lower supplies expense partially offset restructuring plan fourth quarter 2019 impairment losses goodwill longlived assets conjunction annual valuation goodwill impairment losses 2019 2018 impaired goodwill associated 1999 acquisition pasteur sanofi diagnostics sa 2007 2012 acquisitions diamed holding ag diamed fennica oy diamed gb limited diamed benelux collectively diamed 2010 acquisition biotest ag 2013 acquisition abd serotec amounts 181 million 2472 million 108 million 59 million respectively goodwill diamed biotest ag abd serotec fully impaired december 31 2018 impairments pasteur sanofi diagnostics sa diamed biotest ag included clinical diagnostics segments results operations impairment abd serotec included life science segments results operations 2018 impaired developed product technology fully impaired covenants compete amounts 88 million 17 million respectively associated 2012 acquisition cell sorting system propel labs inc impairments included life science segments results operations results operations nonoperating interest expense interest expense 2019 234 million slight decrease compared 2018 240 million foreign currency exchange gains losses foreign currency exchange gains losses consist primarily foreign currency transaction gains losses intercompany net receivables payables change fair value forward foreign exchange contracts used manage foreign currency exchange risk net foreign currency exchange losses 2019 2018 22 million 29 million respectively 2019 2018 net foreign currency exchange losses attributable market volatility result estimating process inherent timing shipments payments intercompany debt cost hedging years affected economic hedging program employ hedge intercompany receivables payables denominated foreign currencies change fair market value equity securities change fair market value equity securities gains 20310 million 2019 compared 6062 million 2018 primarily resulting recognition holding gains investment sartorius ag income expense net income expense net includes investment dividend income interest income cash equivalents shortterm investments long term marketable securities income expense net 2019 decreased 261 million income compared 366 million income 2018 income net decreased primarily due land sale 41 million divestiture product line 51 million occurred 2018 higher otherthantemporary impairment losses equity method investments recorded light investees financial condition 2019 effective tax rate effective tax rate 222 287 2019 2018 respectively effective tax rate 2018 driven detriments due nondeductible impairment charges taxation foreign operations partially offset 49 million benefit recorded result completion accounting tax act sab 118 effective tax rate may impacted future either favorably unfavorably many factors including limited changes geographic mix earnings changes statutory tax rates changes tax laws regulations tax audits settlements generation tax credits income tax returns routinely audited us federal state foreign tax authorities currently examination many tax authorities differing interpretations tax laws regulations result significant disputes may arise tax authorities involving issues timing amount deductions allocations income among various tax jurisdictions believe currently pending uncertain tax positions material adverse effect consolidated financial statements although adverse resolution one uncertain tax positions period may material impact results operations period record liabilities unrecognized tax benefits related uncertain tax positions believe resolution uncertain tax positions material adverse effect consolidated financial statements although adverse resolution one uncertain tax positions period may material impact results operations period december 31 2019 based expected outcome certain examinations result expiration statutes limitation certain jurisdictions believe within next twelve months reasonably possible previously unrecognized tax benefits could decrease approximately 28 million substantially amounts impact effective income tax rate comparison year ended december 31 2018 year ended december 31 2017 refer item 7 management’s discussion analysis financial condition results operations located annual report form 10k fiscal year ended december 31 2018 filed april 16 2019 discussion comparison fiscal year ended december 31 2018 fiscal year ended december 31 2017 earliest three fiscal years presented consolidated statements operations liquidity capital resources biorad operates conducts business globally primarily subsidiary companies established markets trade goods manufactured small number locations shipped local distribution facilities around world product mix diversified certain products compete largely product efficacy others compete price gross margins generally sufficient exceed normal operating costs funding research development new products well routine outflows capital expenditures interest taxes addition annual positive cash flow operating activities additional liquidity readily available via sale shortterm investments access domestic 2000 million unsecured credit agreement entered april 2019 lesser extent international lines credit borrowings 2019 credit agreement available revolving basis used make permitted acquisitions working capital general corporate purposes outstanding borrowings 2019 credit agreement december 31 2019 however 02 million utilized domestic standby letters credit reduced borrowing availability 2019 credit agreement matures april 2024 total domestic international lines credit standby letters credit guarantee arrangements approximately 2075 million available borrowing usage december 31 2019 reduced approximately 42 million utilized standby letters credit guarantee arrangements issued banks support obligations management believes availability together cash flow operations adequate meet current objectives operations research development capital additions manufacturing distribution plant equipment information technology systems acquisition reasonable proportion existing total available capital however outstanding 4250 million principal amount senior notes due december 2020 4875 notes currently assessing repayment 4875 notes believe adequate resources repay finance obligation december 31 2019 available 11146 million cash equivalents shortterm investments approximately 21 held foreign subsidiaries believe holdings cash equivalents shortterm investments us foreign subsidiaries sufficient meet current longterm needs global operations amount funds held united states fluctuate due timing receipts payments ordinary course business due reasons businessdevelopment activities part ongoing liquidity assessments regularly monitor mix domestic foreign cash flows inflows outflows generally intention repatriate certain foreign earnings extent repatriations restricted local laws accounting rules substantial incremental costs demand products services could change dramatically previous years based activity funding reimbursement constraints support levels government universities hospitals private industry including diagnostic laboratories need certain sovereign nations large annual deficits curtail spending international trade disputes increased regulation could lead slower growth even decline business sovereign nations either delaying payment goods services renegotiating debts could impact liquidity cash flows operations net cash provided operations 4579 million 2855 million 2019 2018 respectively net increase 2019 2018 1724 million primarily resulted • lower cash paid suppliers included value added tax refunds approximately 53 million 2019 • lower income tax payments 2019 compared 2018 • higher investment income received partially offset • lower comparative cash received customers 2019 primarily due higher collections 2018 subsequent erp implementation 2017 • forward foreign exchange contracts lower net proceeds 2019 compared 2018 cash flows operations first quarter historically larger payments royalties fourth quarter sales commissions third parties annual employee bonuses expect pattern recur first quarter 2020 cash flows investing activities net cash used investing activities 2089 million 1870 million 2019 2018 respectively net increase 2019 2018 219 million primarily due payments acquisitions 2019 lesser extent proceeds divestiture product line 2018 discussed partially offset primarily lower capital expenditures 2019 2018 discussed sales marketable securities investments increased 276 million 2019 compared 2018 items affected cash flows investing activities discussed investment objective maintain liquidity meet anticipated operational corporate requirements capital preserved increased investing low risk high quality securities commensurate returns consistent risk tolerance level first quarter 2019 received 74 million escrow release related acquisition 2011 within life science group first quarter 2018 received 70 million divestiture product line 41 million land sale october 2019 acquired issued outstanding shares foreign distributor approximately 42 million included cash payments closing net closing cash 36 million 06 million contingent consideration potentially payable sellers acquisition meet significant material subsidiary test purchase price allocation preliminary additional time required complete valuation assets acquired liabilities assumed august 2019 acquired issued outstanding membership interests exact diagnostics llc approximately 600 million cash payments closing net closing cash 597 million acquisition meet significant material subsidiary test march 2019 completed acquisition issued outstanding stock small us private company approximately 200 million cash payments net closing cash consisted 40 million paid november 2018 remaining 160 million paid march 2019 acquisition meet significant material subsidiary test acquisitions immaterial biorad taken whole periods presented continue review possible acquisitions including early stage businesses expand life science clinical diagnostics segments routinely meet principals brokers subject companies however certain time discussions advance completion capital expenditures 2019 totaled 985 million compared 1298 million 2018 capital expenditures represent addition replacement production machinery research equipment ongoing manufacturing facility additions expansion regulatory environmental compliance also included capital expenditures investments business systems data communication upgrades enhancements including remaining phases global enterprise resource planning erp platform periods include equipment placed clinical diagnostics segment customers contract purchase reagents use capital expenditures lower 2019 2018 primarily due implementing smaller phases erp platform addition 2018 made investment two office buildings adjacent land greater san francisco bay area california cash flows financing activities net cash used financing activities 228 million compared 487 million 2019 2018 respectively net cash used financing activities lower 2019 2018 primarily due lower repurchases common stock 2019 2018 209 million outstanding 4875 notes 4250 million due december 2020 currently assessing repayment 4875 notes believe adequate resources repay finance obligation believe current cash sufficient meet normal operating costs funding research development new products well routine outflows capital expenditures interest taxes treasury shares 2019 137748 shares class treasury stock 917 shares class b treasury stock aggregate total cost 387 million reissued fulfill annual grants employees restricted stock program fulfill employee stock purchase plan purchases upon reissuing class b treasury stock restricted stock program loss 84 million incurred reissued lower price average cost reduced retained earnings 249 million reduced additional paidincapital reissuances restricted stock program require cash payments receipts therefore affect liquidity upon fulfilling employee stock purchase plan purchases loss 16 million incurred issued lower price average cost reduced retained earnings resulted net proceeds 38 million offbalance sheet arrangements offbalance sheet arrangements reasonably likely current future material effect financial condition results operations liquidity contractual obligations following summarizes certain contractual obligations december 31 2019 effect obligations expected cash flows future periods millions recent accounting pronouncements adopted see note 1 consolidated financial statements recent accounting pronouncements adopted item 7aitem 7 managements discussion analysis financial condition results operations section headed managements discussion analysis results operations financial condition appearing pages 28 37 exhibit 131 incorporated herein reference item 7aitem 7 management’s discussion analysis financial condition results operations discussion read conjunction information contained consolidated financial statements accompanying notes integral part statements overview multinational manufacturer worldwide distributor life science research clinical diagnostics products business organized two primary segments life science clinical diagnostics mission provide scientists specialized tools needed biological research clinical diagnostics sell 9000 products services diverse client base comprised scientific research healthcare education government customers worldwide disclose quantitative information different products services impractical based primarily numerous products services sell global markets serve manufacture supply customers range reagents apparatus equipment separate complex chemical biological materials identify analyze purify components customers require standardization experiments test results much revenues recurring impacted support many governments research healthcare current global economic outlook still uncertain need control government social spending many governments limits opportunities growth adding uncertainty referendum united kingdom withdraw european union change us executive branch government approximately 38 2018 consolidated net sales derived united states approximately 62 derived international locations europe largest international region international sales largely denominated local currencies euro swiss franc japanese yen chinese yuan british sterling result consolidated net sales expressed dollars benefit us dollar weakens suffer dollar strengthens us dollar strengthens benefit lower cost sales international manufacturing sites well nonus suppliers lower international operating expenses regularly discuss changes revenue expense categories terms changing foreign exchange rates terms currency neutral basis notable explain impact currency results impairment losses goodwill longlived assets 2018 impaired goodwill associated 1999 acquisition pasteur sanofi diagnostics sa 2007 2012 acquisitions diamed holding ag diamed fennica oy diamed gb limited diamed benelux collectively diamed 2010 acquisition biotest ag 2013 acquisition abd serotec amounts 181 million 2472 million 108 million 59 million respectively goodwill diamed biotest ag abd serotec fully impaired december 31 2018 impaired developed product technology fully impaired covenants compete amounts 88 million 17 million respectively associated 2012 acquisition cell sorting system propel labs inc 2017 impaired goodwill associated 1999 acquisition pasteur sanofi diagnostics sa 2013 acquisition abd serotec amounts 28 million 87 million respectively 2016 fully impaired goodwill inprocess research development amounts 135 million 464 million respectively associated 2014 acquisition gnubio inc also 2016 impaired intellectual property license associated research development project 24 million restructuring costs termination diagnostics research development project facility closures december 2018 announced closure small manufacturing facility outside paris france recorded restructuring charges related severance employee benefits 39 million exit costs 02 million year ended december 31 2018 june 2018 announced closure small manufacturing operation munich germany recorded 17 million expense restructuring charges related severance employee benefits year ended december 31 2018 december 2017 announced termination diagnostics research development project europe recorded restructuring charges adjustments related severance employee benefits 04 million 110 million asset writeoffs exit costs 01 million 101 million years ended december 31 2018 2017 respectively restructuring charges termination diagnostics research development project facility closures included clinical diagnostics segments results operations facility closures natural evolution larger consolidations began 2016 european reorganization activities described amounts recorded reflected cost goods sold 54 million 23 million selling general administrative expense 04 million 33 million research development expense 03 million 155 million consolidated statements income years ended december 31 2018 2017 respectively liability 115 million december 31 2018 consisted 73 million recorded accrued payroll employee benefits 42 million recorded longterm liabilities consolidated balance sheets restructuring costs gnubio inc september 2017 announced closing gnubio research program facilities massachusetts recorded restructuring charges september 2017 related severance employee benefits 29 million asset writeoffs 55 million amounts recorded reflected selling general administrative expense 08 million research development expense 76 million consolidated statements income year ended december 31 2017 liability balance december 31 2017 14 million recorded accrued payroll employee benefits consolidated balance sheets liability paid early 2018 restructuring costs european reorganization may 2016 announced would take certain actions europe geographic region designed better align expenses revenue gross margin profile position us improved operating performance actions aligned creation evolution organization structure coordinated implementation global single instance enterprise resource planning erp platform expected incurred 2019 recorded approximately 02 million 05 million 125 million restructuring charges adjustments related severance employee benefits years ended december 31 2018 2017 2016 respectively may 2016 december 31 2018 total expenses 128 million liability 16 million december 31 2018 recorded accrued payroll employee benefits consolidated balance sheets amounts recorded reflected cost goods sold 01 million 02 million 21 million selling general administrative expense 01 million 07 million 104 million consolidated statements income years ended december 31 2018 2017 2016 respectively amounts adjusted primarily additional positions identified elimination partially offset employees finding positions within biorad leaving prematurely acquisition raindance technologies inc february 2017 acquired issued outstanding stock raindance technologies inc raindance approximately 727 million cash payments closing 729 million addition cash payment 100 million preexisting condition concurrent acquisition recorded cost goods sold acquisition included life science segment’s results operations acquisition date accounted business combination raindances foundational intellectual property portfolio product lines encompass wide range biological reactions droplets potential applications life science research clinical research genomic tools provide ultrasensitive detection genetic variations cancer well inherited infectious diseases enabling research areas noninvasive liquid biopsy believe raindances dropletbased solutions extend reach nextgeneration sequencing applications strengthen position area droplet digital™ pcr offering customers solutions wide range nucleic acid detection applications final allocation payments 729 million 376 million definitelived intangibles 02 million acquired net assets 262 million goodwill deferred tax liability 136 million primarily related purchased intangibles deferred tax asset 225 million primarily related acquired net operating losses critical accounting policies estimates accompanying discussion analysis financial condition results operations based upon consolidated financial statements prepared accordance us generally accepted accounting principles gaap preparation financial statements conformity gaap requires management make estimates assumptions affect reported amounts assets liabilities contingencies date financial statements reported amounts revenues expenses reporting periods evaluate estimates ongoing basis base estimates historical experience assumptions believed reasonable circumstances results form basis making judgments carrying values assets liabilities readily apparent sources however future events may cause us change assumptions estimates may require adjustment actual results could differ estimates determined periods reported annual report form 10k following accounting policies estimates critical understanding financial condition results operations accounting income taxes management required make estimates related income tax provision jurisdictions operate process involves estimating current tax exposures well making judgments regarding recoverability deferred tax assets jurisdiction deferred tax assets liabilities reflect tax effects losses credits temporary differences carrying amounts assets liabilities financial reporting purposes amounts used income tax purposes management assesses likelihood deferred tax assets recovered future taxable income extent management believes recovery likely valuation allowance must established extent management establishes valuation allowance increases allowance period increase expense within provision income taxes consolidated statements income may result december 31 2018 2017 recorded valuation allowance 708 million 664 million respectively due uncertainties related ability utilize deferred tax assets primarily consisting certain foreign net operating losses carried forward certain state research development credits valuation allowance based management’s current estimates taxable income jurisdictions operate period deferred tax assets recoverable event actual results differ estimates adjusted future periods additional valuation allowance may need established would increase tax provision lowering income impacting financial position realization deferred tax assets valuation allowance provided occur provision income taxes may decrease raising income positively impacting biorad’s financial position recognize tax benefit uncertain tax position likely tax position sustained examination taxing authorities based technical merits position tax benefits recognized financial statements particular tax position measured based largest benefit greater 50 likelihood realized upon settlement amount unrecognized tax benefits adjusted appropriate changes facts circumstances significant amendments existing tax law new regulations interpretations taxing authorities new information obtained tax examination resolution examination recognize accrued interest penalties appropriate related unrecognized tax benefits income tax expense overall effective tax rate subject fluctuations changes geographic mix earnings changes statutory tax rates tax laws impact various tax audits assessments well generation tax credits december 22 2017 us enacted comprehensive tax legislation “tax act” new legislation contains significant tax provisions affect us including onetime mandatory deemed repatriation tax certain unrepatriated foreign earnings transition tax reduction corporate income tax rate 35 21 effective january 1 2018 change worldwide tax system modified territorial system required recognize effect tax law changes period enactment computation transition tax remeasurement us deferred tax assets liabilities well reassessment net realizability deferred tax assets liabilities subsequent enactment tax act sec staff issued staff accounting bulletin 118 income tax accounting implications tax cuts jobs act sab 118 provides guidance accounting tax effects tax act sab 118 provides measurement period extend beyond one year tax act enactment date companies complete accounting standards codification asc 740 income taxes completed accounting income tax effects tax act sab 118 december 31 2018 noted 2017 annual report able make reasonable estimates provisionally recorded income tax benefit 70 million related transition tax remeasurement us federal deferred tax assets liabilities final accounting tax act resulted additional income tax benefit 49 million final income tax benefit 119 million comprised 169 million tax benefit related remeasurement us federal deferred tax assets liabilities offset 50 million tax detriment transition tax elected account tax effect global intangible lowtaxed income “gilti” period incurred valuation business acquisitions goodwill longlived assets upon consummation business combination use multiple analyses determine fair market value consideration assets acquired liabilities assumed fair market value acquired business determined residual value fair market value consideration defined goodwill represents excess cost fair value net tangible identifiable intangible assets acquired businesses could include contingent consideration contingent consideration obligation acquirer transfer additional assets equity interest former owners acquiree part exchange control acquiree specified future events occur conditions met contingent consideration reported fair value reporting period contingency resolved changes fair value recognized earnings could become volatile time depending facts circumstances goodwill amounts assigned reporting units time acquisition adjusted subsequent significant transfers business reporting units assess impairment goodwill annually fourth quarter whenever events changes circumstances indicate carrying value may recoverable perform impairment tests goodwill reporting unit level one level operating segments january 1 2017 adopted accounting standards update 201704 simplifying test goodwill impairment goodwill impairment amount reporting units carrying value exceeds fair value exceed carrying amount goodwill use projected discounted cash flow model determine fair value reporting unit discounted cash flow method determining goodwill may different fair value would result actual transaction willing buyer willing seller projections discounted cash flow models inherently uncertain accordingly actual future cash flows may differ materially projected cash flows management judgment required developing assumptions discounted cash flow model assumptions include revenue growth rates profit margins future capital expenditures working capital needs expected foreign currency rates discount rates terminal values estimate future cash flows using current longerterm financial forecasts take account current economic environment discount rates used compiled using independent sources current trends similar businesses observable market data changes rates might result material changes valuation determination recoverability goodwill example increase discount rate used discount cash flows decrease computed fair value impairment tests highly sensitive changes assumptions minor changes assumptions could result impairment losses forecasts utilized 2018 impairment test assumed among things sales growth executing sales marketing programs new product introductions successful product development timely registration products required controlling costs manufacture service equipment customer site addition external factors competitive pricing market currency inflation rates cost capital forecasted tax rates could affect determination fair value reporting units aside pasteur sanofi diagnostics sa diamed holding ag biotest ag abd serotec reporting units reflected carrying value exceeded fair value impairment tests resulted excessive fair value book value ranging 13 400 various reporting units one reporting unit consists 2001 acquisition helix inc excess fair value book value 13 december 31 2018 goodwill amount 14 million allocated reporting unit december 31 2018 initiatives mentioned achieve desired results external factors change detrimentally future impairment losses may occur validate reasonableness reporting unit fair values reconcile aggregate fair values reporting units enterprise market capitalization performing reconciliation may depending volatility market value stock price use either stock price valuation date average stock price range dates around valuation date purposes recognition measurement impairment loss longlived asset assets grouped assets liabilities lowest level identifiable cash flows largely independent cash flows assets liabilities assess impairment longlived assets including identifiable intangibles whenever events changes circumstances indicate carrying value may recoverable addition required quantitative review also review quarterly qualitative factors consider important could trigger impairment review include • significant reporting unit underperformance relative expected historical projected future operating results • significant changes manner use longlived assets intangible assets strategy overall business • current expectation likely longlived asset sold otherwise disposed end previously estimated useful life • significant negative industry legal regulatory economic trends management determines carrying value longlived assets may recoverable based upon existence one indicators impairment test impairment based projected undiscounted cash flow method projected future operating results cash flows asset group used establish fair value used evaluating carrying value longlived intangible assets estimate future cash flows longlived assets using current longterm financial forecasts carrying amount longlived asset recoverable exceeds sum undiscounted cash flows expected result use eventual disposition asset case impairment loss would recognized impairment loss recognized amount carrying amount exceeds fair value 2018 impaired goodwill associated 1999 acquisition pasteur sanofi diagnostics sa 2007 2012 acquisitions diamed holding ag diamed fennica oy diamed gb limited diamed benelux collectively diamed 2010 acquisition biotest ag 2013 acquisition abd serotec amounts 181 million 2472 million 108 million 59 million respectively goodwill diamed biotest ag abd serotec fully impaired december 31 2018 impaired developed product technology fully impaired covenants compete amounts 88 million 17 million respectively associated 2012 acquisition cell sorting system propel labs inc 2017 impaired goodwill associated 1999 acquisition pasteur sanofi diagnostics sa 2013 acquisition abd serotec amounts 28 million 87 million respectively 2016 fully impaired goodwill inprocess research development amounts 135 million 464 million respectively associated 2014 acquisition gnubio inc impairments based upon revision level 3 valuation inputs ie expected future cash flows also 2016 impaired intellectual property amount 24 million associated termination research development project valuation inventories value inventory lower actual cost purchase andor manufacture inventory current estimated net realizable value inventory review inventory quantities hand reduce cost basis excess obsolete inventory based primarily estimated forecast product demand production requirements quality efficacy potency raw materials review done quarterly basis warranted circumstances frequently addition industry characterized technological change frequent new product development product obsolescence could result increase amount obsolete inventory quantities hand estimates future product demand may prove inaccurate high may overstated carrying value inventory future inventory determined overvalued would required write value inventory market recognize costs cost goods sold time determination therefore although make efforts ensure accuracy forecasts future product demand perform procedures safeguard overall inventory quality significant unanticipated changes demand technological developments regulations storage conditions economic environmental factors affecting biological materials could significant impact value inventory reported results operations results operations sales gross margins expenses following shows cost goods sold gross profit expense items net income percentage net sales net sales net sales 2018 229 billion increase 60 compared 216 billion 2017 excluding impact foreign currency exchange rate fluctuations 2018 sales increased approximately 50 compared 2017 currency neutral sales increased regions slight increase europe january 1 2018 adopted fasb accounting standards codification asc 606 “revenue contracts customers” using modified retrospective method applied contracts completed january 1 2018 see note 1 consolidated financial statements impact revenue result applying asc 606 2018 significant life science segment sales 2018 8617 million increase 97 compared 2017 currency neutral basis sales increased 89 compared 2017 currency neutral sales increase primarily droplet digital™ pcr process chromatography real time amplification systems food science cell biology antibody businesses currency neutral sales increase primarily reflected north america europe brazil within latin america countries within asia pacific except japan clinical diagnostics segment sales 2018 141 billion increase 37 compared 2017 currency neutral basis sales increased 26 compared 2017 currency neutral sales increase primarily attributable growth across quality control immunology blood typing product lines including resolution claim relating licensed patent 60 million first quarter 2018 geographic view currency neutral sales year americas asia pacific partially offset decreased sales europe primarily due pricing pressure product renewals loss customers timing several middle eastern customer orders net sales 2017 216 billion increase 44 compared 207 billion 2016 excluding impact foreign currency exchange rate fluctuations 2017 sales increased approximately 35 compared 2016 currency neutral sales growth reflected regions life science segment sales 2017 7852 million increase 75 compared 2016 currency neutral basis sales increased 68 compared 2016 currency neutral sales increase primarily driven growth droplet digital™ pcr gene expression product lines addition sales acquisition raindance 2017 currency neutral sales increase primarily reflected regions except latin america mostly due government imposed spend control clinical diagnostics segment sales 2017 136 billion increase 28 compared 2016 currency neutral basis sales increased 16 compared 2016 currency neutral sales increase primarily attributable growth across quality control immunohematology diabetes immunology partially offset lower sales infectious disease geographic view currency neutral sales increases 2017 primarily reflected asia pacific excluding japan latin america partially offset lower sales north america japan gross margin consolidated gross margins 534 2018 compared 550 2017 life science segment gross margins 2018 increased compared 2017 approximately 12 percentage points primarily due 100 million onetime expense associated raindance acquisition 2017 lower intangible amortization within digital biology partially offset increase royalty amortization within gene expression addition 2017 gross margins impacted legal matters reduced 2017 cost goods sold approximately 104 million clinical diagnostics segment gross margins 2018 decreased approximately 29 percentage points compared 2017 primarily driven product mix competitive pricing pressures impacting particularly equipment consumes reagents diagnostic testing factors 186 million higher costs excess expired inventory onsite service well 54 million expenses associated closing small manufacturing operation munich germany small manufacturing facility outside paris france decrease gross margins partially offset 60m royalties generated license resolution patent owned biorad consolidated gross margins 550 2017 compared 550 2016 life science segment gross margins 2017 increased 2016 approximately 12 percentage points primarily due higher margins gene expression digital biology businesses largely due decline royalty expense license agreements relating amplification reagents addition gross margins impacted legal matters reduced cost goods sold approximately 104 million gross margin improvements partially offset 100 million preexisting condition higher acquisition intangible amortization associated raindance acquisition clinical diagnostics segment gross margins 2017 decreased approximately 08 percentage points compared 2016 primarily due lower margin sales termination infectious disease research development project effected cost goods sold cost 23 million 2017 partially offset lower amortization intangibles licenses fees favorable manufacturing variances compared 2016 selling general administrative expense consolidated selling general administrative expenses sga increased 8348 million 365 sales 2018 compared 8068 million 373 sales 2017 increases sga primarily related professional fees 149 million primarily legal matters defend intellectual property lower benefit reversal contingent consideration 119 million normal increases employee related expenses 86 million excluding restructuring costs increased bad debt occasioned failure certain distributor middle east expenses partially offset lower restructuring costs 2018 approximately 85 million equipment savings 20 million primarily due lower information technology maintenance hardware software support consolidated sga decreased 8068 million 373 sales 2017 compared 8147 million 394 sales 2016 decreases sga primarily due 210 million various legal matters 2016 occur 2017 including wadler judgment discussed note 13 consolidated financial statements compared legal matters 2017 reduced sga approximately 07 million 104 million restructuring costs associated european reorganization announced june 2016 see note 15 occur 2017 compared restructuring costs 2017 approximately 85 million also note 15 addition reduction force activities lower contingent consideration 197 million lower third party commissions 25 million numerous net costs 121 million increases sga primarily included employeerelated expenses excluding restructuring costs 170 million facilities 122 million software 77 million bad debt expense 54 million advertising 35 million taxes 33 million travel 30 million purchase accounting amortization 10 million increased costs associated transition took place new european operating model supported european erp implementation inclusion raindance closure costs gnubio research program facilities termination infectious disease research development project occurred 2017 research development expense research development expense decreased 1992 million 87 sales 2018 compared 2502 million 116 sales 2017 life science segment research development expense decreased 2018 2017 primarily due lower development milestone expenses 117 million well consolidation raindance research development decrease partially offset additional spending new product development within droplet digital business clinical diagnostics segment research development expense decreased 2018 2017 result reduced research development activity research development expense increased 2502 million 116 sales 2017 compared 2057 million 99 sales 2016 life science segment research development expense increased 2017 2016 primarily due higher milestone expenses 55 million associated 2016 propel platform acquisition increased project activities included recent raindance acquisition clinical diagnostics segment research development expense increased 2017 2016 primarily driven termination infectious disease research development project 155 million see note 15 consolidated financial statements asset purchase early stage diagnostic device 75 million closure costs 76 million included severance impairment equipment leasehold improvements gnubio research program occurred 2017 partially offset lower spending due timing projects impairment losses goodwill longlived assets 2018 impaired goodwill associated 1999 acquisition pasteur sanofi diagnostics sa 2007 2012 acquisitions diamed holding ag diamed fennica oy diamed gb limited diamed benelux collectively diamed 2010 acquisition biotest ag 2013 acquisition abd serotec amounts 181 million 2472 million 108 million 59 million respectively goodwill diamed biotest ag abd serotec fully impaired december 31 2018 impairments pasteur sanofi diagnostics sa diamed biotest ag included clinical diagnostics segments results operations impairment abd serotec included life science segments results operations 2018 impaired developed product technology fully impaired covenants compete amounts 88 million 17 million respectively associated 2012 acquisition cell sorting system propel labs inc impairments included life science segments results operations 2017 impaired goodwill associated 1999 acquisition pasteur sanofi diagnostics sa 2013 acquisition abd serotec amounts 28 million 87 million respectively impairment pasteur sanofi diagnostics sa included clinical diagnostics segments results operations impairment abd serotec included life science segments results operations 2016 fully impaired goodwill inprocess research development amounts 135 million 464 million respectively associated 2014 acquisition gnubio inc also 2016 impaired intellectual property license associated research development project 24 million impairments included clinical diagnostics segments results operations results operations nonoperating interest expense interest expense 2018 240 million slight increase compared 2017 230 million interest expense 2017 230 million slight decrease 2016 234 million foreign currency exchange gains losses foreign currency exchange gains losses consist primarily foreign currency transaction gains losses intercompany net receivables payables change fair value forward foreign exchange contracts used manage foreign currency exchange risk net foreign currency exchange losses 2018 2017 2016 29 million 91 million 45 million respectively 2018 2017 2016 net foreign currency exchange losses attributable market volatility result estimating process inherent timing shipments payments intercompany debt intercompany movement assets capital new european operating model 2017 cost hedging years affected economic hedging program employ hedge intercompany receivables payables denominated foreign currencies change fair market value equity securities change fair market value equity securities 6062 million 2018 compared none 2017 2016 primarily due adoption asu 201601 see note 1 consolidated financial statements mostly consisted holding gains investment sartorius ag income expense net income expense net includes investment dividend income generally interest income cash equivalents shortterm investments long term marketable securities income expense net 2018 increased 366 million income compared 107 million income 2017 income net increased primarily due higher dividends 140 million 2018 compared 109 million 2017 investment sartorius ag higher investment income approximately 119 million land sale 41 million divestiture product line 51 million occurred first quarter 2018 income expense net 2017 decreased 107 million income compared 138 million income 2016 decrease primarily due 64 million higher otherthantemporary impairment losses investments 2017 2016 light continuing declines investment market prices investees financial conditions time partially offset 12 million higher dividend income 2017 2016 ordinary preferred shares investment sartorius ag higher investment income effective tax rate december 22 2017 us enacted comprehensive tax legislation “tax act” tax act made broad complex changes us tax code affect 2017 financial statements including imposition onetime mandatory deemed repatriation tax “transition tax” certain earnings accumulated offshore since 1986 reduction corporate tax rate 35 21 us taxable income resulting onetime remeasurement us federal deferred tax assets liabilities effective tax rate 29 25 37 2018 2017 2016 respectively effective tax rate 2018 driven detriments due nondeductible impairment charges taxation foreign operations partially offset 49 million benefit recorded result completion accounting tax act sab 118 effective tax rate 2017 driven 70 million benefit recorded provisional estimate accounting tax act effective tax rate 2016 included additional tax liabilities unrecognized tax benefits related nondeductibility interest expense foreign jurisdictions effective tax rate may impacted future either favorably unfavorably many factors including limited changes statutory tax rates changes tax laws regulations tax audits settlements generation tax credits income tax returns audited us federal state foreign tax authorities currently examination many tax authorities differing interpretations tax laws regulations result significant disputes may arise tax authorities involving issues timing amount deductions allocations income among various tax jurisdictions evaluate exposures associated tax filing positions quarterly basis record liabilities unrecognized tax benefits related uncertain tax positions believe resolution uncertain tax positions material adverse effect consolidated financial statements although adverse resolution one uncertain tax positions period may material impact results operations period december 31 2018 based expected outcome certain examinations result expiration statutes limitation certain jurisdictions believe within next twelve months reasonably possible previously unrecognized tax benefits could decrease approximately 31 million substantially amounts impact effective income tax rate liquidity capital resources biorad operates conducts business globally primarily subsidiary companies established markets trade goods manufactured small number locations shipped local distribution facilities around world product mix diversified certain products compete largely product efficacy others compete price gross margins generally sufficient exceed normal operating costs funding research development new products well routine outflows capital expenditures interest taxes addition annual positive cash flow operating activities additional liquidity readily available via sale shortterm investments access domestic 2000 million unsecured credit agreement lesser extent international lines credit borrowings 2014 credit agreement available revolving basis used make permitted acquisitions working capital general corporate purposes outstanding borrowings credit agreement december 31 2018 however 02 million utilized domestic standby letters credit reduced borrowing availability credit agreement matures june 2019 currently evaluating options renewing credit agreement similar arrangements total domestic international lines credit standby letters credit guarantee arrangements approximately 2082 million available borrowing usage december 31 2018 reduced approximately 31 million utilized standby letters credit guarantee arrangements issued banks support obligations management believes availability together cash flow operations adequate meet current objectives operations research development capital additions manufacturing distribution plant equipment information technology systems acquisition reasonable proportion existing total available capital december 31 2018 available 8448 million cash equivalents shortterm investments approximately 17 held foreign subsidiaries believe holdings cash equivalents shortterm investments us foreign subsidiaries sufficient meet current longterm needs global operations amount funds held united states fluctuate due timing receipts payments ordinary course business due reasons businessdevelopment activities part ongoing liquidity assessments regularly monitor mix domestic foreign cash flows inflows outflows generally intention repatriate certain foreign earnings extent repatriations restricted local laws accounting rules substantial incremental costs current year recorded approximately 67 million deferred tax liability earnings certain foreign jurisdictions may repatriate future determination amount unrecognized deferred tax liability foreign earnings indefinitely reinvested practicable estimate demand products services could change dramatically previous years based activity funding reimbursement constraints support levels government universities hospitals private industry including diagnostic laboratories need certain sovereign nations large annual deficits curtail spending international trade disputes increased regulation could lead slower growth even decline business sovereign nations either delaying payment goods services renegotiating debts could impact liquidity cash flows operations net cash provided operations 2855 million 1041 million 2161 million 2018 2017 2016 respectively net increase 2018 2017 1814 million primarily resulted • higher cash received customers 2018 primarily due higher sales addition improving collections subsequent erp implementation 2017 • net proceeds 2018 compared net payments 2017 forward foreign exchange contracts • higher investment income received partially offset • higher cash paid suppliers 2018 primarily inventory build employee related costs professional fees included 2017 100 payment raindance preexisting condition • higher income tax payments 2018 compared 2017 net decrease 2017 2016 1120 million primarily resulted • cash paid suppliers primarily related increased inventory higher employee related costs asset purchase early stage diagnostic device 75 million 100 million raindance preexisting condition higher value added taxes part due european reorganization • higher net payments 2017 compared 2016 forward foreign exchange contracts primarily associated timing product shipments intercompany debt payments intercompany movement assets capital new european operating model • lower income tax refunds 2017 compared 2016 partially offset • higher cash received customers 2017 primarily due higher sales partially offset higher accounts receivable balances due part implementation matters associated european erp system • higher investment income received cash flows operations first quarter historically larger payments royalties fourth quarter sales commissions third parties annual employee bonuses expect pattern recur first quarter 2019 cash flows investing activities net cash used investing activities 1870 million 1756 million 2139 million 2018 2017 2016 respectively purchases marketable securities investments net combined proceeds sales maturities net purchases 687 million 2018 compared net proceeds 2017 171 million improved cash generated operations 2018 generated purchases marketable securities investments proceeds sales maturities net purchases marketable securities investments combined net proceeds of171 million 2017 compared net purchases 582 million 2016 investment objective maintain liquidity meet anticipated operational corporate requirements capital preserved increased investing low risk high quality securities commensurate returns consistent risk tolerance level first quarter 2018 received 70 million divestiture product line purchases intangible assets 2017 primarily due 38 million payment acquired technology knowhow expand product offerings payments acquisitions net cash received longterm investments 2017 2016 primarily due following • february 2017 acquired issued outstanding stock raindance approximately 727 million including certain assumed net liabilities cash payments closing 729 million • january 2016 acquired high performance analytical flow cytometer platform propel total consideration 328 million included 95 million paid cash closing date 233 million contingent consideration potentially payable propel effects calculation revision reflected fourth quarter 2016 continue review possible acquisitions including early stage businesses expand life science clinical diagnostics segments routinely meet principals brokers subject companies however certain time discussions advance completion capital expenditures 2018 totaled 1298 million compared 1113 million 1414 million 2017 2016 respectively capital expenditures represent addition replacement production machinery research equipment ongoing manufacturing facility additions expansion regulatory environmental compliance also included capital expenditures investments business systems data communication upgrades enhancements periods include equipment placed clinical diagnostics segment customers contract purchase reagents use capital expenditures higher 2018 2017 primarily due investment two office buildings adjacent land greater san francisco bay area california capital expenditures lower 2017 2016 implementation costs higher 2016 third phase erp platform implemented april 2017 implement remaining smaller phases erp platform expect lower levels information technology capital expenditures majority erp platform implemented cash flows financing activities net cash used financing activities 487 million 2018 net cash provided financing activities 03 million 90 million 2017 2016 respectively 2018 2017 repurchased common stock 489 million 29 million respectively repurchase programs described 2018 2017 2016 payments 21 million 37 million 35 million respectively propel labs shareholders contingent consideration sales milestones associated acquisitions 2016 2012 income taxes paid net share settlement sharebased compensation 2018 2017 2016 89 million 73 million zero respectively proceeds issuance common stock 2018 2017 2016 141 million 146 million 113 million respectively outstanding senior notes 4250 million due december 2020 believe current cash sufficient meet normal operating costs funding research development new products well routine outflows capital expenditures interest taxes november 2017 board directors authorized new share repurchase program granting biorad authority repurchase discretionary basis 2500 million outstanding shares common stock repurchases may made managements discretion time open market privately negotiated transactions new authorization superseded prior authorization 180 million biorads common stock expiration see note 7 consolidated financial statements share repurchase activity offbalance sheet arrangements offbalance sheet arrangements reasonably likely current future material effect financial condition results operations liquidity contractual obligations following summarizes certain contractual obligations december 31 2018 effect obligations expected cash flows future periods millions recent accounting pronouncements adopted see note 1 consolidated financial statements recent accounting pronouncements adopted item 7aitem 7 managements discussion analysis financial condition results operations section headed managements discussion analysis results operations financial condition appearing pages 28 36 exhibit 131 incorporated herein reference item 7aitem 7 management’s discussion analysis financial condition results operations discussion read conjunction information contained consolidated financial statements accompanying notes integral part statements overview multinational manufacturer worldwide distributor life science research clinical diagnostics products business organized two primary segments life science clinical diagnostics mission provide scientists specialized products needed biological research clinical diagnostics sell 8000 products services diverse client base comprised scientific research healthcare education government customers worldwide disclose quantitative information different products services impractical based primarily numerous products services sell global markets serve manufacture supply customers range reagents apparatus equipment separate complex chemical biological materials identify analyze purify components customers require standardization experiments test results much revenues recurring impacted support many governments research healthcare current global economic outlook still uncertain need control government social spending many governments limits opportunities growth approximately 36 2015 consolidated net sales derived united states approximately 64 derived international locations europe largest region overall international sales largely denominated local currencies euro swiss franc japanese yen chinese yuan british sterling result consolidated net sales expressed dollars benefit us dollar weakens suffer dollar strengthens us dollar strengthens benefit lower cost sales international manufacturing sites well nonus suppliers lower international operating expenses january 2016 acquired high performance analytical flow cytometer platform propel labs propel enable advanced novice users perform basic multiparameter cytometry wide range applications chemistries aggregate consideration instrument consisted cash payment january 2016 100 million payments 200 million due upon completion certain technical milestones following completion milestones semiannual performance payments propel required based percentage sales 2020 biorad expects launch instrument later year previously disclosed may 2010 voluntarily disclosed us department justice doj securities exchange commission sec certain likely potential violations us foreign corrupt practices act fcpa effective november 3 2014 entered nonprosecution agreement npa doj consented entry order sec order actions resolve doj sec investigations result settlements doj sec fourth quarter 2014 paid total 551 million included penalty 144 million 351 million disgorgement 56 million interest april 2014 acquired 100 issued outstanding stock gnubio inc gnubio acquisition accounted business combination included clinical diagnostics segments results operations acquisition date final fair values net assets acquired gnubio acquisition date determined 464 million indefinitelived intangible assets specifically inprocess research development iprd 135 million goodwill 95 million net tangible liabilities fair value consideration acquisition date 504 million included 397 million paid cash closing date 107 million contingent consideration potentially payable gnubios shareholders contingent consideration based probabilityweighted income approach could reach 700 million upon achievement developmentregulatory sales milestones contingent consideration developmentregulatory milestones valued 107 million based assumptions regarding probability achieving milestones amounts discounted present value contingent consideration related developmentregulatory milestones revalued fair value 100 million december 31 2015 2014 included current liabilities contingent consideration sales milestones acquisition date december 31 2015 determined negligible using riskneutral probability money based blackscholes framework sales required purchase agreement low probability obtaining thresholds third quarter 2012 recognized contingent consideration liability 446 million upon acquisition new cell sorting system propel labs inc fair value contingent consideration based probabilityweighted income approach related achievement certain development sales milestones development milestone achieved paid 2013 first sales milestone reached resulting payments 24 million 30 million fourth quarter 2014 first quarter 2015 respectively 2015 contingent consideration revalued decrease 56 million estimated fair value 91 million december 31 2015 critical accounting policies estimates accompanying discussion analysis financial condition results operations based upon consolidated financial statements prepared accordance us generally accepted accounting principles gaap preparation financial statements conformity gaap requires management make estimates assumptions affect reported amounts assets liabilities contingencies date financial statements reported amounts revenues expenses reporting periods evaluate estimates ongoing basis base estimates historical experience assumptions believed reasonable circumstances results form basis making judgments carrying values assets liabilities readily apparent sources however future events may cause us change assumptions estimates may require adjustment actual results could differ estimates determined periods reported annual report form 10k following accounting policies estimates critical understanding financial condition results operations accounting income taxes management required make estimates related income tax provision jurisdictions operate process involves estimating current tax exposures well making judgments regarding recoverability deferred tax assets jurisdiction deferred tax assets liabilities reflect tax effects losses credits temporary differences carrying amounts assets liabilities financial reporting purposes amounts used income tax purposes management assesses likelihood deferred tax assets recovered future taxable income extent management believes recovery likely valuation allowance must established extent management establishes valuation allowance increases allowance period increase expense within provision income taxes consolidated statements income may result recorded valuation allowance 583 million 586 million december 31 2015 2014 respectively due uncertainties related ability utilize deferred tax assets primarily consisting certain foreign net operating losses carried forward valuation allowance based management’s current estimates taxable income jurisdictions operate period deferred tax assets recoverable event actual results differ estimates adjusted future periods additional valuation allowance may need established would increase tax provision lowering income impacting financial position realization deferred tax assets valuation allowance provided occur provision income taxes may decrease raising income positively impacting biorad’s financial position recognize tax benefit uncertain tax position likely tax position sustained examination taxing authorities based technical merits position tax benefits recognized financial statements particular tax position measured based largest benefit greater 50 likelihood realized upon settlement amount unrecognized tax benefits adjusted appropriate changes facts circumstances significant amendments existing tax law new regulations interpretations taxing authorities new information obtained tax examination resolution examination recognize accrued interest penalties appropriate related unrecognized tax benefits income tax expense overall effective tax rate subject fluctuations changes geographic mix earnings changes statutory tax rates tax laws impact various tax audits assessments well generation tax credits valuation goodwill longlived assets goodwill represents excess cost fair value net tangible identifiable intangible assets acquired businesses goodwill amounts assigned reporting units time acquisition adjusted subsequent significant transfers business reporting units assess impairment goodwill annually fourth quarter whenever events changes circumstances indicate carrying value may recoverable perform impairment tests goodwill reporting unit level one level operating segments goodwill impairment test consists twostep process first step goodwill impairment test used identify potential impairment compares fair value reporting unit carrying value including goodwill fair value reporting unit exceeds carrying amount goodwill reporting unit considered impaired second step impairment test required second step required compares implied fair value reporting unit goodwill carrying amount goodwill fair value reporting unit allocated assets liabilities unit including unrecognized intangible assets reporting unit acquired business combination fair value reporting unit price paid acquire reporting unit carrying amount reporting units goodwill exceeds implied fair value impairment charge recognized amount equal excess use projected discounted cash flow model determine fair value reporting unit discounted cash flow method determining goodwill may different fair value would result actual transaction willing buyer willing seller projections discounted cash flow models inherently uncertain accordingly actual future cash flows may differ materially projected cash flows management judgment required developing assumptions discounted cash flow model assumptions include revenue growth rates profit margins future capital expenditures working capital needs expected foreign currency rates discount rates terminal values estimate future cash flows using current longerterm high level financial forecasts take account current economic environment discount rates used compiled using independent sources current trends similar businesses observable market data changes rates might result material changes valuation determination recoverability goodwill example increase discount rate used discount cash flows decrease computed fair value impairment tests highly sensitive changes assumptions minor changes assumptions could result impairment losses forecasts utilized 2015 impairment test assumed among things sales growth executing sales marketing programs new product introductions successful product development timely registration products required controlling costs addition external factors currency inflation rates cost capital could affect determination fair value reporting units impairment tests resulted excessive fair value book value ranging 18 200 various reporting units initiatives mentioned achieve desired results external factors change detrimentally future impairment losses may occur validate reasonableness reporting unit fair values reconcile aggregate fair values reporting units enterprise market capitalization performing reconciliation may depending volatility market value stock price use either stock price valuation date average stock price range dates around valuation date purposes recognition measurement impairment loss longlived asset assets grouped assets liabilities lowest level identifiable cash flows largely independent cash flows assets liabilities assess impairment longlived assets including identifiable intangibles whenever events changes circumstances indicate carrying value may recoverable factors consider important could trigger impairment review include • significant reporting unit underperformance relative expected historical projected future operating results • significant changes manner use longlived assets intangible assets strategy overall business • current expectation likely longlived asset sold otherwise disposed end previously estimated useful life • significant negative industry legal regulatory economic trends management determines carrying value longlived assets may recoverable based upon existence one indicators impairment test impairment based projected undiscounted cash flow method projected future operating results cash flows asset group used establish fair value used evaluating carrying value longlived intangible assets estimate future cash flows longlived assets using current longterm financial forecasts carrying amount longlived asset recoverable exceeds sum undiscounted cash flows expected result use eventual disposition asset case impairment loss would recognized impairment loss recognized amount carrying amount exceeds fair value impairment losses recorded 2015 2013 2014 impaired licenses discontinued product line amount 64 million impairment charge included 58 million cost goods sold 06 million research development expense accompanying consolidated statements income valuation inventories value inventory lower actual cost purchase andor manufacture inventory current estimated net realizable value inventory review inventory quantities hand reduce cost basis excess obsolete inventory based primarily estimated forecast product demand production requirements quality efficacy potency raw materials review done quarterly basis warranted circumstances frequently addition industry characterized technological change frequent new product development product obsolescence could result increase amount obsolete inventory quantities hand estimates future product demand may prove inaccurate high may overstated carrying value inventory future inventory determined overvalued would required write value inventory market recognize costs cost goods sold time determination therefore although make efforts ensure accuracy forecasts future product demand perform procedures safeguard overall inventory quality significant unanticipated changes demand technological developments regulations storage conditions economic environmental factors affecting biological materials could significant impact value inventory reported results operations valuation investments regularly review investments factors may indicate decline fair value investment carrying value otherthantemporary factors considered evaluating whether decline fair value otherthantemporary include ability intent retain investment period time sufficient allow recovery value duration extent fair value less cost financial condition prospects issuer reviews inherently uncertain value investment may fully recover may decline future periods resulting realized losses warranty reserves warrant certain equipment defects design materials workmanship generally period one year upon delivery acceptance equipment establish part cost goods sold provision expected costs warranty repairs based historical experience specific warranty terms customer feedback review performed quarterly basis assess adequacy warranty reserve adjusted necessary warranty reserve based actual experience expected future costs incurred realized costs higher expected costs cost goods sold would lower period estimation higher realized allowance doubtful accounts maintain allowance doubtful accounts estimated losses resulting collectability customer accounts amount allowance determined analyzing known uncollectible accounts age receivables economic conditions customers’ country industry historical losses customers’ general creditworthiness amounts later determined specifically identified uncollectible charged written allowance uncertainty current economic environment prolonged could result greater amounts becoming uncollectible future estimates losses higher actual uncollectible accounts would report lower profitability estimates made higher profitability receivable collected litigation accruals record liabilities consolidated balance sheets estimated amounts claims probable reasonably estimated likelihood material change estimated liabilities dependent possible outcome settlement negotiations regulatory judicial review development facts circumstances extended litigation could change claims assessments amount range loss outstanding litigation uncertain disclose footnotes financial statements unable make reasonable estimate material liability could result unfavorable outcomes litigation events occur assess potential liability related pending litigation revise estimates revisions could materially impact results operations results operations sales gross margins expenses following shows cost goods sold gross profit expense items net income percentage net sales net sales net sales 2015 202 billion decrease 72 compared 218 billion 2014 excluding impact foreign currency 2015 sales increased approximately 16 compared 2014 currency neutral sales growth primarily reflected united states china life science segment sales 2015 6950 million decrease 46 compared 2014 currency neutral basis sales increased 25 compared 2014 currency neutral sales increase primarily droplet digital™ pcr western blotting process chromatography media cell biology products currency neutral sales increase primarily united states europe partially offset lower sales asia excluding china clinical diagnostics segment sales 2015 131 billion decrease 85 compared 2014 currency neutral basis sales increased 11 compared 2014 clinical diagnostics segment currency neutral sales growth quality controls immunology products partially offset declines blood typing infectious disease products currency neutral sales growth primarily north america china latin america european markets still experiencing consolidation pricing pressures net sales 2014 218 billion increase 20 compared 213 billion 2013 excluding impact foreign currency 2014 sales increased approximately 33 compared 2013 currency neutral sales growth reflected regions primarily united states emerging markets eastern europe china currency neutral sales japan decreased life science segment sales 2014 7283 million increase 26 compared 2013 currency neutral basis sales increased 40 compared 2013 currency neutral sales increase reflected across product lines except protein separations products currency neutral sales growth primarily north america europe china partially offset decreased sales rest asia clinical diagnostics segment sales 2014 143 billion increase 17 compared 2013 currency neutral basis sales increased 29 compared 2013 clinical diagnostics growth across product lines currency neutral basis notably quality control products blood typing sales growth partially offset lower sales infectious disease serology product line primarily due laboratory consolidation pricing pressure europe north america currency neutral sales growth primarily eastern europe china partially offset decreased sales western europe gross margin consolidated gross margins 555 2015 compared 542 2014 life science segment gross margins 2015 increased 2014 approximately 09 percentage points primarily due sales higher gross margin products including droplet digital™ pcr gene expression cell biology products addition lower service costs europe costs associated closing manufacturing plant 2014 contributed higher margins clinical diagnostics segment gross margins 2015 increased 2014 approximately 18 percentage points increase compared 2014 primarily due 2014 consolidation closure certain facilities discontinuation underperforming product line sales mix also contributed higher gross margins 2015 beginning 2013 patient protection affordable care act amended health care education reconciliation act ppaca among initiatives provided 23 annual excise tax sales certain medical devices us biorad paying excise tax us clinical diagnostic sales accounted period cost goods sold however consolidated appropriations act 2016 pub l 114113 signed law december 18 2015 includes two year moratorium medical device excise tax period beginning january 1 2016 ending december 31 2017 consolidated gross margins 542 2014 compared 553 2013 life science segment gross margins 2014 decreased 2013 approximately 01 percentage points essentially flat compared 2013 lower margins reflected protein separation products approximately 17 million costs associated closing small manufacturing plant almost entirely offset higher margins process chromatography droplet digital™ pcr food testing products clinical diagnostics segment gross margins 2014 decreased 2013 approximately 15 percentage points decrease primarily reflected approximately 83 million associated discontinuance product line 2014 coupled increase inventory reserves writedown licenses specific technology decrease also due continued pricing pressure approximately 16 million associated closing consolidating certain facilities 2014 increased scrap obsolete products selling general administrative expense consolidated selling general administrative expenses sga decreased 7620 million 377 sales 2015 compared 8082 million 372 sales 2014 underlying overall decrease sga impact foreign currency accrual 195 million 2014 associated sec doj investigations relating fcpa investigation final settlement reached fourth quarter 2014 reduction 42 million revaluations contingent consideration currency neutral increases sga primarily employeerelated expenses largest cost facilities professional fees partially offset travel increases sga included 23 million bad debt expense onetime distributor termination cost 19 million consolidated sga represented 372 sales 2014 compared 374 sales 2013 decreases sga expense relative sales primarily driven • lower expense accrual 195 million 2014 compared accrual 300 million 2013 connection reaching final settlement sec doj investigations relating fcpa • lower external marketing advertising expense professional fees • decrease bad debt expense 40 million primarily russia due distributor bad debt 2013 spain due payments received approximately 11 million public agencies addition improved collections us implementing first phase new erp system partially offsetting decreased costs • increase employeerelated expenses largest cost primarily due increase employee compensation comprised incentive plans including related fringe benefits commissions temporary help associated erp implementation • 14 million 2014 net decrease estimated fair value contingent considerations cell sorting system gnubio compared 58 million 2013 net decrease estimated fair value contingent consideration cell sorting system writeoff remaining quantalife contingent consideration liability resulting overall increase contingent consideration 44 million • increase third party commissions facilities • increase software costs primarily associated erp implementation research development expense research development expense decreased 1930 million 96 sales 2015 compared 2203 million 101 sales 2014 life science segment research development expense decreased 2015 2014 primarily due headcount reductions lower supplies lower external product development spend clinical diagnostics segment research development expense decreased 2015 2014 primarily due wind spending projects approach launch discontinuation underperforming product line 2014 research development expense increased 2203 million 101 sales 2014 compared 2110 million 99 sales 2013 life science segment research development expense decreased slightly 2014 2013 primarily due projects nearing completion clinical diagnostics segment research development expense increased 2014 2013 primarily due continued investments diagnostic applications using recently acquired droplet digital pcr technology new instrument platforms assays increase also reflected approximately 31 million associated discontinuance product line 2014 included contractual costs writedown equipment licenses results operations nonoperating interest expense interest expense 2015 decreased 20 217 million compared 2014 primarily due 06 million 2014 associated offer settle sec doj investigations relating fcpa investigation final settlement reached fourth quarter 2014 interest expense 2014 decreased 639 221 million compared 2013 primarily due absence interest expense 187 million 156 million associated call premium expensing remaining original bond discount unamortized debt issuance costs associated 3000 million principal amount senior subordinated notes 80 notes redeemed september 30 2013 addition interest expense connection reaching final settlement sec doj investigations relating fcpa 06 million 2014 compared 50 million 2013 foreign currency exchange gains losses foreign currency exchange gains losses consist foreign currency transaction gains losses intercompany net receivables payables change fair value forward foreign exchange contracts used manage foreign currency exchange risk net foreign currency exchange losses 2015 2014 2013 102 million 93 million 86 million respectively 2015 2014 2013 net foreign currency exchange losses attributable market volatility increasing costs hedge result estimating process inherent timing shipments payments intercompany debt years affected economic hedging program employ hedge intercompany receivables payables income expense net income expense net includes investment dividend income generally interest income cash equivalents shortterm investments long term marketable securities income expense net 2015 decreased 111 million income compared 130 million income 2014 decrease primarily due lower interest investment income primarily related weaker 2015 foreign currency exchange rate ordinary preferred dividends investment sartorius ag realized losses 2015 compared realized losses 2014 income expense net 2014 increased 130 million income compared 128 million income 2013 increase primarily due higher dividends 2013 realized gains 2014 compared realized losses 2013 partially offset lower interest investment income 2013 sales investments 2013 used provide cash redeem 3000 million 80 senior subordinated notes effective tax rate effective tax rate 22 32 31 2015 2014 2013 respectively effective tax rate 2015 included significant tax benefit expected utilization foreign tax credits us effective tax rate 2014 included nondeductible penalties losses nonrecurring effective tax rate 2013 included significant tax benefit related reinstated 2012 us federal research credit partially offset increase tax liabilities unrecognized tax benefits audit settlements foreign jurisdictions foreign taxes result primarily income earned france switzerland many jurisdictions operate including switzerland russia uk singapore statutory tax rates significantly lower us statutory tax rate 35 effective tax rate may impacted future either favorably unfavorably many factors including limited changes statutory tax rates changes tax laws regulations tax audits settlements generation tax credits income tax returns audited us federal state foreign tax authorities currently examination many tax authorities tax years open examination include years 2012 forward us years 2008 forward certain foreign jurisdictions including france switzerland germany differing interpretations tax laws regulations result significant disputes may arise tax authorities involving issues timing amount deductions allocations income among various tax jurisdictions evaluate exposures associated tax filing positions quarterly basis record liabilities unrecognized tax benefits related uncertain tax positions believe currently pending uncertain tax positions material adverse effect consolidated financial statements although adverse resolution one uncertain tax positions period may material impact results operations period december 31 2015 based expected outcome certain examinations result expiration statutes limitation certain jurisdictions believe within next twelve months reasonably possible previously unrecognized tax benefits could decrease approximately 40 million substantially amounts impact effective income tax rate liquidity capital resources biorad operates conducts business globally primarily subsidiary companies established markets trade goods manufactured small number locations shipped local distribution facilities around world product mix diversified certain products compete largely product efficacy others compete price gross margins generally sufficient exceed normal operating costs funding research development new products well routine outflows capital expenditures interest taxes addition annual positive cash flow operating activities additional liquidity readily available via sale shortterm investments access 2000 million unsecured credit agreement entered june 2014 borrowings credit agreement revolving basis used make permitted acquisitions working capital general corporate purposes outstanding borrowings credit agreement december 31 2015 however 08 million utilized domestic standby letters credit reduced borrowing availability credit agreement matures june 2019 december 31 2015 available 7863 million cash equivalents shortterm investments approximately 32 held foreign subsidiaries believe holdings cash equivalents shortterm investments us foreign subsidiaries sufficient meet current longterm needs global operations amount funds held united states fluctuate due timing receipts payments ordinary course business due reasons businessdevelopment activities part ongoing liquidity assessments regularly monitor mix domestic foreign cash flows inflows outflows repatriation overseas funds result additional us federal state income tax payments general practice intention indefinitely reinvest cash generated foreign subsidiaries foreign subsidiaries operations however fourth quarter 2015 foreign biorad entity repatriated approximately 107 million us domestic international lines credit standby letters credit guarantee arrangements 2012 million available borrowing usage december 31 2015 reduced 26 million utilized standby letters credit guarantee arrangements issued banks support obligations management believes availability together cash flow operations adequate meet current objectives operations research development capital additions manufacturing distribution plant equipment information technology systems acquisition reasonable proportion existing total available capital economic growth somewhat improving instability still exists developed nations us slowing rate growth chinese economy emerging markets especially oilproducing countries affected recent decline oil prices may adversely affect future results cash flows demand products services could change dramatically previous years based activity funding reimbursement constraints support levels government universities hospitals private industry including diagnostic laboratories need certain sovereign nations large annual deficits curtail spending could lead slower growth even decline business sovereign nations either delaying payment goods services renegotiating debts could impact liquidity situation sovereign nations continuously evolving greater knowledge situation publicly reported december 31 2015 december 31 2014 accounts receivable net allowance doubtful accounts spain italy greece portugal 407 million 454 million respectively decrease december 31 2014 result weakening foreign currency cash flows operations net cash provided operations 1862 million 2733 million 1691 million 2015 2014 2013 respectively net decrease 2015 2014 871 million primarily resulted • lower cash received customers primarily due value foreign currency denominated sales subsequent collections affected strengthening us dollar disproportionately larger collections 2014 spanish government lower us collections second half 2015 delays associated second phase erp implementation higher us collections 2014 resulting delays caused first deployment new erp system partially offset • less cash paid suppliers employees primarily related decrease foreign exchange rates reductions force partially offset higher performancebased compensation payments • payment 551 million settlement sec doj associated fcpa fourth quarter 2014 net increase 2014 2013 1042 million primarily resulted • higher cash received customers primarily due improved collections particular spain approximately 11 million public agencies first quarter 2014 us implementing first phase new erp system • decrease income taxes paid primarily due federal income tax quick refund 20 million french income tax refund approximately 11 million related 2013 received 2014 5 million federal income tax extension payment 2013 • absence interest paid 250 million 120 million 2013 associated call premium primarily due early redemption 3000 million 80 senior subordinated notes september 30 2013 • settlement payment royalties audit 12 million second quarter 2013 partially offset • payment 551 million settlement sec doj associated fcpa fourth quarter 2014 regularly review past due receivables assess allowance doubtful accounts believe net accounts receivable fully realizable also routinely review inventory impact obsolescence changes market prices caused introduction new products technologies government reimbursement policies cash flows operations first quarter historically larger payments royalties fourth quarter sales commissions third parties annual employee bonuses expect pattern recur first quarter 2016 cash flows investing activities net cash used investing activities 1669 million 1905 million 2015 2014 respectively net cash provided investing activities 09 million 2013 purchases net sales maturities marketable securities investments overall decrease 354 million 2015 compared 2014 primarily due increase purchases partially offset increase maturities securities sales purchases marketable securities investments proceeds sales marketable securities investments lower 2014 2013 primarily due sales securities provide cash redeem 3000 million 80 senior subordinated notes 2013 addition purchased longer dated securities take advantage higher returns investments therefore experienced additional decline maturities redemptions securities 2014 compared 2013 shortterm restricted investments 421 million 2015 represent money market fund collateral secures workers compensation general liability insurance investment income accrues us recorded investment proceeds miscellaneous receipts net consolidated statements cash flows investment objective maintain liquidity meet anticipated operational corporate requirements capital preserved increased investing low risk high quality securities commensurate returns consistent risk tolerance level purchases intangible assets higher 2014 2015 2013 primarily due higher purchases licenses payments acquisitions net cash received longterm investments 2014 2013 primarily due following • april 2014 acquired 100 issued outstanding stock gnubio total consideration 504 million included 397 million paid cash closing date 107 million contingent consideration potentially payable gnubios shareholders • january 2013 acquired 100 outstanding shares abd serotec division morphosys ag total consideration 622 million net cash received 73 million continue review possible acquisitions asset purchases expand life science clinical diagnostics segments purchase instrument propel january 2016 routinely meet principals brokers subject companies certain time discussions involving material significant acquisitions advance completion capital expenditures 2015 totaled 1120 million compared 1210 million 1067 million 2014 2013 respectively capital expenditures represent addition replacement production machinery research equipment ongoing manufacturing facility additions expansion regulatory environmental compliance also included capital expenditures investments business systems data communication upgrades enhancements periods include equipment placed clinical diagnostics segment customers contract purchase reagents use continue implement phases erp platform expand ecommerce platform expect capital expenditures continue remain historically higher next three years however capital expenditures lower 2015 expect third phase erp system ramp 2016 capital expenditures higher 2014 2015 2013 development stages appropriate costs capitalized implementing second phase global single instance erp platform april 2013 implemented first phase global single instance erp platform hence remainder 2013 costs longer capitalized current estimated future project cost global implementation single instance erp platform projected 150 million 200 million estimated take three years fully implement cash flows financing activities net cash provided financing activities 86 million 117 million 2015 2014 respectively net cash used financing activities 3117 million 2013 net cash provided financing activities 2015 primarily proceeds issuance common stock additionally 2015 payment 30 million propel labs shareholders contingent consideration sales milestone associated valuation 2012 acquisition date net cash provided financing activities 2014 primarily proceeds issuance common stock net cash provided financing activities 2014 partially offset payment 24 million propel labs shareholders contingent consideration sales milestone associated valuation 2012 acquisition date payment shortterm borrowing net cash used financing activities 2013 primarily due early redemption 3000 million 80 senior subordinated notes september 30 2013 also 2013 200 million paid propel labs shareholders contingent consideration 199 million associated valuation 2012 acquisition date remainder recognized cash flows operations additionally 2013 60 million paid quantalife contingent consideration 56 million associated valuation 2011 acquisition date remainder recognized cash flows operations outstanding senior notes 4250 million due 2020 believe current cash sufficient meet normal operating costs funding research development new products well routine outflows capital expenditures interest taxes board directors authorized repurchase 180 million biorads common stock 33 million yet repurchased december 31 2015 credit agreement may limit ability repurchase stock accordance terms awards 2007 incentive award plan june 2012 withheld 122 shares class common stock 917 shares class b common stock satisfy tax obligations due upon vesting restricted stock certain employees considered repurchase stock restricted stock vested december 31 2013 therefore anticipate repurchasing shares purpose repurchases stock 2015 2014 2013 offbalance sheet arrangements offbalance sheet arrangements reasonably likely current future material effect financial condition results operations liquidity contractual obligations following summarizes certain contractual obligations december 31 2015 effect obligations expected cash flows future periods millions recent accounting standards updates february 2016 financial accounting standards board “fasb” issued accounting standards update “asu” 201602 leases require among items lessees recognize leases assets liabilities balance sheet qualitative quantitative disclosures enhanced better understand amount timing uncertainty cash flows arising leases asu 201602 effective fiscal years beginning december 15 2018 interim periods within fiscal years early adoption permitted asu 201602 adopted modified retrospective basis elective reliefs requires application asu 201602 periods presented currently evaluating effect asu 201602 consolidated financial statements january 2016 fasb issued asu 201601 recognition measurement financial assets financial liabilities amendments asu 201601 among items require equity investments unconsolidated entities accounted using equity method accounting generally measured fair value earnings longer availableforsale classification changes fair value reported comprehensive income equity securities readily determinable fair values equity investments without readily determinable fair values cost method also eliminated however entities able elect record equity investments without readily determinable fair values cost less impairment plus minus subsequent adjustments observable price changes basis equity investments reported current earnings asu 201601 effective fiscal years beginning december 15 2017 interim periods within fiscal years currently evaluating effect asu 201601 consolidated financial statements november 2015 fasb issued asu 201517 “balance sheet classification deferred taxes” requires entities present deferred tax assets deferred tax liabilities noncurrent taxpaying jurisdiction balance sheet previous disclosures required entities separate deferred tax assets liabilities current amount noncurrent amount taxpaying jurisdiction asu 201517 effective annual periods beginning december 15 2016 interim periods within years asu 201517 early adopted period issued prospective retrospective basis early adopted asu 201517 fourth quarter 2015 prospective basis change accounting policy therefore prior periods retrospectively adjusted july 2015 fasb issued asu 201511 “simplifying measurement inventory” current guidance entity subsequently measures inventory lower cost market defined replacement cost net realizable value nrv less normal profit margin entity uses current replacement cost provided nrv ie ceiling nrv less “approximately normal profit margin” ie floor asu 201511 eliminates analysis requires entities measure inventory “at lower cost nrv” asu 201511 effective prospectively annual periods beginning december 15 2016 interim periods therein early adoption permitted currently evaluating effect asu 201511 consolidated financial statements april 2015 fasb issued asu 201503 simplifying presentation debt issuance costs asu 201503 issued simplify presentation debt issuance costs requiring debt issuance costs presented deduction corresponding debt liability make presentation debt issuance costs consistent presentation debt discounts premiums current us gaap debt issuance costs reported balance sheet assets amortized interest expense asu 201503 debt issuance costs continue amortized interest expense using effective interest method august 2015 fasb issued asu 201515 presentation subsequent measurement debt issuance costs associated lineofcredit arrangements clarify sec staff’s position would object entity deferring presenting debt issuance costs asset subsequently amortizing deferred debt issuance costs ratably term lineofcredit arrangement current practice asu 201503 effective financial statements issued fiscal years beginning december 15 2015 interim periods within fiscal years early adoption permitted early adopt debt issuance costs material december 31 2015 may 2014 fasb issued asu 201409 “revenue contracts customers” requires entity recognize amount revenue expects entitled transfer promised goods services customers asu 201409 replace existing revenue recognition guidance gaap becomes effective august 2015 fasb issued asu 201514 defer effective date annual reporting periods beginning december 15 2017 including interim periods within reporting period early adoption permitted original effective date asu 201409 annual reporting periods beginning december 15 2016 however plan early adopt new standard applied retrospectively permits use either retrospective cumulative effect transition method currently evaluating effect asu 201409 consolidated financial statements related disclosures yet selected transition method item 7aitem 7 management’s discussion analysis financial condition results operations discussion read conjunction information contained consolidated financial statements accompanying notes integral part statements overview multinational manufacturer worldwide distributor life science research clinical diagnostics products business organized two primary segments life science clinical diagnostics mission provide scientists specialized products needed biological research clinical diagnostics sell 8000 products services diverse client base comprised scientific research healthcare education government customers worldwide disclose quantitative information different products services impractical based primarily numerous products services sell global markets serve manufacture supply customers range reagents apparatus equipment separate complex chemical biological materials identify analyze purify components customers require standardization experiments test results much revenues recurring impacted support many governments research healthcare current global economic outlook still uncertain need control government social spending many governments limits opportunities growth adding uncertainty recent referendum united kingdom withdraw european union change us executive branch government approximately 37 2016 consolidated net sales derived united states approximately 63 derived international locations europe largest international region international sales largely denominated local currencies euro swiss franc japanese yen chinese yuan british sterling result consolidated net sales expressed dollars benefit us dollar weakens suffer dollar strengthens us dollar strengthens benefit lower cost sales international manufacturing sites well nonus suppliers lower international operating expenses regularly discuss changes revenue expense categories terms changing foreign exchange rates terms currency neutral basis notable explain impact currency results february 15 2017 acquired issued outstanding stock raindance technologies inc raindance approximately 87 million including certain assumed net liabilities cash payments closing 829 million acquisition included life science segment’s results operations acquisition date accounted business combination raindances foundational intellectual property portfolio product lines encompass wide range biological reactions droplets potential applications life science research clinical research genomic tools provide ultrasensitive detection genetic variations cancer well inherited infectious diseases enabling research areas noninvasive liquid biopsy believe raindances dropletbased solutions extend reach nextgeneration sequencing applications strengthen position area droplet digital™ pcr offering customers solutions wide range nucleic acid detection applications see note 17 consolidated financial statements fourth quarter 2016 fully impaired goodwill inprocess research development amounts 135 million 464 million respectively associated 2014 acquisition gnubio inc may 2016 announced elimination relocation various positions part restructuring plans approved management connection announcement year ended december 31 2016 recorded 125 million restructuring charges related severance employee benefits 90 million anticipated paid 2019 restructuring actions primarily intended reduce eliminate relocate global workforce order better align expenses revenue gross margin profile position us improved operating performance actions aligned creation evolution organization structure coordinated implementation single instance erp platform future may take additional restructuring actions gain operating efficiencies reduce operating expenses simultaneously implementing additional cost containment measures expense control programs restructuring actions subject significant risks including delays implementing expense control programs workforce reductions failure meet operational targets due loss employees decrease employee morale would impair ability achieve anticipated cost reductions achieve anticipated cost reductions business could harmed see note 15 consolidated financial statements january 2016 acquired high performance analytical flow cytometer platform propel labs propel enable advanced novice users perform basic multiparameter cytometry wide range applications chemistries asset acquisition accounted business combination included life science segments results operations acquisition date fair values net assets acquired propel acquisition date determined 327 million definitelived intangible assets 01 million goodwill effects calculation revision reflected fourth quarter 2016 revision reduced goodwillintangibles contingent consideration amount significant impact consolidated income statement fair value consideration acquisition date 328 million revised included 95 million paid cash closing date 233 million contingent consideration potentially payable propel contingent consideration based probabilityweighted income approach related achievement sales milestones ranging 39 20 calendar years 2017 2020 sales milestones could potentially range 0 unlimited amount december 31 2020 contingent consideration recognized estimated fair value 254 million december 31 2016 previously disclosed may 2010 voluntarily disclosed us department justice doj securities exchange commission sec certain likely potential violations us foreign corrupt practices act fcpa effective november 3 2014 entered nonprosecution agreement npa doj consented entry order sec order actions resolve doj sec investigations result settlements doj sec fourth quarter 2014 paid total 551 million included penalty 144 million 351 million disgorgement 56 million interest october 28 2016 doj sec informed biorad intend extend npa expired november 2 2016 critical accounting policies estimates accompanying discussion analysis financial condition results operations based upon consolidated financial statements prepared accordance us generally accepted accounting principles gaap preparation financial statements conformity gaap requires management make estimates assumptions affect reported amounts assets liabilities contingencies date financial statements reported amounts revenues expenses reporting periods evaluate estimates ongoing basis base estimates historical experience assumptions believed reasonable circumstances results form basis making judgments carrying values assets liabilities readily apparent sources however future events may cause us change assumptions estimates may require adjustment actual results could differ estimates determined periods reported annual report form 10k following accounting policies estimates critical understanding financial condition results operations accounting income taxes management required make estimates related income tax provision jurisdictions operate process involves estimating current tax exposures well making judgments regarding recoverability deferred tax assets jurisdiction deferred tax assets liabilities reflect tax effects losses credits temporary differences carrying amounts assets liabilities financial reporting purposes amounts used income tax purposes management assesses likelihood deferred tax assets recovered future taxable income extent management believes recovery likely valuation allowance must established extent management establishes valuation allowance increases allowance period increase expense within provision income taxes consolidated statements income may result recorded valuation allowance 664 million 583 million december 31 2016 2015 respectively due uncertainties related ability utilize deferred tax assets primarily consisting certain foreign net operating losses carried forward valuation allowance based management’s current estimates taxable income jurisdictions operate period deferred tax assets recoverable event actual results differ estimates adjusted future periods additional valuation allowance may need established would increase tax provision lowering income impacting financial position realization deferred tax assets valuation allowance provided occur provision income taxes may decrease raising income positively impacting biorad’s financial position recognize tax benefit uncertain tax position likely tax position sustained examination taxing authorities based technical merits position tax benefits recognized financial statements particular tax position measured based largest benefit greater 50 likelihood realized upon settlement amount unrecognized tax benefits adjusted appropriate changes facts circumstances significant amendments existing tax law new regulations interpretations taxing authorities new information obtained tax examination resolution examination recognize accrued interest penalties appropriate related unrecognized tax benefits income tax expense overall effective tax rate subject fluctuations changes geographic mix earnings changes statutory tax rates tax laws impact various tax audits assessments well generation tax credits valuation goodwill longlived assets goodwill represents excess cost fair value net tangible identifiable intangible assets acquired businesses goodwill amounts assigned reporting units time acquisition adjusted subsequent significant transfers business reporting units assess impairment goodwill annually fourth quarter whenever events changes circumstances indicate carrying value may recoverable perform impairment tests goodwill reporting unit level one level operating segments goodwill impairment test consists twostep process first step goodwill impairment test used identify potential impairment compares fair value reporting unit carrying value including goodwill fair value reporting unit exceeds carrying amount goodwill reporting unit considered impaired second step impairment test required second step required compares implied fair value reporting unit goodwill carrying amount goodwill fair value reporting unit allocated assets liabilities unit including unrecognized intangible assets reporting unit acquired business combination fair value reporting unit price paid acquire reporting unit carrying amount reporting units goodwill exceeds implied fair value impairment charge recognized amount equal excess use projected discounted cash flow model determine fair value reporting unit discounted cash flow method determining goodwill may different fair value would result actual transaction willing buyer willing seller projections discounted cash flow models inherently uncertain accordingly actual future cash flows may differ materially projected cash flows management judgment required developing assumptions discounted cash flow model assumptions include revenue growth rates profit margins future capital expenditures working capital needs expected foreign currency rates discount rates terminal values estimate future cash flows using current longerterm financial forecasts take account current economic environment discount rates used compiled using independent sources current trends similar businesses observable market data changes rates might result material changes valuation determination recoverability goodwill example increase discount rate used discount cash flows decrease computed fair value impairment tests highly sensitive changes assumptions minor changes assumptions could result impairment losses forecasts utilized 2016 impairment test assumed among things sales growth executing sales marketing programs new product introductions successful product development timely registration products required controlling costs addition external factors currency inflation rates cost capital could affect determination fair value reporting units aside gnubio inc reporting unit reflected carrying value exceeded fair value impairment tests resulted excessive fair value book value ranging 22 400 various reporting units initiatives mentioned achieve desired results external factors change detrimentally future impairment losses may occur validate reasonableness reporting unit fair values reconcile aggregate fair values reporting units enterprise market capitalization performing reconciliation may depending volatility market value stock price use either stock price valuation date average stock price range dates around valuation date purposes recognition measurement impairment loss longlived asset assets grouped assets liabilities lowest level identifiable cash flows largely independent cash flows assets liabilities assess impairment longlived assets including identifiable intangibles whenever events changes circumstances indicate carrying value may recoverable factors consider important could trigger impairment review include • significant reporting unit underperformance relative expected historical projected future operating results • significant changes manner use longlived assets intangible assets strategy overall business • current expectation likely longlived asset sold otherwise disposed end previously estimated useful life • significant negative industry legal regulatory economic trends management determines carrying value longlived assets may recoverable based upon existence one indicators impairment test impairment based projected undiscounted cash flow method projected future operating results cash flows asset group used establish fair value used evaluating carrying value longlived intangible assets estimate future cash flows longlived assets using current longterm financial forecasts carrying amount longlived asset recoverable exceeds sum undiscounted cash flows expected result use eventual disposition asset case impairment loss would recognized impairment loss recognized amount carrying amount exceeds fair value 2016 fully impaired goodwill inprocess research development amounts 135 million 464 million respectively associated 2014 acquisition gnubio inc impairments based upon revision level 3 valuation inputs ie expected future cash flows also 2016 impaired intellectual property amount 24 million associated termination research development project impairment losses recorded 2015 2014 impaired licenses discontinued product line amount 64 million impairment charge included 58 million cost goods sold 06 million research development expense accompanying consolidated statements income early adopted asu 201704 simplifying test goodwill impairment january 1 2017 removes step 2 goodwill impairment test impairments january 1 2017 see note 1 consolidated financial statements valuation inventories value inventory lower actual cost purchase andor manufacture inventory current estimated net realizable value inventory review inventory quantities hand reduce cost basis excess obsolete inventory based primarily estimated forecast product demand production requirements quality efficacy potency raw materials review done quarterly basis warranted circumstances frequently addition industry characterized technological change frequent new product development product obsolescence could result increase amount obsolete inventory quantities hand estimates future product demand may prove inaccurate high may overstated carrying value inventory future inventory determined overvalued would required write value inventory market recognize costs cost goods sold time determination therefore although make efforts ensure accuracy forecasts future product demand perform procedures safeguard overall inventory quality significant unanticipated changes demand technological developments regulations storage conditions economic environmental factors affecting biological materials could significant impact value inventory reported results operations adopted asu 201511 simplifying measurement inventory january 1 2017 requires inventory measurement lower cost net realizable value see note 1 consolidated financial statements valuation investments regularly review investments factors may indicate decline fair value investment carrying value otherthantemporary factors considered evaluating whether decline fair value otherthantemporary include ability intent retain investment period time sufficient allow recovery value duration extent fair value less cost financial condition prospects issuer reviews inherently uncertain value investment may fully recover may decline future periods resulting realized losses warranty reserves warrant certain equipment defects design materials workmanship generally period one year upon delivery acceptance equipment establish part cost goods sold provision expected costs warranty repairs based historical experience specific warranty terms customer feedback review performed quarterly basis assess adequacy warranty reserve adjusted necessary warranty reserve based actual experience expected future costs incurred realized costs higher expected costs cost goods sold would lower period estimation higher realized allowance doubtful accounts maintain allowance doubtful accounts estimated losses resulting collectability customer accounts amount allowance determined analyzing known uncollectible accounts age receivables economic conditions customers’ country industry historical losses customers’ general creditworthiness amounts later determined specifically identified uncollectible charged written allowance uncertainty current economic environment prolonged could result greater amounts becoming uncollectible future estimates losses higher actual uncollectible accounts would report lower profitability estimates made higher profitability receivable collected litigation accruals record liabilities consolidated balance sheets estimated amounts claims probable reasonably estimated likelihood material change estimated liabilities dependent possible outcome settlement negotiations regulatory judicial review development facts circumstances extended litigation could change claims assessments amount range loss outstanding litigation uncertain disclose footnotes financial statements unable make reasonable estimate material liability could result unfavorable outcomes litigation events occur assess potential liability related pending litigation revise estimates revisions could materially impact results operations results operations sales gross margins expenses following shows cost goods sold gross profit expense items net income percentage net sales net sales net sales 2016 207 billion increase 24 compared 202 billion 2015 excluding impact foreign currency 2016 sales increased approximately 40 compared 2015 currency neutral sales growth primarily reflected regions except europe life science segment sales 2016 7307 million increase 51 compared 2015 currency neutral basis sales increased 65 compared 2015 currency neutral sales increase primarily droplet digital™ pcr process media products currency neutral sales increase regions clinical diagnostics segment sales 2016 132 billion increase 10 compared 2015 currency neutral basis sales increased 26 compared 2015 currency neutral sales increase primarily attributable growth quality control immunology blood typing diabetes product lines geographic view currency neutral sales 2016 increased notably americas asia sales declined europe sales 2015 202 billion decrease 72 compared 218 billion 2014 excluding impact foreign currency 2015 sales increased approximately 16 compared 2014 currency neutral sales growth primarily reflected united states china life science segment sales 2015 6950 million decrease 46 compared 2014 currency neutral basis sales increased 25 compared 2014 currency neutral sales increase primarily droplet digital™ pcr western blotting process chromatography media cell biology products currency neutral sales increase primarily united states europe partially offset lower sales asia excluding china clinical diagnostics segment sales 2015 131 billion decrease 85 compared 2014 currency neutral basis sales increased 11 compared 2014 clinical diagnostics segment currency neutral sales growth quality controls immunology products partially offset declines blood typing infectious disease products currency neutral sales growth primarily north america china latin america european markets still experiencing consolidation pricing pressures gross margin consolidated gross margins 550 2016 compared 555 2015 life science segment gross margins 2016 decreased 2015 approximately 07 percentage points primarily due lower margins protein quantification cell biology higher service costs higher acquisition intangible amortization 07 million restructuring costs partially offset higher margins droplet digital™ pcr process media products antibody products clinical diagnostics segment gross margins 2016 decreased 2015 approximately 05 percentage points decrease compared 2015 primarily driven sales mix pricing pressures along higher period expenses 14 million restructuring costs partially offset suspension medical device tax beginning 2013 patient protection affordable care act amended health care education reconciliation act ppaca among initiatives provided 23 annual excise tax sales certain medical devices us biorad paying excise tax us clinical diagnostic sales accounted period cost goods sold however consolidated appropriations act 2016 pub l 114113 signed law december 18 2015 includes two year moratorium medical device excise tax period beginning january 1 2016 ending december 31 2017 consolidated gross margins 555 2015 compared 542 2014 life science segment gross margins 2015 increased 2014 approximately 09 percentage points primarily due sales higher gross margin products including droplet digital™ pcr gene expression cell biology products addition lower service costs europe costs associated closing manufacturing plant 2014 contributed higher margins clinical diagnostics segment gross margins 2015 increased 2014 approximately 18 percentage points increase compared 2014 primarily due 2014 consolidation closure certain facilities discontinuation underperforming product line sales mix also contributed higher gross margins 2015 selling general administrative expense consolidated selling general administrative expenses sga increased 8167 million 395 sales 2016 compared 7620 million 377 sales 2015 increases sga primarily included employeerelated expenses largest cost also included 104 million restructuring costs 210 million various legal matters including wadler judgment discussed note 13 consolidated financial statements professional fees software revaluation contingent consideration primarily associated cell sorting system lesser extent analytical flow cytometer platform travel facilities recruitmentrelocation decreases sga primarily included bad debt expense onetime distributor cost 2015 consolidated sga decreased 7620 million 377 sales 2015 compared 8082 million 372 sales 2014 underlying overall decrease sga impact foreign currency accrual 195 million 2014 associated sec doj investigations relating fcpa investigation final settlement reached fourth quarter 2014 reduction 42 million revaluations contingent consideration currency neutral increases sga primarily employeerelated expenses largest cost facilities professional fees partially offset travel increases sga included 23 million bad debt expense onetime distributor termination cost 19 million research development expense research development expense increased 2059 million 100 sales 2016 compared 1930 million 96 sales 2015 life science segment research development expense increased 2016 2015 primarily due increased project activities droplet digital™ pcr protein quantification cell biology clinical diagnostics segment research development expense increased 2016 2015 primarily increased spending associated gnubio business research development expense decreased 1930 million 96 sales 2015 compared 2203 million 101 sales 2014 life science segment research development expense decreased 2015 2014 primarily due headcount reductions lower supplies lower external product development spend clinical diagnostics segment research development expense decreased 2015 2014 primarily due wind spending projects approach launch discontinuation underperforming product line 2014 results operations nonoperating interest expense interest expense 2016 increased 12 219 million relatively flat compared 217 million 2015 interest expense 2015 decreased 20 217 million compared 2014 primarily due 06 million 2014 associated offer settle sec doj investigations relating fcpa investigation final settlement reached fourth quarter 2014 foreign currency exchange gains losses foreign currency exchange gains losses consist foreign currency transaction gains losses intercompany net receivables payables change fair value forward foreign exchange contracts used manage foreign currency exchange risk net foreign currency exchange losses 2016 2015 2014 45 million 102 million 93 million respectively 2016 2015 2014 net foreign currency exchange losses attributable market volatility increasing costs hedge result estimating process inherent timing shipments payments intercompany debt decision reclassify large percentage intercompany receivable brazil longterm towards end 2015 years affected economic hedging program employ hedge intercompany receivables payables income expense net income expense net includes investment dividend income generally interest income cash equivalents shortterm investments long term marketable securities income expense net 2016 increased 149 million income compared 111 million income 2015 increase primarily due higher dividend income 2016 ordinary preferred shares investment sartorius ag higher investment income expense net 2015 decreased 111 million income compared 130 million income 2014 decrease primarily due lower interest investment income primarily related weaker 2015 foreign currency exchange rate ordinary preferred dividends investment sartorius ag realized losses 2015 compared realized losses 2014 effective tax rate effective tax rate 32 22 32 2016 2015 2014 respectively effective tax rates 2016 2015 included tax benefits repatriation foreign earnings effective tax rate 2016 included additional tax liabilities unrecognized tax benefits related nondeductibility interest expense foreign jurisdictions effective tax rate 2014 included nondeductible penalties losses nonrecurring foreign taxes result primarily income earned france switzerland many jurisdictions operate including switzerland russia uk singapore statutory tax rates significantly lower us statutory tax rate 35 effective tax rate may impacted future either favorably unfavorably many factors including limited changes statutory tax rates changes tax laws regulations tax audits settlements generation tax credits income tax returns audited us federal state foreign tax authorities currently examination many tax authorities tax years open examination include years 2013 forward us years 2010 forward certain foreign jurisdictions including france switzerland germany differing interpretations tax laws regulations result significant disputes may arise tax authorities involving issues timing amount deductions allocations income among various tax jurisdictions evaluate exposures associated tax filing positions quarterly basis record liabilities unrecognized tax benefits related uncertain tax positions believe currently pending uncertain tax positions material adverse effect consolidated financial statements although adverse resolution one uncertain tax positions period may material impact results operations period december 31 2016 based expected outcome certain examinations result expiration statutes limitation certain jurisdictions believe within next twelve months reasonably possible previously unrecognized tax benefits could decrease approximately 35 million substantially amounts impact effective income tax rate 2017 expect proceed implementation european headquarters related restructuring plans could significant effect effective tax rate many plans operational changes may impact jurisdictional mix earnings future liquidity capital resources biorad operates conducts business globally primarily subsidiary companies established markets trade goods manufactured small number locations shipped local distribution facilities around world product mix diversified certain products compete largely product efficacy others compete price gross margins generally sufficient exceed normal operating costs funding research development new products well routine outflows capital expenditures interest taxes addition annual positive cash flow operating activities additional liquidity readily available via sale shortterm investments access 2000 million unsecured credit agreement entered june 2014 borrowings credit agreement revolving basis used make permitted acquisitions working capital general corporate purposes outstanding borrowings credit agreement december 31 2016 however 08 million utilized domestic standby letters credit reduced borrowing availability credit agreement matures june 2019 december 31 2016 available 8394 million cash equivalents shortterm investments approximately 28 held foreign subsidiaries believe holdings cash equivalents shortterm investments us foreign subsidiaries sufficient meet current longterm needs global operations amount funds held united states fluctuate due timing receipts payments ordinary course business due reasons businessdevelopment activities part ongoing liquidity assessments regularly monitor mix domestic foreign cash flows inflows outflows repatriation overseas funds result additional us federal state income tax payments general practice intention indefinitely reinvest cash generated foreign subsidiaries foreign subsidiaries operations domestic international lines credit standby letters credit guarantee arrangements 2057 million available borrowing usage december 31 2016 reduced 54 million utilized standby letters credit guarantee arrangements issued banks support obligations management believes availability together cash flow operations adequate meet current objectives operations research development capital additions manufacturing distribution plant equipment information technology systems acquisition reasonable proportion existing total available capital economic growth somewhat improving instability still exists developed nations us slowing rate growth chinese economy emerging markets especially oilproducing countries affected decline oil prices may adversely affect future results cash flows demand products services could change dramatically previous years based activity funding reimbursement constraints support levels government universities hospitals private industry including diagnostic laboratories need certain sovereign nations large annual deficits curtail spending could lead slower growth even decline business sovereign nations either delaying payment goods services renegotiating debts could impact liquidity situation sovereign nations continuously evolving greater knowledge situation publicly reported december 31 2016 december 31 2015 accounts receivable net allowance doubtful accounts spain italy greece portugal 327 million 407 million respectively cash flows operations net cash provided operations 2164 million 1862 million 2733 million 2016 2015 2014 respectively net increase 2016 2015 302 million primarily resulted • higher cash received customers 2016 primarily due lower us collections second half 2015 delays associated second phase erp implementation • higher investment income received partially offset • cash paid suppliers employees primarily related higher payments inventory suppliers payments delayed latter part 2015 mostly associated second deployment erp system higher annual performancebased compensation payments 2016 higher legal professional fees • higher net income tax payments 2015 • net payments 2016 compared net cash received 2015 forward foreign exchange contracts net decrease 2015 2014 871 million primarily resulted • lower cash received customers primarily due value foreign currency denominated sales subsequent collections affected strengthening us dollar disproportionately larger collections 2014 spanish government lower us collections second half 2015 delays associated second phase erp implementation higher us collections 2014 resulting delays caused first deployment new erp system partially offset • less cash paid suppliers employees primarily related decrease foreign exchange rates reductions force partially offset higher performancebased compensation payments • payment 551 million settlement sec doj associated fcpa fourth quarter 2014 regularly review past due receivables assess allowance doubtful accounts believe net accounts receivable fully realizable also routinely review inventory impact obsolescence changes market prices caused introduction new products technologies government reimbursement policies cash flows operations first quarter historically larger payments royalties fourth quarter sales commissions third parties annual employee bonuses expect pattern recur first quarter 2017 cash flows investing activities net cash used investing activities 2139 million 1669 million 1905 million 2016 2015 2014 respectively purchases net sales maturities marketable securities investments overall decrease 132 million 2016 compared 2015 primarily due decrease maturities securities sales partially offset decrease purchases net sales maturities marketable securities investments overall decrease 354 million 2015 compared 2014 primarily due increase purchases partially offset increase maturities securities sales shortterm restricted investments 456 million 421 million 2016 2015 respectively represent money market fund collateral secures workers compensation general liability insurance investment income accrues us recorded investment proceeds miscellaneous receipts net consolidated statements cash flows investment objective maintain liquidity meet anticipated operational corporate requirements capital preserved increased investing low risk high quality securities commensurate returns consistent risk tolerance level purchases intangible assets higher 2014 2016 2015 primarily due higher purchases licenses payments acquisitions net cash received longterm investments 2016 2014 primarily due following • january 2016 acquired high performance analytical flow cytometer platform propel total consideration 328 million included 95 million paid cash closing date 233 million contingent consideration potentially payable propel effects calculation revision reflected fourth quarter 2016 • april 2014 acquired 100 issued outstanding stock gnubio total consideration 504 million included 397 million paid cash closing date 107 million contingent consideration potentially payable gnubios shareholders level 3 contingent consideration revalued fair value 100 million december 31 2016 2015 continue review possible acquisitions expand life science clinical diagnostics segments acquisition raindance february 2017 routinely meet principals brokers subject companies currently discussion assessing possible acquisitions expect current reported cash equivalents sufficient cash consideration possible acquisitions however certain time discussions involving material significant acquisitions advance completion capital expenditures 2016 totaled 1414 million compared 1120 million 1210 million 2015 2014 respectively capital expenditures represent addition replacement production machinery research equipment ongoing manufacturing facility additions expansion regulatory environmental compliance also included capital expenditures investments business systems data communication upgrades enhancements periods include equipment placed clinical diagnostics segment customers contract purchase reagents use continue implement remaining phases erp platform expect capital expenditures moderate 2017 decline next couple years capital expenditures lower 2015 compared 2016 second phase implemented july 2015 third phase erp system ramped 2016 capital expenditures higher 2014 2015 development stages appropriate costs capitalized implementing second phase global single instance erp platform current estimated future project cost global implementation single instance erp platform projected 90 million 130 million estimated take approximately next two three years fully implement cash flows financing activities net cash provided financing activities 90 million 86 million 117 million 2016 2015 2014 respectively net cash provided financing activities 2016 2015 2014 primarily proceeds issuance common stock additionally 2016 2015 2014 payments 35 million 30 million 24 million respectively propel labs shareholders contingent consideration sales milestones associated valuation 2012 acquisition date 2014 also payment shortterm borrowing outstanding senior notes 4250 million due 2020 believe current cash sufficient meet normal operating costs funding research development new products well routine outflows capital expenditures interest taxes board directors authorized repurchase 180 million biorads common stock 33 million yet repurchased december 31 2016 credit agreement may limit ability repurchase stock accordance terms awards 2007 incentive award plan june 2012 withheld 122 shares class common stock 917 shares class b common stock satisfy tax obligations due upon vesting restricted stock certain employees considered repurchase stock restricted stock vested december 31 2013 therefore anticipate repurchasing shares purpose repurchases stock 2016 2015 2014 offbalance sheet arrangements offbalance sheet arrangements reasonably likely current future material effect financial condition results operations liquidity contractual obligations following summarizes certain contractual obligations december 31 2016 effect obligations expected cash flows future periods millions recent accounting standards updates january 2017 financial accounting standards board “fasb” issued accounting standards update “asu” 201704 simplifying test goodwill impairment asu 201704 removes step 2 goodwill impairment test requires hypothetical purchase price allocation goodwill impairment amount reporting unit’s carrying value exceeds fair value exceed carrying amount goodwill asu 201704 effective prospectively annual interim periods beginning december 15 2019 early adoption permitted impairment tests performed january 1 2017 asu 201704 provide streamlined approach evaluating future goodwill impairment early adopted january 1 2017 assessed impact asu 201704 consolidated financial statements goodwill impairment occurred january 1 2017 january 2017 fasb issued asu 201701 clarifying definition business asu 201701 changes definition business assist entities evaluating set transferred assets activities business substantially fair value concentrated single asset group similar assets acquired determining whether set constitutes business critical accounting business combination differs significantly asset acquisition asu 201701 effective fiscal years beginning december 15 2017 interim periods within years asu 201701 applied prospectively transactions occur set business met entity evaluates whether set meets requirement business include minimum input substantive process together significantly contribute ability create outputsring within period adoption early adoption permitted including interim annual periods financial statements issued made available issuance early adopted asu 201701 january 1 2017 acquisition raindance technologies inc asu 201701 affect conclusion business combination see note 17 consolidated financial statements november 2016 fasb issued asu 201618 restricted cash asu 201618 requires entities show changes total cash equivalents restricted cash restricted cash equivalents statement cash flows result entities longer present transfers cash equivalents restricted cash restricted cash equivalents statement cash flows asu 201618 applied retrospectively effective fiscal years beginning december 15 2017 interim periods within years early adoption permitted limited amount restricted cash 20 million 14 million december 31 2016 2015 respectively reclassified cash either prepaid expenses current assets consolidated balance sheets time adoption cannot assure whether restricted cash amounts held restricted cash may historically reported amounts similar october 2016 fasb issued asu 201616 intraentity transfers assets inventory asu 201616 requires immediate recognition income tax consequences intercompany asset transfers inventory transfers existing gaap prohibits recognition income tax consequences intercompany asset transfers whereby seller defers net tax effect buyer prohibited recognizing deferred tax asset difference newly created tax basis asset tax jurisdiction financial statement carrying amount reported consolidated financial statements asu 201616 specifically excludes scope intercompany inventory transfers whereby recognition tax consequences take place inventory sold third parties asu 201616 effective fiscal years beginning december 15 2017 interim periods within fiscal years early adoption permitted beginning annual reporting period financial statements issued made available issuance plan early adopt asu 201616 currently evaluating effect asu 201616 consolidated financial statements august 2016 fasb issued asu 201615 classification certain cash receipts cash payments asu 201615 intended reduce diversity practice certain transactions classified statement cash flows asu 201615 effective fiscal years beginning december 15 2017 interim periods within fiscal years early adoption permitted currently evaluating effect asu 201615 consolidated statements cash flows june 2016 fasb issued asu 201613 measurement credit losses financial instruments asu 201613 replace current incurred loss approach expected loss model trade receivables instruments measured amortized cost require entities record allowances availableforsale debt securities rather reduce carrying amount current otherthantemporary impairment model asu 201613 effective fiscal years beginning december 15 2019 interim periods within fiscal years early adoption permitted entities annual periods beginning december 15 2018 interim periods therein currently evaluating effect asu 201613 consolidated financial statements march 2016 fasb issued asu 201609 improvements employee sharebased payment accounting asu 201609 require income tax effects awards recognized income statement awards vest settled also allow employer repurchase employee’s shares today tax withholding purposes without triggering liability accounting make policy election account forfeitures occur asu 201609 effective fiscal years beginning december 15 2016 interim periods within fiscal years adopted asu 201609 january 1 2017 made policy election account forfeitures occur expect asu 201609 material impact consolidated financial statements march 2016 fasb issued asu 201607 simplifying transition equity method accounting eliminates requirement retrospectively apply equity method previous periods investor initially obtains significant influence investee current guidance investor consolidate investment initially accounts method equity method required retrospectively apply equity method prior periods held investment subsequently obtained significant influence asu 201607 applied prospective basis effective entities fiscal years beginning december 15 2016 interim periods within years adopted asu 201607 january 1 2017 expect materially affect consolidated financial statements unless situation changes regarding ability influence investee future result cost method investment sartorius ag see note 3 consolidated financial statements february 2016 fasb issued asu 201602 leases require among items lease accounting recognize leases assets liabilities balance sheet qualitative quantitative disclosures enhanced better understand amount timing uncertainty cash flows arising leases asu 201602 effective fiscal years beginning december 15 2018 interim periods within fiscal years early adoption permitted plan early adopt asu 201602 adopted modified retrospective basis elective reliefs requires application asu 201602 periods presented currently gathering documenting analyzing lease agreements related asu anticipate material additions balance sheet rightofuse assets offset associated liabilities january 2016 fasb issued asu 201601 recognition measurement financial assets financial liabilities amendments asu 201601 among items require equity investments unconsolidated entities accounted using equity method accounting generally measured fair value earnings longer availableforsale classification changes fair value reported comprehensive income equity securities readily determinable fair values equity investments without readily determinable fair values cost method also eliminated however entities able elect record equity investments without readily determinable fair values cost less impairment plus minus subsequent adjustments observable price changes basis equity investments reported current earnings asu 201601 effective fiscal years beginning december 15 2017 interim periods within fiscal years equity securities would affected asu 201601 see availableforsale investments table note 3 consolidated financial statements time adoption cannot assure whether equity securities held equity securities may historically reported changes similar september 2015 fasb issued asu 201516 simplifying accounting measurementperiod adjustments eliminates requirement acquirer business combination account measurementperiod adjustments retrospectively asu 201516 acquirers must recognize measurementperiod adjustments period determine amounts including effect earnings amounts would recorded previous periods accounting completed acquisition date measurement period cannot exceed one year date acquisition asu 201516 effective january 1 2016 adopted time change accounting policy impact consolidated financial statements july 2015 fasb issued asu 201511 “simplifying measurement inventory” current guidance entity subsequently measures inventory lower cost market defined replacement cost net realizable value nrv less normal profit margin entity uses current replacement cost provided nrv ie ceiling nrv less “approximately normal profit margin” ie floor asu 201511 eliminates analysis requires entities measure inventory “at lower cost nrv” asu 201511 effective prospectively annual periods beginning december 15 2016 interim periods therein adopted asu 201511 january 1 2017 expect material impact consolidated financial statements april 2015 fasb issued asu 201503 simplifying presentation debt issuance costs asu 201503 issued simplify presentation debt issuance costs requiring debt issuance costs presented deduction corresponding debt liability makes presentation debt issuance costs consistent presentation debt discounts premiums prior us gaap debt issuance costs reported balance sheet assets amortized interest expense asu 201503 debt issuance costs continue amortized interest expense using effective interest method august 2015 fasb issued asu 201515 presentation subsequent measurement debt issuance costs associated lineofcredit arrangements clarify sec staff’s position would object entity deferring presenting debt issuance costs asset subsequently amortizing deferred debt issuance costs ratably term lineofcredit arrangement current practice adopted asu 201503 january 1 2016 retrospective basis change accounting policy condensed consolidated balance sheet december 31 2015 retrospectively adjusted decreasing assets longterm debt net current maturities 18 million respectively may 2014 fasb issued asu 201409 “revenue contracts customers” requires entity recognize amount revenue expects entitled transfer promised goods services customers asu 201409 replace existing revenue recognition guidance gaap becomes effective august 2015 fasb issued asu 201514 defer effective date annual reporting periods beginning december 15 2017 including interim periods within reporting period early adoption permitted original effective date asu 201409 annual reporting periods beginning december 15 2016 however early adopt december 2016 fasb issued asu 201620 technical corrections improvements topic 606 revenue contracts customers affect narrow aspects guidance issued asu 201409 may 2016 fasb issued asu 201612 narrowscope improvements practical expedients amends clarifies certain aspects asu 201409 include collectiblity presentation sales taxes collected customers noncash consideration contract modifications completed contracts transition april 2016 fasb issued asu 201610 identifying performance obligations licensing amends guidance asu 201409 accounting licenses intellectual property identifying performance obligations march 2016 fasb issued asu 201608 principal versus agent considerations reporting revenue gross versus net amends principal versus agent guidance asu 201409 standards applied retrospectively permit use either retrospective cumulative effect transition method use cumulative effect transition method adopt asus 201409 201620 201612 201610 201608 january 1 2018 completed revenue recognition diagnostic surveys across regions decentralized sales contracting process based local country commercial regulations practices begun assessing individual contracts identify performance obligations asu’s compared deliverables separate units accounting previously identified current us gaap determine effect asu’s consolidated financial statements related disclosures item 7aitem 7 management’s discussion analysis financial condition results operations discussion read conjunction information contained consolidated financial statements accompanying notes integral part statements overview multinational manufacturer worldwide distributor life science research clinical diagnostics products business organized two reportable segments life science clinical diagnostics mission provide scientists specialized tools needed biological research health care specialists products needed clinical diagnostics sell 9000 products services diverse client base comprised scientific research healthcare education government customers worldwide disclose quantitative information different products services impractical based primarily numerous products services sell global markets serve manufacture supply customers range reagents apparatus equipment separate complex chemical biological materials identify analyze purify components customers require standardization experiments test results much revenues recurring impacted support many governments research healthcare current global economic outlook still uncertain need control government social spending many governments limits opportunities growth adding uncertainty withdrawal united kingdom european union approximately 39 2020 consolidated net sales derived united states approximately 61 derived international locations europe largest international region international sales largely denominated local currencies euro swiss franc japanese yen chinese yuan british sterling result consolidated net sales expressed dollars benefit us dollar weakens suffer dollar strengthens us dollar strengthens benefit lower cost sales international manufacturing sites well nonus suppliers lower international operating expenses regularly discuss changes revenue expense categories terms changing foreign exchange rates terms currency neutral basis notable explain impact currency results covid19 full impact covid19 pandemic inherently uncertain time report covid19 pandemic impacted expect continue disrupt parts business operations impacting financial conditions results operations variety ways saw strong demand products associated covid19 testing related research however saw lower demand many products rest business discussion relating impacts covid19 pandemic please see item 1a risk factors annual report cyberattack previously disclosed december 9 2019 form 8k filed securities exchange commission sec detected cyberattack network evening december 5 2019 pst immediately took affected systems offline part comprehensive response contain activity “december 2019 cyberattack” virus targeted windowsbased systems attack global erp system sap nonwindowsbased systems critical systems back online within days incident part indepth investigation incident engaged outside cyber security experts assist us investigation remediation efforts found evidence unauthorized transfer misuse personal data indication customer systems affected insurance coverage costs resulting cyberattacks pay ransom connection incident acquisitions april 1 2020 acquisition date acquired equity interests celsee inc celsee total consideration 993 million including estimated fair value contingent consideration contingent consideration 600 million payable cash upon achievement certain net revenues period beginning january 1 2021 ending december 31 2022 celsee manufacturer instruments consumables isolation detection analysis single cells believe acquisition complement life science product offerings acquisition included life science segments results operations acquisition date informatics divestiture april 2020 received 122 million sale informatics division focused providing developing comprehensive highquality spectral databases associated software division part operations segment connection sale recorded 117 million gain income net consolidated statements income year ended december 31 2020 restructurings february 3 2021 initiated strategydriven restructuring plan furtherance ongoing program improve operating performance restructuring plan primarily impacts operations europe includes elimination certain positions consolidation certain functions relocation certain manufacturing operations europe asia restructuring plan expected eliminate total approximately 530 positions subsequent creation total approximately 325 new positions anticipate restructuring plan implemented phases expected substantially completed end fiscal year 2022 estimate result restructuring plan incur approximately 125 million 130 million total cost anticipate consist approximately 86 million cash expenditures form onetime termination benefits affected employees including cash severance payments healthcare benefits related transition assistance ii approximately 19 million capital expenditures associated restructuring plan iii approximately 20 million 25 million onetime transition costs including employee transition costs supply chain costs regulatory costs anticipate record approximately 80 million 90 million charges related restructuring plan first quarter fiscal year 2021 amounts preliminary estimates based information currently available management possible additional charges future cash payments could occur relation restructuring actions critical accounting policies estimates accompanying discussion analysis financial condition results operations based upon consolidated financial statements prepared accordance us generally accepted accounting principles gaap preparation financial statements conformity gaap requires management make estimates assumptions affect reported amounts assets liabilities contingencies date financial statements reported amounts revenues expenses reporting periods evaluate estimates ongoing basis base estimates historical experience assumptions believed reasonable circumstances results form basis making judgments carrying values assets liabilities readily apparent sources however future events may cause us change assumptions estimates may require adjustment actual results could differ estimates determined periods reported annual report form 10k following accounting policies estimates critical understanding financial condition results operations accounting income taxes operate multiple jurisdictions profits taxed pursuant tax laws jurisdictions effective income tax rate may affected changes interpretations tax laws tax agreements given jurisdiction utilization net operating loss tax credit carryforwards changes geographical mix income expense changes assessment matters ability realize deferred tax assets result considerations must estimate income taxes jurisdictions operate process involves estimating current tax exposure together assessing temporary differences resulting different treatment items tax accounting purposes differences result deferred tax assets liabilities included consolidated balance sheet assess likelihood deferred tax assets recovered future taxable income considering available evidence historical levels income expectations risks associated estimates future taxable income ongoing prudent feasible tax strategies determine likely realize part deferred tax assets adjustment charged earnings period determination made likewise later determine likely part deferred tax assets would realized previously provided valuation allowance would reversed make certain estimates judgments application tax laws expected resolution uncertain tax positions matters surrounding recognition measurement uncertain tax benefits event uncertain tax positions resolved amounts different estimates related statutes limitations expire without assessment additional income taxes required adjust amounts related assets liabilities period events occur adjustments may material impact income tax provision results operations business acquisitions accounting business acquisitions requires us make significant estimates assumptions especially acquisition date respect tangible intangible assets acquired liabilities assumed preacquisition contingencies business combination allocate purchase price acquired business’ identifiable assets liabilities acquisition date fair values excess purchase price amount allocated identifiable assets liabilities recorded goodwill date assets acquired liabilities assumed business combinations primarily consisted acquired working capital definitelived intangible assets carrying value acquired working capital approximates fair value given shortterm nature assets liabilities estimate fair value definitelived intangible assets acquired using discounted cash flow approach includes analysis future cash flows expected generated assets risk associated achieving cash flows key assumptions used discounted cash flow model include discount rate applied discretely forecasted future cash flows calculate present value cash flows estimate future cash flows attributable acquired intangible assets include revenue operating expenses taxes estimates inherently uncertain subject refinement result measurement period may one year acquisition date may record adjustments fair value assets acquired liabilities assumed corresponding offset goodwill represents excess aggregate fair value consideration transferred business combination b fair value assets acquired net liabilities assumed goodwill amortized subject annual impairment tests described conduct goodwill impairment analysis annually fourth quarter frequently indicators impairment exist decision made sell exit business significant judgments involved determining indicator impairment occurred indicators may include deterioration general economic conditions negative developments equity credit markets adverse changes markets entity operates increases input costs negative effect earnings cash flows trend negative declining cash flows decline actual planned revenue earnings compared actual projected results relevant prior periods relevant entityspecific events changes management key personnel strategy customers contemplation bankruptcy litigation fair value could realized actual transaction may differ used evaluate impairment goodwill first may assess qualitative factors determine likely fair value reporting unit less carrying amount basis determining whether necessary perform quantitative goodwill impairment test included us gaap extent assessment identifies adverse conditions elect bypass qualitative assessment goodwill tested reporting unit level using quantitative impairment test year ended december 31 2020 elected perform qualitative assessment determined impairment likely analysis required intangible assets acquired intangible assets connection certain business acquisitions assets recorded estimated fair values acquisition date amortized respective estimated useful lives using method amortization reflects pattern economic benefits intangible assets used estimated useful lives determined based historical use similar assets expectation future realization cash flows attributable intangible assets changes circumstances technological advances changes business model could result actual useful lives differing current estimates cases determine useful life intangible asset shortened amortize net book value excess estimated salvage value revised remaining useful life revise previously assigned useful life estimates attributed intangible assets years ended december 31 2020 2019 2018 estimated useful lives used computing amortization intangible assets follows customer relationshipslists 4 16 years know 14 years developed product technology 7 20 years licenses 12 13 years tradenames 10 15 years covenants compete 3 10 years impairment longlived assets review longlived assets including property equipment intangible assets impairment whenever events changes circumstances indicate carrying amount asset group may recoverable typical indicators asset may impaired include limited •a significant adverse change extent manner longlived asset used physical condition •a currentperiod operating cash flow loss combined history operating cash flow losses projection forecast demonstrates continuing losses associated use longlived asset •a current expectation likely longlived asset sold otherwise disposed significantly end previously estimated useful life recoverability assets held used measured comparison carrying amount assets future undiscounted net cash flows expected generated recoverability measurement estimating undiscounted cash flows assets held used done lowest possible levels identifiable cash flows assets considered impaired generally amount impairment recognized would equal amount carrying amount assets exceeds fair value assets would compute using discounted cash flow approach assets disposed recorded lower carrying amount fair value less costs sell estimating future cash flows attributable longlived assets requires significant judgment projections may vary cash flows eventually realized triggering events cause us record impairment charge year ended december 31 2020 revenue recognition recognize revenue operations sale products services license intellectual property rental instruments revenue contracts customers recognized upon transfer control promised products services customers amount reflects consideration expect receive exchange products services enter contracts include various combinations products services generally accounted distinct performance obligations revenue recognized net taxes collected customers sales tax value added tax etc subsequently remitted government authorities contracts customers often include promises transfer multiple products services customer determining whether products services considered distinct performance obligations accounted separately versus together may require significant judgment may impact timing revenue recognition revenue associated equipment requires factory installation recognized installation complete customer acceptance required occurred certain equipment requires installation due fact instruments operated clinicallaboratory environment installation services could result modification equipment order ensure instruments working according customer specifications subject validation tests upon completion installation arrangements require factory installation delivery equipment installation separate performance obligations recognize transaction price allocated equipment upon customer acceptance transfer control relation equipment occurred point customer ability direct use obtain substantially remaining benefits asset transaction price allocated installation services also recognized upon customer acceptance without completion installation services related customer acceptance customer cannot receive benefits service time revenue recognized provision recognized estimated product returns right considered variable consideration accordingly product revenues recognized transaction price reduced estimated amount product returns service revenues extended warranty contracts recognized ratably life service agreement standready performance obligation arrangements include combination products services transaction price allocated performance obligation based standalone selling prices method used determine standalone selling prices product service revenues based observable prices product services sold separately primary purpose invoicing terms provide customers simple predictable methods purchasing products services either provide receive financing customers record contract liabilities cash payments received due advance performance disclose value unsatisfied performance obligations contracts original expected length one year less payment terms vary type location customer products services offered term invoicing payment due significant reagent rental agreements diagnostic industry sales method provides use instrument consumables reagents customer per test basis agreements may also include maintenance instruments placed customer locations well initial training initially determine reagent rental arrangement contains lease commencement determined arrangement contains lease next must ascertain lease classification purposes applying appropriate accounting treatment operating salestype direct financing lease purposes determining lease term used performing lease classification test include noncancellable period lease together periods covered option extend lease customer reasonably certain exercise option periods covered option terminate lease customer reasonably certain exercise option periods covered option extend terminate lease exercise option controlled company reagent rental arrangements contain either option lessee extend andor cancel period contract enforceable short period therefore lease term limited noncancellable period generally arrangements contain option lessee purchase underlying asset valuation inventories value inventory lower actual cost purchase andor manufacture inventory current estimated net realizable value inventory review inventory quantities hand reduce cost basis excess obsolete inventory based primarily estimated forecast product demand production requirements quality efficacy potency raw materials review done end fiscal quarter addition industry characterized technological change frequent new product development product obsolescence could result increase amount obsolete inventory quantities hand estimates future product demand may prove inaccurate high may overstated carrying value inventory future inventory determined overvalued would required write value inventory market recognize costs cost goods sold time determination therefore although make efforts ensure accuracy forecasts future product demand perform procedures safeguard overall inventory quality significant unanticipated changes demand technological developments regulations storage conditions economic environmental factors affecting biological materials could significant impact value inventory reported results operations results operations sales gross margins expenses incorporating reference results operations sales gross margins expenses annual report form 10k fiscal year ended december 31 2019 following shows cost goods sold gross profit expense items net income percentage net sales net sales net sales year ended december 31 2020 255 billion compared 231 billion year ended december 31 2019 increase 101 excluding impact foreign currency year ended december 31 2020 sales increased approximately 103 compared year ended december 31 2019 currency neutral sales led growth asia pacific europe life science segment sales year ended december 31 2020 123 billion increase 390 compared year ended december 31 2019 currency neutral basis sales increased 386 compared year ended december 31 2019 currency neutral sales increase primarily driven growth gene expression droplet digital pcr process media product lines regions reported double digit increases currency neutral sales year ended december 31 2020 benefited product lines used diagnosis covid19 carryover related december 2019 cyberattack 32 million damages award related intellectual property litigation pertained sales infringing products occurred fiscal years 2015 2018 sales impacted negatively product lines due lab closures reduced capacity resulting covid19 pandemic clinical diagnostics segment sales year ended december 31 2020 131 billion decrease 76 compared year ended december 31 2019 currency neutral basis sales decreased 71 compared year ended december 31 2019 regions reported currency neutral sales decline sales decreased across product lines exception quality controls sales year ended december 31 2020 benefited carryover related december 2019 cyberattack impacted negatively due effect covid19 customers’ operations gross margin consolidated gross margins 565 year ended december 31 2020 compared 544 year ended december 31 2019 life science segment gross margins year ended december 31 2020 increased approximately 31 percentage points compared year ended december 31 2019 primarily due higher sales favorable product mix lower production costs partially offset 74 million cost sales benefit first quarter 2019 escrow release related acquisition 2011 increased customs duty recognized year ended december 31 2020 relating products shipped primarily prior years clinical diagnostics segment gross margins year ended december 31 2020 decreased slightly approximately 01 percentage points compared year ended december 31 2019 lower sales year ended december 31 2020 primarily offset lower service support activity result covid19 favorable product mix selling general administrative expense consolidated selling general administrative expenses sga decreased 8003 million 314 sales year ended december 31 2020 compared 8246 million 357 sales year ended december 31 2019 decreases sga primarily related lower travel costs marketing communication expenses 35 million mostly due impact covid19 partially offset higher employee costs thirdparty professional services costs research development expense research development rd expense increased 2266 million 89 sales year ended december 31 2020 compared 2027 million 88 sales year ended december 31 2019 life science segment rd expense increased year ended december 31 2020 compared year ended december 31 2019 primarily driven increased spending accelerate innovation key investment areas well expenses related newly acquired celsee business clinical diagnostics segment rd decreased year ended december 31 2020 year ended december 31 2019 primarily due lower spending result covid19 restrictions lower headcount related restructuring programs results operations nonoperating interest expense interest expense years ended december 31 2020 2019 219 million 234 million respectively foreign currency exchange gains losses foreign currency exchange gains losses consist primarily foreign currency transaction gains losses intercompany net receivables payables change fair value forward foreign exchange contracts used manage foreign currency exchange risk net foreign currency exchange losses years ended december 31 2020 2019 18 million 22 million respectively net foreign currency exchange losses attributable market volatility result estimating process inherent timing shipments payments intercompany debt cost hedging years affected economic hedging program employ hedge intercompany receivables payables denominated foreign currencies change fair market value equity securities change fair market value equity securities gains 450 billion year ended december 31 2020 compared 203 billion year ended december 31 2019 primarily resulting recognition holding gains position sartorius ag income net income net includes investment dividend income interest income cash equivalents shortterm investments longterm marketable securities income net year ended december 31 2020 decreased 245 million compared 261 million year ended december 31 2019 income net decreased primarily due lower investment income 60 million lower sartorius ag dividend income 68 million partially offset gain sale informatics division 117 million year ended december 31 2020 effective tax rate effective tax rates 224 222 years ended december 31 2020 2019 respectively effective tax rates years ended december 31 2020 2019 driven unrealized gain equity securities taxed approximately 22 well geographic mix earnings taxation foreign earnings effective tax rate may impacted future either favorably unfavorably many factors including limited changes geographic mix earnings changes statutory tax rates changes tax laws regulations tax audits settlements generation tax credits income tax returns routinely audited us federal state foreign tax authorities currently examination many tax authorities differing interpretations tax laws regulations result significant disputes may arise tax authorities involving issues timing amount deductions allocations income among various tax jurisdictions believe currently pending uncertain tax positions material adverse effect consolidated financial statements although adverse resolution one uncertain tax positions period may material impact results operations period record liabilities unrecognized tax benefits related uncertain tax positions believe resolution uncertain tax positions material adverse effect consolidated financial statements although adverse resolution one uncertain tax positions period may material impact results operations period december 31 2020 based expected outcome certain examinations result expiration statutes limitation certain jurisdictions believe within next twelve months reasonably possible previously unrecognized tax benefits could decrease approximately 172 million substantially amounts impact effective income tax rate comparison year ended december 31 2019 year ended december 31 2018 refer item 7 management’s discussion analysis financial condition results operations located annual report form 10k fiscal year ended december 31 2019 filed march 2 2020 discussion comparison fiscal year ended december 31 2019 fiscal year ended december 31 2018 earliest three fiscal years presented consolidated statements operations liquidity capital resources biorad operates conducts business globally primarily subsidiary companies established markets trade goods manufactured small number locations shipped local distribution facilities around world product mix diversified certain products compete largely product efficacy others compete price gross margins generally sufficient exceed normal operating costs funding research development new products well routine outflows capital expenditures interest taxes addition annual positive cash flow operating activities additional liquidity readily available via sale shortterm investments access 2000 million unsecured revolving credit facility credit agreement entered april 2019 lesser extent international lines credit borrowings credit agreement available revolving basis used make permitted acquisitions working capital general corporate purposes outstanding borrowings credit agreement december 31 2020 however 02 million utilized domestic standby letters credit reduced borrowing availability management believes availability together cash flow operations adequate meet current objectives operations research development capital additions manufacturing distribution plant equipment information technology systems acquisitions reasonable proportion existing total available capital december 2020 paid full 4250 million principal amount senior notes including accrued interest company might deemed investment company investment company act based market value position sartorius ag company may able access capital markets otherwise obtain additional financing determined company investment company inability obtain additional financing may negative impact companys ability make acquisitions nonroutine investments december 31 2020 available 9911 million cash equivalents shortterm investments approximately 37 held foreign subsidiaries believe holdings cash equivalents shortterm investments us foreign subsidiaries sufficient meet current longterm needs global operations amount funds held united states fluctuate due timing receipts payments ordinary course business due reasons acquisitions part ongoing liquidity assessments regularly monitor mix domestic foreign cash flows inflows outflows generally intention repatriate certain foreign earnings extent repatriations restricted local laws accounting rules substantial incremental costs demand products services could change dramatically shortterm previous years due impacts covid19 pandemic well due funding reimbursement constraints support levels government universities hospitals private industry including diagnostic laboratories need certain sovereign nations large annual deficits curtail spending international trade disputes increased regulation could lead slower growth even decline business sovereign nations either delaying payment goods services renegotiating debts could impact liquidity cash flows operations net cash provided operations 5753 million 4579 million years ended december 31 2020 2019 respectively net increase year ended december 31 2020 year ended december 31 2019 1174 million primarily due higher cash received customers result growth sales product lines used covid19 increases partially offset higher cash paid suppliers primarily supplies associated covid19 products cash paid employee related expenses salaries benefits lesser extent employee restructuring programs decrease also consisted higher income taxes paid lower investment income cash flows operations first quarter historically larger payments royalties fourth quarter sales commissions third parties annual employee bonuses expect pattern recur first quarter 2021 cash flows investing activities investing activities consisted primarily cash used acquisitions capital expenditures activity related purchases sales maturities marketable securities net cash used investing activities 603 million 2089 million years ended december 31 2020 2019 respectively decrease 1486 million primarily attributable 1595 million increase net proceeds maturities sales purchases marketable securities proceeds divestiture 122 million partially offset 173 million increase payments acquisitions cash flows financing activities financing activities consisted primarily cash used purchases treasury stock taxes paid vesting restricted stock units proceeds issuance common stock sharebased compensation net cash used financing activities 5230 million compared 228 million years ended december 31 2020 2019 respectively increase primarily attributable repayment 425 million principal amount senior notes 720 million purchase treasury stock treasury shares year ended december 31 2020 117423 shares class treasury stock aggregate total cost 385 million reissued fulfill grants employees restricted stock program upon reissuing class treasury stock loss 90 million incurred reissued lower price average cost reduced retained earnings 295 million reduced additional paidin capital year ended december 31 2019 117993 shares class treasury stock aggregate total cost 332 million reissued fulfill grants employees restricted stock program upon reissuing class treasury stock loss 84 million incurred reissued lower price average cost reduced retained earnings 249 million reduced additional paidin capital reissuance treasury stock years ended december 31 2020 2019 require cash payments receipts therefore affect liquidity year ended december 31 2020 repurchased 291941 shares class common stock 1000 million repurchase program compared repurchase 88486 shares common stock 280 million year ended december 31 2019 designated repurchased shares treasury stock year ended december 31 2019 19755 shares class treasury stock aggregate total cost 54 million reissued fulfill employee stock purchase plan purchases loss 16 million incurred upon reissuing class treasury stock reissued lower price average cost reduced retained earnings resulted net proceeds 38 million november 2017 board directors authorized new share repurchase program granting biorad authority repurchase discretionary basis 2500 million outstanding shares common stock “share repurchase program” july 2020 board directors authorized increasing share repurchase program allow company repurchase additional 2000 million stock december 31 2020 2731 million remained share repurchase program offbalance sheet arrangements offbalance sheet arrangements reasonably likely current future material effect financial condition results operations liquidity contractual obligations following summarizes certain contractual obligations december 31 2020 effect obligations expected cash flows future periods millions recent accounting pronouncements adopted see note 1 consolidated financial statements recent accounting pronouncements adopted item 7a nannannannanitem 7a quantitative qualitative disclosures market risk section headed financial risk management appearing pages 31 32 exhibit 131 incorporated herein reference item 8item 7a quantitative qualitative disclosures market risk section headed financial risk management appearing page 32 exhibit 131 incorporated herein reference item 8item 7a quantitative qualitative disclosures market risk section headed financial risk management appearing pages 4041 exhibit 131 incorporated herein reference item 8item 7a quantitative qualitative disclosures market risk section headed financial risk management appearing page 44 exhibit 131 incorporated herein reference item 8item 7a quantitative qualitative disclosures market risk section headed financial risk management appearing pages 45 46 exhibit 131 incorporated herein reference item 8item 7a quantitative qualitative disclosures market risk section headed financial risk management appearing pages 46 47 exhibit 131 incorporated herein reference item 8item 7a quantitative qualitative disclosures market risk section headed “financial risk management” appearing pages 43 44 exhibit 131 incorporated herein reference item 8item 7a quantitative qualitative disclosures market risk section headed “financial risk management” appearing pages 51 52 exhibit 131 incorporated herein reference item 8item 7a quantitative qualitative disclosures market risk section headed “financial risk management” appearing pages 46 47 exhibit 131 incorporated herein reference item 8item 7a quantitive qualitative disclosures market risk financial risk management main goal biorad’s financial risk management program reduce variance expected cash flows arising unexpected foreign exchange rate interest rate changes financial exposures managed operational means using various financial instruments including cash liquid resources borrowings forward spot foreign exchange contracts derivative financial instruments entered purpose trading speculation company policy requires derivative positions undertaken manage risks arising underlying business activities derivative transactions qualify hedge accounting treatment per general standards derivatives hedging derivative instruments used transactions valued fair value changes fair value included reported earnings foreign exchange risk operate conduct business many countries exposed movements foreign currency exchange rates face transactional currency exposures arise enter transactions denominated currencies us dollars additionally consolidated net equity impacted conversion net assets international subsidiaries functional currency us dollar foreign currency exposures managed centralized basis allows netting natural offsets lowers transaction costs net exposures possible seek manage foreign exchange risk part operational means including matching samecurrency revenues currency costs samecurrency assets samecurrency liabilities moreover weakening one currency often offset strengthening another currency foreign exchange risk also managed use forward foreign exchange contracts positions primarily euro swiss franc british sterling japanese yen majority forward contracts periods 90 days less record change value foreign currency receivables payables foreign exchange gain loss consolidated statements income along change fair market value forward exchange contract used economic hedge assets liabilities forward contract holdings yearend analyzed determine sensitivity fluctuations foreign currency exchange rates variables held constant market risk associated derivative holdings potential change fair value derivative positions arising adverse movement foreign exchange rates decline 10 quoted foreign exchange rates would result approximate netpresentvalue loss 33 million derivative position impact change exchange rates excludes offset derived change value underlying assets liabilities could reduce adverse effect significantly interest rate risk debt instruments biorad centrally manages shortterm cash surpluses shortfalls subsidiaries holdings variable rate debt instruments yearend analyzed determine sensitivity movements interest rates due relatively small amount shortterm variable rate debt outstanding would material impact earnings cash flows interest rates moved adversely 10 longterm debt consists primarily fixedrate instruments thus insulated interest rate changes december 31 2009 overall interest rate risk associated debt significant item 8item 7a quantitive qualitative disclosures market risk financial risk management main goal biorad’s financial risk management program reduce variance expected cash flows arising unexpected foreign exchange rate interest rate changes financial exposures managed operational means using various financial instruments including cash liquid resources borrowings forward spot foreign exchange contracts derivative financial instruments entered purpose trading speculation company policy requires derivative positions undertaken manage risks arising underlying business activities derivative transactions qualify hedge accounting treatment per general standards derivatives hedging derivative instruments used transactions valued fair value changes fair value included reported earnings foreign exchange risk operate conduct business many countries exposed movements foreign currency exchange rates face transactional currency exposures arise enter transactions denominated currencies us dollars additionally consolidated net equity impacted conversion net assets international subsidiaries functional currency us dollar foreign currency exposures managed centralized basis allows netting natural offsets lowers transaction costs net exposures possible seek manage foreign exchange risk part operational means including matching samecurrency revenues currency costs samecurrency assets samecurrency liabilities moreover weakening one currency often offset strengthening another currency foreign exchange risk also managed use forward foreign exchange contracts positions primarily euro swiss franc british sterling singapore dollar japanese yen majority forward contracts periods 90 days less record change value foreign currency receivables payables foreign exchange gain loss consolidated statements income along change fair market value forward exchange contract used economic hedge assets liabilities forward contract holdings yearend analyzed determine sensitivity fluctuations foreign currency exchange rates variables held constant market risk associated derivative holdings potential change fair value derivative positions arising adverse movement foreign exchange rates decline 10 quoted foreign exchange rates would result approximate netpresentvalue loss 49 million derivative position impact change exchange rates excludes offset derived change value underlying assets liabilities could reduce adverse effect significantly interest rate risk debt instruments biorad centrally manages shortterm cash surpluses shortfalls subsidiaries holdings variable rate debt instruments yearend analyzed determine sensitivity movements interest rates due relatively small amount shortterm variable rate debt outstanding would material impact earnings cash flows interest rates moved adversely 10 longterm debt consists primarily fixedrate instruments thus insulated interest rate changes december 31 2010 overall interest rate risk associated debt significant item 8item 7a quantitive qualitative disclosures market risk financial risk management main goal biorad’s financial risk management program reduce variance expected cash flows arising unexpected foreign exchange rate interest rate changes financial exposures managed operational means using various financial instruments including cash liquid resources borrowings forward spot foreign exchange contracts derivative financial instruments entered purpose trading speculation company policy requires derivative positions undertaken manage risks arising underlying business activities derivative transactions qualify hedge accounting treatment per general standards derivatives hedging derivative instruments used transactions valued fair value changes fair value included reported earnings foreign exchange risk operate conduct business many countries exposed movements foreign currency exchange rates face transactional currency exposures arise enter transactions denominated currencies us dollars additionally consolidated net equity impacted conversion net assets international subsidiaries functional currency us dollar foreign currency exposures managed centralized basis allows netting natural offsets lowers transaction costs net exposures possible seek manage foreign exchange risk part operational means including matching samecurrency revenues currency costs samecurrency assets samecurrency liabilities moreover weakening one currency often offset strengthening another currency foreign exchange risk also managed use forward foreign exchange contracts positions primarily euro swiss franc british sterling singapore dollar japanese yen majority forward contracts periods 90 days less record change value foreign currency receivables payables foreign exchange gain loss consolidated statements income along change fair market value forward exchange contract used economic hedge assets liabilities forward contract holdings yearend analyzed determine sensitivity fluctuations foreign currency exchange rates variables held constant market risk associated derivative holdings potential change fair value derivative positions arising adverse movement foreign exchange rates decline 10 quoted foreign exchange rates would result approximate netpresentvalue loss 35 million derivative position december 31 2011 impact change exchange rates excludes offset derived change value underlying assets liabilities could reduce adverse effect significantly interest rate risk debt instruments biorad centrally manages shortterm cash surpluses shortfalls subsidiaries holdings variable rate debt instruments yearend analyzed determine sensitivity movements interest rates due relatively small amount shortterm variable rate debt outstanding would material impact earnings cash flows interest rates moved adversely 10 longterm debt consists primarily fixedrate instruments thus insulated interest rate changes december 31 2011 overall interest rate risk associated debt significant item 8item 7a quantitive qualitative disclosures market risk financial risk management main goal biorad’s financial risk management program reduce variance expected cash flows arising unexpected foreign exchange rate interest rate changes financial exposures managed operational means using various financial instruments including cash liquid resources borrowings forward spot foreign exchange contracts derivative financial instruments entered purpose trading speculation company policy requires derivative positions undertaken manage risks arising underlying business activities derivative transactions qualify hedge accounting treatment derivative instruments used transactions valued fair value changes fair value included reported earnings foreign exchange risk operate conduct business many countries exposed movements foreign currency exchange rates face transactional currency exposures arise enter transactions denominated currencies us dollars additionally consolidated net equity impacted conversion net assets international subsidiaries functional currency us dollar foreign currency exposures managed centralized basis allows netting natural offsets lowers transaction costs net exposures possible seek manage foreign exchange risk part operational means including matching samecurrency revenues samecurrency costs samecurrency assets samecurrency liabilities moreover weakening one currency often offset strengthening another currency foreign exchange risk also managed use forward foreign exchange contracts positions primarily euro swiss franc british sterling singapore dollar brazilian real japanese yen majority forward contracts periods 90 days less record change value foreign currency receivables payables foreign exchange gain loss consolidated statements income along change fair market value forward exchange contract used economic hedge assets liabilities forward contract holdings yearend analyzed determine sensitivity fluctuations foreign currency exchange rates variables held constant market risk associated derivative holdings potential change fair value derivative positions arising adverse movement foreign exchange rates decline 10 quoted foreign exchange rates would result approximate netpresentvalue loss 42 million derivative position december 31 2012 impact change exchange rates excludes offset derived change value underlying assets liabilities could reduce adverse effect significantly interest rate risk debt instruments biorad centrally manages shortterm cash surpluses shortfalls subsidiaries holdings variable rate debt instruments yearend analyzed determine sensitivity movements interest rates due relatively small amount shortterm variable rate debt outstanding would material impact earnings cash flows interest rates moved adversely 10 longterm debt consists primarily fixedrate instruments thus insulated interest rate changes december 31 2012 overall interest rate risk associated debt significant item 8item 7a quantitive qualitative disclosures market risk financial risk management main goal biorad’s financial risk management program reduce variance expected cash flows arising unexpected foreign exchange rate interest rate changes financial exposures managed operational means using various financial instruments including cash liquid resources borrowings forward spot foreign exchange contracts derivative financial instruments entered purpose trading speculation company policy requires derivative positions undertaken manage risks arising underlying business activities derivative transactions qualify hedge accounting treatment derivative instruments used transactions valued fair value changes fair value included reported earnings foreign exchange risk operate conduct business many countries exposed movements foreign currency exchange rates face transactional currency exposures arise enter transactions denominated currencies us dollars additionally consolidated net equity impacted conversion net assets international subsidiaries functional currency us dollar foreign currency exposures managed centralized basis allows netting natural offsets lowers transaction costs net exposures possible seek manage foreign exchange risk part operational means including matching samecurrency revenues samecurrency costs samecurrency assets samecurrency liabilities moreover weakening one currency often offset strengthening another currency foreign exchange risk also managed use forward foreign exchange contracts positions primarily euro swiss franc british sterling singapore dollar brazilian real japanese yen majority forward contracts periods 90 days less record change value foreign currency receivables payables foreign exchange gain loss consolidated statements income along change fair market value forward exchange contract used economic hedge assets liabilities forward contract holdings yearend analyzed determine sensitivity fluctuations foreign currency exchange rates variables held constant market risk associated derivative holdings potential change fair value derivative positions arising adverse movement foreign exchange rates decline 10 quoted foreign exchange rates would result approximate netpresentvalue loss 46 million derivative position december 31 2013 impact change exchange rates excludes offset derived change value underlying assets liabilities could reduce adverse effect significantly interest rate risk debt instruments biorad centrally manages shortterm cash surpluses shortfalls subsidiaries holdings variable rate debt instruments yearend analyzed determine sensitivity movements interest rates due relatively small amount shortterm variable rate debt outstanding would material impact earnings cash flows interest rates moved adversely 10 longterm debt consists primarily fixedrate instruments thus insulated interest rate changes december 31 2013 overall interest rate risk associated debt significant item 8item 7a quantitive qualitative disclosures market risk financial risk management main goal biorad’s financial risk management program reduce variance expected cash flows arising unexpected foreign exchange rate interest rate changes financial exposures managed operational means using various financial instruments including cash liquid resources borrowings forward spot foreign exchange contracts derivative financial instruments entered purpose trading speculation company policy requires derivative positions undertaken manage risks arising underlying business activities derivative transactions qualify hedge accounting treatment derivative instruments used transactions valued fair value changes fair value included reported earnings foreign exchange risk operate conduct business many countries exposed movements foreign currency exchange rates face transactional currency exposures arise enter transactions denominated currencies us dollars additionally consolidated net equity impacted conversion net assets international subsidiaries functional currency us dollar foreign currency exposures managed centralized basis allows netting natural offsets lowers transaction costs net exposures possible seek manage foreign exchange risk part operational means including matching samecurrency revenues samecurrency costs samecurrency assets samecurrency liabilities moreover weakening one currency often offset strengthening another currency foreign exchange risk also managed use forward foreign exchange contracts positions primarily euro swiss franc british sterling singapore dollar brazilian real japanese yen majority forward contracts periods 90 days less record change value foreign currency receivables payables foreign exchange gain loss consolidated statements income along change fair market value forward exchange contract used economic hedge assets liabilities forward contract holdings yearend analyzed determine sensitivity fluctuations foreign currency exchange rates variables held constant market risk associated derivative holdings potential change fair value derivative positions arising adverse movement foreign exchange rates decline 10 quoted foreign exchange rates would result approximate netpresentvalue loss 32 million derivative position december 31 2014 impact change exchange rates excludes offset derived change value underlying assets liabilities could reduce adverse effect significantly interest rate risk debt instruments biorad centrally manages shortterm cash surpluses shortfalls subsidiaries holdings variable rate debt instruments yearend analyzed determine sensitivity movements interest rates due relatively small amount shortterm variable rate debt outstanding would material impact earnings cash flows interest rates moved adversely 10 longterm debt consists primarily fixedrate instruments thus insulated interest rate changes december 31 2014 overall interest rate risk associated debt significant item 8item 7a quantitive qualitative disclosures market risk financial risk management main goal biorad’s financial risk management program reduce variance expected cash flows arising unexpected foreign exchange rate interest rate changes financial exposures managed operational means using various financial instruments including cash liquid resources borrowings forward spot foreign exchange contracts derivative financial instruments entered purpose trading speculation company policy requires derivative positions undertaken manage risks arising underlying business activities derivative transactions qualify hedge accounting treatment derivative instruments used transactions valued fair value changes fair value included reported earnings foreign exchange risk operate conduct business many countries exposed movements foreign currency exchange rates face transactional currency exposures arise enter transactions denominated currencies us dollars additionally consolidated net equity impacted conversion net assets international subsidiaries functional currency us dollar foreign currency exposures managed centralized basis allows netting natural offsets lowers transaction costs net exposures possible seek manage foreign exchange risk part operational means including matching samecurrency revenues samecurrency costs samecurrency assets samecurrency liabilities moreover weakening one currency often offset strengthening another currency foreign exchange risk also managed use forward foreign exchange contracts positions primarily euro swiss franc british sterling singapore dollar brazilian real japanese yen majority forward contracts periods 90 days less record change value foreign currency receivables payables foreign exchange gain loss consolidated statements income along change fair market value forward exchange contract used economic hedge assets liabilities forward contract holdings yearend analyzed determine sensitivity fluctuations foreign currency exchange rates variables held constant market risk associated derivative holdings potential change fair value derivative positions arising adverse movement foreign exchange rates decline 10 quoted foreign exchange rates would result approximate netpresentvalue loss 37 million derivative position december 31 2017 impact change exchange rates excludes offset derived change value underlying assets liabilities could reduce adverse effect significantly interest rate risk debt instruments biorad centrally manages shortterm cash surpluses shortfalls subsidiaries holdings variable rate debt instruments yearend analyzed determine sensitivity movements interest rates due relatively small amount shortterm variable rate debt outstanding would material impact earnings cash flows interest rates moved adversely 10 longterm debt consists primarily fixedrate instruments thus insulated interest rate changes december 31 2017 overall interest rate risk associated debt significant item 8item 7a quantitive qualitative disclosures market risk financial risk management main goal biorad’s financial risk management program reduce variance expected cash flows arising unexpected foreign exchange rate interest rate changes financial exposures managed operational means using various financial instruments including cash liquid resources borrowings forward spot foreign exchange contracts derivative financial instruments entered purpose trading speculation company policy requires derivative positions undertaken manage risks arising underlying business activities derivative transactions qualify hedge accounting treatment derivative instruments used transactions valued fair value changes fair value included reported earnings foreign exchange risk operate conduct business many countries exposed movements foreign currency exchange rates face transactional currency exposures arise enter transactions denominated currencies us dollars additionally consolidated net equity impacted conversion net assets international subsidiaries functional currency us dollar foreign currency exposures managed centralized basis allows netting natural offsets lowers transaction costs net exposures possible seek manage foreign exchange risk part operational means including matching samecurrency revenues samecurrency costs samecurrency assets samecurrency liabilities moreover weakening one currency often offset strengthening another currency foreign exchange risk also managed use forward foreign exchange contracts positions primarily euro swiss franc japanese yen chinese yuan british sterling majority forward contracts periods 90 days less record change value foreign currency receivables payables foreign exchange gain loss consolidated statements income along change fair market value forward exchange contract used economic hedge assets liabilities forward contract holdings yearend analyzed determine sensitivity fluctuations foreign currency exchange rates variables held constant market risk associated derivative holdings potential change fair value derivative positions arising adverse movement foreign exchange rates decline 10 quoted foreign exchange rates would result approximate netpresentvalue loss 25 million derivative position december 31 2019 impact change exchange rates excludes offset derived change value underlying assets liabilities could reduce adverse effect significantly interest rate risk debt instruments biorad centrally manages shortterm cash surpluses shortfalls subsidiaries holdings variable rate debt instruments yearend analyzed determine sensitivity movements interest rates due relatively small amount shortterm variable rate debt outstanding would material impact earnings cash flows interest rates moved adversely 10 longterm debt consists primarily fixedrate instruments thus insulated interest rate changes december 31 2019 overall interest rate risk associated debt significant item 8item 7a quantitative qualitative disclosures market risk section headed financial risk management appearing page 36 exhibit 131 incorporated herein reference item 8item 7a quantitive qualitative disclosures market risk financial risk management main goal biorad’s financial risk management program reduce variance expected cash flows arising unexpected foreign exchange rate interest rate changes financial exposures managed operational means using various financial instruments including cash liquid resources borrowings forward spot foreign exchange contracts derivative financial instruments entered purpose trading speculation company policy requires derivative positions undertaken manage risks arising underlying business activities derivative transactions qualify hedge accounting treatment derivative instruments used transactions valued fair value changes fair value included reported earnings foreign exchange risk operate conduct business many countries exposed movements foreign currency exchange rates face transactional currency exposures arise enter transactions denominated currencies us dollars additionally consolidated net equity impacted conversion net assets international subsidiaries functional currency us dollar foreign currency exposures managed centralized basis allows netting natural offsets lowers transaction costs net exposures possible seek manage foreign exchange risk part operational means including matching samecurrency revenues samecurrency costs samecurrency assets samecurrency liabilities moreover weakening one currency often offset strengthening another currency foreign exchange risk also managed use forward foreign exchange contracts positions primarily euro swiss franc japanese yen chinese yuan british sterling majority forward contracts periods 90 days less record change value foreign currency receivables payables foreign exchange gain loss consolidated statements income along change fair market value forward exchange contract used economic hedge assets liabilities forward contract holdings yearend analyzed determine sensitivity fluctuations foreign currency exchange rates variables held constant market risk associated derivative holdings potential change fair value derivative positions arising adverse movement foreign exchange rates decline 10 quoted foreign exchange rates would result approximate netpresentvalue loss 26 million derivative position december 31 2018 impact change exchange rates excludes offset derived change value underlying assets liabilities could reduce adverse effect significantly interest rate risk debt instruments biorad centrally manages shortterm cash surpluses shortfalls subsidiaries holdings variable rate debt instruments yearend analyzed determine sensitivity movements interest rates due relatively small amount shortterm variable rate debt outstanding would material impact earnings cash flows interest rates moved adversely 10 longterm debt consists primarily fixedrate instruments thus insulated interest rate changes december 31 2018 overall interest rate risk associated debt significant item 8item 7a quantitative qualitative disclosures market risk section headed financial risk management appearing pages 34 35 exhibit 131 incorporated herein reference item 8item 7a quantitive qualitative disclosures market risk financial risk management main goal biorad’s financial risk management program reduce variance expected cash flows arising unexpected foreign exchange rate interest rate changes financial exposures managed operational means using various financial instruments including cash liquid resources borrowings forward spot foreign exchange contracts derivative financial instruments entered purpose trading speculation company policy requires derivative positions undertaken manage risks arising underlying business activities derivative transactions qualify hedge accounting treatment derivative instruments used transactions valued fair value changes fair value included reported earnings foreign exchange risk operate conduct business many countries exposed movements foreign currency exchange rates face transactional currency exposures arise enter transactions denominated currencies us dollars additionally consolidated net equity impacted conversion net assets international subsidiaries functional currency us dollar foreign currency exposures managed centralized basis allows netting natural offsets lowers transaction costs net exposures possible seek manage foreign exchange risk part operational means including matching samecurrency revenues samecurrency costs samecurrency assets samecurrency liabilities moreover weakening one currency often offset strengthening another currency foreign exchange risk also managed use forward foreign exchange contracts positions primarily euro swiss franc british sterling singapore dollar brazilian real japanese yen majority forward contracts periods 90 days less record change value foreign currency receivables payables foreign exchange gain loss consolidated statements income along change fair market value forward exchange contract used economic hedge assets liabilities forward contract holdings yearend analyzed determine sensitivity fluctuations foreign currency exchange rates variables held constant market risk associated derivative holdings potential change fair value derivative positions arising adverse movement foreign exchange rates decline 10 quoted foreign exchange rates would result approximate netpresentvalue loss 27 million derivative position december 31 2015 impact change exchange rates excludes offset derived change value underlying assets liabilities could reduce adverse effect significantly interest rate risk debt instruments biorad centrally manages shortterm cash surpluses shortfalls subsidiaries holdings variable rate debt instruments yearend analyzed determine sensitivity movements interest rates due relatively small amount shortterm variable rate debt outstanding would material impact earnings cash flows interest rates moved adversely 10 longterm debt consists primarily fixedrate instruments thus insulated interest rate changes december 31 2015 overall interest rate risk associated debt significant item 8item 7a quantitive qualitative disclosures market risk financial risk management main goal biorad’s financial risk management program reduce variance expected cash flows arising unexpected foreign exchange rate interest rate changes financial exposures managed operational means using various financial instruments including cash liquid resources borrowings forward spot foreign exchange contracts derivative financial instruments entered purpose trading speculation company policy requires derivative positions undertaken manage risks arising underlying business activities derivative transactions qualify hedge accounting treatment derivative instruments used transactions valued fair value changes fair value included reported earnings foreign exchange risk operate conduct business many countries exposed movements foreign currency exchange rates face transactional currency exposures arise enter transactions denominated currencies us dollars additionally consolidated net equity impacted conversion net assets international subsidiaries functional currency us dollar foreign currency exposures managed centralized basis allows netting natural offsets lowers transaction costs net exposures possible seek manage foreign exchange risk part operational means including matching samecurrency revenues samecurrency costs samecurrency assets samecurrency liabilities moreover weakening one currency often offset strengthening another currency foreign exchange risk also managed use forward foreign exchange contracts positions primarily euro swiss franc british sterling singapore dollar brazilian real japanese yen majority forward contracts periods 90 days less record change value foreign currency receivables payables foreign exchange gain loss consolidated statements income along change fair market value forward exchange contract used economic hedge assets liabilities forward contract holdings yearend analyzed determine sensitivity fluctuations foreign currency exchange rates variables held constant market risk associated derivative holdings potential change fair value derivative positions arising adverse movement foreign exchange rates decline 10 quoted foreign exchange rates would result approximate netpresentvalue loss 30 million derivative position december 31 2016 impact change exchange rates excludes offset derived change value underlying assets liabilities could reduce adverse effect significantly interest rate risk debt instruments biorad centrally manages shortterm cash surpluses shortfalls subsidiaries holdings variable rate debt instruments yearend analyzed determine sensitivity movements interest rates due relatively small amount shortterm variable rate debt outstanding would material impact earnings cash flows interest rates moved adversely 10 longterm debt consists primarily fixedrate instruments thus insulated interest rate changes december 31 2016 overall interest rate risk associated debt significant item 8item 7a quantitative qualitative disclosures market risk financial risk management main goal biorad’s financial risk management program reduce variance expected cash flows arising unexpected foreign exchange rate interest rate changes financial exposures managed operational means using various financial instruments including cash liquid resources borrowings forward spot foreign exchange contracts derivative financial instruments entered purpose trading speculation company policy requires derivative positions undertaken manage risks arising underlying business activities derivative transactions qualify hedge accounting treatment derivative instruments used transactions valued fair value changes fair value included reported earnings foreign exchange risk operate conduct business many countries exposed movements foreign currency exchange rates face transactional currency exposures arise enter transactions denominated currencies us dollars additionally consolidated net equity impacted conversion net assets international subsidiaries functional currency us dollar foreign currency exposures managed centralized basis allows netting natural offsets lowers transaction costs net exposures possible seek manage foreign exchange risk part operational means including matching samecurrency revenues samecurrency costs samecurrency assets samecurrency liabilities moreover weakening one currency often offset strengthening another currency foreign exchange risk also managed use forward foreign exchange contracts positions primarily euro swiss franc japanese yen chinese yuan british sterling majority forward contracts periods 90 days less record change value foreign currency receivables payables foreign exchange gain loss consolidated statements income along change fair market value forward exchange contract used economic hedge assets liabilities forward contract holdings yearend analyzed determine sensitivity fluctuations foreign currency exchange rates variables held constant market risk associated derivative holdings potential change fair value derivative positions arising adverse movement foreign exchange rates decline 10 quoted foreign exchange rates would result approximate netpresentvalue loss 18 million derivative position december 31 2020 impact change exchange rates excludes offset derived change value underlying assets liabilities could reduce adverse effect significantly interest rate risk debt instruments biorad centrally manages shortterm cash surpluses shortfalls subsidiaries holdings variable rate debt instruments yearend analyzed determine sensitivity movements interest rates due relatively small amount shortterm variable rate debt instruments outstanding would material impact earnings cash flows interest rates moved adversely 10 holdings longterm debt instruments consist primarily fixedrate instruments thus insulated interest rate changes december 31 2020 overall interest rate risk associated debt instruments significant item 8 item 8 financial statements supplementary data report independent public accountants consolidated financial statements notes thereto appearing pages 2 25 exhibit 131 incorporated herein reference item 9item 8 financial statements supplementary data report independent public accountants consolidated financial statements notes thereto appearing pages 2 24 exhibit 131 incorporated herein reference item 9item 8 financial statements supplementary data report independent public accountants consolidated financial statements notes thereto appearing pages 2 26 exhibit 131 incorporated herein reference item 9item 8 financial statements supplementary data report independent public accountants consolidated financial statements notes thereto appearing pages 2 27 exhibit 131 incorporated herein reference item 9item 8 financial statements supplementary data report independent public accountants consolidated financial statements notes thereto appearing pages 2 24 exhibit 131 incorporated herein reference item 9item 8 financial statements supplementary data consolidated financial statements notes thereto report independent public accountants appearing pages 1 33 exhibit 131 incorporated herein reference item 9item 8 financial statements supplementary data consolidated financial statements notes thereto reports independent public accountants appearing pages 2 32 exhibit 131 incorporated herein reference item 9item 8 financial statements supplementary data consolidated financial statements notes thereto reports independent public accountants appearing pages 2 30 exhibit 131 incorporated herein reference item 9item 8 financial statements supplementary data consolidated financial statements notes thereto report independent registered public accounting firm appearing pages 2 34 exhibit 131 incorporated herein reference item 9item 8 financial statements supplementary data consolidated financial statements notes thereto report independent registered public accounting firm appearing pages 2 34 exhibit 131 incorporated herein reference item 9item 8 financial statements supplementary data consolidated financial statements notes thereto report independent registered public accounting firm appearing pages 1 32 exhibit 131 incorporated herein reference item 9item 8 financial statements supplementary data consolidated financial statements notes thereto report independent registered public accounting firm appearing pages 2 39 exhibit 131 incorporated herein reference item 9item 8 financial statements supplementary data consolidated financial statements notes thereto report independent registered public accounting firm appearing pages 2 35 exhibit 131 incorporated herein reference item 9item 8 financial statements supplementary data report ernst young llp independent registered public accounting firm board directors stockholders biorad laboratories inc audited accompanying consolidated balance sheet biorad laboratories inc december 31 2009 related consolidated statements income stockholders equity comprehensive income cash flows year ended audit also included financial statement schedules listed index item 15a2 financial statements schedules responsibility companys management responsibility express opinion financial statements schedules based audit conducted audit accordance standards public company accounting oversight board united states standards require plan perform audit obtain reasonable assurance whether financial statements free material misstatement audit includes examining test basis evidence supporting amounts disclosures financial statements audit also includes assessing accounting principles used significant estimates made management well evaluating overall financial statement presentation believe audit provides reasonable basis opinion financial statements referred present fairly material respects consolidated financial position biorad laboratories december 31 2009 consolidated results operations cash flows year ended conformity us generally accepted accounting principles also opinion related financial statement schedules considered relation basic financial statements taken whole presents fairly material respects information set forth therein discussed note 1 consolidated financial statements accompanying consolidated financial statements retrospectively adjusted adoption new accounting standards noncontrolling interests granted sharebased payment transactions also audited accordance standards public company accounting oversight board united states effectiveness biorad laboratories inc’s internal control financial reporting december 31 2009 based criteria established internal controlintegrated framework issued committee sponsoring organizations treadway commission report dated february 26 2010 expressed unqualified opinion thereon ernst young llp palo alto california february 26 2010 report deloitte touche llp independent registered public accounting firm board directors stockholders biorad laboratories inc hercules california audited accompanying consolidated balance sheets biorad laboratories inc subsidiaries “company” december 31 2008 related consolidated statements income stockholders equity cash flows two years period ended december 31 2008 audits also included financial statement schedule listed item 15a2 financial statements financial statement schedule responsibility companys management responsibility express opinion financial statements financial statement schedule based audits conducted audits accordance standards public company accounting oversight board united states standards require plan perform audit obtain reasonable assurance whether financial statements free material misstatement audit includes examining test basis evidence supporting amounts disclosures financial statements audit also includes assessing accounting principles used significant estimates made management well evaluating overall financial statement presentation believe audits provide reasonable basis opinion consolidated financial statements present fairly material respects financial position biorad laboratories inc subsidiaries december 31 2008 results operations cash flows two years period ended december 31 2008 conformity accounting principles generally accepted united states america also opinion financial statement schedule considered relation basic consolidated financial statements taken whole present fairly material respects information set forth therein discussed note 1 consolidated financial statements accompanying consolidated financial statements retrospectively adjusted adoption new accounting standards noncontrolling interests granted sharebased payment transactions deloitte touche llp san francisco california february 25 2009 may 18 2009 effects retrospective adoption new accounting standards described note 1 financial statements accompanying notes integral part consolidated financial statements accompanying notes integral part consolidated financial statements biorad laboratories inc consolidated statements cash flows accompanying notes integral part consolidated financial statements biorad laboratories inc consolidated statements changes stockholders’ equity comprehensive income thousands accompanying notes integral part consolidated financial statements calculated using specific identification method biorad laboratories inc notes consolidated financial statements 1 significant accounting policies basis presentation consolidated financial statements include accounts biorad laboratories inc wholly majority owned subsidiaries referred report “biorad” “we” “us” “our” elimination intercompany balances transactions preparation financial statements conformity us generally accepted accounting principles requires management make estimates assumptions affect amounts reported financial statements accompanying notes actual results could differ estimates evaluate subsequent events evidence provide conditions existing date balance sheet well conditions arose balance sheet date financial statements issued effects conditions existed balance sheet date recognized financial statements events conditions arising balance sheet date financial statements issued evaluated determine disclosure required keep financial statements misleading extent events conditions exist disclosures made regarding nature events estimated financial effects events conditions purposes preparing accompanying consolidated financial statements following notes financial statements evaluated subsequent events date financial statements issued cash equivalents cash equivalents consist cash highly liquid investments original maturities three months less readily convertible cash equivalents stated cost approximates fair value availableforsale investments availableforsale investments consist corporate obligations municipal securities asset backed securities us agencies marketable equity securities management classifies investments time purchase reevaluates classification balance sheet date investments maturities beyond one year may classified shortterm based liquid nature marketable securities represent investment cash available current operations availableforsale investments reported fair value based quoted market prices observable market data unrealized gains losses reported component comprehensive income net related tax effect unrealized losses charged income decline fair value individual security determined otherthan temporary review availableforsale investments otherthantemporary losses quarterly basis realized gains losses otherthantemporary impairments investments included income expense net see note 9 concentration credit risk financial instruments potentially subject us concentration credit risk consist primarily cash equivalents investments foreign exchange contracts trade accounts receivable cash equivalents investments placed various highly rated major financial institutions located different geographic regions biorad sustained significant losses instruments held financial institutions forward contracts used managing foreign currency exposures element risk counterparties may unable meet terms agreements attempt minimize risk limiting counterparties diverse group highlyrated domestic international financial institutions event nonperformance counterparties carrying values financial instruments represent maximum amount loss would incurred fiscal yearend however expect record losses result counterparty default perform credit evaluation procedures related trade receivables exception certain developing countries generally require collateral result increased risk developing countries biorad sales subject collateral letters credit customers credit risk trade accounts receivable generally limited due large number customers dispersion across many geographic areas however significant amount trade receivables national healthcare systems coun­tries within european economic community currently anticipate credit risk associated receivables accounts receivable maintain allowance doubtful accounts estimated losses resulting inability customers make required payments amount allowance determined analyzing known uncollectible accounts aged receivables economic conditions customers’ country industry historical losses customers’ creditworthiness amounts later determined specifically identified uncollectible charged written reserve inventory inventories valued lower actual cost market net realizable value include material labor overhead costs firstin firstout fifo method used remove inventory property plant equipment property plant equipment carried cost less accumulated depreciation amortization included property plant equipment buildings equipment acquired capital lease arrangements reagent rental equipment property plant equipment assessed impairment annually whenever events changes circumstances indicate carrying amount may recoverable depreciation computed straightline basis estimated useful lives assets buildings leasehold improvements amortized 1530 years term leases life improvements whichever shorter exception reagent rental equipment amortized 15 year period equipment depreciated 312 years proceeds sale property plant equipment 12 million 09 million 02 million 2009 2008 2007 respectively included capital expenditures net consolidated statements cash flows goodwill purchased intangible assets goodwill represents excess cost fair value net tangible identifiable intangible assets acquired businesses goodwill assessed impairment applying fair value based tests annually whenever events changes circumstances indicate carrying amount may recoverable perform impairment tests goodwill reporting unit level one level reporting segments reporting units identified components discrete financial information available regularly reviewed management goodwill amounts assigned reporting units time acquisition goodwill impairment test consists twostep process first step goodwill impairment test used identify potential impairment compares fair value reporting unit carrying value including goodwill use discounted cash flow models determine fair value reporting unit fair value reporting unit exceeds carrying amount goodwill reporting unit considered impaired second step impairment test required second step required compares implied fair value reporting unit goodwill carrying amount goodwill fair value reporting unit allocated assets liabilities unit including unrecognized intangible assets reporting unit acquired business combination fair value reporting unit price paid acquire reporting unit carrying amount reporting unit’s goodwill exceeds implied fair value impairment charge recognized amount equal excess intangible assets assessed impairment applying fair value based tests annually whenever events changes circumstances indicate carrying amount may recoverable impairment expense calculated excess carrying value asset fair value fair value estimated based discounted future cash flows impairment charges related goodwill intangible assets 38 million 288 million recorded 2009 2008 respectively see note 4 impairment losses recorded 2007 longlived assets purposes recognition measurement impairment loss longlived asset assets grouped assets liabilities lowest level identifiable cash flows largely independent cash flows assets liabilities assess impairment longlived assets including identifiable intangible assets annually whenever events changes circumstances indicate carrying value may recoverable factors consider important could trigger impairment review include · significant underperformance relative expected historical projected future operating results · significant changes manner use longlived assets intangible assets strategy overall business · current expectation likely longlived asset sold otherwise disposed loss end previously estimated useful life · significant negative industry legal regulatory economic trends management determines carrying value longlived assets may recoverable based upon existence one indicators impairment test impairment based projected undiscounted cash flow method projected future operating results cash flows asset group used establish fair value used evaluating carrying value longlived intangible assets estimate future cash flows longlived assets using current longterm financial forecasts carrying amount longlived asset recoverable exceeds sum undiscounted cash flows expected result use eventual disposition asset case impairment loss would recognized impairment loss recognized amount carrying amount exceeds fair value income taxes account income taxes asset liability method requires recognition deferred tax assets liabilities expected future tax consequences events included financial statements method deferred tax assets liabilities determined based differences financial statements tax basis assets liabilities using enacted tax rates effect year differences expected reverse effect change tax rates deferred tax assets liabilities recognized income period includes enactment date record net deferred tax assets extent believe assets likely realized making determination consider available positive negative evidence including scheduled reversals deferred tax liabilities projected future taxable income tax planning strategies recent financial operations extent determine able realize deferred income tax assets future excess net recorded amount make adjustment valuation allowance may reduce provision income taxes recognize tax benefit uncertain tax position likely tax position sustained examination taxing authorities based technical merits position tax benefits recognized financial statements particular tax position measured based largest benefit greater 50 likelihood realized upon settlement amount unrecognized tax benefits adjusted appropriate changes facts circumstances significant amendments existing tax law new regulations interpretations taxing authorities new information obtained tax examination resolution examination recognize accrued interest penalties appropriate related unrecognized tax benefits income tax expense revenue recognition revenue recognized pervasive evidence arrangement exists price buyer fixed determinable collectibility reasonably assured title passed customer product delivered absent specific contractual specifications equipment requires factory installation recorded installation complete customer acceptance required contractually occurred time related revenue recognized provision recognized estimated product returns reagent agreements diagnostic industry sales method provides use instrument customer exclusively purchases company’s reagents use instrument evaluated reagent agreements account contracts terms guidance regard accounting revenue arrangements multiple deliverables revenues earn reagent agreements recognized reagent delivered used customer service revenues extended warranty contracts recognized ratably life service agreement services performed contract shipping handling classify freight costs billed customers net sales related freight costs included cost goods sold warranty warrant certain equipment defects design materials workmanship generally period one year upon delivery equipment establish part cost goods sold provision expected costs warranty based historical experience specific warranty terms customer feedback review performed quarterly basis assess adequacy warranty accrual components warranty accrual included current liabilities longterm liabilities follows millions research development internal research development costs expensed incurred thirdparty research development costs expensed contracted work performed purchased inprocess research development costs january 1 2009 expensed time purchase beginning january 1 2009 new accounting standard purchased inprocess research development costs capitalized intangible asset foreign currency balance sheet accounts international subsidiaries translated current exchange rates end accounting period income statement items translated average exchange rates period resulting translation adjustments recorded separate component stockholders’ equity foreign currency transaction gains losses included foreign exchange losses consolidated statements income transaction gains losses result primarily fluctuations exchange rates intercompany receivables payables denominated currencies functional currency subsidiary recorded transaction forward foreign exchange contracts part distributing products regularly enter intercompany transactions enter forward foreign exchange contracts manage foreign exchange risk future movements exchange rates affect foreign currency denominated intercompany receivables payables use derivative financial instruments speculative trading purposes seek hedge accounting treatment contracts result contracts generally maturity dates 90 days less related primarily currencies industrial countries recorded asset liability measured fair value balance sheet date resulting gains losses offset exchange gains losses related receivables payables recorded foreign exchange losses consolidated statements income cash flows related contracts classified cash flows investing activities consolidated statements cash flows noncontrolling interests 100 voting stock consolidated subsidiaries remaining shares held third parties represent noncontrolling minority interest subsidiaries consolidated statements present full amount assets liabilities income expenses consolidated subsidiaries offsetting amounts shown noncontrolling interests portion items attributable us sharebased compensation plans stockbased compensation expense sharebased payment awards granted determined based grantdate fair value recognize compensation costs net estimated forfeitures requisite service period award generally vesting term sharebased payment awards estimated forfeiture rate based historical experience plans described fully note 8 earnings per share effective january 1 2009 adopted new guidance specified unvested sharebased payment awards contain nonforfeitable rights dividends dividend equivalents whether paid unpaid participating securities shall included computation earnings per share eps pursuant twoclass method unvested restricted shares qualify participating securities included shares computation eps basic earnings per share computed dividing net income loss attributable biorad weighted average number common shares outstanding period diluted earnings per share takes account effect dilutive instruments stock options restricted stock uses average share price period determining number potential common shares added weighted average number shares outstanding potential common shares excluded diluted earnings per share calculation effect would antidilutive weighted average number common shares outstanding used calculate basic diluted earnings per share antidilutive shares follows thousands fair value financial instruments certain financial instruments including cash equivalents shortterm investments accounts receivable marketable securities notes payable accounts payable foreign exchange contracts carrying amounts approximate fair value estimated fair value financial instruments based exchange price would received asset paid transfer liability exit price using available market information appropriate valuation methodologies principal advantageous market asset liability orderly transaction market participants estimates necessarily indicative amounts could realized current market exchange considerable judgment required interpreting market data used develop estimates fair value use different market assumptions estimation techniques could material effect estimated fair value see note 3 recent financial accounting standards january 2010 financial accounting standards board fasb issued standard improve disclosures fair value measurements specifically standard requires entities disclose amounts significant transfers level 1 level 2 fair value hierarchy reasons transfers reasons transfers level 3 information reconciliation recurring level 3 measurements purchases sales issuances settlements gross basis standard effective interim period ending march 31 2010 except requirement disclose information purchases sales issuances settlements reconciliation recurring level 3 measurements gross basis disclosures effective interim period ending march 31 2011 standard effect consolidated financial statements disclosure purposes october 2009 fasb issued guidance regard multipledeliverable revenue arrangements guidance regard certain arrangements include software elements guidance regard multipledeliverable revenue arrangements requires entities allocate revenue arrangement using estimated selling prices delivered goods services based selling price hierarchy guidance eliminates residual method revenue allocation requires revenue allocated using relative selling price method guidance regard certain arrangements include software elements removes tangible products scope software revenue guidance provides guidance determining whether software deliverables arrangement includes tangible product covered scope software revenue guidance two new issuances applied prospective basis revenue arrangements entered materially modified effective interim period ending march 31 2011 early adoption permitted expect adopt early effect adopting two new issuances review management june 2009 fasb established fasb accounting standards codification fasb codification source authoritative us gaap recognized fasb applied nongovernmental entities fasb codification explicitly recognizes rules interpretive releases securities exchange commission sec authority federal securities laws sources authoritative gaap sec registrants fasb codification became effective interim period ended september 30 2009 adoption fasb codification impact consolidated financial statements may 2009 adopted general standards accounting disclosure subsequent events occur balance sheet date financial statements issued available issued adoption standard material impact consolidated financial statements january 1 2009 adopted enhanced disclosures regarding fair value measurements nonfinancial assets liabilities measured recognized fair value nonrecurring basis addition april 2009 adopted following new general standards intended provide additional application guidance enhance disclosures regarding fair value measurements impairments securities new general standard regard determining fair value volume level activity asset liability significantly decreased identifying transactions orderly provides additional guidance estimating fair value volume level activity asset liability significantly decreased general standard also provides guidance identifying circumstances indicate transaction orderly effect new general standard material impact consolidated financial statements new general standard regard interim disclosures fair value financial instruments requires disclosures fair value financial instruments interim reporting periods publicly traded companies previously required disclosed annual financial statements general standard amends disclosure requirements fair value financial instruments interim periods adoption general standard affect financial condition results operations cash flows new general standard regard recognition presentation otherthantemporary impairments amends current otherthantemporary impairment guidance debt securities make guidance operational improve presentation disclosure otherthantemporary impairments debt equity securities financial statements general standard amend existing recognition measurement guidance related otherthantemporary impairments equity securities adoption general standard material impact consolidated financial statements january 1 2009 adopted new standard regard noncontrolling interests consolidated financial statements standard establishes new accounting reporting standards noncontrolling interest subsidiary deconsolidation subsidiary clarifies noncontrolling interest subsidiary minority interest ownership interest consolidated entity reported equity consolidated financial statements separate parent company’s equity statement also requires disclosure face consolidated statements income amounts consolidated net income attributable parent noncontrolling interest disclosure requirements applied retrospectively periods presented adoption standard impacted certain captions previously used consolidated statements income largely identifying net income including noncontrolling interests net income attributable biorad certain captions consolidated balance sheets consolidated statements cash flows also changed january 1 2009 adopted new guidance regard determining whether instruments granted sharebased payment transactions participating securities guidance concluded unvested sharebased payment awards contain nonforfeitable rights dividends dividend equivalents whether paid unpaid participating securities shall included computation earnings per share eps pursuant twoclass method adoption guidance material impact eps data 2009 eps prior periods 2 acquisitions diamed holding ag diamed develops manufactures markets worldwide complete line reagents used blood typing screening well instruments instrument systems use proprietary reagents products used hospitals clinical laboratories blood banks identify certain properties cell serum components human blood prior blood transfusion october 1 2007 acquired 8596 outstanding shares diamed 3993 million march 2008 acquired additional 556 shares diamed approximately 14 million december 2008 acquired additional 600 shares diamed 196 million total purchase december 31 2008 approximately 4329 million included 381 million net tangible assets 2020 million goodwill 1928 million intangible assets included clinical diagnostics segment expect goodwill recorded acquisitions deductible tax purposes allocation total purchase price net tangible assets goodwill intangible assets recorded fair market value based upon management estimates except noncontrolling interest share assets liabilities recorded historical cost april 2009 purchased 955 remaining 1000 shares diamed held multiple noncontrolling shareholders paid approximately 30 million shareholders terms original purchase agreement biorad’s additional paidin capital noncontrolling interests reduced 142 million 145 million respectively remainder purchase price attributable commissions expensed december 31 2009 total ownership outstanding shares diamed amounted 997 february 2010 acquired remaining 45 shares 15 million swiss francs approximately 14 million remaining outstanding noncontrolling interests certain subsidiaries acquired part diamed acquisition recorded noncontrolling interests consolidated balance sheets december 2008 acquired 100 shares diamed fennica oy fennica 100 shares diamed gb limited companies independent distributors diamed products included clinical diagnostics segment total cash purchase price acquisitions approximately 17 million acquired 22 million net tangible liabilities 57 million goodwill 135 million intangible assets based completion purchase price allocations 2009 expect goodwill recorded acquisition deductible tax purposes 3 fair value measurements determine fair value asset liability based assumptions market participants would use pricing asset liability identification market participant assumptions provides basis determining inputs used pricing asset liability fair value hierarchy established gives precedence fair value measurements calculated using observable inputs using unobservable inputs hierarchy prioritizes inputs three broad levels follows • level 1 quoted prices active markets identical securities • level 2 significant observable inputs including quoted prices active markets similar securities • level 3 significant unobservable inputs including assumptions determining fair value investments financial assets carried fair value recurring basis december 31 2009 classified hierarchy follows millions financial assets carried fair value recurring basis december 31 2008 classified hierarchy follows millions december 31 2009 2008 hold financial assets use level 3 inputs determine fair value availableforsale investments consist following millions december 31 2009 2008 investments gross unrealized losses 15 million 18 million respectively loss position 12 months december 31 2008 investments gross unrealized losses 114 million loss position less 12 months number investment positions unrealized loss position 37 december 31 2009 unrealized losses securities due number factors including changes interest rates changes economic conditions changes market outlook various industries among others biorad ability intent hold investments unrealized losses recovery fair value reasonable period time sufficient forecasted recovery fair value may maturity consider investments otherthantemporarily impaired december 31 2009 following summary amortized cost estimated fair value debt securities december 31 2009 contractual maturity date millions estimated fair value financial instruments table determined using available market information appropriate valuation methodologies estimates necessarily indicative amounts could realized current market exchange considerable judgment required interpreting market data used develop estimates fair value use different market assumptions estimation techniques could material effect estimated fair value assets include financial instruments fair values based market quotations longterm debt estimated fair value based quoted market prices similar issues estimated fair value financial instruments follows millions shares ordinary voting stock sartorius ag goettingen germany process technology supplier biotechnology pharmaceutical chemical food beverage industries purchased shares approximately 03 million 2009 approximately 1 million 2008 bringing total investment approximately 28 outstanding voting shares sartorius december 31 2009 sartorius family trust sartorius family members hold controlling interest outstanding voting shares representative designee sartorius’ board directors influence operating financial policies sartorius therefore account investment using cost method investment reported assets 4 goodwill purchased intangible assets goodwill balances included corporate segment reporting purposes note 13 changes goodwill follows millions part acquisition diamed october 2007 purchase additional shares march december 2008 see note 2 acquired 2020 million goodwill 1928 million intangible assets 726 million customer relationships 811 million know 170 million tradenames 187 million developed product technology 34 million licenses purchase price allocation finalized 2008 involved certain analyses inventory taxes external valuations certain fixed assets property final revisions included adjustments carrying value diamed’s recorded assets liabilities related depreciation amortization residual amount allocated goodwill estimated acquisition liabilities settled without requiring payment additional collections made opening balance receivables increase work process inventory recorded fourth quarter 2008 272 million impairment loss related goodwill recorded life science segment goodwill originally recorded part acquisition 1999 impairment caused primarily continuing decline sales bse bovine spongiform encephalopathy product line goodwill intangible assets indefinite lives information regarding identifiable purchased intangible assets definite lives follows millions fourth quarters 2009 2008 38 million 16 million respectively impairment losses related intangible assets recorded life science segment intangible asset impairments related developed technology intangible assets certain product lines acquired 2006 amortization expense related purchased intangible assets years ended december 31 2009 2008 2007 317 million 298 million 128 million respectively estimated future amortization expense based existing intangible assets years ending december 31 2010 2011 2012 2013 2014 315 million 301 million 268 million 241 million 211 million respectively 5 notes payable longterm debt notes payable includes local credit lines maintained international subsidiaries aggregating approximately 527 million 491 million unused december 31 2009 december 31 2008 lines aggregated approximately 275 million 203 million unused weighted average interest rate lines 40 41 december 31 2009 2008 respectively biorad guaranteed credit lines principal components longterm debt follows millions may 2009 biorad sold 3000 million principal amount senior subordinated notes due 2016 80 notes sale yielded net cash proceeds 2948 million effective interest rate 83 notes pay fixed rate interest 80 per year option redeem 80 notes various declining redemption prices 100 principal amount plus “applicable premium” defined indenture along accrued unpaid interest certain charges depending date redeemed biorad’s obligations 80 notes secured rank equal senior subordinated notes rank junior biorad’s existing future senior debt december 2004 biorad sold 2000 million principal amount senior subordinated notes due 2014 6125 notes pay fixed rate interest 6125 per year option redeem 6125 notes various declining redemption prices 100 principal amount plus “applicable premium” defined indenture along accrued unpaid interest certain charges depending date redeemed biorad’s obligations 6125 notes secured rank equal senior subordinated notes rank junior biorad’s existing future senior debt august 2003 biorad sold 2250 million principal amount senior subordinated notes due 2013 75 notes pay fixed rate interest 75 per year option redeem 75 notes various declining redemption prices 100 principal amount plus “applicable premium” defined indenture along accrued unpaid interest certain charges depending date redeemed biorad’s obligations 75 notes secured rank equal senior subordinated notes rank junior biorad’s existing future senior debt may 2009 biorad entered amendment 3 amended restated credit agreement credit agreement amendment 3 amends certain provisions credit agreement including increasing amount certain indebtedness permitted credit agreement certain conditions well increasing permitted maximum leverage ratio permit issuance 80 notes borrowings credit agreement revolving basis used make acquisitions working capital general corporate purposes outstanding balance credit agreement december 31 2009 credit agreement expires june 21 2010 currently evaluating options renewing credit agreement similar arrangements credit agreement secured substantially personal property assets domestic subsidiaries 65 capital stock certain foreign subsidiaries guaranteed existing future material domestic subsidiaries credit agreement 6125 notes 75 notes 80 notes require biorad comply certain financial ratios covenants among things covenants include leverage ratio test interest coverage test consolidated net worth test also restrictions ability declare pay dividends incur debt guarantee debt enter transactions affiliates merge consolidate sell assets make investments create liens prepay subordinated debt compliance covenants december 31 2009 maturities longterm debt december 31 2009 follows 2010 47 million 2011 75 million 2012 04 million 2013 2251 million 2014 2000 million thereafter 3049 million 6 income taxes us international components income taxes follows millions provision income taxes consists following millions reconciliation effective tax rate income taxes statutory tax rate follows deferred tax assets liabilities reflect tax effects losses credits temporary differences carrying amounts assets liabilities financial reporting purposes amounts used income tax purposes significant components deferred tax assets liabilities follows millions december 31 2009 biorad’s international subsidiaries combined net operating loss carryforwards 736 million loss carryforwards expiration date believe likely benefit certain net operating loss carryforwards realized provided valuation allowance 217 million deferred tax assets relating net operating loss carryforwards recognized tax benefits relating reversal valuation allowance deferred tax assets december 31 2009 recognized reduction income tax expense december 31 2009 biorad us federal net operating loss carryforwards 74 million result acquisition utilization net operating loss carryforwards subject annual limitation internal revenue code section 382 expected fully realized loss carryforward expire year 2018 december 31 2009 biorad deferred tax asset 97 million relating california research development tax credit carryforwards may carried forward indefinitely based judgment consistent prior years recorded full valuation allowance deferred tax asset fourth quarter 2009 irs audit settlement years 2001 2005 approved joint committee taxation received cash 34 million statute limitations 2003 2005 years expires september 30 2010 following table summarizes december 31 2009 tax years either currently audit remain open subject examination tax authorities major jurisdictions biorad operates following tabular reconciliation total amounts unrecognized tax benefits year millions included balance unrecognized tax benefits december 31 2009 2008 175 million 171 million respectively tax benefits recognized would affect effective tax rate also included balance unrecognized tax benefits december 31 2008 11 million tax benefits recognized would result adjustments tax accounts primarily deferred taxes biorad recognizes accrued interest penalties related unrecognized tax benefits income tax expense related unrecognized tax benefits noted biorad accrued interest 25 million 24 million december 31 2009 2008 respectively december 31 2009 believe reasonably possible approximately 32 million unrecognized tax benefits may recognized end 2010 result statute lapses benefits related uncertainty regarding sustainability certain deductions credits tax years remain subject examination relevant tax authorities general practice intention reinvest earnings nonus subsidiaries operations december 31 2009 biorad made provision us additional foreign withholding taxes approximately 351 million excess amount financial reporting tax basis investments foreign subsidiaries essentially permanent duration generally amounts become subject us taxation upon remittance dividends certain circumstances earnings repatriated us deferred tax liability associated temporary differences would approximately 77 million 7 stockholders’ equity biorad’s issued outstanding stock consists class common stock class b common stock class b share class b participates equally earnings biorad identical respects except class limited voting rights share class entitled onetenth vote matters share class b entitled one vote additionally class stockholders entitled elect 25 board directors class b stockholders entitled elect balance directors cash dividends may paid class shares without paying cash dividend class b shares cash dividend may paid class b shares unless least equal cash dividend paid class shares class b shares convertible time class shares oneforone basis option stockholder schwartz family collectively holds majority biorad’s voting stock result schwartz family able exercise significant influence biorad 8 sharebased compensationstock option purchase plans description sharebased compensation plans stock option award plans three stock option plans officers certain employees amended 1994 stock option plan 1994 plan 2003 stock option plan 2003 plan 2007 incentive award plan 2007 plan 1994 plan 2003 plan authorize grant incentive stock options nonqualified stock options employees 2007 plan authorizes grant stock options restricted stock awards stock appreciation rights types equity awards employees longer make stock option grants 1994 plan 2003 plan total 1650360 shares reserved issuance equity awards may either class b common stock december 31 2009 1150740 shares available granted future plans class b options granted prices less fair market value underlying common stock date grant generally options granted term 10 years vest increments 20 per year fiveyear period yearly anniversary date grant stock awards issued 2007 plan generally vest increments 20 per year fiveyear period yearly anniversary date grant employee stock purchase plan espp employee stock purchase plan provides eligible employees may contribute 10 compensation 25000 annually toward quarterly purchase class common stock employees’ purchase price 85 lesser fair market value stock first business day last business day calendar quarter authorized sale 2390000 shares common stock espp sharebased compensation expense included sharebased compensation expense cost related stock option grants espp stock purchases restricted stock restricted stock unit awards sharebased compensation expense allocated cost goods sold product research development expense selling general administrative expense consolidated statements income 2009 2008 2007 recognized pretax sharebased compensation expense 91 million 73 million 55 million respectively capitalize sharebased compensation expense options granted january 1 2006 amortize fair value accelerated basis options awards granted january 1 2006 amortize fair value straightline basis stock compensation awards amortized requisite service periods awards generally vesting periods stock options following table summarizes stock option activity following summarizes information stock options outstanding december 31 2009 intrinsic value stock options defined difference current market value grant price total intrinsic value date exercise stock options exercised 2009 2008 2007 approximately 4 million 17 million 13 million respectively cash received stock options exercised 2009 2008 2007 35 million 68 million 63 million respectively actual tax benefit realized tax deductions stock options exercised totaled 20 million 63 million 36 million 2009 2008 2007 respectively december 31 2009 64 million total unrecognized compensation cost stock options cost expected recognized future weightedaverage period approximately 2 years weightedaverage fair value stock options granted estimated using blackscholes optionpricing model following weightedaverage assumptions volatility based historical volatilities common stock period equal stock option’s expected life riskfree interest rate based us treasury yield curve effect time grant 2009 2008 expected life represents number years estimate based primarily historical experience options outstanding prior exercise anticipate paying cash dividends future therefore use expected dividend yield zero restricted stock restricted stock granted 2008 2007 plan fair value share restricted stock market value determined closing price stock day grant following table summarizes restricted stock activity december 31 2009 approximately 62 million total unrecognized compensation cost related restricted stock granted 2007 plan cost expected recognized weightedaverage period approximately 3 years restricted stock units restricted stock units rights receive shares company stock granted 2009 2008 2007 plan fair value restricted stock unit market value determined closing price stock day grant following table summarizes restricted stock unit activity december 31 2009 approximately 91 million total unrecognized compensation cost related restricted stock units granted 2007 plan cost expected recognized weightedaverage period approximately 4 years employee stock purchase plan fair value employees’ purchase rights estimated using blackscholes model following weightedaverage assumptions major assumptions primarily based historical data volatility based historical volatilities common stock period equal expected life purchase rights riskfree interest rate based us treasury yield curve effect time grant anticipate paying cash dividends future therefore use expected dividend yield zero sold 109025 shares 68 million 88533 shares 61 million 81388 shares 53 million espp employees 2009 2008 2007 respectively december 31 2009 228604 shares remain authorized espp currently issue new shares satisfy stock option exercises restricted stock issuances espp stock purchases 9 income expense net income expense net includes following components millions included impairment investments otherthantemporary impairments certain availableforsale investments light continuing declines market prices believe particular investments recover near future 10 supplemental cash flow information reconciliation net income including noncontrolling interests net cash provided operating activities follows millions 11 commitments contingent liabilities rents leases net rental expense operating leases 370 million 2009 388 million 2008 328 million 2007 leases principally facilities automobiles annual future minimum lease payments december 31 2009 operating leases follows 2010 316 million 2011 252 million 2012 175 million 2013 94 million 2014 57 million subsequent 2014 168 million deferred profit sharing retirement plan profit sharing plan covering substantially us employees contributions made discretion board directors biorad liability current year’s contribution contributions charged income 115 million 105 million 94 million 2009 2008 2007 respectively postemployment benefits several foreign locations statutorily required provide lump sum severance termination indemnity employees plans vested benefit obligation december 31 2009 2008 224 million 190 million respectively included longterm liabilities consolidated balance sheets plans required funded trust device used accumulate assets settle obligations forward foreign exchange contracts enter forward foreign exchange con­tracts economic hedge foreign currency denominated intercompany receivables payables december 31 2009 contracts maturing january march 2010 sell foreign currency nominal value 2663 million unrealized gain 03 million contracts purchase foreign currency nominal value 1085 million unrealized loss 01 million fair value forward foreign exchange contracts december 31 2009 03 million included prepaid expenses current assets consolidated balance sheets recognized loss 25 million 2009 included income expense net consolidated statements income purchase obligations december 31 2009 purchase obligations 407 million include agreements purchase goods services enforceable legally binding biorad specify significant terms exclude agreements cancelable without penalty letters credit ordinary course business times required post letters credit letters credit issued banks guarantee obligations various parties including insurance companies contingently liable 82 million standby letters credit banks december 31 2009 12 legal proceedings party various claims legal actions complaints arising ordinary course business believe time ultimate liability resulting matters material adverse effect results operations financial position liquidity however cannot give assurance regarding ultimate outcome lawsuits resolution could material operating results particular period depending upon level income period 13 segment information biorad multinational manufacturer worldwide distributor life science research products clinical diagnostics products two reportable segments life science clinical diagnostics reportable segments strategic business lines offer different products services require different marketing strategies life science segment develops manufactures sells services reagents apparatus instruments used biological research products sold university medical school laboratories pharmaceutical biotechnology companies food testing laboratories government industrial research facilities clinical diagnostics segment develops manufactures sells services automated test systems informatics systems test kits specialized quality controls healthcare market products sold reference laboratories hospital laboratories state newborn screening facilities physicians’ office laboratories transfusion laboratories insurance forensic testing laboratories operations include remainder former analytical instruments segment accounting policies segments described significant accounting policies see note 1 segment profit loss used corporate management purposes includes allocation corporate expense based upon sales allocation interest expense based upon accounts receivable inventories segments expected manage assets completely control accordingly segment assets include primarily accounts receivable inventories gross machinery equipment goodwill balances included corporate segment reporting purposes information regarding industry segments december 31 2009 2008 2007 years ended follows millions 1 life science segment profit 2009 included 38 million intangibles impairment expense see note 4 2 life science segment profit 2008 included 288 million goodwill intangibles impairment expense see note 4 3 clinical diagnostics segment profit 2007 included 77 million inprocess research development expense recorded connection diamed acquisition see note 2 difference total segment allocated interest expense depreciation amortization capital expenditures corresponding consolidated amounts attributable corporate headquarters following reconciles total segment profit consolidated income taxes millions following reconciles total segment assets consolidated total assets millions following presents sales external customers geographic area based primarily location use product service millions following presents assets property plant equipment net geographic area based upon location asset millions prior periods table presented total longlived assets including intangible assets updated conform current year presentation tangible assets property equipment 14 quarterly financial data unaudited summarized quarterly financial data 2009 2008 follows millions except per share data 15 subsequent event january 6 2010 acquired certain diagnostic businesses biotest ag 45 million euros approximately 654 million cash included clinical diagnostics segment acquired assets measured fair values acquisition date based upon management’s best estimates goodwill measured excess consideration transferred fair values identifiable net assets acquired expect goodwill recorded acquisition deductible tax purposes integrating acquired portion biotests diagnostic businesses biorads product portfolio expected broaden offering area immunohematology provide biorad access us markets range products item 9item 8 financial statements supplementary data report ernst young llp independent registered public accounting firm board directors stockholders biorad laboratories inc audited accompanying consolidated balance sheets biorad laboratories inc december 31 2010 2009 related consolidated statements income cash flows changes stockholders equity comprehensive income years ended audits also included financial statement schedule listed index item 15a2 financial statements schedule responsibility companys management responsibility express opinion financial statements schedule based audits conducted audits accordance standards public company accounting oversight board united states standards require plan perform audit obtain reasonable assurance whether financial statements free material misstatement audit includes examining test basis evidence supporting amounts disclosures financial statements audit also includes assessing accounting principles used significant estimates made management well evaluating overall financial statement presentation believe audits provide reasonable basis opinion financial statements referred present fairly material respects consolidated financial position biorad laboratories inc december 31 2010 2009 consolidated results operations cash flows years ended conformity us generally accepted accounting principles also opinion related financial statement schedule considered relation basic financial statements taken whole presents fairly material respects information set forth therein also audited accordance standards public company accounting oversight board united states effectiveness biorad laboratories inc’s internal control financial reporting december 31 2010 based criteria established internal controlintegrated framework issued committee sponsoring organizations treadway commission report dated february 28 2011 expressed adverse opinion thereon ernst young llp palo alto california february 28 2011 report deloitte touche llp independent registered public accounting firm board directors stockholders biorad laboratories inc hercules california audited accompanying consolidated statements income changes stockholders equity comprehensive income cash flows biorad laboratories inc subsidiaries “company” year ended december 31 2008 audit also included financial statement schedule year ended december 31 2008 listed item 15a2 financial statements financial statement schedule responsibility companys management responsibility express opinion financial statements financial statement schedule based audit conducted audit accordance standards public company accounting oversight board united states standards require plan perform audit obtain reasonable assurance whether financial statements free material misstatement audit includes examining test basis evidence supporting amounts disclosures financial statements audit also includes assessing accounting principles used significant estimates made management well evaluating overall financial statement presentation believe audit provides reasonable basis opinion consolidated financial statements present fairly material respects results company’s operations cash flows year ended december 31 2008 conformity accounting principles generally accepted united states america also opinion financial statement schedule year ended december 31 2008 considered relation basic consolidated financial statements taken whole presents fairly material respects information set forth therein discussed note 1 consolidated financial statements accompanying consolidated financial statements retrospectively adjusted adoption new accounting standards noncontrolling interests grants sharebased payment transactions deloitte touche llp san francisco california february 28 2009 may 18 2009 effects retrospective adoption new accounting standards described note 1 financial statements accompanying notes integral part consolidated financial statements accompanying notes integral part consolidated financial statements accompanying notes integral part consolidated financial statements accompanying notes integral part consolidated statements calculated using specific identification method biorad laboratories inc notes consolidated financial statements 1 significant accounting policies basis presentation consolidated financial statements include accounts biorad laboratories inc wholly majority owned subsidiaries referred report “biorad” “we” “us” “our” elimination intercompany balances transactions preparation financial statements conformity us generally accepted accounting principles requires management make estimates assumptions affect amounts reported financial statements accompanying notes actual results could differ estimates changed presentation consolidated statements changes stockholders’ equity comprehensive income periods presenting headings columns dates rows previously headings rows dates columns believe presentation preferable roll forward headings easier understand presentation consistent companies evaluate subsequent events evidence provide conditions existing date balance sheet well conditions arose balance sheet date financial statements issued effects conditions existed balance sheet date recognized financial statements events conditions arising balance sheet date financial statements issued evaluated determine disclosure required keep financial statements misleading extent events conditions exist disclosures made regarding nature events estimated financial effects events conditions cash equivalents cash equivalents consist cash highly liquid investments original maturities three months less readily convertible cash equivalents stated cost approximates fair value restricted cash restricted cash 6 million swiss francs approximately 64 million represents deposit escrow account purchase leased building expected take place may 2011 availableforsale investments availableforsale investments consist corporate obligations municipal securities asset backed securities us agencies marketable equity securities management classifies investments time purchase reevaluates classification balance sheet date investments maturities beyond one year may classified shortterm based liquid nature marketable securities represent investment cash available current operations availableforsale investments reported fair value based quoted market prices observable market data unrealized gains losses reported component comprehensive income net related tax effect unrealized losses charged income decline fair value individual security determined otherthan temporary review availableforsale investments otherthantemporary losses quarterly basis realized gains losses otherthantemporary impairments investments included income expense net see note 9 concentration credit risk financial instruments potentially subject us concentration credit risk consist primarily cash equivalents investments foreign exchange contracts trade accounts receivable cash equivalents investments placed various highly rated major financial institutions located different geographic regions biorad sustained significant losses instruments held financial institutions forward contracts used managing foreign currency exposures element risk counterparties may unable meet terms agreements attempt minimize risk limiting counterparties diverse group highlyrated domestic international financial institutions event nonperformance counterparties carrying values financial instruments represent maximum amount loss would incurred fiscal yearend however expect record losses result counterparty default perform credit evaluation procedures related trade receivables exception certain developing countries generally require collateral result increased risk developing countries biorad sales subject collateral letters credit customers credit risk trade accounts receivable generally limited due large number customers dispersion across many geographic areas however significant amount trade receivables national healthcare systems coun­tries within european economic community accounts receivable maintain allowance doubtful accounts estimated losses resulting inability customers make required payments amount allowance determined analyzing known uncollectible accounts aged receivables economic conditions customers’ country industry historical losses customers’ creditworthiness amounts later determined specifically identified uncollectible charged written reserve inventory inventories valued lower actual cost market net realizable value include material labor overhead costs firstin firstout fifo method used remove inventory property plant equipment property plant equipment carried cost less accumulated depreciation amortization included property plant equipment buildings equipment acquired capital lease arrangements reagent rental equipment property plant equipment assessed impairment annually whenever events changes circumstances indicate carrying amount may recoverable depreciation computed straightline basis estimated useful lives assets buildings leasehold improvements amortized 1530 years term leases life improvements whichever shorter exception reagent rental equipment amortized 15 year period equipment depreciated 312 years proceeds sale property plant equipment 12 million 12 million 09 million 2010 2009 2008 respectively included capital expenditures net consolidated statements cash flows goodwill represents excess cost fair value net tangible identifiable intangible assets acquired businesses goodwill assessed impairment applying fair value based tests annually whenever events changes circumstances indicate carrying amount may recoverable perform impairment tests goodwill reporting unit level one level reporting segments reporting units identified components discrete financial information available regularly reviewed management goodwill amounts assigned reporting units time acquisition goodwill impairment test consists twostep process first step goodwill impairment test used identify potential impairment compares fair value reporting unit carrying value including goodwill use discounted cash flow models determine fair value reporting unit fair value reporting unit exceeds carrying amount goodwill reporting unit considered impaired second step impairment test required second step required compares implied fair value reporting unit goodwill carrying amount goodwill fair value reporting unit allocated assets liabilities unit including unrecognized intangible assets reporting unit acquired business combination fair value reporting unit price paid acquire reporting unit carrying amount reporting unit’s goodwill exceeds implied fair value impairment charge recognized amount equal excess longlived assets purposes recognition measurement impairment loss longlived asset assets grouped assets liabilities lowest level identifiable cash flows largely independent cash flows assets liabilities assess impairment longlived assets including identifiable intangible assets annually whenever events changes circumstances indicate carrying value may recoverable factors consider important could trigger impairment review include · significant underperformance relative expected historical projected future operating results · significant changes manner use longlived assets intangible assets strategy overall business · current expectation likely longlived asset sold otherwise disposed loss end previously estimated useful life · significant negative industry legal regulatory economic trends management determines carrying value longlived assets may recoverable based upon existence one indicators impairment test impairment based projected undiscounted cash flow method projected future operating results cash flows asset group used establish fair value used evaluating carrying value longlived intangible assets estimate future cash flows longlived assets using current longterm financial forecasts carrying amount longlived asset recoverable exceeds sum undiscounted cash flows expected result use eventual disposition asset case impairment loss would recognized impairment loss recognized amount carrying amount exceeds fair value income taxes account income taxes asset liability method requires recognition deferred tax assets liabilities expected future tax consequences events included financial statements method deferred tax assets liabilities determined based differences financial statements tax basis assets liabilities using enacted tax rates effect year differences expected reverse effect change tax rates deferred tax assets liabilities recognized income period includes enactment date record net deferred tax assets extent believe assets likely realized making determination consider available positive negative evidence including scheduled reversals deferred tax liabilities projected future taxable income tax planning strategies recent financial operations extent determine able realize deferred income tax assets future excess net recorded amount make adjustment valuation allowance may reduce provision income taxes recognize tax benefit uncertain tax position likely tax position sustained examination taxing authorities based technical merits position tax benefits recognized financial statements particular tax position measured based largest benefit greater 50 likelihood realized upon settlement amount unrecognized tax benefits adjusted appropriate changes facts circumstances significant amendments existing tax law new regulations interpretations taxing authorities new information obtained tax examination resolution examination recognize accrued interest penalties appropriate related unrecognized tax benefits income tax expense revenue recognition revenue recognized pervasive evidence arrangement exists price buyer fixed determinable collectibility reasonably assured title passed customer product delivered absent specific contractual specifications equipment requires factory installation recorded installation complete customer acceptance required contractually occurred time related revenue recognized provision recognized estimated product returns reagent agreements diagnostic industry sales method provides use instrument customer exclusively purchases company’s reagents use instrument evaluated reagent agreements account contracts terms guidance regard accounting revenue arrangements multiple deliverables revenues earn reagent agreements recognized pursuant terms arrangement either reagent delivered used customer service revenues extended warranty contracts recognized ratably life service agreement services performed contract shipping handling classify freight costs billed customers net sales related freight costs included cost goods sold warranty warrant certain equipment defects design materials workmanship generally period one year upon delivery equipment establish part cost goods sold provision expected costs warranty based historical experience specific warranty terms customer feedback review performed quarterly basis assess adequacy warranty accrual components warranty accrual included current liabilities longterm liabilities follows millions research development internal research development costs expensed incurred thirdparty research development costs expensed contracted work performed purchased inprocess research development costs january 1 2010 expensed time purchase beginning january 1 2010 new accounting standard purchased inprocess research development costs acquired business combination capitalized intangible asset foreign currency balance sheet accounts international subsidiaries translated current exchange rates end accounting period income statement items translated average exchange rates period resulting translation adjustments recorded separate component stockholders’ equity foreign currency transaction gains losses included foreign exchange losses net consolidated statements income transaction gains losses result primarily fluctuations exchange rates intercompany receivables payables denominated currencies functional currency subsidiary recorded transaction forward foreign exchange contracts part distributing products regularly enter intercompany transactions enter forward foreign exchange contracts manage foreign exchange risk future movements exchange rates affect foreign currency denominated intercompany receivables payables use derivative financial instruments speculative trading purposes seek hedge accounting treatment contracts result contracts generally maturity dates 90 days less related primarily currencies industrial countries recorded asset liability measured fair value balance sheet date resulting gains losses offset exchange gains losses related receivables payables recorded foreign exchange losses net consolidated statements income cash flows related contracts classified cash flows investing activities consolidated statements cash flows noncontrolling interests january 1 2009 adopted new standard regard noncontrolling interests consolidated financial statements standard established new accounting reporting standards noncontrolling interest subsidiary deconsolidation subsidiary clarified noncontrolling interest subsidiary minority interest ownership interest consolidated entity reported equity consolidated financial statements separate parent company’s equity statement requires disclosure face consolidated statements income amounts consolidated net income attributable parent noncontrolling interest disclosure requirements applied retrospectively periods presented 100 voting stock consolidated subsidiaries remaining shares held third parties represent noncontrolling minority interest subsidiaries consolidated statements present full amount assets liabilities income expenses consolidated subsidiaries offsetting amounts shown noncontrolling interests portion items attributable us sharebased compensation plans stockbased compensation expense sharebased payment awards granted determined based grantdate fair value recognize compensation costs net estimated forfeitures requisite service period award generally vesting term sharebased payment awards estimated forfeiture rate based historical experience plans described fully note 8 earnings per share effective january 1 2009 adopted new guidance specified unvested sharebased payment awards contain nonforfeitable rights dividends dividend equivalents whether paid unpaid participating securities included computation earnings per share eps pursuant twoclass method unvested restricted shares qualify participating securities included shares computation eps basic earnings per share computed dividing net income loss attributable biorad weighted average number common shares outstanding period diluted earnings per share takes account effect dilutive instruments stock options restricted stock uses average share price period determining number potential common shares added weighted average number shares outstanding potential common shares excluded diluted earnings per share calculation effect would antidilutive weighted average number common shares outstanding used calculate basic diluted earnings per share antidilutive shares follows thousands fair value financial instruments certain financial instruments including cash equivalents shortterm investments accounts receivable marketable securities notes payable accounts payable foreign exchange contracts carrying amounts approximate fair value estimated fair value financial instruments based exchange price would received asset paid transfer liability exit price using available market information appropriate valuation methodologies principal advantageous market asset liability orderly transaction market participants estimates necessarily indicative amounts could realized current market exchange considerable judgment required interpreting market data used develop estimates fair value use different market assumptions estimation techniques could material effect estimated fair value see note 3 recent financial accounting standards january 2010 financial accounting standards board fasb issued standard improve disclosures fair value measurements specifically standard requires entities disclose amounts significant transfers level 1 level 2 fair value hierarchy reasons transfers reasons transfers level 3 information reconciliation recurring level 3 measurements purchases sales issuances settlements gross basis standard effective interim period ended march 31 2010 except requirement disclose information purchases sales issuances settlements reconciliation recurring level 3 measurements gross basis disclosures effective interim period ending march 31 2011 standard effect expected effect consolidated financial statements disclosure purposes 2 acquisitions january 2010 acquired certain diagnostic businesses biotest ag biotest 45 million euros approximately 649 million cash acquisition accounted business combination operating results businesses included clinical diagnostics segment acquired 309 million net tangible assets 128 million goodwill 212 million intangible assets goodwill recorded deductible tax purposes integrating acquired portion biotests diagnostic businesses product portfolio broadened product offering area immunohematology provided us access us markets range products october 2007 began acquiring outstanding shares diamed holding ag diamed develops manufactures markets worldwide complete line reagents used blood typing screening well instruments instrument systems use proprietary reagents included clinical diagnostics segment acquisition performed stages final shares purchased february 2010 december 2008 acquired 381 million net tangible assets 2020 million goodwill 1928 million intangible assets final two purchases accounted equity transactions resulted net reduction biorad’s additional paid capital 149 million following table summarizes purchase activity related diamed millions september 2010 acquired remaining noncontrolling interests diamed france sa paid 102 million euros approximately 129 million cash approximately 15 million euros approximately 19 million due 2011 additional contingent consideration included current liabilities consolidated balance sheet acquisition accounted equity transaction biorad’s additional paidin capital increased 12 million december 2008 acquired 100 shares diamed fennica oy fennica 100 shares diamed gb limited companies independent distributors diamed products included clinical diagnostics segment total cash purchase price acquisitions approximately 17 million acquired 22 million net tangible liabilities 57 million goodwill 135 million intangible assets based completion purchase price allocations 2009 3 fair value measurements determine fair value asset liability based assumptions market participants would use pricing asset liability identification market participant assumptions provides basis determining inputs used pricing asset liability fair value hierarchy established gives precedence fair value measurements calculated using observable inputs using unobservable inputs hierarchy prioritizes inputs three broad levels follows • level 1 quoted prices active markets identical instruments • level 2 significant observable inputs including quoted prices active markets similar instruments • level 3 significant unobservable inputs including assumptions determining fair value certain investments financial assets liabilities carried fair value recurring basis december 31 2010 classified hierarchy follows millions cash equivalents included cash equivalents consolidated balance sheets b availableforsale investments 1186 million included shortterm investments 932 million included assets consolidated balance sheets c forward foreign exchange contracts asset position included prepaid expenses taxes current assets consolidated balance sheets forward foreign exchange contracts liability position included current liabilities consolidated balance sheets estimate fair value level 2 debt securities excluding commercial paper us treasury bills notes examine quarterly pricing provided two pricing services obtain indicative market prices insufficient correlation pricing services estimate fair value level 2 commercial paper us treasury bills notes examine quarterly pricing primary pricing service ensure consistency similar securities result analysis december 31 2010 utilized primary pricing service level 2 debt securities consistency since results require use alternative pricing addition review investment securities may trade illiquid inactive markets identifying instances significant decrease volume frequency trades relative historical levels well instances significant widening bidask spread brokered markets december 31 2010 investment securities illiquid inactive markets inputs used primary pricing service level 2 cash equivalents corporate debt securities foreign government obligations us government sponsored agencies municipal obligations vary depending type security valued generally include benchmark yields reported trades brokerdealer quotes issuer spreads twosided markets benchmark securities bids offers reference data corporate actions nationally recognized municipal securities information repository nrmsir material event notices plus new issue money market rates inputs used primary pricing service estimating fair value level 2 collateralized mortgage obligations mortgagebacked securities include many inputs mentioned addition monthly payment information issues priced primary pricing service issues similar vintage credit quality adjustments tranche average life extension risk forward foreign exchange contracts part distributing products regularly enter intercompany transactions enter forward foreign currency exchange contracts manage foreign exchange risk future movements foreign exchange rates affect foreign currency denominated intercompany receivables payables use derivative financial instruments speculative trading purposes seek hedge accounting treatment contracts result contracts generally maturity dates 90 days less related primarily currencies industrial countries recorded fair value balance sheet date fair value contracts derived using spot rates published wall street journal last business day quarter points provided counterparties resulting gains losses offset exchange gains losses related receivables payables recorded foreign exchange losses net consolidated statements income cash flows related contracts classified cash flows investing activities consolidated statements cash flows december 31 2010 contracts maturing january march 2011 sell foreign currency notional value 541 million unrealized loss 01 million contracts purchase foreign currency notional value 4327 million unrealized loss 27 million financial assets carried fair value recurring basis december 31 2009 classified hierarchy follows millions december 31 2010 2009 hold financial assets use level 3 inputs determine fair value availableforsale investments consist following millions december 31 2010 2009 investments gross unrealized losses 06 million 15 million respectively loss position 12 months number investment positions unrealized loss position 43 37 december 31 2010 2009 respectively unrealized losses securities due number factors including changes interest rates changes economic conditions changes market outlook various industries among others biorad ability intent hold investments unrealized losses recovery fair value reasonable period time sufficient forecasted recovery fair value may maturity consider investments otherthantemporarily impaired december 31 2010 following summary amortized cost estimated fair value debt securities december 31 2010 contractual maturity date millions estimated fair value financial instruments table determined using available market information appropriate valuation methodologies estimates necessarily indicative amounts could realized current market exchange considerable judgment required interpreting market data used develop estimates fair value use different market assumptions estimation techniques could material effect estimated fair value assets include financial instruments fair values based market quotations longterm debt estimated fair value based quoted market prices similar issues estimated fair value financial instruments follows millions shares ordinary voting stock sartorius ag goettingen germany process technology supplier biotechnology pharmaceutical chemical food beverage industries 30 outstanding voting shares excluding treasury shares sartorius december 31 2010 sartorius family trust sartorius family members hold controlling interest outstanding voting shares representative designee sartorius’ board directors influence operating financial policies sartorius therefore account investment using cost method carrying value investment included assets consolidated balance sheets 4 goodwill purchased intangible assets goodwill balances included corporate segment reporting purposes note 13 changes goodwill follows millions conjunction acquisition certain businesses biotest january 2010 see note 2 recorded 128 million goodwill 212 million intangible assets 75 million customer relationships 95 million developed product technology 42 million tradenames 2009 purchase price allocation completed december 2008 acquisitions diamed fennica oy diamed gb limited 2008 272 million impairment loss related goodwill recorded life science segment goodwill originally recorded part acquisition 1999 impairment caused primarily continuing decline sales bse bovine spongiform encephalopathy product line impairment losses related goodwill recorded 2010 2009 goodwill intangible assets indefinite lives information regarding identifiable purchased intangible assets definite lives follows millions 2009 38 million impairment loss related intangible assets recorded life science segment intangible asset impairment related developed technology intangible assets certain product lines acquired 2006 2008 16 million impairment loss related intangible assets recorded life science segment intangible asset impairment related developed technology intangible assets certain product lines acquired 2006 impairment losses related intangible assets recorded 2010 amortization expense related purchased intangible assets years ended december 31 2010 2009 2008 337 million 317 million 298 million respectively estimated future amortization expense based existing intangible assets years ending december 31 2011 2012 2013 2014 2015 329 million 306 million 263 million 237 million 207 million respectively 5 notes payable longterm debt notes payable includes credit lines maintained locally international subsidiaries aggregating approximately 512 million 480 million unused december 31 2010 december 31 2009 lines aggregated approximately 527 million 491 million unused weighted average interest rate lines 14 40 december 31 2010 2009 respectively biorad guaranteed credit lines principal components longterm debt follows millions december 2010 biorad sold 4250 million principal amount senior notes due 2020 4875 notes sale yielded net cash proceeds 4226 million effective rate 4946 4875 notes pay fixed rate interest 4875 per year option redeem 4875 notes time redemption price 100 principal amount plus specified makewhole premium defined indenture governing 4875 notes accrued unpaid interest thereon redemption date obligations 4875 notes secured rank equal right payment existing future unsubordinated indebtedness net proceeds issuance 4875 notes used together cash hand redeem 200 million 6125 notes defined december 2010 225 million 75 notes defined january 2011 june 2010 biorad entered 2000 million amended restated credit agreement credit agreement borrowings credit agreement revolving basis used acquisitions working capital general corporate purposes outstanding borrowings credit agreement december 31 2010 credit agreement expires june 21 2014 may 2009 biorad sold 3000 million principal amount senior subordinated notes due 2016 80 notes sale yielded net cash proceeds 2948 million effective interest rate 83 80 notes pay fixed rate interest 80 per year option redeem 80 notes time prior september 15 2013 redemption price 100 principal amount thereof plus specified makewhole premium defined indenture governing 80 notes accrued unpaid interest thereon redemption date also option redeem 80 notes time september 15 2013 various declining redemption prices plus accrued unpaid interest thereon redemption date obligations 80 notes secured rank equal right payment existing future senior subordinated indebtedness rank junior right payment existing future unsubordinated indebtedness including borrowings credit agreement 4875 notes december 2004 biorad sold 2000 million principal amount senior subordinated notes due 2014 6125 notes december 2010 redeemed 6125 notes 2043 million including call premium included interest expense consolidated statements income august 2003 biorad sold 2250 million principal amount senior subordinated notes due 2013 75 notes january 2011 redeemed 75 notes 2346 million including call premium included interest expense consolidated statements income credit agreement secured substantially personal property assets domestic subsidiaries 65 capital stock certain foreign subsidiaries guaranteed existing future material domestic subsidiaries credit agreement 80 notes require biorad comply certain financial ratios covenants among things ratios covenants include leverage ratio test interest coverage test well restrictions ability declare pay dividends incur debt guarantee debt enter transactions affiliates merge consolidate sell assets make investments create liens prepay subordinated debt compliance ratios covenants december 31 2010 maturities longterm debt december 31 2010 follows 2011 2331 million 2012 04 million 2013 02 million 2014 01 million 2015 01 million thereafter 7303 million 6 income taxes us international components income taxes follows millions provision income taxes consists following millions reconciliation effective tax rate income taxes statutory tax rate follows deferred tax assets liabilities reflect tax effects losses credits temporary differences carrying amounts assets liabilities financial reporting purposes amounts used income tax purposes significant components deferred tax assets liabilities follows millions december 31 2010 biorad’s international subsidiaries combined net operating loss carryforwards 800 million loss carryforwards expiration date believe likely benefit net operating loss carryforwards realized provided valuation allowance 241 million deferred tax assets relating net operating loss carryforwards recognized tax benefits relating reversal valuation allowance deferred tax assets december 31 2010 recognized reduction income tax expense december 31 2010 biorad us federal net operating loss carryforwards 73 million result acquisitions utilization net operating loss carryforwards subject annual limitation internal revenue code section 382 expected fully realized loss carryforwards expire following years 2018 62 million 2028 11 million december 31 2010 biorad deferred tax asset 91 million relating california research development tax credit carryforwards may carried forward indefinitely based judgment consistent prior years recorded full valuation allowance deferred tax asset following table summarizes december 31 2010 tax years either currently audit remain open subject examination tax authorities major jurisdictions biorad operates following tabular reconciliation total amounts unrecognized tax benefits year millions substantially unrecognized tax benefits december 31 2010 2009 2008 would affect effective tax rate recognized biorad recognizes accrued interest penalties related unrecognized tax benefits income tax expense related unrecognized tax benefits noted biorad accrued interest 28 million 25 million december 31 2010 2009 respectively december 31 2010 believe reasonably possible approximately 57 million unrecognized tax benefits may recognized end 2011 result statute lapses benefits related uncertainty regarding sustainability certain deductions credits tax years remain subject examination relevant tax authorities general practice intention reinvest earnings nonus subsidiaries operations december 31 2010 biorad made provision us additional foreign withholding taxes approximately 393 million excess amount financial reporting tax basis investments foreign subsidiaries essentially permanent duration generally amounts become subject us taxation upon remittance dividends certain circumstances earnings repatriated us deferred tax liability associated temporary differences would approximately 86 million 7 stockholders’ equity biorad’s issued outstanding stock consists class common stock class b common stock class b share class b participates equally earnings biorad identical respects except class limited voting rights share class entitled onetenth vote matters share class b entitled one vote additionally class stockholders entitled elect 25 board directors class b stockholders entitled elect balance directors cash dividends may paid class shares without paying cash dividend class b shares cash dividend may paid class b shares unless least equal cash dividend paid class shares class b shares convertible time class shares oneforone basis option stockholder schwartz family collectively holds majority biorad’s voting stock result schwartz family able exercise significant influence biorad 8 sharebased compensationstock option purchase plans description sharebased compensation plans stock option award plans three stock option plans officers certain employees amended 1994 stock option plan 1994 plan 2003 stock option plan 2003 plan 2007 incentive award plan 2007 plan 1994 plan 2003 plan authorized grant incentive stock options nonqualified stock options employees 2007 plan authorizes grant stock options restricted stock awards stock appreciation rights types equity awards employees longer make stock option grants 1994 plan 2003 plan total 1650360 shares reserved issuance equity awards may either class b common stock december 31 2010 983227 shares available granted future plans class b options granted prices less fair market value underlying common stock date grant generally options granted term 10 years vest increments 20 per year fiveyear period yearly anniversary date grant stock awards issued 2007 plan generally vest increments 20 per year fiveyear period yearly anniversary date grant employee stock purchase plan espp employee stock purchase plan provides eligible employees may contribute 10 compensation 25000 annually toward quarterly purchase class common stock employees’ purchase price 85 lesser fair market value stock first business day last business day calendar quarter authorized sale 2390000 shares common stock espp sharebased compensation expense included sharebased compensation expense cost related stock option grants espp stock purchases restricted stock restricted stock unit awards sharebased compensation expense allocated cost goods sold research development expense selling general administrative expense consolidated statements income 2010 2009 2008 recognized pretax sharebased compensation expense 102 million 91 million 73 million respectively capitalize sharebased compensation expense options awards amortize fair value straightline basis stock compensation awards amortized requisite service periods awards generally vesting periods stock options following table summarizes stock option activity following summarizes information stock options outstanding december 31 2010 intrinsic value stock options defined difference current market value grant price total intrinsic value date exercise stock options exercised 2010 2009 2008 approximately 13 million 4 million 17 million respectively cash received stock options exercised 2010 2009 2008 54 million 35 million 68 million respectively actual tax benefit realized tax deductions stock options exercised totaled 50 million 20 million 63 million 2010 2009 2008 respectively december 31 2010 55 million total unrecognized compensation cost stock options cost expected recognized future weightedaverage period approximately 3 years weightedaverage fair value stock options granted estimated using blackscholes optionpricing model following weightedaverage assumptions volatility based historical volatilities common stock period equal stock option’s expected life riskfree interest rate based us treasury yield curve effect time grant expected life represents number years estimate based primarily historical experience options outstanding prior exercise anticipate paying cash dividends future therefore use expected dividend yield zero restricted stock 2007 plan restricted stock last granted 2008 grants fair value share restricted stock market value determined closing price stock day grant following table summarizes restricted stock activity december 31 2010 approximately 40 million total unrecognized compensation cost related restricted stock granted 2007 plan cost expected recognized remaining weightedaverage period approximately 2 years restricted stock units restricted stock units rights receive shares company stock granted 2007 2010 2007 plan fair value restricted stock unit market value determined closing price stock day grant following table summarizes restricted stock unit activity december 31 2010 approximately 148 million total unrecognized compensation cost related restricted stock units granted 2007 plan cost expected recognized remaining weightedaverage period approximately 4 years employee stock purchase plan fair value employees’ purchase rights estimated using blackscholes model following weightedaverage assumptions major assumptions primarily based historical data volatility based historical volatilities common stock period equal expected life purchase rights riskfree interest rate based us treasury yield curve effect time grant anticipate paying cash dividends future therefore use expected dividend yield zero sold 96586 shares 74 million 109025 shares 68 million 88533 shares 61 million espp employees 2010 2009 2008 respectively december 31 2010 132018 shares remain authorized espp currently issue new shares satisfy stock option exercises restricted stock issuances espp stock purchases 9 income expense net income expense net includes following components millions otherthantemporary impairments investments recorded 2010 2009 2008 certain availableforsale investments light continuing declines market prices time believe particular investments would recover carrying value 10 supplemental cash flow information reconciliation net income including noncontrolling interests net cash provided operating activities follows millions 11 commitments contingent liabilities rents leases net rental expense operating leases 383 million 2010 370 million 2009 388 million 2008 leases principally facilities automobiles annual future minimum lease payments december 31 2010 operating leases follows 2011 331 million 2012 272 million 2013 188 million 2014 147 million subsequent 2015 389 million deferred profit sharing retirement plan profit sharing plan covering substantially us employees contributions made discretion board directors biorad liability current year’s contribution expense 122 million 115 million 105 million 2010 2009 2008 respectively postemployment benefits several foreign locations statutorily required provide lump sum severance termination indemnity employees plans vested benefit obligation december 31 2010 2009 288 million 224 million respectively included current liabilities longterm liabilities consolidated balance sheets plans required funded trust device used accumulate assets settle obligations purchase obligations december 31 2010 purchase obligations 592 million include agreements purchase goods services enforceable legally binding biorad specify significant terms exclude agreements cancelable without penalty letters credit ordinary course business times required post letters credit letters credit issued banks guarantee obligations various parties including insurance companies contingently liable 139 million standby letters credit banks december 31 2010 12 legal proceedings based internal review identified conduct certain overseas operations may violated antibribery provisions united states foreign corrupt practices act fcpa likely violated fcpa’s books records internal controls provisions internal policies may 2010 voluntarily disclosed matters us department justice doj securities exchange commission sec commenced investigation audit committee board directors audit committee assumed direct responsibility reviewing matters hired experienced independent counsel conduct investigation provide legal advice provided intend continue provide additional information doj sec audit committee’s investigation progresses audit committee’s investigation doj sec investigations continuing presently unable predict duration scope results audit committee’s investigation investigations doj sec whether either agency commence legal actions doj sec broad range civil criminal sanctions fcpa laws regulations including limited injunctive relief disgorgement fines penalties modifications business practices including termination modification existing business relationships imposition compliance programs retention monitor oversee compliance fcpa unable estimate outcome matter however imposition sanctions remedial measures could material adverse effect business financial condition date assessed whether activities question violated laws foreign jurisdictions took place addition party various claims legal actions complaints arising ordinary course business believe time ultimate liability resulting matters material adverse effect results operations financial position liquidity however cannot give assurance regarding ultimate outcome matters resolution could material operating results particular period depending level income period 13 segment information biorad multinational manufacturer worldwide distributor life science research products clinical diagnostics products two reportable segments life science clinical diagnostics reportable segments strategic business lines offer different products services require different marketing strategies life science segment develops manufactures sells services reagents apparatus instruments used biological research products sold university medical school laboratories pharmaceutical biotechnology companies food testing laboratories government industrial research facilities clinical diagnostics segment develops manufactures sells services automated test systems informatics systems test kits specialized quality controls healthcare market products sold reference laboratories hospital laboratories state newborn screening facilities physicians’ office laboratories transfusion laboratories insurance forensic testing laboratories operations include remainder former analytical instruments segment accounting policies segments described significant accounting policies see note 1 segment profit loss used corporate management purposes includes allocation corporate expense based upon sales allocation interest expense based upon accounts receivable inventories segments expected manage assets completely control accordingly segment assets include primarily accounts receivable inventories gross machinery equipment goodwill balances included corporate segment reporting purposes information regarding industry segments december 31 2010 2009 2008 years ended follows millions 1 life science segment profit 2009 included 38 million intangibles impairment expense see note 4 2 life science segment profit 2008 included 288 million goodwill intangibles impairment expense see note 4 difference total segment allocated interest expense depreciation amortization capital expenditures corresponding consolidated amounts attributable corporate headquarters following reconciles total segment profit consolidated income taxes millions following reconciles total segment assets consolidated total assets millions following presents net sales external customers geographic area based primarily location use product service millions following presents assets property plant equipment net geographic area based upon location asset millions 14 quarterly financial data unaudited summarized quarterly financial data 2010 2009 follows millions except per share data item 9item 8 financial statements supplementary data report independent registered public accounting firm board directors stockholders biorad laboratories inc audited accompanying consolidated balance sheets biorad laboratories inc december 31 2011 2010 related consolidated statements income cash flows changes stockholders equity comprehensive income three years period ended december 31 2011 audits also included financial statement schedule listed index item 15a2 financial statements schedule responsibility companys management responsibility express opinion financial statements schedule based audits conducted audits accordance standards public company accounting oversight board united states standards require plan perform audit obtain reasonable assurance whether financial statements free material misstatement audit includes examining test basis evidence supporting amounts disclosures financial statements audit also includes assessing accounting principles used significant estimates made management well evaluating overall financial statement presentation believe audits provide reasonable basis opinion financial statements referred present fairly material respects consolidated financial position biorad laboratories inc december 31 2011 2010 consolidated results operations cash flows three years period ended december 31 2011 conformity us generally accepted accounting principles also opinion related financial statement schedule considered relation basic financial statements taken whole presents fairly material respects information set forth therein also audited accordance standards public company accounting oversight board united states effectiveness biorad laboratories inc’s internal control financial reporting december 31 2011 based criteria established internal controlintegrated framework issued committee sponsoring organizations treadway commission report dated february 29 2012 expressed unqualified opinion thereon accompanying notes integral part consolidated financial statements accompanying notes integral part consolidated financial statements biorad laboratories inc consolidated statements income thousands except per share data accompanying notes integral part consolidated financial statements biorad laboratories inc consolidated statements cash flows thousands accompanying notes integral part consolidated financial statements accompanying notes integral part consolidated financial statements calculated using specific identification method biorad laboratories inc notes consolidated financial statements 1significant accounting policies basis presentation consolidated financial statements include accounts biorad laboratories inc wholly majority owned subsidiaries referred report “biorad” “we” “us” “our” elimination intercompany balances transactions preparation financial statements conformity us generally accepted accounting principles requires management make estimates assumptions affect amounts reported financial statements accompanying notes actual results could differ estimates evaluate subsequent events evidence provide conditions existing date balance sheet well conditions arose balance sheet date financial statements issued effects conditions existed balance sheet date recognized financial statements events conditions arising balance sheet date financial statements issued evaluated determine disclosure required keep financial statements misleading extent events conditions exist disclosures made regarding nature events estimated financial effects events conditions cash equivalents cash equivalents consist cash highly liquid investments original maturities three months less readily convertible cash equivalents stated cost approximates fair value restricted cash restricted cash approximately 64 million december 31 2010 represented deposit escrow account final lump sum payment building finance lease amount paid june 2011 restricted cash balance december 31 2011 availableforsale investments availableforsale investments consist corporate obligations municipal securities asset backed securities us government sponsored agencies marketable equity securities management classifies investments time purchase reevaluates classification balance sheet date investments maturities beyond one year may classified shortterm based liquid nature marketable securities represent investment cash available current operations availableforsale investments reported fair value based quoted market prices observable market data unrealized gains losses reported component comprehensive income net related tax effect unrealized losses charged income decline fair value individual security determined otherthantemporary review availableforsale investments otherthantemporary losses quarterly basis realized gains losses otherthantemporary impairments investments included income expense net see note 9 concentration credit risk financial instruments potentially subject us concentration credit risk consist primarily cash equivalents investments foreign exchange contracts trade accounts receivable cash equivalents investments placed various highly rated major financial institutions located different geographic regions biorad sustained significant losses instruments held financial institutions forward contracts used managing foreign currency exposures element risk counterparties may unable meet terms agreements attempt minimize risk limiting counterparties diverse group highlyrated domestic international financial institutions event nonperformance counterparties carrying values financial instruments represent maximum amount loss would incurred fiscal yearend however expect record losses result counterparty default perform credit evaluation procedures related trade receivables exception certain developing countries generally require collateral result increased risk certain developing countries biorad sales subject collateral letters credit customers credit risk trade accounts receivable generally limited due large number customers dispersion across many geographic areas however significant amount trade receivables national healthcare systems countries within european union accounts receivable maintain allowance doubtful accounts estimated losses resulting inability customers make required payments amount allowance determined analyzing known uncollectible accounts aged receivables economic conditions customers’ country industry historical losses customers’ creditworthiness amounts later determined specifically identified uncollectible charged written reserve inventory inventories valued lower actual cost market net realizable value include material labor overhead costs firstin firstout fifo method used remove inventory property plant equipment property plant equipment carried cost less accumulated depreciation amortization included property plant equipment buildings equipment acquired capital lease arrangements reagent rental equipment capitalized software including costs software developed obtained internal use property plant equipment assessed impairment quarterly whenever events changes circumstances indicate carrying amount may recoverable depreciation computed straightline basis estimated useful lives assets buildings leasehold improvements amortized 1530 years term leases life improvements whichever shorter exception reagent rental equipment amortized 15 year period equipment depreciated 312 years goodwill represents excess cost fair value net tangible identifiable intangible assets acquired businesses goodwill assessed impairment applying fair value based tests annually whenever events changes circumstances indicate carrying amount may recoverable perform impairment tests goodwill reporting unit level one level reporting segments reporting units identified components discrete financial information available regularly reviewed management goodwill amounts assigned reporting units time acquisition goodwill impairment test consists twostep process first step goodwill impairment test used identify potential impairment compares fair value reporting unit carrying value including goodwill use projected discounted cash flow model determine fair value reporting unit fair value reporting unit exceeds carrying amount goodwill reporting unit considered impaired second step impairment test required second step required compares implied fair value reporting unit goodwill carrying amount goodwill fair value reporting unit allocated assets liabilities unit including unrecognized intangible assets reporting unit acquired business combination fair value reporting unit price paid acquire reporting unit carrying amount reporting unit’s goodwill exceeds implied fair value impairment charge recognized amount equal excess longlived assets purposes recognition measurement impairment loss longlived asset assets grouped assets liabilities lowest level identifiable cash flows largely independent cash flows assets liabilities assess impairment longlived assets including identifiable intangible assets quarterly whenever events changes circumstances indicate carrying value may recoverable factors consider important could trigger impairment review include • significant underperformance relative expected historical projected future operating results • significant changes manner use longlived assets intangible assets strategy overall business • current expectation likely longlived asset sold otherwise disposed loss end previously estimated useful life • significant negative industry legal regulatory economic trends management determines carrying value longlived assets may recoverable based upon existence one indicators impairment test impairment based projected undiscounted cash flow method projected future operating results cash flows asset group used establish fair value used evaluating carrying value longlived intangible assets estimate future cash flows longlived assets using current longterm financial forecasts carrying amount longlived asset recoverable exceeds sum undiscounted cash flows expected result use eventual disposition asset case impairment loss would recognized impairment loss recognized amount carrying amount exceeds fair value income taxes account income taxes asset liability method requires recognition deferred tax assets liabilities expected future tax consequences events included financial statements method deferred tax assets liabilities determined based differences financial statements tax basis assets liabilities using enacted tax rates effect year differences expected reverse effect change tax rates deferred tax assets liabilities recognized income period includes enactment date record net deferred tax assets extent believe assets likely realized making determination consider available positive negative evidence including scheduled reversals deferred tax liabilities projected future taxable income tax planning strategies recent financial operations extent determine able realize deferred income tax assets future excess net recorded amount make adjustment valuation allowance may reduce provision income taxes recognize tax benefit uncertain tax position likely tax position sustained examination taxing authorities based technical merits position tax benefits recognized financial statements particular tax position measured based largest benefit greater 50 likelihood realized upon settlement amount unrecognized tax benefits adjusted appropriate changes facts circumstances significant amendments existing tax law new regulations interpretations taxing authorities new information obtained tax examination resolution examination recognize accrued interest penalties appropriate related unrecognized tax benefits income tax expense revenue recognition revenue recognized pervasive evidence arrangement exists price buyer fixed determinable collectability reasonably assured title passed customer product delivered absent specific contractual specifications revenue associated equipment requires factory installation recorded installation complete customer acceptance required contractually occurred time related revenue recognized provision recognized estimated product returns reagent agreements diagnostic industry sales method provides use instrument customer exclusively purchases company’s reagents use instrument evaluate reagent agreements account contracts guidance pertaining accounting revenue arrangements multiple deliverables revenues earn reagent agreements recognized pursuant terms arrangement either reagent delivered used customer service revenues extended warranty contracts recognized ratably life service agreement services performed contract shipping handling classify freight costs billed customers net sales related freight costs included cost goods sold warranty warrant certain equipment defects design materials workmanship generally period one year upon delivery equipment establish part cost goods sold provision expected costs warranty based historical experience specific warranty terms customer feedback review performed quarterly basis assess adequacy warranty accrual changes warranty accrual included current liabilities longterm liabilities follows millions research development internal research development costs expensed incurred thirdparty research development costs expensed contracted work performed purchased inprocess research development costs january 1 2010 expensed time purchase beginning january 1 2010 new accounting standard purchased inprocess research development costs acquired business combination capitalized intangible asset foreign currency balance sheet accounts international subsidiaries translated current exchange rates end accounting period income statement items translated average exchange rates period resulting translation adjustments recorded separate component stockholders’ equity foreign currency transaction gains losses included foreign exchange losses net consolidated statements income transaction gains losses result primarily fluctuations exchange rates intercompany receivables payables denominated currencies functional currency subsidiary recorded transaction forward foreign exchange contracts part distributing products regularly enter intercompany transactions enter forward foreign exchange contracts manage foreign exchange risk future movements exchange rates affect foreign currency denominated intercompany receivables payables use derivative financial instruments speculative trading purposes seek hedge accounting treatment contracts result contracts generally maturity dates 90 days less related primarily currencies industrial countries recorded asset liability measured fair value balance sheet date resulting gains losses offset exchange gains losses related receivables payables recorded foreign exchange losses net consolidated statements income cash flows related contracts classified cash flows investing activities consolidated statements cash flows noncontrolling interests noncontrolling interest subsidiary ownership interest consolidated entity reported equity consolidated financial statements separate biorad’s equity addition net income loss attributable noncontrolling interests reported separately net income attributable biorad consolidated financial statements 100 voting stock one consolidated subsidiaries remaining shares held third parties represent noncontrolling minority interest subsidiary consolidated statements present full amount assets liabilities income expenses consolidated subsidiaries partially offsetting amount shown noncontrolling interests portion assets liabilities controlled us sharebased compensation plans stockbased compensation expense sharebased payment awards granted determined based grantdate fair value recognize compensation costs net estimated forfeitures requisite service period award generally vesting term sharebased payment awards estimated forfeiture rate based historical experience plans described fully note 8 earnings per share basic earnings per share computed dividing net income loss attributable biorad weighted average number common shares outstanding period diluted earnings per share takes account effect dilutive instruments stock options restricted stock uses average share price period determining number potential common shares added weighted average number shares outstanding potential common shares excluded diluted earnings per share calculation effect would antidilutive unvested sharebased payment awards contain nonforfeitable rights dividends dividend equivalents whether paid unpaid participating securities included computation earnings per share eps pursuant twoclass method unvested restricted shares qualify participating securities included shares computation eps weighted average number common shares outstanding used calculate basic diluted earnings per share antidilutive shares follows thousands fair value financial instruments certain financial instruments including cash equivalents shortterm investments accounts receivable marketable securities notes payable accounts payable foreign exchange contracts carrying amounts approximate fair value estimated fair value financial instruments based exchange price would received asset paid transfer liability exit price using available market information appropriate valuation methodologies principal advantageous market asset liability orderly transaction market participants estimates necessarily indicative amounts could realized current market exchange considerable judgment required interpreting market data used develop estimates fair value use different market assumptions estimation techniques could material effect estimated fair value see note 3 recent accounting standards updates may 2011 financial accounting standards board fasb issued guidance regard fair value measurement new guidance results consistent definition fair value common requirements measurement disclosure fair value gaap international financial reporting standards ifrs guidance effective interim annual periods beginning december 15 2011 anticipate adoption guidance material impact consolidated financial statements june 2011 fasb issued guidance regard presentation comprehensive income new guidance entity option present total comprehensive income components net income components comprehensive income either single continuous statement comprehensive income two separate consecutive statements december 2011 fasb deferred new requirement present components reclassifications comprehensive income face income statement guidance effective fiscal years interim periods within years beginning december 15 2011 biorad currently evaluating alternative presentations however adoption guidance material impact consolidated financial statements relates required disclosures presentation september 2011 fasb issued guidance regard goodwill impairment new guidance intended reduce cost complexity annual goodwill impairment test providing entities option performing qualitative assessment determine whether impairment testing necessary entity choose perform qualitative assessment none reporting units moreover entity bypass qualitative assessment reporting unit period proceed directly step one impairment test perform qualitative assessment subsequent period new guidance effective annual interim goodwill impairment tests performed fiscal years beginning december 15 2011 adopted expect guidance material impact consolidated financial statements 2 acquisitions october 4 2011 acquired issued outstanding stock quantalife inc quantalife fair value consideration acquisition date 1794 million comprised 1503 million paid cash closing date 50 million holdback cash completion certain postclosing matters 241 million contingent consideration potentially payable quantalife shareholders contingent consideration recognized estimated fair value 241 million based probabilityweighted income approach could reach 48 million upon achievement certain sales development milestones contingent consideration development milestone valued based assumptions regarding probability achieving milestone amounts discounted present value contingent consideration sales milestones valued based statistical significant number simulations potential outcome operating results business included results operations life science segment acquisition date acquisition accounted business combination consider quantalife acquisition material business combination therefore disclosed pro forma results operations required material business combinations fair values net assets acquired acquisition date determined 1061 million goodwill 947 million intangible assets 214 million net tangible liabilities expect goodwill recorded deductible tax purposes integrating acquired quantalife business biorad expected expand current stateoftheart methods quantitative polymerase chain reaction pcr believe complement biorads existing amplification business determination fair value net assets acquired quantalife based upon valuation information estimates assumptions available october 4 2011 still finalizing analysis limited number acquired tax attributes could affect fair values certain deferred tax assets goodwill result december 31 2011 accounting acquisition preliminary january 2010 acquired certain diagnostic businesses biotest ag biotest 45 million euros approximately 649 million cash acquisition accounted business combination operating results businesses included clinical diagnostics segment acquired 309 million net tangible assets 128 million goodwill 212 million intangible assets goodwill recorded deductible tax purposes integrating acquired portion biotests diagnostic businesses product portfolio broadened product offering area immunohematology provided us access us markets range products october 2007 began acquiring outstanding shares diamed holding ag diamed develops manufactures markets worldwide complete line reagents used blood typing screening well instruments instrument systems use proprietary reagents included clinical diagnostics segment acquisition performed stages final shares purchased february 2010 december 2008 acquired 381 million net tangible assets 2020 million goodwill 1928 million intangible assets final two purchases accounted equity transactions resulted net reduction biorad’s additional paid capital 149 million following table summarizes purchase activity related diamed millions june 2011 acquired remaining outstanding shares diamed sea limited diamed thailand multiple noncontrolling shareholders approximately 02 million cash acquisition accounted equity transaction biorads noncontrolling interest reduced 10 million additional paidincapital increased 08 million february 2011 acquired additional 39 distribuidora de analitica para medicina ibérica sa diamed spain multiple noncontrolling shareholders increasing ownership diamed spain 90 paid approximately 25 million euros 34 million cash acquisition accounted equity transaction reduced biorad’s noncontrolling interests additional paidin capital approximately 24 million 10 million respectively september 2010 acquired remaining noncontrolling interests diamed france sa paid 102 million euros approximately 129 million cash approximately 13 million euros approximately 17 million paid july 2011 additional contingent consideration acquisition accounted equity transaction biorad’s additional paidin capital increased 12 million 3 fair value measurements determine fair value asset liability based assumptions market participants would use pricing asset liability identification market participant assumptions provides basis determining inputs used pricing asset liability fair value hierarchy established gives precedence fair value measurements calculated using observable inputs using unobservable inputs hierarchy prioritizes inputs three broad levels follows • level 1 quoted prices active markets identical instruments • level 2 significant observable inputs including quoted prices active markets similar instruments • level 3 significant unobservable inputs including assumptions determining fair value certain investments financial assets liabilities carried fair value measured recurring basis december 31 2011 classified hierarchy follows millions addition assets liabilities measured fair value recurring basis included tables fourth quarter 2011 recognized contingent consideration liability upon acquisition quantalife october 2011 related potential future payments due upon achievement certain sales development milestones contingent consideration determined based probabilityweighted income approach significant change valuation liability acquisition date december 31 2011 financial assets liabilities carried fair value measured recurring basis december 31 2010 classified hierarchy follows millions cash equivalents included cash equivalents consolidated balance sheets b availableforsale investments included following accounts consolidated balance sheets millions c forward foreign exchange contracts asset position included prepaid expenses taxes current assets consolidated balance sheets forward foreign exchange contracts liability position included current liabilities consolidated balance sheets e contingent consideration liability included following accounts consolidated balance sheet millions estimate fair value level 2 debt securities december 31 2011 primary pricing service relies inputs multiple industryrecognized pricing sources determine price investment addition performed reasonableness testing prices daily basis comparing prices reported custodians well prior day prices price difference fell outside tolerable levels investigated cause resolved pricing issue based review results analysis utilized primary pricing service level 2 debt securities none securities tested outside tolerable levels estimate fair value level 2 debt securities december 31 2010 excluding commercial paper us treasury bills notes examined quarterly pricing provided two pricing services obtained indicative market prices insufficient correlation pricing services estimate fair value level 2 commercial paper us treasury bills notes examined quarterly pricing primary pricing service ensure consistency similar securities result analysis december 31 2010 utilized primary pricing service level 2 debt securities consistency since results require use alternative pricing december 31 2011 primary pricing service inputs level 2 cash equivalents bonds us government sponsored agencies municipal obligations corporate debt securities bonds assetbacked securities consisted market prices variety industry standard data providers security master files large financial institutions thirdparty sources multiple market prices used primary pricing service inputs distributioncurve based algorithm determine daily market value december 31 2011 primary pricing service inputs level 2 cash equivalents commercial paper corporate debt securities commercial paper foreign government obligations commercial paper time deposits consisted dynamic static security characteristics information obtained several independent security characteristic sources dynamic inputs credit rating factor variablerate updated daily static characteristics included inputs day count first coupon upon initial security creation securities typically priced via mathematical calculations reliant observable inputs availableforsale foreign government obligations based indicative bids market participants december 31 2010 inputs used primary pricing service level 2 cash equivalents corporate debt securities foreign government obligations us government sponsored agencies municipal obligations varied depending type security valued generally included benchmark yields reported trades brokerdealer quotes issuer spreads twosided markets benchmark securities bids offers reference data corporate actions nationally recognized municipal securities information repository nrmsir material event notices plus new issue money market rates december 31 2010 inputs used primary pricing service estimating fair value level 2 collateralized mortgage obligations mortgagebacked securities included many inputs mentioned addition monthly payment information issues priced primary pricing service issues similar vintage credit quality adjustments tranche average life extension risk forward foreign exchange contracts part distributing products regularly enter intercompany transactions enter forward foreign currency exchange contracts manage foreign exchange risk future movements foreign exchange rates affect foreign currency denominated intercompany receivables payables use derivative financial instruments speculative trading purposes seek hedge accounting treatment contracts result contracts generally maturity dates 90 days less related primarily currencies industrial countries recorded fair value balance sheet date fair value contracts derived using spot rates published wall street journal last business day quarter points provided counterparties resulting gains losses offset exchange gains losses related receivables payables recorded foreign exchange losses gains net consolidated statements income cash flows related contracts classified cash flows investing activities consolidated statements cash flows following summary forward foreign currency exchange contracts millions availableforsale investments consist following millions following summary investments gross unrealized losses associated fair value millions unrealized losses securities due number factors including changes interest rates changes economic conditions changes market outlook various industries among others biorad ability intent hold investments unrealized losses recovery fair value reasonable period time sufficient forecasted recovery fair value may maturity consider investments otherthantemporarily impaired december 31 2011 following summary amortized cost estimated fair value debt securities december 31 2011 contractual maturity date millions estimated fair value financial instruments table determined using available market information appropriate valuation methodologies estimates necessarily indicative amounts could realized current market exchange considerable judgment required interpreting market data used develop estimates fair value use different market assumptions estimation techniques could material effect estimated fair value assets include financial instruments fair values based market quotations longterm debt estimated fair value based quoted market prices similar issues estimated fair value financial instruments follows millions shares ordinary voting stock sartorius ag sartorius goettingen germany process technology supplier biotechnology pharmaceutical chemical food beverage industries 30 outstanding voting shares excluding treasury shares sartorius december 31 2011 sartorius family trust sartorius family members hold controlling interest outstanding voting shares representative designee sartorius’ board directors ability exercise significant influence operating financial policies sartorius addition ordinary voting stock sartorius thinly traded therefore account investment using cost method carrying value investment included assets consolidated balance sheets 4 goodwill purchased intangible assets changes goodwill segment follows millions part acquisition quantalife october 2011 see note 2 recorded 1061 million goodwill 947 million definitelived intangible assets considered know determination fair value net assets acquired quantalife see note 2 based upon valuation information estimates assumptions available october 4 2011 still finalizing analysis limited number acquired tax attributes could affect fair values certain deferred tax assets goodwill result december 31 2011 accounting acquisition preliminary conjunction acquisition certain businesses biotest january 2010 see note 2 recorded 128 million goodwill 212 million intangible assets 75 million customer relationships 95 million developed product technology 42 million tradenames goodwill significant intangible assets indefinite lives information regarding identifiable purchased intangible assets definite lives follows millions 2009 38 million impairment loss related intangible assets recorded life science segment intangible asset impairment related developed technology intangible assets certain product lines acquired 2006 material impairment losses related intangible assets recorded 2011 2010 amortization expense related purchased intangible assets years ended december 31 2011 2010 2009 391 million 337 million 317 million respectively estimated future amortization expense based existing intangible assets years ending december 31 2012 2013 2014 2015 2016 439 million 392 million 360 million 330 million 295 million respectively 5notes payable longterm debt notes payable includes amounts borrowed credit lines maintained locally international subsidiaries borrowing capacity approximately 219 million 175 million unused december 31 2011 december 31 2010 lines aggregated approximately 512 million 480 million unused weighted average interest rate lines 27 14 december 31 2011 2010 respectively biorad guaranteed credit lines principal components longterm debt follows millions senior subordinated notes due 2013 august 2003 biorad sold 2250 million principal amount senior subordinated notes due 2013 75 notes january 2011 redeemed 75 senior subordinated notes due 2013 2346 million including call premium included interest expense consolidated statements income senior subordinated notes due 2016 may 2009 biorad sold 3000 million principal amount senior subordinated notes due 2016 80 notes sale yielded net cash proceeds 2948 million effective interest rate 83 80 notes pay fixed rate interest 80 per year option redeem 80 notes time prior september 15 2013 redemption price 100 principal amount thereof plus specified makewhole premium defined indenture governing 80 notes accrued unpaid interest thereon redemption date also option redeem 80 notes time september 15 2013 various declining redemption prices plus accrued unpaid interest thereon redemption date obligations 80 notes secured rank equal right payment existing future senior subordinated indebtedness rank junior right payment existing future unsubordinated indebtedness including borrowings credit agreement 4875 notes senior notes due 2020 december 2010 biorad sold 4250 million principal amount senior notes due 2020 4875 notes sale yielded net cash proceeds 4226 million effective rate 4946 4875 notes pay fixed rate interest 4875 per year option redeem 4875 notes time redemption price 100 principal amount plus specified makewhole premium defined indenture governing 4875 notes accrued unpaid interest thereon redemption date obligations 4875 notes secured rank equal right payment existing future unsubordinated indebtedness net proceeds issuance 4875 notes used together cash hand redeem 2000 million 6125 notes defined december 2010 2250 million 75 notes defined january 2011 senior subordinated notes due 2014 december 2004 biorad sold 2000 million principal amount senior subordinated notes due 2014 6125 notes december 2010 redeemed 6125 notes 2043 million including call premium included interest expense consolidated statements income amended restated credit agreement credit agreement june 2010 biorad entered 2000 million credit agreement borrowings credit agreement revolving basis used acquisitions working capital general corporate purposes outstanding borrowings credit agreement december 31 2011 credit agreement expires june 21 2014 credit agreement secured substantially personal property assets domestic subsidiaries 65 capital stock certain foreign subsidiaries guaranteed existing future material domestic subsidiaries credit agreement 80 notes require biorad comply certain financial ratios covenants among things ratios covenants include leverage ratio test interest coverage test well restrictions ability declare pay dividends incur debt guarantee debt enter transactions affiliates merge consolidate sell assets make investments create liens prepay subordinated debt compliance ratios covenants december 31 2011 maturities longterm debt december 31 2011 follows 2012 06 million 2013 02 million 2014 02 million 2015 02 million 2016 2965 million thereafter 4347 million 6 income taxes us international components income taxes follows millions provision income taxes consists following millions reconciliation effective tax rate income taxes statutory tax rate follows deferred tax assets liabilities reflect tax effects losses credits temporary differences carrying amounts assets liabilities financial reporting purposes amounts used income tax purposes significant components deferred tax assets liabilities follows millions december 31 2011 biorad’s international subsidiaries combined net operating loss carryforwards 814 million loss carryforwards 806 million expiration date believe likely benefit net operating loss carryforwards realized provided valuation allowance 248 million relating net operating loss carryforwards december 31 2011 biorad us federal net operating loss carryforwards approximately 56 million result acquisitions carryforwards subject limitation utilization expire 2018 2032 december 31 2011 biorad us federal research tax credit carryforwards 11 million subject limitations utilization december 31 2011 biorad approximately 55 million california net operating loss carryforwards related acquisition quantalife believe likely benefit net operating loss carryforwards realized recorded full valuation allowance losses december 31 2011 biorad deferred tax asset 137 million relating california research tax credit carryforwards including 11 million acquisition quantalife may carried forward indefinitely based judgment consistent prior years recorded full valuation allowance deferred tax asset believe likely certain deferred tax assets described realized foreseeable future recognized tax benefits relating reversal valuation allowance deferred tax assets december 31 2011 related quantalife within measurement period recognized reduction income tax expense following table summarizes december 31 2011 tax years either currently audit remain open subject examination tax authorities major jurisdictions biorad operates following tabular reconciliation total amounts unrecognized tax benefits year millions substantially unrecognized tax benefits december 31 2011 2010 2009 would affect effective tax rate recognized biorad recognizes accrued interest penalties related unrecognized tax benefits income tax expense related unrecognized tax benefits noted biorad accrued interest 21 million 28 million december 31 2011 2010 respectively december 31 2011 believe reasonably possible 28 million unrecognized tax benefits may recognized end 2012 result statute lapses benefits related uncertainty regarding sustainability certain deductions credits tax years remain subject examination relevant tax authorities general practice intention reinvest earnings nonus subsidiaries operations december 31 2011 biorad made provision us additional foreign withholding taxes approximately 433 million excess amount financial reporting tax basis investments foreign subsidiaries essentially permanent duration generally amounts become subject us taxation upon remittance dividends certain circumstances earnings repatriated us deferred tax liability associated temporary differences would approximately 93 million 7 stockholders equity biorad’s issued outstanding stock consists class common stock class b common stock class b share class b participates equally earnings biorad identical respects except class limited voting rights share class entitled one tenth vote matters share class b entitled one vote additionally class stockholders entitled elect 25 board directors class b stockholders entitled elect 75 directors cash dividends may paid class shares without paying cash dividend class b shares cash dividend may paid class b shares unless least equal cash dividend paid class shares class b shares convertible time class shares oneforone basis option stockholder schwartz family collectively holds majority biorad’s voting stock result schwartz family able exercise significant influence biorad 8 sharebased compensationstock option purchase plans description sharebased compensation plans stock option award plans three stock option plans officers certain employees 1994 stock option plan 1994 plan 2003 stock option plan 2003 plan 2007 incentive award plan 2007 plan 1994 plan 2003 plan authorized grant incentive stock options nonqualified stock options employees 2007 plan authorizes grant stock options restricted stock awards stock appreciation rights types equity awards employees longer grant stock option grants 1994 plan 2003 plan total 1650360 shares reserved issuance equity awards 2007 plan may either class b common stock december 31 2011 816322 shares available granted future plans class b options granted prices less fair market value underlying common stock date grant generally options granted term 10 years vest increments 20 per year fiveyear period yearly anniversary date grant stock awards issued 2007 plan generally vest increments 20 per year fiveyear period yearly anniversary date grant employee stock purchase plans amended restated 1988 employee stock purchase plan 1988 espp provides eligible employees may contribute 10 compensation 25000 annually toward quarterly purchase class common stock employees’ purchase price 85 lesser fair market value stock first business day last business day calendar quarter authorized sale 2390000 shares common stock 1988 espp december 31 2011 intend issue shares plan april 2011 shareholders approved 2011 employee stock purchase plan 2011 espp terms 1988 espp regard employee contributions purchase price 2011 espp provides eligible employees opportunity purchase shares company class common stock 2011 espp includes two components code section 423 component intend qualify “employee stock purchase plan” section 423 us internal revenue code 1986 amended “code” non423 component authorizes grant purchase rights qualify “employee stock purchase plan” section 423 code 2011 espp 600000 shares class common stock authorized sale sharebased compensation expense included sharebased compensation expense cost related stock option grants espp stock purchases restricted stock restricted stock unit awards sharebased compensation expense allocated cost goods sold research development expense selling general administrative expense consolidated statements income 2011 2010 2009 recognized pretax sharebased compensation expense 107 million 102 million 91 million respectively capitalize sharebased compensation expense options awards amortize fair value straightline basis stock compensation awards amortized requisite service periods awards generally vesting periods stock options following table summarizes stock option activity following summarizes information stock options outstanding december 31 2011 intrinsic value stock options defined difference current market value grant price total intrinsic value date exercise stock options exercised 2011 2010 2009 approximately 14 million 13 million 4 million respectively cash received stock options exercised 2011 2010 2009 94 million 54 million 35 million respectively actual tax benefit realized tax deductions stock options exercised totaled 60 million 50 million 20 million 2011 2010 2009 respectively december 31 2011 56 million total unrecognized compensation cost stock options cost expected recognized future weightedaverage period approximately 3 years weightedaverage fair value stock options granted estimated using blackscholes optionpricing model following weightedaverage assumptions volatility based historical volatilities common stock period equal stock option’s expected life riskfree interest rate based us treasury yield curve effect time grant expected life represents number years estimate based primarily historical experience options outstanding prior exercise anticipate paying cash dividends future therefore use expected dividend yield zero restricted stock 2007 plan restricted stock last granted 2008 grants fair value share restricted stock market value determined closing price stock day grant following table summarizes restricted stock activity december 31 2011 approximately 2 million total unrecognized compensation cost related restricted stock granted 2007 plan cost expected recognized remaining weightedaverage period approximately 1 year restricted stock units restricted stock units rights receive shares company stock granted 2007 2011 2007 plan fair value restricted stock unit market value determined closing price stock day grant following table summarizes restricted stock unit activity december 31 2011 approximately 205 million total unrecognized compensation cost related restricted stock units granted 2007 plan cost expected recognized remaining weightedaverage period approximately 4 years employee stock purchase plans fair value employees’ purchase rights 1988 espp estimated using blackscholes model following weightedaverage assumptions major assumptions primarily based historical data volatility based historical volatilities common stock period equal expected life purchase rights riskfree interest rate based us treasury yield curve effect time grant anticipate paying cash dividends future therefore use expected dividend yield zero sold 96362 shares 81 million 96586 shares 74 million 109025 shares 68 million 1988 espp employees 2011 2010 2009 respectively december 31 2011 35656 shares remain authorized 1988 espp however intend issue shares plan december 31 2011 december 31 2011 600000 shares remain authorized 2011 espp currently issue new shares satisfy stock option exercises restricted stock issuances espp stock purchases 9 income expense net income expense net includes following components millions otherthantemporary impairment losses investments recorded 2011 2010 2009 certain availableforsale investments light continuing declines market prices time believe particular investments would recover carrying value 10 supplemental cash flow information reconciliation net income including noncontrolling interests net cash provided operating activities follows millions 11 commitments contingent liabilities rents leases net rental expense operating leases 424 million 383 million 370 million 2011 2010 2009 respectively leases principally facilities automobiles annual future minimum lease payments december 31 2011 operating leases follows 2012 349 million 2013 272 million 2014 214 million 2015 145 million 2016 beyond 503 million deferred profit sharing retirement plan profit sharing plan covering substantially us employees contributions made discretion board directors biorad liability current year’s contribution expense 121 million 122 million 115 million 2011 2010 2009 respectively postemployment benefits several foreign locations statutorily required provide lump sum severance termination indemnity employees plans vested benefit obligation december 31 2011 2010 271 million 288 million respectively included current liabilities longterm liabilities consolidated balance sheets plans required funded trust device used accumulate assets settle obligations purchase obligations december 31 2011 purchase obligations 730 million include agreements purchase goods services enforceable legally binding biorad specify significant terms exclude agreements cancelable without penalty letters credit ordinary course business times required post letters credit letters credit issued banks guarantee obligations various parties including insurance companies contingently liable 126 million standby letters credit banks december 31 2011 contingent consideration connection acquisition quantalife october 2011 see note 2 recorded contingent consideration relating amounts potentially payable quantalife shareholders contingent consideration recognized estimated fair value 241 million date acquisition december 31 2011 determined based probabilityweighted income approach contingent consideration could reach 48 million upon achievement certain sales development milestones 12legal proceedings based internal review identified conduct certain overseas operations may violated antibribery provisions united states foreign corrupt practices act fcpa likely violated fcpa’s books records internal controls provisions internal policies may 2010 voluntarily disclosed matters us department justice doj securities exchange commission sec commenced investigation audit committee board directors audit committee assumed direct responsibility reviewing matters hired experienced independent counsel conduct investigation provide legal advice provided intend continue provide additional information doj sec audit committee’s investigation progresses audit committee’s investigation doj sec investigations continuing presently unable predict duration scope results audit committee’s investigation investigations doj sec whether either agency commence legal actions doj sec broad range civil criminal sanctions fcpa laws regulations including limited injunctive relief disgorgement fines penalties modifications business practices including termination modification existing business relationships imposition compliance programs retention monitor oversee compliance fcpa unable estimate outcome matter however imposition sanctions remedial measures could material adverse effect business financial condition date determined whether activities question violated laws foreign jurisdictions took place april 13 2011 shareholder derivative lawsuit filed directors superior court contra costa county california case also names company nominal defendant captioned city riviera beach general employees’ retirement system v david schwartz et al case msc1100854 complaint plaintiff alleges directors breached fiduciary duties failing ensure sufficient internal controls systems compliance fcpa purportedly seeking relief behalf plaintiff seeks award unspecified compensatory punitive damages costs expenses including attorneys’ fees declaration directors breached fiduciary duties individual defendants filed demurrer requesting dismissal complaint case well motion stay matter pending resolution abovereferenced investigations doj sec following hearing september 30 2011 court sustained demurrer dismissed complaint without prejudice granted plaintiff february 29 2012 file amended complaint parties subsequently agreed extend date march 29 2012 subject court approval court denied motion stay matter dismissed complaint addition party various claims legal actions complaints arising ordinary course business believe time ultimate liability resulting matters material adverse effect results operations financial position liquidity however cannot give assurance regarding ultimate outcome matters resolution could material operating results particular period depending level income period 13 segment information biorad multinational manufacturer worldwide distributor life science research products clinical diagnostics products two reportable segments life science clinical diagnostics reportable segments strategic business lines offer different products services require different marketing strategies life science segment develops manufactures sells services reagents apparatus instruments used biological research products sold university medical school laboratories pharmaceutical biotechnology companies food testing laboratories government industrial research facilities clinical diagnostics segment develops manufactures sells services automated test systems informatics systems test kits specialized quality controls healthcare market products sold reference laboratories hospital laboratories state newborn screening facilities physicians’ office laboratories transfusion laboratories insurance forensic testing laboratories operations include remainder former analytical instruments segment accounting policies segments described significant accounting policies see note 1 segment profit loss used corporate management purposes includes allocation corporate expense based upon sales allocation interest expense based upon accounts receivable inventories segments expected manage assets completely control accordingly segment assets include primarily accounts receivable inventories gross machinery equipment goodwill balances included corporate segment reporting purposes information regarding industry segments december 31 2011 2010 2009 years ended follows millions 1 life science segment profit 2009 included 38 million intangibles impairment expense see note 4 difference total segment allocated interest expense depreciation amortization capital expenditures corresponding consolidated amounts attributable corporate headquarters following reconciles total segment profit consolidated income taxes millions following reconciles total segment assets consolidated total assets millions following presents net sales external customers geographic area based primarily location use product service millions following presents assets property plant equipment net geographic area based upon location asset millions 14 quarterly financial data unaudited summarized quarterly financial data 2011 2010 follows millions except per share data item 9item 8 financial statements supplementary data report independent registered public accounting firm board directors stockholders biorad laboratories inc audited accompanying consolidated balance sheets biorad laboratories inc december 31 2012 2011 related consolidated statements income comprehensive income cash flows changes stockholders equity three years period ended december 31 2012 audits also included financial statement schedule listed index item 15a2 financial statements schedule responsibility companys management responsibility express opinion financial statements schedule based audits conducted audits accordance standards public company accounting oversight board united states standards require plan perform audit obtain reasonable assurance whether financial statements free material misstatement audit includes examining test basis evidence supporting amounts disclosures financial statements audit also includes assessing accounting principles used significant estimates made management well evaluating overall financial statement presentation believe audits provide reasonable basis opinion financial statements referred present fairly material respects consolidated financial position biorad laboratories inc december 31 2012 2011 consolidated results operations cash flows three years period ended december 31 2012 conformity us generally accepted accounting principles also opinion related financial statement schedule considered relation basic financial statements taken whole presents fairly material respects information set forth therein also audited accordance standards public company accounting oversight board united states biorad laboratories inc’s internal control financial reporting december 31 2012 based criteria established internal controlintegrated framework issued committee sponsoring organizations treadway commission report dated march 18 2013 expressed adverse opinion thereon accompanying notes integral part consolidated financial statements accompanying notes integral part consolidated financial statements biorad laboratories inc consolidated statements income thousands except per share data accompanying notes integral part consolidated financial statements biorad laboratories inc consolidated statements comprehensive income thousands reclassification adjustments calculated using specific identification method accompanying notes integral part consolidated financial statements biorad laboratories inc consolidated statements cash flows thousands accompanying notes integral part consolidated financial statements accompanying notes integral part consolidated financial statements biorad laboratories inc notes consolidated financial statements 1significant accounting policies basis presentation consolidated financial statements include accounts biorad laboratories inc wholly majority owned subsidiaries referred report “biorad” “we” “us” “our” elimination intercompany balances transactions preparation financial statements conformity us generally accepted accounting principles requires management make estimates assumptions affect amounts reported financial statements accompanying notes actual results could differ estimates evaluate subsequent events evidence provide conditions existing date balance sheet well conditions arose balance sheet date financial statements issued effects conditions existed balance sheet date recognized financial statements events conditions arising balance sheet date financial statements issued evaluated determine disclosure required keep financial statements misleading extent events conditions exist disclosures made regarding nature events estimated financial effects events conditions announced february 26 2012 preliminary unaudited results fourth quarter year ended december 31 2012 results included accrual royalties third party related interest since announcement reviewed developments relating royalties increased accrual royalties related interest consolidated financial statements included annual report form 10k year ended december 31 2012 reflect increased accrual royalties interest well related impact provision income taxes cash equivalents cash equivalents consist cash highly liquid investments original maturities three months less readily convertible cash equivalents stated cost approximates fair value restricted cash restricted cash approximately 64 million december 31 2010 represented deposit escrow account final lump sum payment building finance lease amount paid june 2011 restricted cash balance december 31 2012 2011 availableforsale investments availableforsale investments consist corporate obligations municipal securities asset backed securities us government sponsored agencies marketable equity securities management classifies investments time purchase reevaluates classification balance sheet date investments maturities beyond one year may classified shortterm based liquid nature marketable securities represent investment cash available current operations availableforsale investments reported fair value based quoted market prices observable market data unrealized gains losses reported component comprehensive income net related tax effect unrealized losses charged income decline fair value individual security determined otherthantemporary review availableforsale investments otherthantemporary losses quarterly basis realized gains losses otherthantemporary impairments investments included income expense net see note 10 concentration credit risk financial instruments potentially subject us concentration credit risk consist primarily cash equivalents investments foreign exchange contracts trade accounts receivable cash equivalents investments placed various highly rated major financial institutions located different geographic regions biorad sustained significant losses instruments held financial institutions forward contracts used managing foreign currency exposures element risk counterparties may unable meet terms agreements attempt minimize risk limiting counterparties diverse group highlyrated domestic international financial institutions event nonperformance counterparties carrying values financial instruments represent maximum amount loss would incurred fiscal yearend however expect record losses result counterparty default perform credit evaluation procedures related trade receivables exception certain developing countries generally require collateral result increased risk certain developing countries biorad sales subject collateral letters credit customers credit risk trade accounts receivable generally limited due large number customers dispersion across many geographic areas however significant amount trade receivables national healthcare systems countries within european union accounts receivable maintain allowance doubtful accounts estimated losses resulting inability customers make required payments amount allowance determined analyzing known uncollectible accounts aged receivables economic conditions customers’ country industry historical losses customers’ creditworthiness amounts later determined specifically identified uncollectible charged written allowance inventory inventories valued lower actual cost market net realizable value include material labor overhead costs firstin firstout method used relieve inventory products sold property plant equipment property plant equipment carried cost less accumulated depreciation amortization included property plant equipment buildings equipment acquired capital lease arrangements reagent rental equipment capitalized software including costs software developed obtained internal use property plant equipment assessed impairment quarterly whenever events changes circumstances indicate carrying amount may recoverable depreciation computed straightline basis estimated useful lives assets buildings leasehold improvements amortized 1530 years term leases life improvements whichever shorter exception reagent rental equipment amortized 15 year period equipment capitalized software depreciated 312 years goodwill represents excess cost fair value net tangible identifiable intangible assets acquired businesses goodwill assessed impairment applying fair value based tests annually whenever events changes circumstances indicate carrying amount may recoverable perform impairment tests goodwill reporting unit level one level reporting segments reporting units identified components discrete financial information available regularly reviewed management goodwill amounts assigned reporting units time acquisition goodwill impairment test consists twostep process first step goodwill impairment test used identify potential impairment compares fair value reporting unit carrying value including goodwill use projected discounted cash flow model determine fair value reporting unit fair value reporting unit exceeds carrying amount goodwill reporting unit considered impaired second step impairment test required second step required compares implied fair value reporting unit goodwill carrying amount goodwill fair value reporting unit allocated assets liabilities unit including unrecognized intangible assets reporting unit acquired business combination fair value reporting unit price paid acquire reporting unit carrying amount reporting unit’s goodwill exceeds implied fair value impairment charge recognized amount equal excess longlived assets purposes recognition measurement impairment loss longlived asset assets grouped assets liabilities lowest level identifiable cash flows largely independent cash flows assets liabilities assess impairment longlived assets including identifiable intangible assets quarterly whenever events changes circumstances indicate carrying value may recoverable factors consider important could trigger impairment review include • significant underperformance relative expected historical projected future operating results • significant changes manner use longlived assets intangible assets strategy overall business • current expectation likely longlived asset sold otherwise disposed loss end previously estimated useful life • significant negative industry legal regulatory economic trends management determines carrying value longlived assets may recoverable based upon existence one indicators impairment test impairment based projected undiscounted cash flow method projected future operating results cash flows asset group used establish fair value used evaluating carrying value longlived intangible assets estimate future cash flows longlived assets using current longterm financial forecasts carrying amount longlived asset recoverable exceeds sum undiscounted cash flows expected result use eventual disposition asset case impairment loss would recognized impairment loss recognized amount carrying amount exceeds fair value income taxes account income taxes asset liability method requires recognition deferred tax assets liabilities expected future tax consequences events included financial statements method deferred tax assets liabilities reflect tax effects losses credits temporary differences carrying amounts assets liabilities financial reporting purposes amounts used income tax purposes determined using enacted tax rates effect year differences expected reverse effect change tax rates deferred tax assets liabilities recognized income period includes enactment date record net deferred tax assets extent believe assets likely realized making determination consider available positive negative evidence including scheduled reversals deferred tax liabilities projected future taxable income tax planning strategies recent financial operations extent determine able realize deferred income tax assets future excess net recorded amount make adjustment valuation allowance may reduce provision income taxes establish reduce valuation allowance deferred tax assets provision income taxes increase decrease respectively period determination change valuation allowance made recognize tax benefit uncertain tax position likely tax position sustained examination taxing authorities based technical merits position tax benefits recognized financial statements particular tax position measured based largest benefit greater 50 likelihood realized upon settlement amount unrecognized tax benefits adjusted appropriate changes facts circumstances significant amendments existing tax law new regulations interpretations taxing authorities new information obtained tax examination resolution examination recognize accrued interest penalties appropriate related unrecognized tax benefits provision income taxes revenue recognition revenue recognized pervasive evidence arrangement exists price buyer fixed determinable collectability reasonably assured title passed customer product delivered absent specific contractual specifications revenue associated equipment requires factory installation recorded installation complete customer acceptance required contractually occurred time revenue recognized provision recognized estimated product returns service revenues extended warranty contracts recognized ratably life service agreement services performed contract reagent agreements diagnostic industry sales method provides use instrument consumables reagents customer per test basis evaluate reagent agreements account contracts guidance pertaining accounting revenue arrangements multiple deliverables reagent agreements represent one unit accounting instrument consumables interdependent producing diagnostic result neither standalone value respect agreements revenues earn reagent agreements recognized pursuant terms agreement based entirely contingent upon either consumables conduct fixed number tests delivered ii reported customer per test basis shipping handling classify freight costs billed customers net sales related freight costs included cost goods sold warranty warrant certain equipment defects design materials workmanship mostly period one year upon delivery equipment establish part cost goods sold provision expected costs warranty based historical experience specific warranty terms customer feedback review performed quarterly basis assess adequacy warranty accrual changes warranty accrual included current liabilities longterm liabilities follows millions research development internal research development costs expensed incurred thirdparty research development costs expensed contracted work performed foreign currency balance sheet accounts international subsidiaries translated current exchange rates end accounting period income statement items translated average exchange rates period resulting translation adjustments recorded separate component stockholders’ equity foreign currency transaction gains losses included foreign exchange losses net consolidated statements income transaction gains losses result primarily fluctuations exchange rates intercompany receivables payables denominated currencies functional currency subsidiary recorded transaction forward foreign exchange contracts part distributing products regularly enter intercompany transactions enter forward foreign exchange contracts manage foreign exchange risk future movements exchange rates affect foreign currency denominated intercompany receivables payables use derivative financial instruments speculative trading purposes seek hedge accounting treatment contracts result contracts generally maturity dates 90 days less denominated primarily currencies industrial countries recorded asset liability measured fair value balance sheet date resulting gains losses offset exchange gains losses related receivables payables recorded foreign exchange losses net consolidated statements income cash flows related contracts classified cash flows investing activities consolidated statements cash flows noncontrolling interests noncontrolling interest subsidiary ownership interest consolidated entity reported equity consolidated financial statements separate biorad’s equity addition net income loss attributable noncontrolling interests reported separately net income attributable biorad consolidated financial statements 100 voting stock one consolidated subsidiaries remaining shares held third party represents noncontrolling minority interest subsidiary consolidated statements present full amount assets liabilities income expenses consolidated subsidiaries partially offsetting amount shown noncontrolling interests portion assets liabilities controlled us sharebased compensation plans stockbased compensation expense sharebased payment awards granted determined based grantdate fair value recognize compensation costs net estimated forfeitures requisite service period award generally vesting term sharebased payment awards estimated forfeiture rate based historical experience plans described fully note 9 earnings per share basic earnings per share computed dividing net income loss attributable biorad weighted average number common shares outstanding period diluted earnings per share takes account effect dilutive instruments stock options restricted stock uses average share price period determining number potential common shares added weighted average number shares outstanding potential common shares excluded diluted earnings per share calculation effect would antidilutive unvested sharebased payment awards contain nonforfeitable rights dividends dividend equivalents whether paid unpaid participating securities included computation earnings per share eps pursuant twoclass method unvested restricted shares qualify participating securities included shares computation eps weighted average number common shares outstanding used calculate basic diluted earnings per share antidilutive shares follows thousands fair value financial instruments certain financial instruments including cash equivalents shortterm investments accounts receivable marketable securities notes payable accounts payable foreign exchange contracts carrying amounts approximate fair value estimated fair value financial instruments based exchange price would received asset paid transfer liability exit price using available market information appropriate valuation methodologies principal advantageous market asset liability orderly transaction market participants estimates necessarily indicative amounts could realized current market exchange considerable judgment required interpreting market data used develop estimates fair value use different market assumptions estimation techniques could material effect estimated fair value see note 3 recent accounting standards updates march 2013 financial accounting standards board fasb issued guidance regard parents accounting upon derecognition certain subsidiaries groups assets within foreign entity investment foreign entity guidance specifies cumulative translation adjustment cta released earnings entity ceases controlling financial interest subsidiary group assets within consolidated foreign entity sale transfer results complete substantially complete liquidation foreign entity sales equity method investment foreign entity pro rata portion cta attributable investment would recognized earnings upon sale investment entity sells either part investment consolidated foreign entity cta would recognized earnings sale results parent longer controlling financial interest foreign entity cta would recognized earnings business combination achieved stages ie step acquisition guidance effective prospectively annual interim reporting periods beginning december 15 2013 expect adoption guidance material impact consolidated financial statements july 2012 fasb issued guidance regard testing indefinitelived intangible assets impairment new guidance provides entities option performing qualitative assessment determine whether existence events circumstances indicates likely indefinitelived asset impaired hence testing necessary entity also option bypass qualitative assessment indefinitelived intangible asset period proceed directly performing quantitative impairment test entity able resume performing qualitative assessment subsequent period guidance effective annual interim impairment tests performed fiscal years beginning september 15 2012 expected material impact consolidated financial statements june 2011 fasb issued guidance regard presentation comprehensive income new guidance entity option present total comprehensive income components net income components comprehensive income either single continuous statement comprehensive income two separate consecutive statements adopted guidance using two separate consecutive statements january 1 2012 february 2013 fasb issued guidance requiring companies present either single note parenthetically face financial statements effect significant amounts reclassified component accumulated comprehensive income based source income statement line items affected reclassification component required reclassified net income entirety companies would instead cross reference related footnote additional information guidance effective annual interim reporting periods beginning december 15 2012 may 2011 fasb issued guidance regard fair value measurement new guidance results consistent definition fair value common requirements measurement disclosure fair value gaap international financial reporting standards ifrs adopted guidance january 1 2012 material impact results operations financial position 2 acquisitions august 2012 acquired propel labs inc new cell sorting system automated easytouse benchtop cell sorting flow cytometer new system sold exclusively biorad brand s3tm cell sorter asset acquisition accounted business combination new cell sorting system represented integrated set activities assets capable conducted managed purpose providing return therefore constitutes business accordance gaap amount acquisitionrelated cost minimal biorad primarily represented acquisition process business acquisition included life science segments results operations acquisition date fair value consideration acquisition date 496 million included 50 million paid cash closing date 446 million contingent consideration potentially payable propel labs shareholders contingent consideration based probabilityweighted income approach related achievement certain development sales milestones contingent consideration development milestones valued 199 million based assumptions regarding probability achieving milestones amounts discounted present value contingent consideration sales milestones valued 247 million based statistically significant number simulations potential outcome contingent consideration recognized estimated fair value 446 million december 31 2012 see note 3 discussion contingent consideration valuation underlying assumptions fair values net assets acquired propel labs inc acquisition date determined 174 million goodwill 321 million definitelived intangible assets 01 million net tangible assets expect goodwill recorded deductible income tax purposes acquired cell sorting system fits well biorads existing life science segment product offerings may offer researchers greater access technology july 2012 acquired outstanding shares diamed benelux 46 million euros approximately 56 million cash acquisition accounted business combination diamed benelux represented integrated set activities assets capable conducted managed purpose providing return therefore constitutes business accordance gaap amount acquisitionrelated cost minimal biorad primarily represented acquisition process business acquisition included clinical diagnostics segments results operations acquisition date acquired net tangible liabilities fair value 23 million fair values assets acquired acquisition date determined 30 million goodwill 49 million definitelived intangible assets goodwill recorded deductible income tax purposes diamed benelux became exclusive distributor certain biorad immunohematology products benelux market result 2007 acquisition diamed holding ag distributor acquisition consistent stated objective control distribution products services january 2012 purchased cash certain assets raw material supplier approximately 125 million asset acquisition accounted business combination certain assets acquired represented integrated set activities assets capable conducted managed purpose providing return therefore constitutes business accordance gaap amount acquisitionrelated cost minimal biorad primarily represented acquisition process business acquisition included clinical diagnostics segments results operations acquisition date fair value assets acquired acquisition date determined 63 million net tangible assets 51 million intangible assets 11 million goodwill expect goodwill recorded deductible income tax purposes addition paid 20 million employment agreements incentive certain employees acquired business remain biorad amount expensed next two years recorded prepaid expenses taxes current assets consolidated balance sheet believe acquisition allow us secure supply critical raw materials lower overall costs clinical diagnostics segment consider business combinations 2012 individually aggregated material therefore disclosed pro forma results operations required material business combinations october 4 2011 acquired issued outstanding stock quantalife inc quantalife fair value consideration acquisition date 1794 million comprised 1503 million paid cash closing date 50 million holdback cash completion certain postclosing matters 241 million contingent consideration potentially payable quantalife shareholders contingent consideration initially recognized estimated fair value 241 million october 4 2011 based probabilityweighted income approach would reach 48 million upon achievement sales development milestones contingent consideration development milestone valued based assumptions regarding probability achieving milestone amounts discounted present value contingent consideration sales milestones valued based statistically significant number simulations potential outcome see note 3 discussion contingent consideration valuation underlying assumptions operating results business included results operations life science segment acquisition date acquisition accounted business combination determination fair value net assets acquired quantalife based upon valuation information estimates assumptions available october 4 2011 second quarter 2012 finalized determination fair value certain acquired tax attributes adjusted preliminary carrying values goodwill certain assets liabilities order reflect final information received resulting overall reduction goodwill 06 million measurement period adjustments impact results operations year ended december 31 2012 final fair values net assets acquired acquisition date determined 1055 million goodwill 947 million intangible assets 208 million net tangible liabilities expect goodwill recorded deductible tax purposes integrating acquired quantalife business biorad expected expand current portfolio products amplification study dna believe complement biorads existing business june 2011 acquired remaining outstanding shares diamed sea limited diamed thailand multiple noncontrolling shareholders approximately 02 million cash acquisition accounted equity transaction biorads noncontrolling interest reduced 10 million additional paidincapital increased 08 million diamed included clinical diagnostics segment february 2011 acquired additional 39 distribuidora de analitica para medicina ibérica sa diamed spain multiple noncontrolling shareholders increasing ownership diamed spain 90 paid approximately 25 million euros 34 million cash acquisition also included clinical diagnostics segment accounted equity transaction reduced biorad’s noncontrolling interests additional paidin capital approximately 24 million 10 million respectively 3 fair value measurements determine fair value asset liability based assumptions market participants would use pricing asset liability orderly transaction market participants measurement date identification market participant assumptions provides basis determining inputs used pricing asset liability fair value hierarchy established gives precedence fair value measurements calculated using observable inputs using unobservable inputs hierarchy prioritizes inputs three broad levels follows • level 1 quoted prices active markets identical instruments • level 2 significant observable inputs including quoted prices active markets similar instruments • level 3 significant unobservable inputs including assumptions determining fair value certain investments financial assets liabilities carried fair value measured recurring basis december 31 2012 classified hierarchy follows millions financial assets liabilities carried fair value measured recurring basis december 31 2011 classified hierarchy follows millions cash equivalents included cash equivalents consolidated balance sheets b availableforsale investments included following accounts consolidated balance sheets millions c forward foreign exchange contracts asset position included prepaid expenses taxes current assets consolidated balance sheets forward foreign exchange contracts liability position included current liabilities consolidated balance sheets e contingent consideration liability included following accounts consolidated balance sheet millions fourth quarter 2011 recognized contingent consideration liability upon acquisition quantalife related potential future payments due upon achievement certain sales development milestones contingent consideration initially recognized estimated fair value 241 million based probabilityweighted income approach contingent consideration recognized estimated fair value 80 million 241 million december 31 2012 2011 respectively october 4 2011 contingent consideration could originally reached maximum 48 million upon achievement sales milestones development milestone december 31 2012 first three shortterm sales milestones met therefore contingent consideration reach maximum 37 million upon achievement remaining sales development milestones development milestone met december 31 2012 resulting payment 6 million january 2013 third quarter 2012 recognized contingent consideration liability upon acquisition new cell sorting system propel labs inc contingent consideration recognized estimated fair value 446 million december 31 2012 based probabilityweighted income approach related achievement certain development sales milestones valued 199 million 247 million respectively development milestone could potentially reach maximum 20 million consider probability likely achieving milestones form payment guarantees seller transitions manufacturing product biorad sales milestone could potentially range 0 maximum 600 567 544 annual cell sorting system purchase orders payment occur upon anniversary completion certain number cell sorting systems three consecutive years respectively maximum payout ratios begin annual cell sorting system purchase orders excess 20 million 30 million 45 million three consecutive years respectively following table provides reconciliation level 3 contingent consideration liabilities measured fair value based third party valuations year ended december 31 2012 millions decrease contingent consideration liability quantalife primarily due achieving first three shortterm sales milestones result recent weakening funding research development markets longer sales cycle new technology causing revision sales forecasts remaining sales milestone contractual period ending march 2014 following table provides quantitative information level 3 inputs fair value measurement contingent consideration liabilities december 31 2012 significant increases decreases inputs isolation could result significantly lower higher fair value measurement estimate fair value level 2 debt securities december 31 2012 december 31 2011 primary pricing service relies inputs multiple industryrecognized pricing sources determine price investment addition pricing service performed reasonableness testing prices daily basis comparing prices reported custodians well prior day prices price difference fell outside predetermined tolerable levels investigated cause resolved pricing issue based review results analysis utilized primary pricing service level 2 debt securities none securities tested outside tolerable levels december 31 2012 primary pricing service inputs level 2 us government sponsored agencies municipal obligations corporate foreign government bonds assetbacked securities related cash equivalents consisted market prices variety industry standard data providers security master files large financial institutions thirdparty sources multiple market prices used primary pricing service inputs distributioncurve based algorithm determine daily market value december 31 2012 primary pricing service inputs level 2 corporate debt securities commercial paper bank deposits related cash equivalents consisted dynamic static security characteristics information obtained several independent sources security data dynamic inputs credit rating factor variablerate updated daily static characteristics included inputs day count first coupon upon initial security creation securities typically priced utilizing mathematical calculations reliant observable inputs availableforsale foreign government obligations based indicative bids market participants december 31 2011 primary pricing service inputs level 2 cash equivalents bonds us government sponsored agencies municipal obligations corporate debt securities bonds assetbacked securities consisted market prices variety industry standard data providers security master files large financial institutions thirdparty sources multiple market prices used primary pricing service inputs distributioncurve based algorithm determine daily market value december 31 2011 primary pricing service inputs level 2 cash equivalents commercial paper corporate debt securities commercial paper foreign government obligations commercial paper time deposits consisted dynamic static security characteristics information obtained several independent sources security data dynamic inputs credit rating factor variablerate updated daily static characteristics included inputs day count first coupon upon initial security creation securities typically priced via mathematical calculations reliant observable inputs availableforsale foreign government obligations based indicative bids market participants availableforsale investments consist following millions following summary investments gross unrealized losses associated fair value millions unrealized losses securities due number factors including changes interest rates changes economic conditions changes market outlook various industries among others biorad ability intent hold investments unrealized losses recovery fair value reasonable period time sufficient forecasted recovery fair value may maturity consider investments otherthantemporarily impaired december 31 2012 december 31 2011 forward foreign exchange contracts part distributing products regularly enter intercompany transactions enter forward foreign currency exchange contracts manage foreign exchange risk future movements foreign exchange rates affect foreign currency denominated intercompany receivables payables use derivative financial instruments speculative trading purposes seek hedge accounting treatment contracts result contracts generally maturity dates 90 days less denominated primarily currencies industrial countries recorded fair value balance sheet date notional principal amounts provide one measure transaction volume outstanding december 31 2012 represent amount biorads exposure loss estimated fair value contracts derived using spot rates published wall street journal last business day quarter points provided counterparties resulting gains losses offset exchange gains losses related receivables payables included foreign exchange losses net consolidated statements income cash flows related contracts classified cash flows investing activities consolidated statements cash flows following summary forward foreign currency exchange contracts millions following summary amortized cost estimated fair value debt securities december 31 2012 contractual maturity date millions estimated fair value financial instruments table determined using quoted prices active markets identical instruments significant observable inputs including quoted prices active markets similar instruments estimates necessarily indicative amounts could realized current market exchange considerable judgment required interpreting market data used develop estimates fair value use different market assumptions estimation techniques could material effect estimated fair value assets include financial instruments fair values based market quotations longterm debt excluding leases current maturities estimated fair value based quoted market prices similar issues estimated fair value financial instruments level fair value hierarchy within fair value measurement categorized follows millions shares ordinary voting stock sartorius ag sartorius goettingen germany process technology supplier biotechnology pharmaceutical chemical food beverage industries 30 outstanding voting shares excluding treasury shares sartorius december 31 2012 sartorius family trust sartorius family members hold controlling interest outstanding voting shares representative designee sartorius’ board directors ability exercise significant influence operating financial policies sartorius addition ordinary voting stock sartorius thinly traded therefore account investment using cost method carrying value investment included assets consolidated balance sheets 4 goodwill purchased intangible assets changes goodwill segment follows millions december 2012 sold building 64 million clinical diagnostics segment associated 1999 acquisition recognized gain sale 43 million portion goodwill recorded 1999 acquisition written 10 million conjunction purchase certain assets propel labs inc life science segment august 2012 recorded 174 million goodwill 321 million definitelived intangible assets 273 million developed product technology 47 million covenants compete 01 million intangible assets conjunction acquisition 100 outstanding shares diamed benelux clinical diagnostics segment july 2012 recorded 30 million goodwill 49 million definitelived intangible assets 38 million customer relationshipslists 11 million tradenames conjunction acquisition certain assets raw material supplier clinical diagnostics segment january 2012 recorded 11 million goodwill 51 million definitelived intangible assets considered developed product technology part acquisition quantalife life science segment october 2011 recorded 1055 million goodwill 947 million definitelived intangible assets considered know goodwill significant intangible assets indefinite lives information regarding identifiable purchased intangible assets definite lives follows millions material impairment losses related intangible assets recorded 2012 2011 amortization expense related purchased intangible assets years ended december 31 2012 2011 2010 428 million 391 million 337 million respectively estimated future amortization expense based existing intangible assets years ending december 31 2013 2014 2015 2016 2017 409 million 382 million 353 million 319 million 234 million respectively 5notes payable longterm debt notes payable includes amounts borrowed credit lines maintained locally international subsidiaries borrowing capacity approximately 279 million 238 million unused december 31 2012 december 31 2011 lines aggregated approximately 219 million 175 million unused weighted average interest rate lines 32 27 december 31 2012 2011 respectively biorad guaranteed credit lines principal components longterm debt follows millions senior subordinated notes due 2016 may 2009 biorad sold 3000 million principal amount senior subordinated notes due 2016 80 notes sale yielded net cash proceeds 2948 million effective interest rate 83 80 notes pay fixed rate interest 80 per year option redeem 80 notes time prior september 15 2013 redemption price 100 principal amount thereof plus specified makewhole premium defined indenture governing 80 notes accrued unpaid interest thereon redemption date also option redeem 80 notes time september 15 2013 various declining redemption prices plus accrued unpaid interest thereon redemption date obligations 80 notes secured rank equal right payment existing future senior subordinated indebtedness rank junior right payment existing future unsubordinated indebtedness including borrowings credit agreement 4875 notes senior notes due 2020 december 2010 biorad sold 4250 million principal amount senior notes due 2020 4875 notes sale yielded net cash proceeds 4226 million effective rate 4946 4875 notes pay fixed rate interest 4875 per year option redeem 4875 notes time redemption price 100 principal amount plus specified makewhole premium defined indenture governing 4875 notes accrued unpaid interest thereon redemption date obligations 4875 notes secured rank equal right payment existing future unsubordinated indebtedness net proceeds issuance 4875 notes used together cash hand redeem 2000 million 6125 notes defined december 2010 2250 million 75 notes defined january 2011 senior subordinated notes due 2013 august 2003 biorad sold 2250 million principal amount senior subordinated notes due 2013 75 notes january 2011 redeemed 75 senior subordinated notes due 2013 2346 million including call premium 28 million included interest expense consolidated statements income senior subordinated notes due 2014 december 2004 biorad sold 2000 million principal amount senior subordinated notes due 2014 6125 notes december 2010 redeemed 6125 notes 2043 million including call premium 41 million included interest expense consolidated statements income amended restated credit agreement credit agreement june 2010 biorad entered 2000 million credit agreement borrowings credit agreement revolving basis used acquisitions working capital general corporate purposes outstanding borrowings credit agreement december 31 2012 december 31 2011 credit agreement expires june 21 2014 credit agreement secured substantially personal property assets domestic subsidiaries 65 capital stock certain foreign subsidiaries guaranteed existing future material domestic subsidiaries credit agreement 80 notes require biorad comply certain financial ratios covenants among things ratios covenants include leverage ratio test interest coverage test well restrictions ability declare pay dividends incur debt guarantee debt enter transactions affiliates merge consolidate sell assets make investments create liens prepay subordinated debt compliance ratios covenants december 31 2012 maturities longterm debt december 31 2012 follows 2013 02 million 2014 02 million 2015 02 million 2016 2971 million 2017 02 million thereafter 4347 million 6 income taxes us international components income taxes follows millions provision income taxes consists following millions reconciliation effective tax rate income taxes statutory tax rate follows effective tax rate 2012 reflected tax benefit related adjustment fair value quantalife contingent consideration effective tax rate 2012 include tax benefits us federal tax research credits law extending credit enacted 2013 effective tax rate 2011 reflected tax benefits nontaxable dividend income release tax liabilities lower effective tax rate 2010 due 220 million foreign tax credit benefit related 1640 million distribution foreign affiliates us effective tax rates three periods lower us statutory rate primarily due tax benefits differences us foreign statutory tax rates research development tax credits foreign income earned primarily france switzerland switzerlands statutory tax rate significantly lower us statutory tax rate 35 effective tax rates also significantly reduced french tax incentives related research development activities effective tax rate may impacted future either favorably unfavorably many factors including limited changes statutory tax rates changes tax laws regulations tax audits settlements generation tax credits deferred tax assets liabilities reflect tax effects losses credits temporary differences carrying amounts assets liabilities financial reporting purposes amounts used income tax purposes significant components deferred tax assets liabilities follows millions december 31 2012 biorad’s international subsidiaries combined net operating loss carryforwards 996 million loss carryforwards 977 million expiration date believe likely benefit net operating loss carryforwards realized provided valuation allowance 256 million relating net operating loss carryforwards december 31 2012 biorad us federal net operating loss carryforwards approximately 36 million result acquisitions carryforwards subject limitation utilization expire 2018 2030 december 31 2012 biorad us federal research tax credit carryforwards 15 million subject limitations utilization december 31 2012 biorad approximately 53 million california net operating loss carryforwards related acquisition quantalife believe likely benefit net operating loss carryforwards realized recorded full valuation allowance losses december 31 2012 biorad deferred tax asset 172 million relating california research tax credit carryforwards including 11 million acquisition quantalife may carried forward indefinitely based judgment consistent prior years recorded full valuation allowance deferred tax asset believe likely certain deferred tax assets described realized foreseeable future recognized tax benefits relating reversal valuation allowance deferred tax assets december 31 2012 recognized reduction income tax expense following table summarizes december 31 2012 tax years either currently audit remain open subject examination tax authorities major jurisdictions biorad operates following tabular reconciliation total amounts unrecognized tax benefits millions substantially unrecognized tax benefits december 31 2012 2011 2010 would affect effective tax rate recognized biorad recognizes accrued interest penalties related unrecognized tax benefits income tax expense related unrecognized tax benefits noted biorad accrued interest 20 million 21 million december 31 2012 2011 respectively december 31 2012 believe reasonably possible 37 million unrecognized tax benefits may recognized end 2013 result statute lapses benefits related uncertainty regarding sustainability certain deductions credits tax years remain subject examination relevant tax authorities general practice intention reinvest earnings nonus subsidiaries operations december 31 2012 biorad made provision us additional foreign withholding taxes approximately 484 million excess amount financial reporting tax basis investments foreign subsidiaries essentially permanent duration generally amounts become subject us taxation upon remittance dividends certain circumstances earnings repatriated us deferred tax liability associated temporary differences would approximately 102 million 7 stockholders equity biorad’s issued outstanding stock consists class common stock class b common stock class b share class b participates equally earnings biorad identical respects except class limited voting rights share class entitled one tenth vote matters share class b entitled one vote additionally class stockholders entitled elect 25 board directors class b stockholders entitled elect 75 directors cash dividends may paid class shares without paying cash dividend class b shares cash dividend may paid class b shares unless least equal cash dividend paid class shares class b shares convertible time class shares oneforone basis option stockholder founders biorad schwartz family collectively holds majority biorad’s voting stock result schwartz family able exercise significant influence biorad treasury shares board directors authorized repurchase 180 million biorads common stock 33 million yet repurchased open market december 31 2012 amended restated credit agreement credit agreement indenture governing 80 senior subordinated notes due 2016 limit ability repurchase stock accordance terms awards 2007 incentive award plan june 2012 withheld 122 shares class common stock 917 shares class b common stock satisfy minimum statutory tax obligations due upon vesting restricted stock certain employees considered repurchase stock repurchases stock 2012 2011 2013 estimate repurchasing approximately 1000 shares satisfy tax obligations due upon vesting restricted stock certain employees 8 accumulated comprehensive income accumulated comprehensive income included consolidated balance sheets consolidated statements changes stockholders equity consists following components net income taxes millions 9 sharebased compensationstock option purchase plans description sharebased compensation plans stock option award plans three stock option plans officers certain employees 1994 stock option plan 1994 plan 2003 stock option plan 2003 plan 2007 incentive award plan 2007 plan 1994 plan 2003 plan authorized grant incentive stock options nonqualified stock options employees 2007 plan authorizes grant stock options restricted stock awards restricted stock units stock appreciation rights types equity awards employees longer grant stock option grants 1994 plan 2003 plan since 2007 sharebased compensation grants 2007 plan total 1650360 shares reserved issuance equity awards 2007 plan may either class b common stock december 31 2012 653015 shares available granted future plans class b options granted prices less fair market value underlying common stock date grant generally options granted term 10 years vest increments 20 per year fiveyear period yearly anniversary date grant stock awards issued 2007 plan generally vest increments 20 per year fiveyear period yearly anniversary date grant employee stock purchase plans amended restated 1988 employee stock purchase plan 1988 espp 2011 employee stock purchase plan 2011 espp provides eligible employees may contribute 10 compensation 25000 annually toward quarterly purchase class common stock employees’ purchase price 85 lesser fair market value stock first business day last business day calendar quarter january 1 2012 longer issue shares 1988 espp 2011 espp includes two components code section 423 component intend qualify “employee stock purchase plan” section 423 us internal revenue code 1986 amended “code” non423 component authorizes grant purchase rights qualify “employee stock purchase plan” section 423 code authorized sale 600000 shares class common stock 2011 espp sharebased compensation expense included sharebased compensation expense cost related stock option grants espp stock purchases restricted stock restricted stock unit awards sharebased compensation expense allocated cost goods sold research development expense selling general administrative expense consolidated statements income 2012 2011 2010 recognized sharebased compensation expense 132 million 107 million 102 million respectively capitalize sharebased compensation expense inventory options awards amortize fair value straightline basis stock compensation awards amortized requisite service periods awards generally vesting periods stock options following table summarizes stock option activity following summarizes information stock options outstanding december 31 2012 intrinsic value stock options defined difference current market value grant price total intrinsic value date exercise stock options exercised 2012 2011 2010 approximately 11 million 14 million 13 million respectively total fair value options vested 2012 2011 2010 23 million 33 million 42 million respectively cash received stock options exercised 2012 2011 2010 81 million 94 million 54 million respectively actual tax benefit realized tax deductions stock options exercised totaled 65 million 60 million 50 million 2012 2011 2010 respectively december 31 2012 57 million total unrecognized compensation cost stock options amount expected recognized future weightedaverage period approximately 3 years weightedaverage fair value stock options granted estimated using blackscholes optionpricing model following weightedaverage assumptions volatility based historical volatilities common stock period equal stock option’s expected life riskfree interest rate based us treasury yield curve effect time grant expected life represents number years estimate based primarily historical experience options outstanding prior exercise anticipate paying cash dividends future therefore use expected dividend yield zero restricted stock 2007 plan restricted stock last granted 2008 grants fair value share restricted stock market value determined closing price stock day grant following table summarizes restricted stock activity december 31 2012 approximately 05 million total unrecognized compensation cost related restricted stock awards amount expected recognized remaining weightedaverage period less 1 year restricted stock units restricted stock units rights receive shares company stock granted 2007 2012 2007 plan fair value restricted stock unit market value determined closing price stock day grant following table summarizes restricted stock unit activity december 31 2012 approximately 266 million total unrecognized compensation cost related restricted stock units amount expected recognized remaining weightedaverage period approximately 4 years employee stock purchase plans fair value employees’ purchase rights 2011 espp 1988 espp estimated using blackscholes model following weightedaverage assumptions major assumptions primarily based historical data volatility based historical volatilities common stock period equal expected life purchase rights riskfree interest rate based us treasury yield curve effect time grant anticipate paying cash dividends future therefore use expected dividend yield zero sold 107749 shares 92 million 96362 shares 81 million 96586 shares 74 million 2011 espp 1988 espp employees 2012 2011 2010 respectively december 31 2012 492251 shares remain authorized available issuance 2011 espp currently issue new shares satisfy stock option exercises restricted stock issuances espp stock purchases 10 income expense net income expense net includes following components millions otherthantemporary impairment losses investments recorded 2012 2011 2010 certain availableforsale investments light continuing declines market prices time primarily associated investment sovereign nation large deficits decision sell holdings particular adviser account december 2012 sold building 64 million clinical diagnostics segment associated 1999 acquisition recognized gain sale 43 million portion goodwill recorded 1999 acquisition written 10 million 11 supplemental cash flow information reconciliation net income including noncontrolling interests net cash provided operating activities follows millions 12 commitments contingent liabilities rents leases net rental expense operating leases 414 million 424 million 383 million 2012 2011 2010 respectively leases principally facilities automobiles annual future minimum lease payments december 31 2012 operating leases follows 2013 353 million 2014 308 million 2015 232 million 2016 189 million 2017 beyond 580 million deferred profit sharing retirement plan profit sharing plan covering substantially us employees contributions made discretion board directors biorad liability current year’s contribution expense 121 million 121 million 122 million 2012 2011 2010 respectively postemployment benefits several foreign locations statutorily required provide lump sum severance termination indemnity employees plans vested benefit obligation december 31 2012 2011 395 million 307 million respectively included current liabilities longterm liabilities consolidated balance sheets plans required funded trust device used accumulate assets settle obligations purchase obligations december 31 2012 purchase obligations 655 million include agreements purchase goods services enforceable legally binding biorad specify significant terms exclude agreements cancelable without penalty annual future fixed determinable portion purchase obligations december 31 2012 follows 2013 560 million 2014 2015 95 million letters credit ordinary course business times required post letters credit letters credit issued banks guarantee obligations various parties including insurance companies contingently liable 116 million standby letters credit banks december 31 2012 contingent consideration fourth quarter 2011 recognized contingent consideration liability upon acquisition quantalife related potential future payments due upon achievement certain sales development milestones contingent consideration initially recognized estimated fair value 241 million based probabilityweighted income approach contingent consideration recognized estimated fair value 80 million 241 million december 31 2012 2011 respectively october 4 2011 contingent consideration could originally reached maximum 48 million upon achievement sales milestones development milestone december 31 2012 first three shortterm sales milestones met therefore contingent consideration reach maximum 37 million upon achievement remaining sales development milestones development milestone met december 31 2012 resulting payment 6 million january 2013 third quarter 2012 recognized contingent consideration liability upon acquisition new cell sorting system propel labs inc contingent consideration recognized estimated fair value 446 million december 31 2012 based probabilityweighted income approach related achievement certain development sales milestones valued 199 million 247 million respectively development milestone could potentially reach maximum 20 million consider probability likely achieving milestones form payment guarantees seller transitions manufacturing product biorad sales milestone could potentially range 0 maximum 600 567 544 annual cell sorting system purchase orders payment occur upon anniversary completion certain number cell sorting systems three consecutive years respectively maximum payout ratios begin annual cell sorting system purchase orders excess 20 million 30 million 45 million three consecutive years respectively concentrations labor subject collective bargaining agreements december 31 2012 approximately seven percent biorads approximately 2975 us employees covered collective bargaining agreement expire november 7 2016 many biorads nonus fulltime employees especially france covered collective bargaining agreements consider employee relations general good royalty contingency license certain technologies particular third party connection audit royalty obligations licenses third party proposed owe additional 302 million unpaid royalties disagree amount royalties owed discussions third party resolve claims related unpaid royalties well enter license agreements third party relating respective technologies recorded accrued liability matter reflects amount within range possible outcomes best estimate amount expect pay settle claims related past royalties part overall settlement ultimate resolution matters however may result loss excess amount accrued december 31 2012 13 legal proceedings based internal investigation identified conduct certain overseas operations may violated antibribery provisions united states foreign corrupt practices act fcpa likely violated fcpas books records internal controls provisions internal policies may 2010 voluntarily disclosed matters us department justice doj securities exchange commission sec commenced investigation audit committee board directors audit committee assumed direct responsibility reviewing matters hired experienced independent counsel conduct investigation provide legal advice provided additional information doj sec audit committees investigation progressed continue cooperate doj sec investigations provide information audit committee determined continue investigation based matters arose connection assessment accrual royalties payable us certain patent licenses third party doj sec investigations also continuing presently unable predict duration scope results investigations whether either agency commence legal actions doj sec broad range civil criminal sanctions fcpa laws regulations including limited injunctive relief disgorgement fines penalties modifications business practices including termination modification existing business relationships imposition compliance programs retention monitor oversee compliance fcpa unable estimate outcome matter however imposition sanctions remedial measures could material adverse effect business financial condition date determined whether activities question violated laws foreign jurisdictions took place april 13 2011 shareholder derivative lawsuit filed directors superior court contra costa county california case also names company nominal defendant captioned city riviera beach general employees retirement system v david schwartz et al case msc1100854 complaint plaintiff alleges directors breached fiduciary duties failing ensure sufficient internal controls systems compliance fcpa purportedly seeking relief behalf plaintiff seeks award unspecified compensatory punitive damages costs expenses including attorneys fees declaration directors breached fiduciary duties individual defendants filed demurrer requesting dismissal complaint case well motion stay matter pending resolution abovereferenced investigations doj sec following hearing september 30 2011 court sustained demurrer dismissed complaint without prejudice granted plaintiff additional time file amended complaint court denied motion stay matter dismissed complaint parties agreed stipulated dismissal case without prejudice tolling statute limitations pending resolution doj sec investigations addition party various claims legal actions complaints arising ordinary course business believe time ultimate liability resulting matters material adverse effect results operations financial position liquidity however cannot give assurance regarding ultimate outcome matters resolution could material operating results particular period depending level income period 14 segment information biorad multinational manufacturer worldwide distributor life science research products clinical diagnostics products two reportable segments life science clinical diagnostics reportable segments strategic business lines offer 8000 different products services require different marketing strategies disclose quantitative information different products services impractical based primarily numerous products services sell global markets serve life science segment develops manufactures sells services reagents apparatus instruments used biological research products sold university medical school laboratories pharmaceutical biotechnology companies food testing laboratories government industrial research facilities clinical diagnostics segment develops manufactures sells services automated test systems informatics systems test kits specialized quality controls healthcare market products sold reference laboratories hospital laboratories state newborn screening facilities physicians’ office laboratories transfusion laboratories insurance forensic testing laboratories operations include remainder former analytical instruments segment results presented manner present operations internally make operating decisions assess performance accounting policies segments described significant accounting policies see note 1 segment profit loss includes allocation corporate expense based upon sales allocation interest expense based upon accounts receivable inventories difference total segment allocated interest expense depreciation amortization capital expenditures corresponding consolidated amounts attributable corporate headquarters segments expected manage assets completely control accordingly segment assets include primarily accounts receivable inventories gross machinery equipment goodwill balances included corporate segment reporting purposes information regarding industry segments december 31 2012 2011 2010 years ended follows millions net corporate operating expense consists receipts expenditures primary responsibility segment operating management therefore allocated segments performance assessment chief operating decision maker following reconciles total segment profit consolidated income taxes millions following reconciles total segment assets consolidated total assets millions following presents net sales external customers geographic region based primarily location use product service millions following presents assets property plant equipment net geographic region based upon location asset millions 15 quarterly financial data unaudited summarized quarterly financial data 2012 2011 follows millions except per share data first quarter 2012 identified error consolidated financial statements years 2007 2011 related foreign supplemental tax associated social benefits incorrectly interpreted applied local statutes circumstances accrued 61 million foreign supplemental taxes including penalties interest first quarter 2012 paid foreign supplemental tax related penalties interest deductible income tax purposes error impact biorads provision income taxes evaluated materiality error qualitative quantitative perspective based evaluation concluded accumulation error significant threemonth period ended march 31 2012 correction material individual prior period year ended december 31 2012 effect trend financial results taking account requirements securities exchange commission sec staff accounting bulletin 108 considering effects prior year misstatements quantifying misstatements current year financial statements sab 108 16 subsequent event january 2013 acquired 100 outstanding shares abd serotec division morphosys ag approximately 53 million euros approximately 70 million cash acquisition included life science segments results operations acquisition date accounted business combination amount acquisitionrelated cost minimal biorad primarily represented acquisition process goodwill recorded deductible income tax purposes unable complete fair value net assets acquired time needed complete information transfer seller include information valuation individual assets liabilities believe abd serotecs comprehensive catalog antibodies able offer customers total assay solutions validated many research platforms western blotting multiplex protein expression elisa cell sorting item 9item 8 financial statements supplementary data report independent registered public accounting firm board directors stockholders biorad laboratories inc audited accompanying consolidated balance sheet biorad laboratories inc subsidiaries company december 31 2013 related consolidated statements income comprehensive income stockholders’ equity cash flows year ended december 31 2013 connection audit consolidated financial statements also audited financial statement schedule consolidated financial statements financial statement schedule responsibility company’s management responsibility express opinion consolidated financial statements financial statement schedule based audits conducted audit accordance standards public company accounting oversight board united states standards require plan perform audit obtain reasonable assurance whether financial statements free material misstatement audit includes examining test basis evidence supporting amounts disclosures financial statements audit also includes assessing accounting principles used significant estimates made management well evaluating overall financial statement presentation believe audit provides reasonable basis opinion consolidated financial statements referred present fairly material respects financial position biorad laboratories inc subsidiaries december 31 2013 results operations cash flows year ended december 31 2013 conformity us generally accepted accounting principles also opinion related financial statement schedule considered relation basic consolidated financial statements taken whole present fairly material respects information set forth therein also audited accordance standards public company accounting oversight board united states biorad laboratories inc’s internal control financial reporting december 31 2013 based criteria established internal control integrated framework 1992 issued committee sponsoring organizations treadway commission coso report dated march 17 2014 expressed adverse opinion effectiveness company’s internal control financial reporting report independent registered public accounting firm board directors stockholders biorad laboratories inc audited biorad laboratories inc’s company internal control financial reporting december 31 2013 based criteria established internal control integrated framework 1992 issued committee sponsoring organizations treadway commission coso biorad laboratories inc’s management responsible maintaining effective internal control financial reporting assessment effectiveness internal control financial reporting included accompanying management’s report internal control financial reporting item 9ab responsibility express opinion companys internal control financial reporting based audit conducted audit accordance standards public company accounting oversight board united states standards require plan perform audit obtain reasonable assurance whether effective internal control financial reporting maintained material respects audit included obtaining understanding internal control financial reporting assessing risk material weakness exists testing evaluating design operating effectiveness internal control based assessed risk audit also included performing procedures considered necessary circumstances believe audit provides reasonable basis opinion companys internal control financial reporting process designed provide reasonable assurance regarding reliability financial reporting preparation financial statements external purposes accordance generally accepted accounting principles company’s internal control financial reporting includes policies procedures 1 pertain maintenance records reasonable detail accurately fairly reflect transactions dispositions assets company 2 provide reasonable assurance transactions recorded necessary permit preparation financial statements accordance generally accepted accounting principles receipts expenditures company made accordance authorizations management directors company 3 provide reasonable assurance regarding prevention timely detection unauthorized acquisition use disposition company’s assets could material effect financial statements inherent limitations internal control financial reporting may prevent detect misstatements also projections evaluation effectiveness future periods subject risk controls may become inadequate changes conditions degree compliance policies procedures may deteriorate material weakness deficiency combination deficiencies internal control financial reporting reasonable possibility material misstatement company’s annual interim financial statements prevented detected timely basis material weakness related design monitoring controls operations certain company’s locations within united states overseas completeness timeliness communication locations well precision controls designed documented identified included management’s assessment also audited accordance standards public company accounting oversight board united states consolidated balance sheet consolidated statements income comprehensive income stockholders’ equity cash flows financial statement schedule biorad laboratories inc material weakness considered determining nature timing extent audit tests applied audit 2013 consolidated financial statements report affect audit opinion dated march 17 2014 expressed unqualified opinion consolidated financial statements opinion effect aforementioned material weakness achievement objectives control criteria biorad laboratories inc maintained effective internal control financial reporting december 31 2013 based criteria established internal controlintegrated framework 1992 issued committee sponsoring organizations treadway commission coso report ernst young llp independent registered public accounting firm board directors stockholders biorad laboratories inc audited accompanying consolidated balance sheet biorad laboratories inc december 31 2012 related consolidated statements income comprehensive income cash flows changes stockholders equity two years ended december 31 2012 audits also included financial statement schedule listed index item 15a2 financial statements schedule responsibility companys management responsibility express opinion financial statements schedule based audits conducted audits accordance standards public company accounting oversight board united states standards require plan perform audit obtain reasonable assurance whether financial statements free material misstatement audit includes examining test basis evidence supporting amounts disclosures financial statements audit also includes assessing accounting principles used significant estimates made management well evaluating overall financial statement presentation believe audits provide reasonable basis opinion financial statements referred present fairly material respects consolidated financial position biorad laboratories inc december 31 2012 consolidated results operations cash flows two years ended december 31 2012 conformity us generally accepted accounting principles also opinion related financial statement schedule considered relation basic financial statements taken whole presents fairly material respects information set forth therein ernst young llp redwood city california march 18 2013 except section note 1 entitled ‘correction immaterial errors reclassification certain amounts’ date march 17 2014 accompanying notes integral part consolidated financial statements accompanying notes integral part consolidated financial statements biorad laboratories inc consolidated statements income thousands except per share data accompanying notes integral part consolidated financial statements biorad laboratories inc consolidated statements comprehensive income thousands reclassification adjustments calculated using specific identification method accompanying notes integral part consolidated financial statements biorad laboratories inc consolidated statements cash flows thousands accompanying notes integral part consolidated financial statements accompanying notes integral part consolidated financial statements biorad laboratories inc notes consolidated financial statements 1significant accounting policies basis presentation consolidated financial statements include accounts biorad laboratories inc wholly majority owned subsidiaries referred report “biorad” “we” “us” “our” elimination intercompany balances transactions preparation financial statements conformity us generally accepted accounting principles requires management make estimates assumptions affect amounts reported financial statements accompanying notes actual results could differ estimates evaluate subsequent events evidence provide conditions existing date balance sheet well conditions arose balance sheet date financial statements issued effects conditions existed balance sheet date recognized financial statements events conditions arising balance sheet date financial statements issued evaluated determine disclosure required keep financial statements misleading extent events conditions exist disclosures made regarding nature events estimated financial effects events conditions cash equivalents cash equivalents consist cash highly liquid investments original maturities three months less readily convertible cash equivalents stated cost approximates fair value availableforsale investments availableforsale investments consist corporate obligations municipal securities asset backed securities us government sponsored agencies marketable equity securities management classifies investments time purchase reevaluates classification balance sheet date investments maturities beyond one year may classified shortterm based liquid nature marketable securities represent investment cash available current operations availableforsale investments reported fair value based quoted market prices observable market data unrealized gains losses reported component comprehensive income net related tax effect unrealized losses charged income decline fair value individual security determined otherthantemporary review availableforsale investments otherthantemporary losses quarterly basis realized gains losses otherthantemporary impairments investments included income expense net see note 10 concentration credit risk financial instruments potentially subject us concentration credit risk consist primarily cash equivalents investments foreign exchange contracts trade accounts receivable cash equivalents investments placed various highly rated major financial institutions located different geographic regions biorad sustained significant losses instruments held financial institutions forward contracts used managing foreign currency exposures element risk counterparties may unable meet terms agreements attempt minimize risk limiting counterparties diverse group highlyrated domestic international financial institutions event nonperformance counterparties carrying values financial instruments represent maximum amount loss would incurred fiscal yearend however expect record losses result counterparty default perform credit evaluation procedures related trade receivables exception certain developing countries generally require collateral result increased risk certain developing countries biorad sales subject collateral letters credit customers credit risk trade accounts receivable generally limited due large number customers dispersion across many geographic areas however significant amount trade receivables national healthcare systems countries within european union accounts receivable maintain allowance doubtful accounts estimated losses resulting inability customers make required payments amount allowance determined analyzing known uncollectible accounts aged receivables economic conditions customers’ country industry historical losses customers’ creditworthiness amounts later determined specifically identified uncollectible charged written allowance inventory inventories valued lower actual cost market net realizable value include material labor overhead costs firstin firstout method used relieve inventory products sold property plant equipment property plant equipment carried cost less accumulated depreciation amortization included property plant equipment buildings equipment acquired capital lease arrangements reagent rental equipment capitalized software including costs software developed obtained internal use property plant equipment assessed impairment quarterly whenever events changes circumstances indicate carrying amount may recoverable depreciation computed straightline basis estimated useful lives assets buildings leasehold improvements amortized 1530 years term leases life improvements whichever shorter exception reagent rental equipment amortized 15 year period equipment capitalized software depreciated 312 years goodwill represents excess cost fair value net tangible identifiable intangible assets acquired businesses goodwill assessed impairment applying fair value based tests annually fourth quarter whenever events changes circumstances indicate carrying amount may recoverable perform impairment tests goodwill reporting unit level one level operating segments reporting units identified components discrete financial information available regularly reviewed management goodwill amounts assigned reporting units time acquisition goodwill impairment test consists twostep process first step goodwill impairment test used identify potential impairment compares fair value reporting unit carrying value including goodwill use projected discounted cash flow model determine fair value reporting unit fair value reporting unit exceeds carrying amount goodwill reporting unit considered impaired second step impairment test required second step required compares implied fair value reporting unit goodwill carrying amount goodwill fair value reporting unit allocated assets liabilities unit including unrecognized intangible assets reporting unit acquired business combination fair value reporting unit price paid acquire reporting unit carrying amount reporting unit’s goodwill exceeds implied fair value impairment charge recognized amount equal excess longlived assets purposes recognition measurement impairment loss longlived asset assets grouped assets liabilities lowest level identifiable cash flows largely independent cash flows assets liabilities assess impairment longlived assets including identifiable intangible assets quarterly whenever events changes circumstances indicate carrying value may recoverable factors consider important could trigger impairment review include • significant underperformance relative expected historical projected future operating results • significant changes manner use longlived assets intangible assets strategy overall business • current expectation likely longlived asset sold otherwise disposed loss end previously estimated useful life • significant negative industry legal regulatory economic trends management determines carrying value longlived assets may recoverable based upon existence one indicators impairment test impairment based projected undiscounted cash flow method projected future operating results cash flows asset group used establish fair value used evaluating carrying value longlived intangible assets estimate future cash flows longlived assets using current longterm financial forecasts carrying amount longlived asset recoverable exceeds sum undiscounted cash flows expected result use eventual disposition asset case impairment loss would recognized impairment loss recognized amount carrying amount exceeds fair value income taxes account income taxes asset liability method requires recognition deferred tax assets liabilities expected future tax consequences events included financial statements method deferred tax assets liabilities reflect tax effects losses credits temporary differences carrying amounts assets liabilities financial reporting purposes amounts used income tax purposes determined using enacted tax rates effect year differences expected reverse effect change tax rates deferred tax assets liabilities recognized income period includes enactment date record net deferred tax assets extent believe assets likely realized making determination consider available positive negative evidence including scheduled reversals deferred tax liabilities projected future taxable income tax planning strategies recent financial operations extent determine able realize deferred income tax assets future excess net recorded amount make adjustment valuation allowance may reduce provision income taxes establish reduce valuation allowance deferred tax assets provision income taxes increase decrease respectively period determination change valuation allowance made recognize tax benefit uncertain tax position likely tax position sustained examination taxing authorities based technical merits position tax benefits recognized financial statements particular tax position measured based largest benefit greater 50 likelihood realized upon settlement amount unrecognized tax benefits adjusted appropriate changes facts circumstances significant amendments existing tax law new regulations interpretations taxing authorities new information obtained tax examination resolution examination recognize accrued interest penalties appropriate related unrecognized tax benefits provision income taxes revenue recognition revenue recognized pervasive evidence arrangement exists price buyer fixed determinable collectability reasonably assured title passed customer product delivered absent specific contractual specifications revenue associated equipment requires factory installation recorded installation complete customer acceptance required contractually occurred time revenue recognized provision recognized estimated product returns service revenues extended warranty contracts recognized ratably life service agreement services performed contract reagent agreements diagnostic industry sales method provides use instrument consumables reagents customer per test basis evaluate reagent agreements account contracts guidance pertaining accounting revenue arrangements multiple deliverables reagent agreements represent one unit accounting instrument consumables interdependent producing diagnostic result neither standalone value respect agreements revenues earn reagent agreements recognized pursuant terms agreement based entirely contingent upon either consumables conduct fixed number tests delivered ii reported customer per test basis shipping handling classify freight costs billed customers net sales related freight costs included cost goods sold warranty warrant certain equipment defects design materials workmanship mostly period one year upon delivery equipment establish part cost goods sold provision expected costs warranty based historical experience specific warranty terms customer feedback review performed quarterly basis assess adequacy warranty accrual changes warranty accrual included current liabilities longterm liabilities follows millions research development internal research development costs expensed incurred thirdparty research development costs expensed contracted work performed foreign currency balance sheet accounts international subsidiaries translated current exchange rates end accounting period income statement items translated average exchange rates period resulting translation adjustments recorded separate component stockholders’ equity foreign currency transaction gains losses included foreign exchange losses net consolidated statements income transaction gains losses result primarily fluctuations exchange rates intercompany receivables payables denominated currencies functional currency subsidiary recorded transaction forward foreign exchange contracts part distributing products regularly enter intercompany transactions enter forward foreign exchange contracts manage foreign exchange risk future movements exchange rates affect foreign currency denominated intercompany receivables payables use derivative financial instruments speculative trading purposes seek hedge accounting treatment contracts result contracts generally maturity dates 90 days less denominated primarily currencies industrial countries recorded asset liability measured fair value balance sheet date resulting gains losses offset exchange gains losses related receivables payables recorded foreign exchange losses net consolidated statements income noncontrolling interests noncontrolling interest subsidiary ownership interest consolidated entity reported equity consolidated financial statements separate biorad’s equity addition net income loss attributable noncontrolling interests reported separately net income attributable biorad consolidated financial statements consolidated statements presented full amount assets liabilities income expenses consolidated subsidiaries partially offsetting amount shown noncontrolling interests portion assets liabilities controlled us february 2013 acquired remaining outstanding shares distribuidora de analitica para medicina iberica sa diamed spain remaining noncontrolling shareholder approximately 06 million euros 09 million cash acquisition accounted equity transaction reduced biorads noncontrolling interests additional paidin capital 06 million 03 million respectively therefore noncontrolling interests biorad sharebased compensation plans stockbased compensation expense sharebased payment awards granted determined based grantdate fair value recognize compensation costs net estimated forfeitures requisite service period award generally vesting term sharebased payment awards estimated forfeiture rate based historical experience plans described fully note 9 earnings per share basic earnings per share computed dividing net income attributable biorad weighted average number common shares outstanding period diluted earnings per share takes account effect dilutive instruments stock options restricted stock uses average share price period determining number potential common shares added weighted average number shares outstanding potential common shares excluded diluted earnings per share calculation effect would antidilutive unvested sharebased payment awards contain nonforfeitable rights dividends dividend equivalents whether paid unpaid participating securities included computation earnings per share eps pursuant twoclass method unvested restricted shares qualify participating securities included shares computation eps weighted average number common shares outstanding used calculate basic diluted earnings per share antidilutive shares follows thousands fair value financial instruments certain financial instruments including cash equivalents shortterm investments accounts receivable marketable securities notes payable accounts payable foreign exchange contracts carrying amounts approximate fair value estimated fair value financial instruments based exchange price would received asset paid transfer liability exit price using available market information appropriate valuation methodologies principal advantageous market asset liability orderly transaction market participants estimates necessarily indicative amounts could realized current market exchange considerable judgment required interpreting market data used develop estimates fair value use different market assumptions estimation techniques could material effect estimated fair value see note 3 correction immaterial errors reclassification certain amounts inventory costing third quarter 2013 identified errors consolidated financial statements years 2011 2012 interim periods therein unaudited interim condensed consolidated financial statements three month periods ended march 31 2013 june 30 2013 related valuation finished goods inventory life science segment inappropriately expensing inventory amounts greater actual costs nonsales transactions primarily related inventory used demonstration purposes product samples recorded selling general administrative expense addition life science segment inventory error affected cost goods sold relieved inventory higher cost incurred limited sales third parties produced nonus manufacturing facility effect correcting errors 2011 2012 consolidated financial statements increases net income 08 million 17 million respectively research development rd tax credit third quarter 2013 revised classification one item periods presented “provision income taxes” “research development expense” consolidated statements income conform current year presentation item reclassified pertains refundable french rd tax credit reclassification reduces research development expense believe presentation appropriate required taxable income order earn credits effect reclassifications provision income taxes research development expense 2011 2012 88 million 48 million respectively impact immaterial error correction reclassification described consolidated balance sheet consolidated statements income periods presented follows thousands except per share data presentation disclosure statements comprehensive income first quarter 2013 identified errors consolidated statements comprehensive income 2012 2011 2010 unaudited interim condensed consolidated statements comprehensive income three quarters 2012 affected two line items within financial statement specifically incorrectly calculated 1 net unrealized holding gains availableforsale afs investments net tax 2 reclassification adjustments net holding gainslosses afs investments included net income including noncontrolling interests net tax following amounts thousands reported consolidated statements comprehensive income giving effect errors described management evaluated materiality errors described qualitative quantitative perspective based evaluation concluded accumulation errors significant year ended december 31 2013 correction would material individual prior period effect trend financial results taking account requirements securities exchange commission sec staff accounting bulletin 108 considering effects prior year misstatements quantifying misstatements current year financial statements sab 108 accordingly correcting errors every affected period 2013 consolidated financial statements included form 10k recent accounting standards updates february 2013 financial accounting standards board fasb issued guidance requiring companies present either single note parenthetically face financial statements effect significant amounts reclassified component accumulated comprehensive income based source income statement line items affected reclassification component required reclassified net income entirety companies would instead cross reference related footnote additional information adopted guidance january 1 2013 present single note guidance related disclosure therefore impact consolidated financial position results operations cash flows 2 acquisitions january 2013 acquired 100 outstanding shares abd serotec division morphosys ag total consideration 622 million net cash received 73 million acquisition accounted business combination abd serotec represented integrated set activities assets capable conducted managed purpose providing return therefore constitutes business accordance gaap amount acquisitionrelated costs minimal biorad primarily represented acquisition process business acquisition included life science segments results operations acquisition date believe abd serotecs comprehensive catalog antibodies able offer customers total assay solutions validated many research platforms western blotting multiplex protein expression elisa cell sorting second quarter 2013 finalized determination fair values certain acquired intangible assets adjusted preliminary carrying values goodwill certain assets liabilities include final information received update weighted average tax rate applied valuation model changes determination fair values certain assets acquired liabilities assumed factors existed acquisition date resulted overall increase intangible assets 17 million reduction goodwill 21 million increase net tangible assets 04 million measurement period adjustments material impact previously reported condensed consolidated financial statements therefore retrospectively adjusted financial statements final fair values net assets acquired consist definitelived intangible assets 440 million goodwill 149 million net tangible assets 33 million portion goodwill recorded may deductible income tax purposes consider business combination material therefore disclosed pro forma results operations required material business combinations august 2012 acquired propel labs inc new cell sorting system automated easytouse benchtop cell sorting flow cytometer new system sold exclusively biorad brand s3tm cell sorter asset acquisition accounted business combination new cell sorting system represented integrated set activities assets capable conducted managed purpose providing return therefore constitutes business accordance gaap amount acquisitionrelated cost minimal biorad primarily represented acquisition process business acquisition included life science segments results operations acquisition date fair value consideration acquisition date 496 million included 50 million paid cash closing date 446 million contingent consideration potentially payable propel labs shareholders contingent consideration based probabilityweighted income approach related achievement certain development sales milestones contingent consideration development milestones valued 199 million based assumptions regarding probability achieving milestones amounts discounted present value contingent consideration sales milestones valued 247 million based statistically significant number simulations potential outcome contingent consideration recognized estimated fair value 208 million december 31 2013 see note 3 discussion contingent consideration valuation underlying assumptions fair values net assets acquired propel labs inc acquisition date determined 174 million goodwill 321 million definitelived intangible assets 01 million net tangible assets expect goodwill recorded deductible income tax purposes acquired cell sorting system fits well biorads existing life science segment product offerings july 2012 acquired 100 outstanding shares diamed benelux 46 million euros approximately 56 million cash acquisition accounted business combination diamed benelux represented integrated set activities assets capable conducted managed purpose providing return therefore constitutes business accordance gaap amount acquisitionrelated cost minimal biorad primarily represented acquisition process business acquisition included clinical diagnostics segments results operations acquisition date acquired net liabilities fair value 23 million fair values assets acquired acquisition date determined 30 million goodwill 49 million definitelived intangible assets goodwill recorded deductible income tax purposes diamed benelux became exclusive distributor certain biorad immunohematology products benelux market result 2007 acquisition diamed holding ag distributor acquisition consistent stated objective control distribution products services january 2012 purchased cash certain assets raw material supplier approximately 125 million asset acquisition accounted business combination certain assets acquired represented integrated set activities assets capable conducted managed purpose providing return therefore constitutes business accordance gaap amount acquisitionrelated cost minimal biorad primarily represented acquisition process business acquisition included clinical diagnostics segments results operations acquisition date fair value assets acquired acquisition date determined 63 million net tangible assets 51 million intangible assets 11 million goodwill expect goodwill recorded deductible income tax purposes addition paid 20 million employment agreements incentive certain employees acquired business remain biorad amount expensed two years date acquisition believe acquisition allow us secure supply critical raw materials lower overall costs clinical diagnostics segment 3 fair value measurements determine fair value asset liability based assumptions market participants would use pricing asset liability orderly transaction market participants measurement date identification market participant assumptions provides basis determining inputs used pricing asset liability fair value hierarchy established gives precedence fair value measurements calculated using observable inputs using unobservable inputs hierarchy prioritizes inputs three broad levels follows • level 1 quoted prices active markets identical instruments • level 2 significant observable inputs including quoted prices active markets similar instruments • level 3 significant unobservable inputs including assumptions determining fair value certain investments financial assets liabilities carried fair value measured recurring basis december 31 2013 classified hierarchy follows millions financial assets liabilities carried fair value measured recurring basis december 31 2012 classified hierarchy follows millions cash equivalents included cash equivalents consolidated balance sheets b availableforsale investments included following accounts consolidated balance sheets millions c forward foreign exchange contracts asset position included prepaid expenses taxes current assets consolidated balance sheets forward foreign exchange contracts liability position included current liabilities consolidated balance sheets e contingent consideration liability included following accounts consolidated balance sheet millions fourth quarter 2011 recognized contingent consideration liability upon acquisition quantalife related potential future payments due upon achievement certain sales development milestones contingent consideration initially recognized estimated fair value 241 million based probabilityweighted income approach acquisition date october 4 2011 total contingent consideration could originally reached maximum 48 million upon achievement sales milestones development milestone development milestone met december 31 2012 resulting payment 60 million january 2013 2012 first three shortterm sales milestones met therefore fair value contingent consideration lowered 161 million credited selling general administrative expense 2013 expect remaining sales milestones would met therefore 20 million remaining contingent consideration liability credited selling general administrative expense third quarter 2012 recognized contingent consideration liability upon acquisition new cell sorting system propel labs inc fair value contingent consideration based probabilityweighted income approach related achievement certain development sales milestones recorded 446 million 2012 development milestones achieved payments totaling 200 million made 2013 based recent valuation sales milestones could potentially range 0 maximum 600 5132 5038 annual cell sorting system purchase orders payment occur upon anniversary completion certain number cell sorting systems three consecutive years respectively maximum payout ratios begin annual cell sorting system purchase orders excess 20 million 30 million 45 million three consecutive years respectively contingent consideration revalued net reduction 38 million 2013 selling general administrative expense estimated fair value 208 million december 31 2013 following table provides reconciliation level 3 contingent consideration liabilities measured estimated fair value based original valuations updated quarterly year ended december 31 2013 millions following table provides quantitative information level 3 inputs fair value measurement contingent consideration liabilities december 31 2013 significant increases decreases inputs isolation could result significantly lower higher fair value measurement estimate fair value level 2 debt securities december 31 2013 primary pricing provider simplified process first quarter 2013 eliminating certain pricing sources established sp capital iq primary pricing source new pricing process allows us select hierarchy pricing sources securities held chosen pricing hierarchy level 2 securities certificates deposit commercial paper sp capital iq primary pricing source custodian secondary pricing source sp capital iq price level 2 security hold pricing provider utilize custodian supplied pricing commercial paper december 31 2013 pricing determined straightline calculation starting purchase price date purchase increasing par maturity interest bearing certificates deposit commercial paper priced par addition primary pricing provider performed daily reasonableness testing sp capital iq prices custodian reported prices outside tolerable variance approximately 1 investigated resolved estimate fair value level 2 debt securities december 31 2012 primary pricing service relied inputs multiple industryrecognized pricing sources determine price investment addition pricing service performed reasonableness testing prices daily basis comparing prices reported custodians well prior day prices price difference fell outside predetermined tolerable levels investigated cause resolved pricing issue based review results analysis utilized primary pricing service level 2 debt securities none securities tested outside tolerable levels december 31 2012 primary pricing service inputs level 2 us government sponsored agencies municipal obligations corporate foreign government bonds assetbacked securities related cash equivalents consisted market prices variety industry standard data providers security master files large financial institutions thirdparty sources multiple market prices used primary pricing service inputs distributioncurve based algorithm determine daily market value december 31 2012 primary pricing service inputs level 2 corporate debt securities commercial paper bank deposits related cash equivalents consisted dynamic static security characteristics information obtained several independent sources security data dynamic inputs credit rating factor variablerate updated daily static characteristics included inputs day count first coupon upon initial security creation securities typically priced utilizing mathematical calculations reliant observable inputs availableforsale foreign government obligations based indicative bids market participants availableforsale investments consist following millions following summary investments gross unrealized losses associated fair value millions unrealized losses securities due number factors including changes interest rates changes economic conditions changes market outlook various industries among others biorad ability intent hold investments unrealized losses recovery fair value reasonable period time sufficient forecasted recovery fair value may maturity consider investments otherthantemporarily impaired december 31 2013 december 31 2012 forward foreign exchange contracts part distributing products regularly enter intercompany transactions enter forward foreign exchange contracts manage foreign exchange risk future movements foreign exchange rates affect foreign currency denominated intercompany receivables payables use derivative financial instruments speculative trading purposes seek hedge accounting treatment contracts result contracts generally maturity dates 90 days less denominated primarily currencies industrial countries recorded fair value balance sheet date notional principal amounts provide one measure transaction volume outstanding december 31 2013 represent amount biorads exposure loss estimated fair value contracts derived using spot rates reuters last business day quarter points provided counterparties resulting gains losses offset exchange gains losses related receivables payables included foreign exchange losses net consolidated statements income following summary forward foreign currency exchange contracts millions following summary amortized cost estimated fair value debt securities december 31 2013 contractual maturity date millions estimated fair value financial instruments recognized fair value consolidated balance sheets included investments presented table fair value determined using significant observable inputs including quoted prices active markets similar instruments estimates necessarily indicative amounts could realized current market exchange considerable judgment required interpreting market data used develop estimates fair value use different market assumptions estimation techniques could material effect estimated fair value investments include financial instruments majority fair value based similar actively traded stock adjusted various discounts including discount marketability longterm debt excluding leases current maturities estimated fair value based quoted market prices similar issues estimated fair value financial instruments discussed level fair value hierarchy within fair value measurement categorized follows millions shares ordinary voting stock sartorius ag sartorius goettingen germany process technology supplier biotechnology pharmaceutical chemical food beverage industries 35 outstanding voting shares excluding treasury shares sartorius december 31 2013 sartorius family trust sartorius family members hold controlling interest outstanding voting shares representative designee sartorius’ board directors ability exercise significant influence operating financial policies sartorius account investment using cost method carrying value investment included investments consolidated balance sheets historically classified estimated fair value sartorius ordinary voting stock level 1 fair value hierarchy however stock thinly traded conjunction valuation method discussed believe classification level 1 inappropriate classified estimated fair value level 2 periods presented conjunction filing level 2 classification appropriate given valuation method employed incorporates observable input fair value sartorius’ actively traded preferred stock 4 goodwill purchased intangible assets changes goodwill segment follows millions conjunction acquisition 100 outstanding shares abd serotec life science segment january 2013 recorded 149 million goodwill 440 million definitelived intangible assets 330 million developed product technology 88 million licenses 13 million customer relationshipslists 04 million tradenames 05 million purchased intangibles weighted average useful lives definitelived intangible assets acquisition date 139 13 12 2 1 years respectively total weighted average useful life 137 years december 2012 sold building 64 million clinical diagnostics segment associated 1999 acquisition recognized gain sale 43 million portion goodwill recorded 1999 acquisition written 10 million conjunction purchase certain assets propel labs inc life science segment august 2012 recorded 174 million goodwill 321 million definitelived intangible assets 273 million developed product technology 47 million covenants compete 01 million intangible assets conjunction acquisition 100 outstanding shares diamed benelux clinical diagnostics segment july 2012 recorded 30 million goodwill 49 million definitelived intangible assets 38 million customer relationshipslists 11 million tradenames conjunction acquisition certain assets raw material supplier clinical diagnostics segment january 2012 recorded 11 million goodwill 51 million definitelived intangible assets considered developed product technology goodwill intangible assets indefinite lives information regarding identifiable purchased intangible assets definite lives follows millions material impairment losses related intangible assets recorded 2013 2012 amortization expense related purchased intangible assets years ended december 31 2013 2012 2011 450 million 428 million 391 million respectively estimated future amortization expense based existing intangible assets years ending december 31 2014 2015 2016 2017 2018 thereafter 420 million 390 million 356 million 270 million 241 million 985 million respectively 5notes payable longterm debt notes payable includes amounts borrowed credit lines maintained locally international subsidiaries borrowing capacity approximately 201 million 158 million unused december 31 2013 december 31 2012 borrowing capacity aggregated approximately 279 million 238 million unused weighted average interest rate lines 30 32 december 31 2013 2012 respectively biorad guaranteed eight credit lines december 31 2013 2012 principal components longterm debt follows millions senior subordinated notes due 2016 may 2009 biorad sold 3000 million principal amount senior subordinated notes due 2016 80 notes sale yielded net cash proceeds 2948 million september 2013 redeemed 80 notes 3120 million including call premium 120 million expensed remaining original issuance bond discount 25 million unamortized bond issuance costs 11 million total expense redemption 156 million included interest expense consolidated statements income senior notes due 2020 december 2010 biorad sold 4250 million principal amount senior notes due 2020 4875 notes sale yielded net cash proceeds 4226 million effective rate 4946 4875 notes pay fixed rate interest 4875 per year option redeem 4875 notes time redemption price 100 principal amount plus specified makewhole premium defined indenture governing 4875 notes accrued unpaid interest thereon redemption date obligations 4875 notes secured rank equal right payment existing future unsubordinated indebtedness certain covenants apply 4875 notes including limitations following liens sale leaseback transactions mergers consolidations sales assets covenants restrictive covenants relating total indebtedness interest coverage stock repurchases recapitalizations dividends distributions shareholders current ratios net proceeds issuance 4875 notes used together cash hand redeem 2000 million 6125 notes 2043 million including call premium 41 million december 2010 2250 million 75 notes 2346 million including call premium 28 million january 2011 amended restated credit agreement credit agreement june 2010 biorad entered 2000 million credit agreement borrowings credit agreement revolving basis used acquisitions working capital general corporate purposes outstanding borrowings credit agreement december 31 2013 2012 borrowed credit agreement borrowing rate would 20 december 31 2013 credit agreement expires june 21 2014 credit agreement secured substantially personal property assets domestic subsidiaries 65 capital stock certain foreign subsidiaries guaranteed existing future material domestic subsidiaries credit agreement requires biorad comply certain financial ratios covenants among things ratios covenants include leverage ratio test interest coverage test well restrictions ability declare pay dividends incur debt guarantee debt enter transactions affiliates merge consolidate sell assets make investments create liens prepay subordinated debt compliance ratios covenants december 31 2013 maturities longterm debt december 31 2013 follows 2014 02 million 2015 02 million 2016 02 million 2017 02 million 2018 02 million thereafter 4348 million 6 income taxes us international components income taxes follows millions provision income taxes consists following millions reconciliation effective tax rate income taxes statutory tax rate follows effective tax rate 2013 included significant tax benefit related 2012 us federal research credit retroactively reinstated january 2 2013 effective tax rate 2013 higher 2012 primarily due increase tax liabilities audit settlements foreign jurisdictions lower domestic production activities deduction result lower us taxable income 2013 effective tax rates 2013 2012 reflected tax benefits related adjustments fair value quantalife contingent consideration effective tax rate 2011 reflected tax benefits nontaxable dividend income release tax liabilities effective tax rates three periods lower us statutory rate primarily due tax benefits differences us foreign statutory tax rates research development tax credits foreign income earned primarily france switzerland switzerlands statutory tax rate significantly lower us statutory tax rate 35 effective tax rates also significantly reduced french tax incentives related research development activities effective tax rate may impacted future either favorably unfavorably many factors including limited changes statutory tax rates changes tax laws regulations tax audits settlements generation tax credits deferred tax assets liabilities reflect tax effects losses credits temporary differences carrying amounts assets liabilities financial reporting purposes amounts used income tax purposes significant components deferred tax assets liabilities follows millions december 31 2013 biorad’s international subsidiaries combined net operating loss carryforwards 1166 million loss carryforwards 1146 million expiration date believe likely benefit net operating loss carryforwards realized provided valuation allowance 280 million relating net operating loss carryforwards december 31 2013 biorad us federal net operating loss carryforwards approximately 17 million result acquisitions carryforwards subject limitation utilization expire 2018 2030 december 31 2013 biorad us federal research tax credit carryforwards 15 million subject limitations utilization december 31 2013 biorad approximately 53 million california net operating loss carryforwards related acquisition quantalife believe likely benefit net operating loss carryforwards realized recorded full valuation allowance losses december 31 2013 biorad deferred tax asset 214 million relating california research tax credit carryforwards including 20 million acquisition quantalife may carried forward indefinitely based judgment consistent prior years recorded full valuation allowance deferred tax asset believe likely certain deferred tax assets described realized foreseeable future recognized tax benefits relating reversal valuation allowance deferred tax assets december 31 2013 recognized reduction income tax expense tax years subject examination tax authorities major jurisdictions biorad operates include years 2009 forward us years 2008 forward certain foreign jurisdictions including france switzerland germany following tabular reconciliation total amounts unrecognized tax benefits millions substantially unrecognized tax benefits december 31 2013 2012 2011 would affect effective tax rate recognized biorad recognizes accrued interest penalties related unrecognized tax benefits income tax expense related unrecognized tax benefits noted biorad accrued interest 34 million 19 million 20 million december 31 2013 2012 2011 respectively december 31 2013 believe reasonably possible 15 million unrecognized tax benefits may recognized end 2014 result statute lapses benefits related uncertainty regarding sustainability certain deductions credits tax years remain subject examination relevant tax authorities general practice intention reinvest earnings nonus subsidiaries operations december 31 2013 biorad made provision us additional foreign withholding taxes approximately 537 million excess amount financial reporting tax basis investments foreign subsidiaries essentially permanent duration generally amounts become subject us taxation upon remittance dividends certain circumstances earnings repatriated us deferred tax liability associated temporary differences would approximately 108 million 7 stockholders equity biorad’s issued outstanding stock consists class common stock class b common stock class b share class b participates equally earnings biorad identical respects except follows class limited voting rights share class entitled one tenth vote matters share class b entitled one vote additionally class stockholders entitled elect 25 board directors class b stockholders entitled elect 75 directors cash dividends may paid class shares without paying cash dividend class b shares cash dividend may paid class b shares unless least equal cash dividend paid class shares class b shares convertible time class shares oneforone basis option stockholder founders biorad schwartz family collectively hold majority biorad’s voting stock result schwartz family able exercise significant influence biorad changes biorads common stock shares follows thousands treasury shares board directors authorized repurchase 180 million biorads common stock 33 million yet repurchased open market december 31 2013 amended restated credit agreement credit agreement limits ability repurchase stock accordance terms awards 2007 incentive award plan june 2012 withheld 122 shares class common stock 917 shares class b common stock satisfy minimum statutory tax obligations due upon vesting restricted stock certain employees considered repurchase stock restricted stock vested december 31 2013 therefore anticipate repurchasing shares purpose repurchases stock 2013 2012 8 accumulated comprehensive income accumulated comprehensive income included consolidated balance sheets consolidated statements changes stockholders equity consists following components net income taxes millions effects consolidated statements income amounts reclassified accumulated comprehensive income period ended december 31 2012 summarized following table effects consolidated statements income amounts reclassified accumulated comprehensive income period ended december 31 2013 summarized following table 9 sharebased compensationstock option purchase plans description sharebased compensation plans stock option award plans three stock option plans officers certain employees 1994 stock option plan 1994 plan 2003 stock option plan 2003 plan 2007 incentive award plan 2007 plan 1994 plan 2003 plan authorized grant incentive stock options nonqualified stock options employees 2007 plan authorizes grant stock options restricted stock restricted stock units stock appreciation rights types equity awards employees longer grant stock option grants 1994 plan 2003 plan since 2007 sharebased compensation grants 2007 plan total 1650360 shares reserved issuance equity awards 2007 plan may either class b common stock december 31 2013 492310 shares available granted future plans class b options granted prices less fair market value underlying common stock date grant generally options granted term 10 years vest increments 20 per year fiveyear period yearly anniversary date grant stock awards issued 2007 plan generally vest increments 20 per year fiveyear period yearly anniversary date grant employee stock purchase plans amended restated 1988 employee stock purchase plan 1988 espp 2011 employee stock purchase plan 2011 espp provides eligible employees may contribute 10 compensation 25000 annually toward quarterly purchase class common stock employees’ purchase price 85 lesser fair market value stock first business day last business day calendar quarter january 1 2012 longer issue shares 1988 espp 2011 espp includes two components code section 423 component intend qualify “employee stock purchase plan” section 423 us internal revenue code 1986 amended “code” non423 component authorizes grant purchase rights qualify “employee stock purchase plan” section 423 code authorized sale 600000 shares class common stock 2011 espp sharebased compensation expense included sharebased compensation expense cost related stock option grants espp stock purchases restricted stock restricted stock unit awards sharebased compensation expense allocated cost goods sold research development expense selling general administrative expense consolidated statements income 2013 2012 2011 recognized sharebased compensation expense 137 million 132 million 107 million respectively capitalize sharebased compensation expense inventory options awards amortize fair value straightline basis stock compensation awards amortized requisite service periods awards generally vesting periods stock options following table summarizes stock option activity following summarizes information stock options outstanding december 31 2013 intrinsic value stock options defined difference current market value grant price total intrinsic value date exercise stock options exercised 2013 2012 2011 approximately 11 million 11 million 14 million respectively total fair value options vested 2013 2012 2011 22 million 23 million 33 million respectively cash received stock options exercised 2013 2012 2011 41 million 34 million 77 million respectively actual tax benefit realized tax deductions stock options exercised totaled 66 million 65 million 60 million 2013 2012 2011 respectively december 31 2013 61 million total unrecognized compensation cost stock options amount expected recognized future weightedaverage period approximately 3 years weightedaverage fair value stock options granted estimated using blackscholes optionpricing model following weightedaverage assumptions volatility based historical volatilities common stock period equal stock option’s expected life riskfree interest rate based us treasury yield curve effect time grant expected life represents number years estimate based primarily historical experience options outstanding prior exercise anticipate paying cash dividends future therefore use expected dividend yield zero restricted stock 2007 plan restricted stock last granted 2008 grants fair value share restricted stock market value determined closing price stock day grant following table summarizes restricted stock activity december 31 2013 unrecognized compensation cost related restricted stock restricted stock units restricted stock units rights receive shares company stock granted 2007 2013 2007 plan fair value restricted stock unit market value determined closing price stock day grant following table summarizes restricted stock unit activity december 31 2013 approximately 305 million total unrecognized compensation cost related restricted stock units amount expected recognized remaining weightedaverage period approximately 4 years employee stock purchase plans fair value employees’ purchase rights 2011 espp 1988 espp estimated using blackscholes model following weightedaverage assumptions major assumptions primarily based historical data volatility based historical volatilities common stock period equal expected life purchase rights riskfree interest rate based us treasury yield curve effect time grant anticipate paying cash dividends future therefore use expected dividend yield zero sold 103669 shares 100 million 107749 shares 92 million 96362 shares 81 million 2011 espp 1988 espp employees 2013 2012 2011 respectively december 31 2013 388582 shares remain authorized available issuance 2011 espp currently issue new shares satisfy stock option exercises restricted stock issuances espp stock purchases 10 income expense net income expense net includes following components millions otherthantemporary impairment losses investments recorded 2013 2012 2011 certain availableforsale investments light continuing declines market prices time primarily associated investment sovereign nation large deficits decision sell holdings particular adviser account december 2012 sold building 64 million clinical diagnostics segment associated 1999 acquisition recognized gain sale 43 million portion goodwill recorded 1999 acquisition written 10 million 11 supplemental cash flow information reconciliation net income including noncontrolling interests net cash provided operating activities follows millions 12 commitments contingent liabilities rents leases net rental expense operating leases 455 million 414 million 424 million 2013 2012 2011 respectively leases principally facilities automobiles annual future minimum lease payments december 31 2013 operating leases follows 2014 391 million 2015 301 million 2016 240 million 2017 186 million 2018 beyond 498 million deferred profit sharing retirement plan profit sharing plan covering substantially us employees contributions made discretion board directors biorad liability current year’s contribution expense 135 million 121 million 121 million 2013 2012 2011 respectively postemployment benefits several foreign locations statutorily required provide lump sum severance termination indemnity employees plans vested benefit obligation december 31 2013 2012 463 million 395 million respectively included current liabilities longterm liabilities consolidated balance sheets plans required funded trust device used accumulate assets settle obligations purchase obligations december 31 2013 obligations recognized balance sheet 990 million include agreements purchase goods services enforceable legally binding biorad specify significant terms exclude agreements cancelable without penalty annual future fixed determinable portion purchase obligations recognized balance sheet december 31 2013 follows 2015 2016 323 million 2017 2018 73 million 2018 594 million december 31 2013 purchase obligations recognized balance sheet 654 million include agreements purchase goods services enforceable legally binding biorad specify significant terms exclude agreements cancelable without penalty annual future fixed determinable portion purchase obligations recognized balance sheet december 31 2013 follows 2014 574 million 2015 72 million 2016 04 million 2017 04 million letters credit ordinary course business times required post letters credit letters credit issued banks guarantee obligations various parties including insurance companies contingently liable 82 million standby letters credit banks december 31 2013 contingent consideration fourth quarter 2011 recognized contingent consideration liability upon acquisition quantalife related potential future payments due upon achievement certain sales development milestones contingent consideration initially recognized estimated fair value 241 million based probabilityweighted income approach acquisition date october 4 2011 total contingent consideration could originally reached maximum 48 million upon achievement sales milestones development milestone development milestone met december 31 2012 resulting payment 60 million january 2013 2012 first three shortterm sales milestones met therefore fair value contingent consideration lowered 161 million credited selling general administrative expense 2013 expect remaining sales milestones would met therefore 20 million remaining contingent consideration liability credited selling general administrative expense third quarter 2012 recognized contingent consideration liability upon acquisition new cell sorting system propel labs inc fair value contingent consideration based probabilityweighted income approach related achievement certain development sales milestones recorded 446 million 2012 development milestones achieved payments totaling 200 million made 2013 based recent valuation sales milestones could potentially range 0 maximum 600 5132 5038 annual cell sorting system purchase orders payment occur upon anniversary completion certain number cell sorting systems three consecutive years respectively maximum payout ratios begin annual cell sorting system purchase orders excess 20 million 30 million 45 million three consecutive years respectively contingent consideration revalued net reduction 38 million selling general administrative expense estimated fair value 208 million december 31 2013 concentrations labor subject collective bargaining agreements december 31 2013 approximately seven percent biorads approximately 3000 us employees covered collective bargaining agreement expire november 8 2016 many biorads nonus fulltime employees especially france covered collective bargaining agreements 13 legal proceedings based internal investigation identified conduct certain overseas operations may violated antibribery provisions united states foreign corrupt practices act fcpa likely violated fcpas books records internal controls provisions internal policies may 2010 voluntarily disclosed matters us department justice doj securities exchange commission sec commenced investigation audit committee board directors audit committee assumed direct responsibility reviewing matters hired experienced independent counsel conduct investigation provide legal advice provided additional information doj sec audit committees investigation progressed continue cooperate doj sec investigations provide information doj sec investigations continuing presently unable predict duration scope results investigations whether either agency commence legal actions doj sec broad range civil criminal sanctions fcpa laws regulations including limited injunctive relief disgorgement fines penalties modifications business practices including termination modification existing business relationships imposition compliance programs retention monitor oversee compliance fcpa engaged discussions doj sec concerning resolution matters unable estimate range reasonably possible outcomes matter differs estimated loss contingency recorded latter half 2013 350 million including 50 million accrued interest imposition sanctions remedial measures could material adverse effect business financial condition date determined whether activities question violated laws foreign jurisdictions took place april 13 2011 shareholder derivative lawsuit filed directors superior court contra costa county california case also names company nominal defendant captioned city riviera beach general employees retirement system v david schwartz et al case msc1100854 complaint plaintiff alleges directors breached fiduciary duties failing ensure sufficient internal controls systems compliance fcpa purportedly seeking relief behalf plaintiff seeks award unspecified compensatory punitive damages costs expenses including attorneys fees declaration directors breached fiduciary duties individual defendants filed demurrer requesting dismissal complaint case well motion stay matter pending resolution abovereferenced investigations doj sec following hearing september 30 2011 court sustained demurrer dismissed complaint without prejudice granted plaintiff additional time file amended complaint court denied motion stay matter dismissed complaint parties agreed stipulated dismissal case without prejudice tolling statute limitations pending resolution doj sec investigations addition party various claims legal actions complaints arising ordinary course business believe time ultimate liability resulting matters material adverse effect results operations financial position liquidity however cannot give assurance regarding ultimate outcome matters resolution could material operating results particular period depending level income period 14 segment information biorad multinational manufacturer worldwide distributor life science research products clinical diagnostics products two reportable segments life science clinical diagnostics reportable segments strategic business lines offer 8000 different products services require different marketing strategies disclose quantitative information different products services impractical based primarily numerous products services sell global markets serve life science segment develops manufactures sells services reagents apparatus instruments used biological research products sold university medical school laboratories pharmaceutical biotechnology companies food testing laboratories government industrial research facilities clinical diagnostics segment develops manufactures sells services automated test systems informatics systems test kits specialized quality controls healthcare market products sold reference laboratories hospital laboratories state newborn screening facilities physicians’ office laboratories transfusion laboratories insurance forensic testing laboratories operations include remainder former analytical instruments segment results presented manner present operations internally make operating decisions assess performance accounting policies segments described significant accounting policies see note 1 segment profit loss includes allocation corporate expense based upon sales allocation interest expense based upon accounts receivable inventories difference total segment allocated interest expense depreciation amortization capital expenditures corresponding consolidated amounts attributable corporate headquarters segments expected manage assets completely control accordingly segment assets include primarily accounts receivable inventories gross machinery equipment goodwill balances included corporate segment reporting purposes information regarding industry segments december 31 2013 2012 2011 years ended follows millions net corporate operating expense consists receipts expenditures primary responsibility segment operating management therefore allocated segments performance assessment chief operating decision maker 2013 included accrual 350 million connection initial efforts resolve sec doj investigations relating fcpa recorded latter half 2013 see note 13 156 million expense redemption 80 senior subordinated notes see note 5 following reconciles total segment profit consolidated income taxes millions following reconciles total segment assets consolidated total assets millions following presents net sales external customers geographic region based primarily location use product service millions following presents assets property plant equipment net geographic region based upon location asset millions 15 quarterly financial data unaudited third quarter 2013 identified errors consolidated financial statements years 2011 2012 interim periods therein unaudited interim condensed consolidated financial statements three month periods ended march 31 2013 june 30 2013 related valuation finished goods inventory life science segment inappropriately expensing inventory amounts greater actual costs nonsales transactions primarily related inventory used demonstration purposes product samples recorded selling general administrative expense addition life science segment inventory error affected cost goods sold relieved inventory higher cost incurred limited sales third parties produced nonus manufacturing facility third quarter 2013 revised classification one item periods presented “provision income taxes” “research development expense” consolidated statements income conform current year presentation item reclassified pertains refundable french rd tax credit reclassification reduces research development expense believe presentation appropriate required taxable income order earn credits management evaluated materiality errors described qualitative quantitative perspective based evaluation concluded accumulation errors significant three months ended september 30 2013 correction would material individual prior period effect trend financial results taking account requirements securities exchange commission sec staff accounting bulletin 108 considering effects prior year misstatements quantifying misstatements current year financial statements sab 108 accordingly correcting errors every affected period 2013 financial statements included form 10k impact immaterial error correction reclassification described presented reported adjustment revised basis following summarized quarterly financial data 2013 2012 millions except per share data first quarter 2012 identified error consolidated financial statements years 2007 2011 related foreign supplemental tax associated social benefits incorrectly interpreted applied local statutes circumstances accrued 61 million foreign supplemental taxes including penalties interest first quarter 2012 paid foreign supplemental tax related penalties interest deductible income tax purposes error impact biorads provision income taxes evaluated materiality error qualitative quantitative perspective based evaluation concluded accumulation error significant threemonth period ended march 31 2012 correction material individual prior period year ended december 31 2012 effect trend financial results taking account requirements securities exchange commission sec staff accounting bulletin 108 considering effects prior year misstatements quantifying misstatements current year financial statements sab 108 item 9item 8 financial statements supplementary data report independent registered public accounting firm board directors stockholders biorad laboratories inc audited accompanying consolidated balance sheets biorad laboratories inc subsidiaries company december 31 2014 2013 related consolidated statements income comprehensive income stockholders’ equity cash flows years twoyear period ended december 31 2014 connection audits consolidated financial statements also audited financial statement schedule consolidated financial statements financial statement schedule responsibility company’s management responsibility express opinion consolidated financial statements financial statement schedule based audits conducted audits accordance standards public company accounting oversight board united states standards require plan perform audit obtain reasonable assurance whether financial statements free material misstatement audit includes examining test basis evidence supporting amounts disclosures financial statements audit also includes assessing accounting principles used significant estimates made management well evaluating overall financial statement presentation believe audits provide reasonable basis opinion consolidated financial statements referred present fairly material respects financial position biorad laboratories inc subsidiaries december 31 2014 2013 results operations cash flows years twoyear period ended december 31 2014 conformity us generally accepted accounting principles also opinion related financial statement schedule considered relation basic consolidated financial statements taken whole present fairly material respects information set forth therein also audited accordance standards public company accounting oversight board united states biorad laboratories inc’s internal control financial reporting december 31 2014 based criteria established internal control integrated framework 1992 issued committee sponsoring organizations treadway commission coso report dated march 2 2015 expressed unqualified opinion effectiveness company’s internal control financial reporting report independent registered public accounting firm board directors stockholders biorad laboratories inc audited biorad laboratories inc’s company internal control financial reporting december 31 2014 based criteria established internal control integrated framework 1992 issued committee sponsoring organizations treadway commission coso biorad laboratories inc’s management responsible maintaining effective internal control financial reporting assessment effectiveness internal control financial reporting included accompanying management’s report internal control financial reporting item 9ab responsibility express opinion company’s internal control financial reporting based audit conducted audit accordance standards public company accounting oversight board united states standards require plan perform audit obtain reasonable assurance whether effective internal control financial reporting maintained material respects audit included obtaining understanding internal control financial reporting assessing risk material weakness exists testing evaluating design operating effectiveness internal control based assessed risk audit also included performing procedures considered necessary circumstances believe audit provides reasonable basis opinion company’s internal control financial reporting process designed provide reasonable assurance regarding reliability financial reporting preparation financial statements external purposes accordance generally accepted accounting principles company’s internal control financial reporting includes policies procedures 1 pertain maintenance records reasonable detail accurately fairly reflect transactions dispositions assets company 2 provide reasonable assurance transactions recorded necessary permit preparation financial statements accordance generally accepted accounting principles receipts expenditures company made accordance authorizations management directors company 3 provide reasonable assurance regarding prevention timely detection unauthorized acquisition use disposition company’s assets could material effect financial statements inherent limitations internal control financial reporting may prevent detect misstatements also projections evaluation effectiveness future periods subject risk controls may become inadequate changes conditions degree compliance policies procedures may deteriorate opinion biorad laboratories inc maintained material respects effective internal control financial reporting december 31 2014 based criteria established internal control integrated framework 1992 issued committee sponsoring organizations treadway commission coso also audited accordance standards public company accounting oversight board united states consolidated balance sheets biorad laboratories inc subsidiaries december 31 2014 2013 related consolidated statements operations comprehensive income stockholders’ equity cash flows years twoyear period ended december 31 2014 report dated march 2 2015 expressed unqualified opinion consolidated financial statements financial statement schedule report ernst young llp independent registered public accounting firm board directors stockholders biorad laboratories inc audited accompanying consolidated statements income comprehensive income cash flows changes stockholders equity biorad laboratories inc year ended december 31 2012 audit also included financial statement schedule listed index item 15a2 financial statements schedule responsibility companys management responsibility express opinion financial statements schedule based audit conducted audit accordance standards public company accounting oversight board united states standards require plan perform audit obtain reasonable assurance whether financial statements free material misstatement audit includes examining test basis evidence supporting amounts disclosures financial statements audit also includes assessing accounting principles used significant estimates made management well evaluating overall financial statement presentation believe audit provides reasonable basis opinion financial statements referred present fairly material respects consolidated results operations cash flows biorad laboratories inc year ended december 31 2012 conformity us generally accepted accounting principles also opinion related financial statement schedule considered relation basic financial statements taken whole presents fairly material respects information set forth therein ernst young llp redwood city california march 18 2013 except section note 1 entitled ‘correction immaterial errors’ date march 2 2015 accompanying notes integral part consolidated financial statements accompanying notes integral part consolidated financial statements biorad laboratories inc consolidated statements income thousands except per share data accompanying notes integral part consolidated financial statements biorad laboratories inc consolidated statements comprehensive income thousands reclassification adjustments calculated using specific identification method accompanying notes integral part consolidated financial statements biorad laboratories inc consolidated statements cash flows thousands accompanying notes integral part consolidated financial statements accompanying notes integral part consolidated financial statements biorad laboratories inc notes consolidated financial statements 1significant accounting policies basis presentation consolidated financial statements include accounts biorad laboratories inc wholly majority owned subsidiaries referred report “biorad” “we” “us” “our” elimination intercompany balances transactions preparation financial statements conformity us generally accepted accounting principles requires management make estimates assumptions affect amounts reported financial statements accompanying notes actual results could differ estimates evaluate subsequent events evidence provide conditions existing date balance sheet well conditions arose balance sheet date financial statements issued effects conditions existed balance sheet date recognized financial statements events conditions arising balance sheet date financial statements issued evaluated determine disclosure required keep financial statements misleading extent events conditions exist disclosures made regarding nature events estimated financial effects events conditions cash equivalents cash equivalents consist cash highly liquid investments original maturities three months less readily convertible cash equivalents stated cost approximates fair value availableforsale investments availableforsale investments consist corporate obligations municipal securities asset backed securities us government sponsored agencies marketable equity securities management classifies investments time purchase reevaluates classification balance sheet date investments maturities beyond one year may classified shortterm based liquid nature marketable securities represent investment cash available current operations availableforsale investments reported fair value based quoted market prices observable market data unrealized gains losses reported component comprehensive income net related tax effect unrealized losses charged income decline fair value individual security determined otherthantemporary review availableforsale investments otherthantemporary losses quarterly basis realized gains losses otherthantemporary impairments investments included income expense net see note 10 concentration credit risk financial instruments potentially subject us concentration credit risk consist primarily cash equivalents investments foreign exchange contracts trade accounts receivable cash equivalents investments placed various highly rated major financial institutions located different geographic regions biorad sustained significant losses instruments held financial institutions forward contracts used managing foreign currency exposures element risk counterparties may unable meet terms agreements attempt minimize risk limiting counterparties diverse group highlyrated domestic international financial institutions event nonperformance counterparties carrying values financial instruments represent maximum amount loss would incurred fiscal yearend however expect record losses result counterparty default perform credit evaluation procedures related trade receivables exception certain developing countries generally require collateral result increased risk certain developing countries biorad sales subject collateral letters credit customers credit risk trade accounts receivable generally limited due large number customers dispersion across many geographic areas however significant amount trade receivables national healthcare systems countries within european union accounts receivable maintain allowance doubtful accounts estimated losses resulting inability customers make required payments amount allowance determined analyzing known uncollectible accounts aged receivables economic conditions customers’ country industry historical losses customers’ creditworthiness amounts later determined specifically identified uncollectible charged written allowance inventory inventories valued lower actual cost market net realizable value include material labor overhead costs firstin firstout method used relieve inventory products sold property plant equipment property plant equipment carried cost less accumulated depreciation amortization included property plant equipment buildings equipment acquired capital lease arrangements reagent rental equipment capitalized software including costs software developed obtained internal use property plant equipment assessed impairment quarterly whenever events changes circumstances indicate carrying amount may recoverable depreciation computed straightline basis estimated useful lives assets buildings leasehold improvements amortized 1530 years term leases life improvements whichever shorter exception reagent rental equipment amortized 15 year period equipment capitalized software depreciated 312 years goodwill represents excess cost fair value net tangible identifiable intangible assets acquired businesses goodwill assessed impairment applying fair value based tests annually fourth quarter whenever events changes circumstances indicate carrying amount may recoverable perform impairment tests goodwill reporting unit level one level operating segments reporting units identified components discrete financial information available regularly reviewed management goodwill amounts assigned reporting units time acquisition goodwill impairment test consists twostep process first step goodwill impairment test used identify potential impairment compares fair value reporting unit carrying value including goodwill use projected discounted cash flow model determine fair value reporting unit fair value reporting unit exceeds carrying amount goodwill reporting unit considered impaired second step impairment test required second step required compares implied fair value reporting unit goodwill carrying amount goodwill fair value reporting unit allocated assets liabilities unit including unrecognized intangible assets reporting unit acquired business combination fair value reporting unit price paid acquire reporting unit carrying amount reporting unit’s goodwill exceeds implied fair value impairment charge recognized amount equal excess longlived assets purposes recognition measurement impairment loss longlived asset assets grouped assets liabilities lowest level identifiable cash flows largely independent cash flows assets liabilities assess impairment longlived assets including identifiable intangible assets quarterly whenever events changes circumstances indicate carrying value may recoverable factors consider important could trigger impairment review include • significant underperformance relative expected historical projected future operating results • significant changes manner use longlived assets intangible assets strategy overall business • current expectation likely longlived asset sold otherwise disposed loss end previously estimated useful life • significant negative industry legal regulatory economic trends management determines carrying value longlived assets may recoverable based upon existence one indicators impairment test impairment based projected undiscounted cash flow method projected future operating results cash flows asset group used establish fair value used evaluating carrying value longlived intangible assets estimate future cash flows longlived assets using current longterm financial forecasts carrying amount longlived asset recoverable exceeds sum undiscounted cash flows expected result use eventual disposition asset case impairment loss would recognized impairment loss recognized amount carrying amount exceeds fair value income taxes account income taxes asset liability method requires recognition deferred tax assets liabilities expected future tax consequences events included financial statements method deferred tax assets liabilities reflect tax effects losses credits temporary differences carrying amounts assets liabilities financial reporting purposes amounts used income tax purposes determined using enacted tax rates effect year differences expected reverse effect change tax rates deferred tax assets liabilities recognized income period includes enactment date record deferred tax assets extent believe assets likely realized making determination consider available positive negative evidence including scheduled reversals deferred tax liabilities projected future taxable income tax planning strategies recent financial operations extent determine able realize deferred income tax assets future excess net recorded amount make adjustment valuation allowance may reduce provision income taxes establish reduce valuation allowance deferred tax assets provision income taxes increase decrease respectively period determination change valuation allowance made recognize tax benefit uncertain tax position likely tax position sustained examination taxing authorities based technical merits position tax benefits recognized financial statements particular tax position measured based largest benefit greater 50 likelihood realized upon settlement amount unrecognized tax benefits adjusted appropriate changes facts circumstances significant amendments existing tax law new regulations interpretations taxing authorities new information obtained tax examination resolution examination recognize accrued interest penalties appropriate related unrecognized tax benefits provision income taxes revenue recognition revenue recognized pervasive evidence arrangement exists price buyer fixed determinable collectability reasonably assured title passed customer product delivered absent specific contractual specifications revenue associated equipment requires factory installation recorded installation complete customer acceptance required contractually occurred time revenue recognized provision recognized estimated product returns service revenues extended warranty contracts recognized ratably life service agreement services performed contract net sales actual selling price products customers taxes billed customer sales tax value added tax etc shall credited tax liability accounts excluded net sales reagent agreements diagnostic industry sales method provides use instrument consumables reagents customer per test basis evaluate reagent agreements account contracts guidance pertaining accounting revenue arrangements multiple deliverables reagent agreements represent one unit accounting instrument consumables interdependent producing diagnostic result neither standalone value respect agreements revenues earn reagent agreements recognized pursuant terms agreement based entirely contingent upon either consumables conduct fixed number tests delivered ii reported customer per test basis shipping handling classify freight costs billed customers net sales related freight costs included cost goods sold warranty warrant certain equipment defects design materials workmanship mostly period one year upon delivery equipment establish part cost goods sold provision expected costs warranty based historical experience specific warranty terms customer feedback review performed quarterly basis assess adequacy warranty accrual changes warranty accrual included current liabilities longterm liabilities follows millions research development internal research development costs expensed incurred thirdparty research development costs expensed contracted work performed foreign currency balance sheet accounts international subsidiaries translated current exchange rates end accounting period income statement items translated average exchange rates period resulting translation adjustments recorded separate component stockholders’ equity foreign currency transaction gains losses included foreign exchange losses net consolidated statements income transaction gains losses result primarily fluctuations exchange rates intercompany receivables payables denominated currencies functional currency subsidiary recorded transaction forward foreign exchange contracts part distributing products regularly enter intercompany transactions enter forward foreign exchange contracts manage foreign exchange risk future movements exchange rates affect foreign currency denominated intercompany receivables payables use derivative financial instruments speculative trading purposes seek hedge accounting treatment contracts result contracts generally maturity dates 90 days less denominated primarily currencies industrial countries recorded asset liability measured fair value balance sheet date resulting gains losses offset exchange gains losses related receivables payables recorded foreign exchange losses net consolidated statements income noncontrolling interests noncontrolling interest subsidiary ownership interest consolidated entity reported equity consolidated financial statements separate biorad’s equity addition net income attributable noncontrolling interests reported separately net income attributable biorad consolidated financial statements consolidated statements presented full amount assets liabilities income expenses consolidated subsidiaries partially offsetting amount shown noncontrolling interests portion assets liabilities controlled us february 2013 acquired remaining outstanding shares distribuidora de analitica para medicina iberica sa diamed spain remaining noncontrolling shareholder approximately 06 million euros 09 million cash acquisition accounted equity transaction reduced biorads noncontrolling interests additional paidin capital 06 million 03 million respectively therefore since date noncontrolling interests biorad sharebased compensation plans stockbased compensation expense sharebased payment awards granted determined based grantdate fair value recognize compensation costs net estimated forfeitures requisite service period award generally vesting term sharebased payment awards estimated forfeiture rate based historical experience plans described fully note 9 earnings per share basic earnings per share computed dividing net income attributable biorad weighted average number common shares outstanding period diluted earnings per share takes account effect dilutive instruments stock options restricted stock uses average share price period determining number potential common shares added weighted average number shares outstanding potential common shares excluded diluted earnings per share calculation effect would antidilutive unvested sharebased payment awards contain nonforfeitable rights dividends dividend equivalents whether paid unpaid participating securities included computation earnings per share eps pursuant twoclass method unvested restricted shares qualify participating securities included shares computation eps weighted average number common shares outstanding used calculate basic diluted earnings per share antidilutive shares follows thousands fair value financial instruments certain financial instruments including cash equivalents shortterm investments accounts receivable marketable securities notes payable accounts payable foreign exchange contracts carrying amounts approximate fair value estimated fair value financial instruments based exchange price would received asset paid transfer liability exit price using available market information appropriate valuation methodologies principal advantageous market asset liability orderly transaction market participants estimates necessarily indicative amounts could realized current market exchange considerable judgment required interpreting market data used develop estimates fair value use different market assumptions estimation techniques could material effect estimated fair value see note 3 correction immaterial errors balance sheet statement cash flows third quarter 2014 identified errors consolidated balance sheet december 31 2013 consolidated statements cash flows years ended december 31 2013 2012 interim periods therein unaudited condensed consolidated balance sheets statements cash flows three months ended march 31 2014 three six months ended june 30 2014 related recorded amounts inventories property plant equipment net periods inappropriately reduced inventories intercompany profit intercompany transactions related certain equipment however portion profit reduced capital additions reflected property plant equipment net equipment biorad product provided customers reagent rental agreements whereby biorad retains ownership equipment charges customer test kits purchased use equipment depreciation calculated correctly impact net income period presented effect correcting errors increase total inventories decrease property plant equipment net december 31 2013 150 million result adjustment 53 million prepaid income taxes included prepaid expenses consolidated balance sheet december 31 2013 reclassified shortterm longterm assets overall effect adjustments total inventories prepaid expenses increased total current assets 96 million adjustments change total assets associated reclassification entries within statements cash flows increase cash paid suppliers employees decrease capital expenditures 63 million 95 million years ended december 31 2013 2012 respectively reclassifications resulted decrease net cash provided operating activities decrease net cash used investing activities 63 million 95 million years ended december 31 2013 2012 respectively change net increase decrease cash equivalents period presented management evaluated materiality errors described qualitative quantitative perspective accordance requirements securities exchange commission sec staff accounting bulletin 99 materiality sab 99 based evaluation concluded errors significant periods impacted correction would material individual prior period effect financial results accordingly correcting errors every affected period consolidated financial statements recent accounting standards updates may 2014 financial accounting standards board “fasb” issued accounting standards update “asu” 201409 “revenue contracts customers” requires entity recognize amount revenue expects entitled transfer promised goods services customers asu 201409 replace existing revenue recognition guidance us generally accepted accounting principles becomes effective new standard effective annual reporting periods beginning december 15 2016 including interim periods within reporting period applied retrospectively early application permitted new standard permits use either retrospective cumulative effect transition method currently evaluating effect asu 201409 consolidated financial statements related disclosures yet selected transition method determined effect standard ongoing financial reporting 2 acquisitions gnubio inc april 2014 acquired 1000 issued outstanding stock gnubio inc gnubio acquisition accounted business combination gnubio represents integrated set activities assets capable conducted managed purpose providing return therefore constitutes business accordance gaap amount acquisitionrelated costs minimal biorad primarily represented acquisition process business acquisition included clinical diagnostics segments results operations acquisition date believe gnubios innovative dna workflow wellsuited clinical diagnostics sequencing market leverage leadership role area droplet digital pcr excess purchase consideration fair value net tangible identifiable intangible assets acquired recorded goodwill fair values assigned tangible identifiable intangible assets acquired liabilities assumed based management’s estimates assumptions fourth quarter 2014 finalized determination fair values certain acquired tax attributes adjusted preliminary carrying values goodwill certain assets liabilities order reflect final information received finalization certain tax returns resulting overall reduction goodwill 17 million measurement period adjustments impact results operations year ending december 31 2014 final fair values net assets acquired gnubio acquisition date determined 464 million indefinitelived intangible assets specifically inprocess research development iprd 135 million goodwill 95 million net tangible liabilities expect goodwill recorded deductible income tax purposes accounting guidance requires fair value iprd acquired business combination recorded balance sheet acquisition date intangible assets related iprd projects considered indefinitelived completion abandonment related project period assets considered indefinitelived amortized tested impairment annual basis annual tests become aware events occurring changes circumstances would indicate reduction fair value projects respective carrying amounts perform annual impairment tests december 31 determined identified intangible assets impaired impairment charge would recorded development considered complete associated assets would deemed finitelived would amortized based respective remaining estimated useful lives fair value consideration acquisition date 504 million includes 397 million paid cash closing date 107 million contingent consideration potentially payable gnubios shareholders contingent consideration based probabilityweighted income approach could reach 700 million upon achievement developmentregulatory sales milestones contingent consideration developmentregulatory milestones valued 107 million based assumptions regarding probability achieving milestones amounts discounted present value contingent consideration sales milestones determined negligible using riskneutral probability money based blackscholes framework contingent consideration recognized estimated fair value 100 million december 31 2014 see note 3 discussion contingent consideration valuation underlying assumptions consider business combination material therefore disclosed pro forma results operations required material business combinations abd serotec january 2013 acquired 100 outstanding shares abd serotec division morphosys ag total consideration 622 million net cash received 73 million acquisition accounted business combination abd serotec represented integrated set activities assets capable conducted managed purpose providing return therefore constitutes business accordance gaap amount acquisitionrelated costs minimal biorad primarily represented acquisition process business acquisition included life science segments results operations acquisition date believe abd serotecs comprehensive catalog antibodies able offer customers total assay solutions validated many research platforms western blotting multiplex protein expression elisa cell sorting second quarter 2013 finalized determination fair values certain acquired intangible assets adjusted preliminary carrying values goodwill certain assets liabilities include final information received update weighted average tax rate applied valuation model changes determination fair values certain assets acquired liabilities assumed factors existed acquisition date resulted overall increase intangible assets 17 million reduction goodwill 21 million increase net tangible assets 04 million measurement period adjustments material impact previously reported condensed consolidated financial statements therefore retrospectively adjusted financial statements final fair values net assets acquired consist definitelived intangible assets 440 million goodwill 149 million net tangible assets 33 million portion goodwill recorded deductible income tax purposes 3 fair value measurements determine fair value asset liability based assumptions market participants would use pricing asset liability orderly transaction market participants measurement date identification market participant assumptions provides basis determining inputs used pricing asset liability fair value hierarchy established gives precedence fair value measurements calculated using observable inputs using unobservable inputs hierarchy prioritizes inputs three broad levels follows • level 1 quoted prices active markets identical instruments • level 2 significant observable inputs including quoted prices active markets similar instruments • level 3 significant unobservable inputs including assumptions determining fair value certain investments financial assets liabilities carried fair value measured recurring basis december 31 2014 classified hierarchy follows millions financial assets liabilities carried fair value measured recurring basis december 31 2013 classified hierarchy follows millions cash equivalents included cash equivalents consolidated balance sheets b availableforsale investments included following accounts consolidated balance sheets millions c forward foreign exchange contracts asset position included current assets consolidated balance sheets forward foreign exchange contracts liability position included current liabilities consolidated balance sheets e contingent consideration liabilities included following accounts consolidated balance sheets millions third quarter 2012 recognized contingent consideration liability 446 million upon acquisition new cell sorting system propel labs inc fair value contingent consideration based probabilityweighted income approach related achievement certain development sales milestones development milestone achieved paid 2013 third quarter 2014 first sales milestone reached cell sorting system purchase orders resulting payment 24 million fourth quarter 2014 effective december 31 2014 amended certain key terms impacting future payment contingent consideration acquisition new cell sorting system propel labs inc include clarification performance period include additional four months seller agreeing support expansion offerings address request customers customization amended sales milestones range 39 annual invoices 2015 2016 annual calendar year performance periods 40 extended september 1 2013 december 31 2014 performance period contingent consideration revalued net reduction 07 million 2014 selling general administrative expense estimated fair value 177 million december 31 2014 second quarter 2014 recognized contingent consideration liability upon acquisition gnubio acquisition date contingent consideration based probabilityweighted income approach could reach 700 million upon achievement developmentregulatory sales milestones contingent consideration developmentregulatory milestones valued 107 million acquisition date based assumptions regarding probability achieving milestones amounts discounted present value fourth quarter 2014 contingent consideration related developmentregulatory milestones revalued fair value 100 million december 31 2014 contingent consideration sales milestones acquisition date december 31 2014 determined negligible using riskneutral probability money based blackscholes framework following table provides reconciliation level 3 contingent consideration liabilities measured estimated fair value based original valuations updated quarterly year ended december 31 2014 millions following table provides quantitative information level 3 inputs fair value measurement contingent consideration liabilities december 31 2014 significant increases decreases inputs isolation could result significantly lower higher fair value measurement estimate fair value level 2 debt securities december 31 2014 2013 primary pricing provider uses sp capital iq primary pricing source pricing process allows us select hierarchy pricing sources securities held chosen pricing hierarchy level 2 securities certificates deposit commercial paper sp capital iq primary pricing source custodian secondary pricing source sp capital iq price level 2 security hold pricing provider utilize custodian supplied pricing commercial paper december 31 2014 2013 pricing determined straightline calculation starting purchase price date purchase increasing par maturity interest bearing certificates deposit commercial paper priced par addition primary pricing provider performed daily reasonableness testing sp capital iq prices custodian reported prices outside tolerable variance approximately 1 investigated resolved availableforsale investments consist following millions following summary investments gross unrealized losses associated fair value millions unrealized losses securities due number factors including changes interest rates changes economic conditions changes market outlook various industries among others biorad ability intent hold investments unrealized losses recovery fair value reasonable period time sufficient forecasted recovery fair value may maturity consider investments otherthantemporarily impaired december 31 2014 december 31 2013 part distributing products regularly enter intercompany transactions enter forward foreign exchange contracts manage foreign exchange risk future movements foreign exchange rates affect foreign currency denominated intercompany receivables payables use derivative financial instruments speculative trading purposes seek hedge accounting treatment contracts result contracts generally maturity dates 90 days less denominated primarily currencies industrial countries recorded fair value balance sheet date notional principal amounts provide one measure transaction volume outstanding december 31 2014 represent amount biorads exposure loss estimated fair value contracts derived using spot rates reuters last business day quarter points provided counterparties resulting gains losses offset exchange gains losses related receivables payables included foreign exchange losses net consolidated statements income following summary forward foreign currency exchange contracts millions following summary amortized cost estimated fair value debt securities december 31 2014 contractual maturity date millions estimated fair value financial instruments recognized fair value consolidated balance sheets included investments presented table fair value determined using significant observable inputs including quoted prices active markets similar instruments estimates necessarily indicative amounts could realized current market exchange considerable judgment required interpreting market data used develop estimates fair value use different market assumptions estimation techniques could material effect estimated fair value investments include financial instruments majority fair value based similar actively traded stock adjusted various discounts including discount marketability longterm debt excluding leases current maturities estimated fair value based quoted market prices similar issues estimated fair value financial instruments discussed level fair value hierarchy within fair value measurement categorized follows millions shares ordinary voting stock sartorius ag sartorius goettingen germany process technology supplier biotechnology pharmaceutical chemical food beverage industries 35 outstanding voting shares excluding treasury shares sartorius december 31 2014 sartorius family trust sartorius family members hold controlling interest outstanding voting shares representative designee sartorius’ board directors ability exercise significant influence operating financial policies sartorius account investment using cost method carrying value investment included investments consolidated balance sheets stock thinly traded conjunction valuation method discussed classified estimated fair value level 2 level 2 classification appropriate given valuation method employed incorporates observable input fair value sartorius’ actively traded preferred stock 4 goodwill purchased intangible assets changes goodwill segment follows millions conjunction acquisition 100 outstanding stock gnubio inc clinical diagnostics segment april 2014 recorded 135 million goodwill 464 million inprocess research development indefinitelived intangible asset conjunction acquisition 100 outstanding shares abd serotec life science segment january 2013 recorded 149 million goodwill 440 million definitelived intangible assets 330 million developed product technology 88 million licenses 13 million customer relationshipslists 04 million tradenames 05 million purchased intangibles weighted average useful lives definitelived intangible assets acquisition date 139 13 12 2 1 years respectively total weighted average useful life 137 years information regarding identifiable purchased intangible assets definite indefinite lives follows millions material impairment losses related purchased intangible assets recorded 2013 2014 impaired licenses discontinued product line amount 64 million impairment charge included 58 million cost goods sold 06 million research development expense accompanying consolidated statements income amortization expense related purchased intangible assets years ended december 31 2014 2013 2012 478 million 450 million 428 million respectively estimated future amortization expense based existing purchased intangible assets including iprd years ending december 31 2015 2016 2017 2018 2019 thereafter 384 million 355 million 269 million 235 million 205 million 744 million respectively 5notes payable longterm debt notes payable includes amounts borrowed credit lines maintained locally international subsidiaries borrowing capacity approximately 409 million 383 million available borrowing december 31 2014 december 31 2013 borrowing capacity aggregated approximately 201 million 158 million available borrowing weighted average interest rate lines 14 30 december 31 2014 2013 respectively biorad guaranteed 23 credit lines december 31 2014 eight december 31 2013 principal components longterm debt follows millions senior subordinated notes due 2016 may 2009 biorad sold 3000 million principal amount senior subordinated notes due 2016 80 notes sale yielded net cash proceeds 2948 million september 2013 redeemed 80 notes 3120 million including call premium 120 million expensed remaining original issuance bond discount 25 million unamortized bond issuance costs 11 million total expense redemption 156 million included interest expense consolidated statements income senior notes due 2020 december 2010 biorad sold 4250 million principal amount senior notes due 2020 4875 notes sale yielded net cash proceeds 4226 million effective rate 4946 4875 notes pay fixed rate interest 4875 per year option redeem 4875 notes time redemption price 100 principal amount plus specified makewhole premium defined indenture governing 4875 notes accrued unpaid interest thereon redemption date obligations 4875 notes secured rank equal right payment existing future unsubordinated indebtedness certain covenants apply year end 4875 notes including limitations following liens sale leaseback transactions mergers consolidations sales assets covenants compliance covenants december 31 2014 restrictive covenants relating total indebtedness interest coverage stock repurchases recapitalizations dividends distributions shareholders current ratios credit agreement june 2014 biorad entered 2000 million unsecured credit agreement replacing amended restated credit agreement june 2010 expired june 21 2014 borrowings credit agreement revolving basis used make permitted acquisitions working capital general corporate purposes outstanding borrowings credit agreement december 31 2014 2013 however 50 million utilized domestic standby letters credit reduced borrowing availability credit agreement matures june 2019 borrowed credit agreement borrowing rate would 15 december 31 2014 credit agreement requires biorad comply certain financial ratios covenants among things ratios covenants include leverage ratio test interest coverage test well restrictions ability declare pay dividends incur debt guarantee debt enter transactions affiliates merge consolidate sell assets make investments create liens compliance ratios covenants december 31 2014 maturities longterm debt december 31 2014 follows 2015 03 million 2016 03 million 2017 03 million 2018 03 million 2019 02 million thereafter 4362 million 6 income taxes us international components income taxes follows millions provision income taxes consists following millions reconciliation effective tax rate income taxes statutory tax rate follows effective tax rates 2014 2013 approximately effective tax rate 2014 includes lower tax benefit research tax credits effective tax rate 2013 included significant tax benefit related 2012 us federal research credit retroactively reinstated january 2 2013 additional tax benefit research credits 2013 offset increase tax liabilities unrecognized tax benefits audit settlements foreign jurisdictions effective tax rates three periods lower us statutory rate primarily due tax benefits differences us foreign statutory tax rates research development tax credits foreign income earned primarily switzerland france jurisdictions operate statutory tax rates significantly lower us statutory tax rate 35 include switzerland russia uk singapore effective tax rate may impacted future either favorably unfavorably many factors including limited changes statutory tax rates changes tax laws regulations tax audits settlements generation tax credits deferred tax assets liabilities reflect tax effects losses credits temporary differences carrying amounts assets liabilities financial reporting purposes amounts used income tax purposes significant components deferred tax assets liabilities follows millions december 31 2014 biorad’s international subsidiaries combined net operating loss carryforwards 1068 million loss carryforwards 1056 million expiration date believe likely benefit net operating loss carryforwards realized provided valuation allowance 236 million relating net operating loss carryforwards december 31 2014 biorad us federal net operating loss carryforwards approximately 10 million result acquisitions carryforwards subject limitation utilization expire 2018 2034 december 31 2014 biorad us federal research tax credit carryforwards 53 million 19 million subject limitations utilization december 31 2014 biorad approximately 53 million california net operating loss carryforwards related acquisition quantalife believe likely benefit net operating loss carryforwards realized recorded full valuation allowance losses december 31 2014 biorad deferred tax asset 202 million relating california research tax credit carryforwards including 20 million acquisition quantalife may carried forward indefinitely based judgment consistent prior years recorded full valuation allowance deferred tax asset believe likely certain deferred tax assets described realized foreseeable future recognized tax benefits relating reversal valuation allowance deferred tax assets december 31 2014 recognized reduction income tax expense tax years subject examination tax authorities major jurisdictions biorad operates include years 2009 forward us years 2008 forward certain foreign jurisdictions including france switzerland germany following tabular reconciliation total amounts unrecognized tax benefits millions substantially unrecognized tax benefits december 31 2014 2013 2012 would affect effective tax rate recognized biorad recognizes accrued interest penalties related unrecognized tax benefits income tax expense related unrecognized tax benefits noted biorad accrued interest 38 million 34 million 19 million december 31 2014 2013 2012 respectively december 31 2014 believe reasonably possible 68 million unrecognized tax benefits may recognized end 2015 result statute lapses benefits related uncertainty regarding sustainability certain deductions credits tax years remain subject examination relevant tax authorities general practice intention reinvest earnings nonus subsidiaries operations december 31 2014 biorad made provision us additional foreign withholding taxes approximately 512 million excess amount financial reporting tax basis investments foreign subsidiaries essentially permanent duration generally amounts become subject us taxation upon remittance dividends certain circumstances earnings repatriated us deferred tax liability associated temporary differences would approximately 106 million 7 stockholders equity biorad’s issued outstanding stock consists class common stock class b common stock class b share class b participates equally earnings biorad identical respects except follows class limited voting rights share class entitled one tenth vote matters share class b entitled one vote additionally class stockholders entitled elect 25 board directors class b stockholders entitled elect 75 directors cash dividends may paid class shares without paying cash dividend class b shares cash dividend may paid class b shares unless least equal cash dividend paid class shares class b shares convertible time class shares oneforone basis option stockholder founders biorad schwartz family collectively hold majority biorad’s voting stock result schwartz family able exercise significant influence biorad changes biorads issued common stock shares follows thousands treasury shares board directors authorized repurchase 180 million biorads common stock 33 million yet repurchased open market december 31 2014 amended restated credit agreement credit agreement limits ability repurchase stock accordance terms awards 2007 incentive award plan june 2012 withheld 122 shares class common stock 917 shares class b common stock satisfy minimum statutory tax obligations due upon vesting restricted stock certain employees considered repurchase stock restricted stock vested december 31 2013 therefore anticipate repurchasing shares purpose repurchases stock 2014 2013 8 accumulated comprehensive income accumulated comprehensive income included consolidated balance sheets consolidated statements changes stockholders equity consists following components millions amounts reclassified accumulated comprehensive income consolidated statements income presentation location follows reclassification adjustments calculated using specific identification method 9 sharebased compensationstock option purchase plans description sharebased compensation plans stock option award plans three stock option plans officers certain employees 1994 stock option plan 1994 plan 2003 stock option plan 2003 plan 2007 incentive award plan 2007 plan 1994 plan 2003 plan authorized grant incentive stock options nonqualified stock options employees 2007 plan authorizes grant stock options restricted stock restricted stock units stock appreciation rights types equity awards employees longer grant stock option grants 1994 plan 2003 plan since 2007 sharebased compensation grants 2007 plan total 2250360 shares reserved issuance equity awards 2007 plan may either class b common stock specified within plan december 31 2014 957053 shares available granted future plans class b options granted prices less fair market value underlying common stock date grant generally options granted term 10 years vest increments 20 per year fiveyear period yearly anniversary date grant stock awards issued 2007 plan generally vest increments 20 per year fiveyear period yearly anniversary date grant employee stock purchase plans 2011 employee stock purchase plan 2011 espp provides eligible employees may contribute 10 compensation 25000 annually toward quarterly purchase class common stock employees’ purchase price 85 lesser fair market value stock first business day last business day calendar quarter 2011 espp includes two components code section 423 component intend qualify “employee stock purchase plan” section 423 us internal revenue code 1986 amended “code” non423 component authorizes grant purchase rights qualify “employee stock purchase plan” section 423 code authorized sale 600000 shares class common stock 2011 espp sharebased compensation expense included sharebased compensation expense cost related stock option grants espp stock purchases restricted stock restricted stock unit awards sharebased compensation expense allocated cost goods sold research development expense selling general administrative expense consolidated statements income 2014 2013 2012 recognized sharebased compensation expense 149 million 137 million 132 million respectively capitalize sharebased compensation expense inventory options awards amortize fair value straightline basis stock compensation awards amortized requisite service periods awards generally vesting periods stock options following table summarizes stock option activity intrinsic value stock options defined difference current market value grant price total intrinsic value date exercise stock options exercised 2014 2013 2012 approximately 5 million 11 million 11 million respectively total grant date fair value options vested 2014 2013 2012 21 million 22 million 23 million respectively cash received stock options exercised 2014 2013 2012 58 million 41 million 34 million respectively actual tax benefit realized tax deductions stock options exercised totaled 53 million 66 million 65 million 2014 2013 2012 respectively december 31 2014 62 million total unrecognized compensation cost stock options amount expected recognized future weightedaverage period approximately 3 years weightedaverage fair value stock options granted estimated using blackscholes optionpricing model following weightedaverage assumptions volatility based historical volatilities common stock period equal stock option’s expected life riskfree interest rate based us treasury yield curve effect time grant expected life represents number years estimate based primarily historical experience options outstanding prior exercise anticipate paying cash dividends future therefore use expected dividend yield zero restricted stock restricted stock units 2007 plan restricted stock last granted 2008 restricted stock units rights receive shares company stock granted 2007 2014 2007 plan fair value restricted stock share restricted stock unit market value determined closing price stock day grant following table summarizes restricted stock restricted stock unit activity total grant date fair value restricted stock restricted stock units 2014 2013 2012 106 million 96 million 85 million respectively december 31 2014 approximately 339 million total unrecognized compensation cost related restricted stock units amount expected recognized remaining weightedaverage period approximately 4 years employee stock purchase plans fair value employees’ purchase rights 2011 espp 1988 espp estimated using blackscholes model following weightedaverage assumptions major assumptions primarily based historical data volatility based historical volatilities common stock period equal expected life purchase rights riskfree interest rate based us treasury yield curve effect time grant anticipate paying cash dividends future therefore use expected dividend yield zero sold 102222 shares 102 million 103669 shares 100 million 107749 shares 92 million 2011 espp employees 2014 2013 2012 respectively december 31 2014 286360 shares remain authorized available issuance 2011 espp currently issue new shares satisfy stock option exercises restricted stock issuances espp stock purchases 10 income expense net income expense net includes following components millions otherthantemporary impairment losses investments recorded 2014 2013 2012 certain availableforsale investments certain equity investment light continuing declines market prices time primarily associated investment sovereign nation large deficits decision sell holdings particular adviser account december 2012 sold building 64 million clinical diagnostics segment associated 1999 acquisition recognized gain sale 43 million portion goodwill recorded 1999 acquisition written 10 million 11 supplemental cash flow information reconciliation net income including noncontrolling interests net cash provided operating activities follows millions 1 amounts revised see note 1 correction immaterial errors 12 commitments contingent liabilities rents leases net rental expense operating leases 469 million 455 million 414 million 2014 2013 2012 respectively leases principally facilities automobiles annual future minimum lease payments december 31 2014 operating leases follows 2015 393 million 2016 336 million 2017 257 million 2018 185 million 2019 beyond 367 million deferred profit sharing retirement plan profit sharing plan covering substantially us employees contributions made discretion board directors biorad liability current year’s contribution expense 137 million 135 million 121 million 2014 2013 2012 respectively postemployment benefits several foreign locations statutorily required provide lump sum severance termination indemnity employees plans vested benefit obligation december 31 2014 2013 461 million 463 million respectively included current liabilities longterm liabilities consolidated balance sheets plans required funded trust device used accumulate assets settle obligations purchase obligations december 31 2014 obligations recognized balance sheet 1105 million include agreements purchase goods services enforceable legally binding biorad specify significant terms exclude agreements cancelable without penalty annual future fixed determinable portion purchase obligations recognized balance sheet december 31 2014 follows 2015 184 million 2016 117 million 2017 107 million 2018 34 million 2019 24 million 2019 639 million december 31 2014 purchase obligations recognized balance sheet 363 million include agreements purchase goods services enforceable legally binding biorad specify significant terms exclude agreements cancelable without penalty annual future fixed determinable portion purchase obligations recognized balance sheet december 31 2014 follows 2015 176 million 2016 43 million 2017 26 million 2018 34 million 2019 53 million 2019 31 million letters credit ordinary course business times required post letters credit letters credit issued banks guarantee obligations various parties including insurance companies contingently liable 76 million standby letters credit banks december 31 2014 contingent consideration second quarter 2014 recognized contingent consideration liability upon acquisition gnubio acquisition date contingent consideration based probabilityweighted income approach could reach 700 million upon achievement developmentregulatory sales milestones contingent consideration developmentregulatory milestones valued 107 million acquisition date based assumptions regarding probability achieving milestones amounts discounted present value fourth quarter 2014 contingent consideration related developmentregulatory milestones revalued fair value 100 million december 31 2014 contingent consideration sales milestones acquisition date december 31 2014 determined negligible using riskneutral probability money based blackscholes framework third quarter 2012 recognized contingent consideration liability 446 million upon acquisition new cell sorting system propel labs inc fair value contingent consideration based probabilityweighted income approach related achievement certain development sales milestones development milestone achieved paid 2013 third quarter 2014 first sales milestone reached cell sorting system purchase orders resulting payment 24 million fourth quarter 2014 effective december 31 2014 amended certain key terms impacting future payment contingent consideration acquisition new cell sorting system propel labs inc include clarification annual performance period include additional 4 months replacement bookings invoicing event determine sales milestone seller agreeing support expanding offerings address request customer customizing s3 unit intention parties among things increase total market penetration evaluate new product configurations provide expanded customer support amended sales milestones range 39 annual invoices 2015 2016 annual calendar year performance periods 40 extended september 1 2013 december 31 2014 performance period contingent consideration revalued net reduction 07 million 2014 selling general administrative expense estimated fair value 177 million december 31 2014 fourth quarter 2011 recognized contingent consideration liability upon acquisition quantalife related potential future payments due upon achievement certain sales development milestones contingent consideration initially recognized estimated fair value 241 million based probabilityweighted income approach acquisition date october 4 2011 total contingent consideration could originally reached maximum 48 million upon achievement sales milestones development milestone development milestone met december 31 2012 resulting payment 60 million january 2013 2012 first three shortterm sales milestones met therefore fair value contingent consideration lowered 161 million credited selling general administrative expense 2013 expect remaining sales milestones would met therefore 20 million remaining contingent consideration liability credited selling general administrative expense concentrations labor subject collective bargaining agreements december 31 2014 approximately eight percent biorads approximately 3100 us employees covered collective bargaining agreement expire november 8 2016 many biorads nonus fulltime employees especially france covered collective bargaining agreements 13 legal proceedings previously disclosed may 2010 voluntarily disclosed us department justice doj securities exchange commission sec certain likely potential violations us foreign corrupt practices act fcpa audit committee board directors audit committee assumed direct responsibility reviewing matters hired experienced independent counsel conduct investigation provide legal advice sec doj commenced investigation following completion audit committee’s investigation provided information doj sec cooperated investigations effective november 3 2014 entered nonprosecution agreement npa doj consented entry order sec order actions resolve doj sec investigations npa concerns violations fcpa’s books records internal control provisions related russia 20052010 pursuant npa fourth quarter 2014 paid penalty 144 million agreed certain compliance reporting cooperation obligations doj agreed criminally prosecute us crimes related conduct disclosed doj provided perform obligations npa two years sec order concerns violations fcpa’s books records internal controls antibribery provisions related russia violations fcpa’s books records internal controls provisions related vietnam certain thailand operations 20052010 pursuant sec order fourth quarter 2014 paid total 407 million included 351 million disgorgement 56 million interest agreed make certain reports sec anticorruption compliance remediation efforts next two years cease desist violations fcpa total amount paid npa sec order 551 million fourth quarter 2014 accrued 350 million december 31 2013 remaining 201 million recorded 2014 npa sec order doj sec respectively took account initial voluntary selfdisclosure potential fcpa violations extensive investigation cooperation investigations extensive significant remediation efforts date neither npa sec order requires appointment independent external monitor oversee activities compliance applicable laws april 13 2011 shareholder derivative lawsuit filed directors superior court contra costa county california case also named company nominal defendant captioned city riviera beach general employees’ retirement system v david schwartz et al complaint plaintiff alleged directors breached fiduciary duties failing ensure sufficient internal controls systems compliance fcpa purportedly seeking relief behalf plaintiff sought award unspecified compensatory punitive damages costs expenses including attorneys’ fees declaration directors breached fiduciary duties parties agreed stipulated dismissal case without prejudice tolling statute limitations pending resolution doj sec investigations occurred november 2014 disclosed january 23 2015 city riviera beach general employees’ retirement system filed new shareholder derivative lawsuit superior court contra costa county three current directors one former director company also named nominal defendant complaint plaintiff alleges company’s directors breached fiduciary duty loyalty failing ensure company sufficient internal controls systems compliance fcpa company failed provide adequate training fcpa based actions directors unjustly enriched purportedly seeking relief company’s behalf plaintiff seeks award restitution unspecified damages costs expenses including attorneys’ fees individual defendants intend file demurrer requesting dismissal complaint january 30 2015 received demand pursuant section 220 delaware general corporation law firm scott llp behalf international brotherhood electrical workers local 38 pension fund inspect certain books records company alleged purpose demand investigate company’s violation fcpa lack internal controls addition party various claims legal actions complaints arising ordinary course business believe time ultimate liability resulting matters material adverse effect results operations financial position liquidity however cannot give assurance regarding ultimate outcome matters resolution could material operating results particular period depending level income period 14 segment information biorad multinational manufacturer worldwide distributor life science research products clinical diagnostics products two reportable segments life science clinical diagnostics reportable segments strategic business lines offer 8000 different products services require different marketing strategies disclose quantitative information different products services impractical based primarily numerous products services sell global markets serve life science segment develops manufactures sells services reagents apparatus instruments used biological research products sold university medical school laboratories pharmaceutical biotechnology companies food testing laboratories government industrial research facilities clinical diagnostics segment develops manufactures sells services automated test systems informatics systems test kits specialized quality controls healthcare market products sold reference laboratories hospital laboratories state newborn screening facilities physicians’ office laboratories transfusion laboratories insurance forensic testing laboratories operations include remainder former analytical instruments segment results presented manner present operations internally make operating decisions assess performance accounting policies segments described significant accounting policies see note 1 segment profit loss includes allocation corporate expense based upon sales allocation interest expense based upon accounts receivable inventories difference total segment allocated interest expense depreciation amortization capital expenditures corresponding consolidated amounts attributable corporate headquarters segments expected manage assets completely control accordingly segment assets include primarily accounts receivable inventories gross machinery equipment goodwill balances included corporate segment reporting purposes information regarding industry segments december 31 2014 2013 2012 years ended follows millions net corporate operating expense consists receipts expenditures primary responsibility segment operating management therefore allocated segments performance assessment chief operating decision maker 2014 2013 included accrual 201 million 350 million respectively connection resolutions sec doj investigations relating fcpa see note 13 2013 also included 156 million expense redemption 80 senior subordinated notes see note 5 following reconciles total segment profit consolidated income taxes millions following reconciles total segment assets consolidated total assets millions following presents net sales external customers geographic region based primarily location use product service millions following presents property plant equipment net investments assets excluding deferred income taxes geographic region based upon location asset millions 15 quarterly financial data unaudited summarized quarterly financial data 2014 2013 follows millions except per share data item 9item 8 financial statements supplementary data report independent registered public accounting firm stockholders board directors biorad laboratories inc opinion consolidated financial statements audited accompanying consolidated balance sheets biorad laboratories inc subsidiaries company december 31 2017 2016 related consolidated statements income comprehensive income changes stockholders’ equity cash flows years threeyear period ended december 31 2017 related notes financial statement schedule collectively consolidated financial statements opinion consolidated financial statements present fairly material respects financial position company december 31 2017 2016 results operations cash flows years threeyear period ended december 31 2017 conformity us generally accepted accounting principles also audited accordance standards public company accounting oversight board united states pcaob companys internal control financial reporting december 31 2017 based criteria established internal controlintegrated framework 2013 issued committee sponsoring organizations treadway commission report dated april 13 2018 expressed adverse opinion effectiveness companys internal control financial reporting basis opinion consolidated financial statements responsibility company’s management responsibility express opinion consolidated financial statements based audits public accounting firm registered pcaob required independent respect company accordance us federal securities laws applicable rules regulations securities exchange commission pcaob conducted audits accordance standards pcaob standards require plan perform audit obtain reasonable assurance whether consolidated financial statements free material misstatement whether due error fraud audits included performing procedures assess risks material misstatement consolidated financial statements whether due error fraud performing procedures respond risks procedures included examining test basis evidence regarding amounts disclosures consolidated financial statements audits also included evaluating accounting principles used significant estimates made management well evaluating overall presentation consolidated financial statements believe audits provide reasonable basis opinion stockholders board directors biorad laboratories inc opinion internal control financial reporting audited biorad laboratories inc subsidiaries company internal control financial reporting december 31 2017 based criteria established internal controlintegrated framework 2013 issued committee sponsoring organizations treadway commission opinion effect material weakness described achievement objectives control criteria company maintained effective internal control financial reporting december 31 2017 based criteria established internal controlintegrated framework 2013 issued committee sponsoring organizations treadway commission also audited accordance standards public company accounting oversight board united states pcaob consolidated balance sheets company december 31 2017 2016 related consolidated statements income comprehensive income changes stockholders equity cash flows years threeyear period ended december 31 2017 related notes financial statement schedule collectively consolidated financial statements report dated april 13 2018 expressed unqualified opinion consolidated financial statements financial statement schedule material weakness deficiency combination deficiencies internal control financial reporting reasonable possibility material misstatement companys annual interim financial statements prevented detected timely basis material weakness related control environment risk assessment control activities certain european entities identified included management’s assessment material weakness considered determining nature timing extent audit tests applied audit 2017 consolidated financial statements report affect report consolidated financial statements basis opinion companys management responsible maintaining effective internal control financial reporting assessment effectiveness internal control financial reporting included accompanying managements report internal control financial reporting responsibility express opinion companys internal control financial reporting based audit public accounting firm registered pcaob required independent respect company accordance us federal securities laws applicable rules regulations securities exchange commission pcaob conducted audit accordance standards pcaob standards require plan perform audit obtain reasonable assurance whether effective internal control financial reporting maintained material respects audit internal control financial reporting included obtaining understanding internal control financial reporting assessing risk material weakness exists testing evaluating design operating effectiveness internal control based assessed risk audit also included performing procedures considered necessary circumstances believe audit provides reasonable basis opinion definition limitations internal control financial reporting companys internal control financial reporting process designed provide reasonable assurance regarding reliability financial reporting preparation financial statements external purposes accordance generally accepted accounting principles companys internal control financial reporting includes policies procedures 1 pertain maintenance records reasonable detail accurately fairly reflect transactions dispositions assets company 2 provide reasonable assurance transactions recorded necessary permit preparation financial statements accordance generally accepted accounting principles receipts expenditures company made accordance authorizations management directors company 3 provide reasonable assurance regarding prevention timely detection unauthorized acquisition use disposition companys assets could material effect financial statements inherent limitations internal control financial reporting may prevent detect misstatements also projections evaluation effectiveness future periods subject risk controls may become inadequate changes conditions degree compliance policies procedures may deteriorate accompanying notes integral part consolidated financial statements accompanying notes integral part consolidated financial statements biorad laboratories inc consolidated statements income thousands except per share data accompanying notes integral part consolidated financial statements biorad laboratories inc consolidated statements comprehensive income thousands see note 1 significant accounting policies recent accounting standards update reclassification adjustments calculated using specific identification method accompanying notes integral part consolidated financial statements biorad laboratories inc consolidated statements cash flows thousands accompanying notes integral part consolidated financial statements see note 1 significant accounting policies recent accounting standards update accompanying notes integral part consolidated financial statements biorad laboratories inc notes consolidated financial statements 1significant accounting policies basis presentation consolidated financial statements include accounts biorad laboratories inc wholly majority owned subsidiaries referred report “biorad” “we” “us” “our” elimination intercompany balances transactions preparation financial statements conformity us generally accepted accounting principles requires management make estimates assumptions affect amounts reported financial statements accompanying notes actual results could differ estimates evaluate subsequent events evidence provide conditions existing date balance sheet well conditions arose balance sheet date financial statements issued effects conditions existed balance sheet date recognized financial statements events conditions arising balance sheet date financial statements issued evaluated determine disclosure required keep financial statements misleading extent events conditions exist disclosures made regarding nature events estimated financial effects events conditions cash equivalents cash equivalents consist cash highly liquid investments original maturities three months less readily convertible cash equivalents stated cost approximates fair value shortterm restricted investments shortterm restricted investments 56 million 46 million december 31 2017 2016 respectively represent money market fund renewed annually collateral secures workers compensation general liability insurance investment income accrues biorad recorded cash equivalents consolidated balance sheets availableforsale investments availableforsale investments consist corporate obligations municipal securities asset backed securities us government sponsored agencies marketable equity securities management classifies investments time purchase reevaluates classification balance sheet date investments maturities beyond one year may classified shortterm based liquid nature marketable securities represent investment cash available current operations availableforsale investments reported fair value based quoted market prices observable market data unrealized gains losses reported component comprehensive income net related tax effect unrealized losses charged income decline fair value individual security determined otherthantemporary review availableforsale investments otherthantemporary losses quarterly basis realized gains losses otherthantemporary impairments investments included income expense net see note 10 concentration credit risk financial instruments potentially subject us concentration credit risk consist primarily cash equivalents investments foreign exchange contracts trade accounts receivable cash equivalents investments placed various highly rated major financial institutions located different geographic regions biorad sustained significant losses instruments held financial institutions forward contracts used managing foreign currency exposures element risk counterparties may unable meet terms agreements attempt minimize risk limiting counterparties diverse group highlyrated domestic international financial institutions event nonperformance counterparties carrying values financial instruments represent maximum amount loss would incurred fiscal yearend however expect record losses result counterparty default perform credit evaluation procedures related trade receivables exception certain developing countries generally require collateral result increased risk certain developing countries biorad sales subject collateral letters credit customers credit risk trade accounts receivable generally limited due large number customers dispersion across many geographic areas however significant amount trade receivables national healthcare systems countries within european union accounts receivable maintain allowance doubtful accounts estimated losses resulting inability customers make required payments amount allowance determined analyzing known uncollectible accounts aged receivables economic conditions customers’ country industry historical losses customers’ creditworthiness amounts later determined specifically identified uncollectible charged written allowance inventory inventories valued lower actual cost market net realizable value include material labor overhead costs firstin firstout method used relieve inventory products sold property plant equipment property plant equipment carried cost less accumulated depreciation amortization included property plant equipment buildings equipment acquired capital lease arrangements reagent rental equipment capitalized software including costs software developed obtained internal use property plant equipment assessed impairment quarterly whenever events changes circumstances indicate carrying amount may recoverable depreciation computed straightline basis estimated useful lives assets buildings leasehold improvements amortized 1530 years term leases life improvements whichever shorter exception reagent rental equipment amortized 15 year period equipment capitalized software depreciated 312 years goodwill represents excess cost fair value net tangible identifiable intangible assets acquired businesses goodwill assessed impairment applying fair value based tests annually fourth quarter whenever events changes circumstances indicate carrying amount may recoverable perform impairment tests goodwill reporting unit level one level operating segments reporting units identified components discrete financial information available regularly reviewed management goodwill amounts assigned reporting units time acquisition effective january 1 2017 accordance accounting standards update 201704 simplifying test goodwill impairment goodwill impairment amount reporting units carrying value exceeds fair value exceed carrying amount goodwill use projected discounted cash flow model determine fair value reporting unit prior january 1 2017 goodwill impairment test consisted twostep process first step goodwill impairment test used identify potential impairment compared fair value reporting unit carrying value including goodwill used projected discounted cash flow model determine fair value reporting unit fair value reporting unit exceeded carrying amount goodwill reporting unit considered impaired second step impairment test required second step required compared implied fair value reporting unit goodwill carrying amount goodwill fair value reporting unit allocated assets liabilities unit including unrecognized intangible assets reporting unit acquired business combination fair value reporting unit price paid acquire reporting unit carrying amount reporting unit’s goodwill exceeded implied fair value impairment charge recognized amount equal excess longlived assets purposes recognition measurement impairment loss longlived asset assets grouped assets liabilities lowest level identifiable cash flows largely independent cash flows assets liabilities assess impairment longlived assets including identifiable intangible assets quarterly whenever events changes circumstances indicate carrying value may recoverable factors consider important could trigger impairment review include • significant underperformance relative expected historical projected future operating results • significant changes manner use longlived assets intangible assets strategy overall business • current expectation likely longlived asset sold otherwise disposed loss end previously estimated useful life • significant negative industry legal regulatory economic trends management determines carrying value longlived assets may recoverable based upon existence one indicators impairment test impairment based projected undiscounted cash flow method projected future operating results cash flows asset group used establish fair value used evaluating carrying value longlived intangible assets estimate future cash flows longlived assets using current longterm financial forecasts carrying amount longlived asset recoverable exceeds sum undiscounted cash flows expected result use eventual disposition asset case impairment loss would recognized impairment loss recognized amount carrying amount exceeds fair value income taxes account income taxes asset liability method requires recognition deferred tax assets liabilities expected future tax consequences events included financial statements method deferred tax assets liabilities reflect tax effects losses credits temporary differences carrying amounts assets liabilities financial reporting purposes amounts used income tax purposes determined using enacted tax rates effect year differences expected reverse effect change tax rates deferred tax assets liabilities recognized income period includes enactment date record deferred tax assets extent believe assets likely realized making determination consider available positive negative evidence including scheduled reversals deferred tax liabilities projected future taxable income tax planning strategies recent financial operations extent determine able realize deferred income tax assets future excess net recorded amount make adjustment valuation allowance may reduce provision income taxes establish reduce valuation allowance deferred tax assets provision income taxes increase decrease respectively period determination change valuation allowance made recognize tax benefit uncertain tax position likely tax position sustained examination taxing authorities based technical merits position tax benefits recognized financial statements particular tax position measured based largest benefit greater 50 likelihood realized upon settlement amount unrecognized tax benefits adjusted appropriate changes facts circumstances significant amendments existing tax law new regulations interpretations taxing authorities new information obtained tax examination resolution examination recognize accrued interest penalties appropriate related unrecognized tax benefits provision income taxes december 22 2017 us enacted comprehensive tax legislation “tax act” new legislation contains significant tax provisions affect us including onetime mandatory deemed repatriation tax certain unrepatriated foreign earnings transition tax reduction corporate income tax rate 35 21 effective january 1 2018 change worldwide tax system modified territorial system required recognize effect tax law changes period enactment computation transition tax remeasurement us deferred tax assets liabilities well reassessment net realizability deferred tax assets liabilities subsequent enactment tax act sec staff issued staff accounting bulletin 118 income tax accounting implications tax cuts jobs act sab 118 provides guidance accounting tax effects tax act sab 118 provides measurement period extend beyond one year tax act enactment date companies complete accounting standards codification asc 740 income taxes accordance sab 118 company must reflect income tax effects aspects tax act accounting asc 740 complete extent company’s accounting certain income tax effects tax act incomplete reasonable estimate determined company must record provisional estimate financial statements year ended december 31 2017 recorded amounts accounting complete able make reasonable estimates provisional estimates transition tax remeasurement deferred tax assets liabilities adjusted additional information guidance become available expect complete relevant analysis later december 31 2018 revenue recognition revenue recognized pervasive evidence arrangement exists price buyer fixed determinable collectability reasonably assured title passed customer product delivered absent specific contractual specifications revenue associated equipment requires factory installation recorded installation complete customer acceptance required contractually occurred time revenue recognized provision recognized estimated product returns service revenues extended warranty contracts recognized ratably life service agreement services performed contract net sales actual selling price products customers taxes billed customer sales tax value added tax etc shall credited tax liability accounts excluded net sales reagent agreements diagnostic industry sales method provides use instrument consumables reagents customer per test basis evaluate reagent agreements account contracts guidance pertaining accounting revenue arrangements multiple deliverables reagent agreements represent one unit accounting instrument consumables interdependent producing diagnostic result neither standalone value respect agreements revenues earn reagent agreements recognized pursuant terms agreement based entirely contingent upon either consumables conduct fixed number tests delivered ii cost per test conducted reported revenue cost per reported basis estimated current period billed actual month reported customer shipping handling classify freight costs billed customers net sales related freight costs included cost goods sold warranty warrant certain equipment defects design materials workmanship mostly period one year upon delivery equipment establish part cost goods sold provision expected costs warranty based historical experience specific warranty terms customer feedback review performed quarterly basis assess adequacy warranty accrual changes warranty accrual included current liabilities longterm liabilities follows millions research development internal research development costs expensed incurred thirdparty research development costs expensed contracted work performed foreign currency balance sheet accounts international subsidiaries translated current exchange rates end accounting period income statement items translated average exchange rates period resulting translation adjustments recorded separate component stockholders’ equity foreign currency transaction gains losses included foreign exchange losses net consolidated statements income transaction gains losses result primarily fluctuations exchange rates intercompany receivables payables denominated currencies functional currency subsidiary recorded transaction forward foreign exchange contracts part distributing products regularly enter intercompany transactions enter forward foreign exchange contracts manage foreign exchange risk future movements exchange rates affect foreign currency denominated intercompany receivables payables use derivative financial instruments speculative trading purposes seek hedge accounting treatment contracts result contracts generally maturity dates 90 days less denominated primarily currencies industrial countries recorded asset liability measured fair value balance sheet date resulting gains losses offset exchange gains losses related receivables payables recorded foreign exchange losses net consolidated statements income sharebased compensation plans stockbased compensation expense sharebased payment awards granted determined based grantdate fair value recognize compensation costs net forfeitures requisite service period award generally vesting term sharebased payment awards starting 2017 recognize forfeitures occur due change accounting principle prior periods estimated forfeiture rate based historical experience plans described fully note 9 earnings per share basic earnings per share computed dividing net income attributable biorad weighted average number common shares outstanding period diluted earnings per share takes account effect dilutive instruments stock options restricted stock uses average share price period determining number potential common shares added weighted average number shares outstanding potential common shares excluded diluted earnings per share calculation effect would antidilutive weighted average number common shares outstanding used calculate basic diluted earnings per share antidilutive shares follows thousands fair value financial instruments certain financial instruments including cash equivalents shortterm investments accounts receivable marketable securities notes payable accounts payable foreign exchange contracts carrying amounts approximate fair value estimated fair value financial instruments based exchange price would received asset paid transfer liability exit price using available market information appropriate valuation methodologies principal advantageous market asset liability orderly transaction market participants estimates necessarily indicative amounts could realized current market exchange considerable judgment required interpreting market data used develop estimates fair value use different market assumptions estimation techniques could material effect estimated fair value see note 3 reclassification certain amounts correction immaterial errors 2016 reclassification buildings leasehold improvements equipment upon implementation global single instance enterprise resource planning erp platform europe second quarter 2017 105 million assets france misclassified equipment reported buildings leasehold improvements periods prior 2017 reclassification 2016 balance conforms correct balance sheet presentation december 31 2017 impact consolidated statements income cash flows please see table corrected amounts buildings leasehold improvements equipment 2016 2015 misstatement income taxes 2016 2015 three different misstatements associated income taxes first misstatement related second implementation global single instance erp platform us third quarter 2015 part data migrated reconciled timely resulting double counting deferred tax asset consequence deferred income taxes 2016 understated 24 million provision income taxes understated 24 million 2015 second misstatement related misapplication tax rule related foreign dividend income consequence retained earnings overstated 14 million 2015 tax liabilities noncurrent reported longterm liabilities understated 46 million 2016 provision income taxes understated 19 million 13 million 2016 2015 respectively third misstatement related design deficiency associated transfer pricing consequence retained earnings overstated 02 million 2015 tax liabilities noncurrent reported longterm liabilities understated 06 million 2016 provision income taxes understated 02 million 2016 2015 impact reclassification immaterial error corrections described consolidated balance sheet consolidated statements income periods presented follows thousands except per share data management evaluated materiality errors described qualitative quantitative perspective based evaluation concluded material individual prior period effect trend financial results taking account requirements securities exchange commission sec staff accounting bulletin 108 considering effect prior year misstatements quantifying misstatements current year financial statements sab 108 accordingly correcting errors every affected period 2015 2016 consolidated financial statements included form 10k recent accounting standards updates february 2018 financial accounting standards board “fasb” issued accounting standards update “asu” 201803 technical corrections improvements financial instruments recognition measurement financial assets financial liabilities asu 201803 amends certain items asu 201601 see equity securities without readily determinable fair value asu 201803 clarifies entity uses measurement alternative equity securities without readily determinable fair values change measurement approach fair value made election irrevocable entity measures equity securities without readily determinable fair values fair value must record cumulativeeffect adjustment retained earnings beginning fiscal year guidance adopted asu 201803 effective fiscal years beginning december 15 2017 interim periods within years beginning june 15 2018 early adoption permitted december 31 2017 accounted investment ordinary shares sartorius ag cost fair value readily determinable stock thinly traded see note 3 consolidated financial statements asu 201601 see account ordinary shares sartorius ag cost less impairment plus minus subsequent adjustments observable price changes anticipate material transaction would provide observable price change ordinary shares sartorius ag based current ownership interests sartorius family trust sartorius family members biorad laboratories inc february 2018 fasb issued asu 201802 reclassification certain tax effects accumulated comprehensive income asu 201802 gives entities option reclassify retained earnings tax effects related items accumulated comprehensive income oci fasb refers stranded accumulated oci result tax act early adopted asu 201802 period adoption tax act fourth quarter 2017 elected reclassify income tax effects tax act remeasurement deferred tax liabilities related availableforsale equity securities including preferred shares sartorius ag increasing oci decreasing retained earnings 1201 million may 2017 fasb issued asu 201709 scope modification accounting asu 201709 clarifies changes terms conditions sharebased payment award must accounted modifications asu 201709 allow companies make certain changes awards vesting conditions without accounting modifications change accounting modifications asu 201709 applied prospectively awards modified adoption date early adopted asu 201709 second quarter 2017 affected consolidated financial statements march 2017 fasb issued asu 201707 improving presentation net periodic pension cost net periodic postretirement benefit cost asu 201707 change employers sponsor defined benefit pension andor postretirement benefit plans present net periodic benefit cost comprised several components income statement asu 201707 employers present service cost component net periodic benefit cost income statement line items employee compensation costs arising services rendered period costs eligible capitalization employers present components separately line items includes service cost outside subtotal income operations asu 201707 effective fiscal years beginning december 15 2017 interim periods within years employers apply guidance presentation components net periodic benefit cost income statement retrospectively expect asu 201707 material impact financial statements january 2017 fasb issued asu 201704 simplifying test goodwill impairment asu 201704 removes step 2 goodwill impairment test required hypothetical purchase price allocation goodwill impairment amount reporting unit’s carrying value exceeds fair value exceed carrying amount goodwill asu 201704 provides streamlined approach evaluating goodwill impairment early adopted january 1 2017 prospective basis change accounting principle see note 4 consolidated financial statements update goodwill impairment january 2017 fasb issued asu 201701 clarifying definition business asu 201701 changes definition business assist entities evaluating set transferred assets activities business substantially fair value concentrated single asset group similar assets acquired set business met entity evaluates whether set meets requirement business include minimum input substantive process together significantly contribute ability create outputs determining whether set constitutes business critical accounting business combination differs significantly asset acquisition early adopted asu 201701 january 1 2017 prospective basis material impact consolidated financial statements november 2016 fasb issued asu 201618 restricted cash asu 201618 requires entities show changes total cash equivalents restricted cash restricted cash equivalents statement cash flows result entities longer present transfers cash equivalents restricted cash restricted cash equivalents statement cash flows asu 201618 applied retrospectively effective fiscal years beginning december 15 2017 interim periods within years expect asu 201618 material impact financial statements impact statements cash flows presentation october 2016 fasb issued asu 201616 intraentity transfers assets inventory asu 201616 requires immediate recognition income tax consequences intercompany asset transfers inventory transfers existing gaap prohibits recognition income tax consequences intercompany asset transfers whereby seller defers net tax effect buyer prohibited recognizing deferred tax asset difference newly created tax basis asset tax jurisdiction financial statement carrying amount reported consolidated financial statements asu 201616 specifically excludes scope intercompany inventory transfers whereby recognition tax consequences take place inventory sold third parties asu 201616 effective fiscal years beginning december 15 2017 interim periods within fiscal years asu 201616 applied modified retrospective basis cumulativeeffect adjustment directly retained earnings beginning period adoption estimate impact cumulativeeffect decrease retained earnings predominately decrease assets approximately 17 million august 2016 fasb issued asu 201615 classification certain cash receipts cash payments asu 201615 intended reduce diversity practice certain transactions classified statement cash flows asu 201615 effective fiscal years beginning december 15 2017 interim periods within fiscal years expect asu 201615 material impact statements cash flows june 2016 fasb issued asu 201613 measurement credit losses financial instruments asu 201613 replace current incurred loss approach expected loss model instruments measured amortized cost require entities record allowances availableforsale debt securities rather reduce carrying amount current otherthantemporary impairment model asu 201613 effective fiscal years beginning december 15 2019 interim periods within fiscal years early adoption permitted entities annual periods beginning december 15 2018 interim periods therein currently evaluating effect asu 201613 consolidated financial statements march 2016 fasb issued asu 201609 improvements employee sharebased payment accounting asu 201609 requires income tax effects awards recognized income statement awards vest settled also allows employer repurchase employee’s shares permitted today tax withholding purposes without triggering liability accounting make policy election account forfeitures occur adopted asu 201609 prospectively change accounting principle january 1 2017 prior periods adjusted addition made policy election account forfeitures occur asu 201609 also requires present excess tax benefits operating activity statement cash flows rather financing activity result adopting asu 201609 january 1 2017 cumulative effect change retained earnings decreased 03 million increased additional paidin capital deferred tax assets 04 million 01 million respectively consolidated balance sheet march 2016 fasb issued asu 201607 simplifying transition equity method accounting eliminates requirement retrospectively apply equity method previous periods investor initially obtains significant influence investee current guidance investor consolidate investment initially accounts method equity method required retrospectively apply equity method prior periods held investment subsequently obtained significant influence adopted asu 201607 january 1 2017 prospective basis currently affected consolidated financial statements february 2016 fasb issued asu 201602 leases require among items lease accounting recognize leases assets liabilities balance sheet qualitative quantitative disclosures enhanced better understand amount timing uncertainty cash flows arising leases asu 201602 effective fiscal years beginning december 15 2018 interim periods within fiscal years early adoption permitted plan early adopt asu 201602 adopted modified retrospective basis elective reliefs requires application asu 201602 periods presented currently gathering documenting analyzing lease agreements related asu anticipate material additions balance sheet rightofuse assets offset associated liabilities january 2016 fasb issued asu 201601 recognition measurement financial assets financial liabilities amendments asu 201601 among items require equity investments unconsolidated entities accounted using equity method accounting generally measured fair value earnings longer availableforsale classification changes fair value reported comprehensive income equity securities readily determinable fair values equity investments without readily determinable fair values cost method also eliminated however entities able elect record equity investments without readily determinable fair values cost less impairment plus minus subsequent adjustments observable price changes basis equity investments reported current earnings asu 201601 effective fiscal years beginning december 15 2017 interim periods within fiscal years equity securities would affected asu 201601 see availableforsale investments table note 3 consolidated financial statements primarily consists investment sartorius ag preferred shares expect impact adoption may material consolidated statement income addition affected securities per note 3 ordinary voting stock sartorius ag accounted investment cost method effective january 1 2018 201601 account investment ordinary shares sartorius ag cost less impairment plus minus subsequent adjustments observable price changes july 2015 fasb issued asu 201511 “simplifying measurement inventory” current guidance entity subsequently measures inventory lower cost market defined replacement cost net realizable value nrv less normal profit margin entity uses current replacement cost provided nrv ie ceiling nrv less “approximately normal profit margin” ie floor asu 201511 eliminates analysis requires entities measure inventory “at lower cost nrv” prospectively adopted asu 201511 change accounting principle january 1 2017 material impact consolidated financial statements may 2014 fasb issued asu 201409 “revenue contracts customers” requires entity recognize amount revenue expects entitled transfer promised goods services customers asu 201409 replace existing revenue recognition guidance gaap becomes effective december 2016 fasb issued asu 201620 technical corrections improvements topic 606 revenue contracts customers affect narrow aspects guidance issued asu 201409 may 2016 fasb issued asu 201612 narrowscope improvements practical expedients amends clarifies certain aspects asu 201409 include collectability presentation sales taxes collected customers noncash consideration contract modifications completed contracts transition april 2016 fasb issued asu 201610 identifying performance obligations licensing amends guidance asu 201409 accounting licenses intellectual property identifying performance obligations march 2016 fasb issued asu 201608 principal versus agent considerations reporting revenue gross versus net amends principal versus agent guidance asu 201409 standards applied retrospectively permit use either retrospective cumulative effect transition method use cumulative effect transition method adopt asus 201409 201620 201612 201610 201608 january 1 2018 upon adoption recognize cumulative effect adopting guidance adjustment opening balance retained earnings prior periods retrospectively adjusted completed preliminary assessment individual contracts identify performance obligations asu’s compared deliverables separate units accounting previously identified current us gaap based preliminary assessment identified material changes timing revenue recognition could result significant transition adjustment upon adoption new accounting standard january 1 2018 accounting costs incurred obtain contract immaterial however still process following assessing impact accounting reagent agreements determine differences timing revenue recognition finalizing required changes accounting policies systems internal control financial reporting assessing new disclosure requirements implemented upon adoption new standard 2 acquisitions raindance technologies inc february 2017 acquired issued outstanding stock raindance technologies inc raindance approximately 727 million cash payments closing 729 million addition cash payment 100 million preexisting condition concurrent acquisition recorded cost goods sold acquisition included life science segment’s results operations acquisition date accounted business combination amount acquisitionrelated costs minimal biorad primarily represented acquisition process goodwill related acquisition deductible income tax purposes pro forma financial statements provided acquisition immaterial biorad taken whole periods presented final allocation payments 729 million 376 million definitelived intangibles 02 million acquired net assets 262 million goodwill deferred tax liability 136 million primarily related purchased intangibles deferred tax asset 225 million primarily related acquired net operating losses final allocation payments reflect effects correcting error recorded fourth quarter 2017 corrections reduced goodwill deferred revenue deferred tax assets 19 million 33 million 14 million respectively significant impact consolidated statements income raindances foundational intellectual property portfolio product lines encompass wide range biological reactions droplets potential applications life science research clinical research genomic tools provide ultrasensitive detection genetic variations cancer well inherited infectious diseases enabling research areas noninvasive liquid biopsy believe raindances dropletbased solutions extend reach nextgeneration sequencing applications strengthen position area droplet digital™ pcr offering customers solutions wide range nucleic acid detection applications propel labs inc january 2016 acquired high performance analytical flow cytometer platform propel labs propel enable advanced novice users perform basic multiparameter cytometry wide range applications chemistries asset acquisition accounted business combination new analytical flow cytometer platform represented integrated set activities assets capable conducted managed purpose providing return therefore constitutes business accordance gaap amount acquisitionrelated cost minimal biorad primarily represented acquisition process business acquisition included life science segment’s results operations acquisition date fair value consideration acquisition date 328 million included 95 million paid cash closing date 233 million contingent consideration potentially payable propel amount contingent consideration determined based probabilityweighted income approach related achievement sales milestones recognized estimated fair value 167 million december 31 2017 see note 3 fair value measurements fair values net assets acquired propel acquisition date determined 327 million definitelived intangible assets 01 million goodwill related acquisition deductible income tax purposes acquired analytical flow cytometer platform fits well biorad’s existing life science segment product offerings may offer researchers greater access technology addition biorad contracted propel provide development services concurrent included purchase agreement biorad receiving manufacturing engineering marketing support propel payments made upon successful completion contracted services result services included total purchase consideration expensed 3 fair value measurements determine fair value asset liability based assumptions market participants would use pricing asset liability orderly transaction market participants measurement date identification market participant assumptions provides basis determining inputs used pricing asset liability fair value hierarchy established gives precedence fair value measurements calculated using observable inputs using unobservable inputs hierarchy prioritizes inputs three broad levels follows • level 1 quoted prices active markets identical instruments • level 2 significant observable inputs including quoted prices active markets similar instruments • level 3 significant unobservable inputs including assumptions determining fair value certain investments financial assets liabilities carried fair value measured recurring basis december 31 2017 classified hierarchy follows millions financial assets liabilities carried fair value measured recurring basis december 31 2016 classified hierarchy follows millions cash equivalents included cash equivalents consolidated balance sheets b availableforsale investments included following accounts consolidated balance sheets millions c forward foreign exchange contracts asset position included current assets consolidated balance sheets forward foreign exchange contracts liability position included current liabilities consolidated balance sheets e contingent consideration liabilities included following accounts consolidated balance sheets millions 2012 recognized contingent consideration liability certain milestones 446 million upon acquisition new cell sorting system propel since 2012 paid 320 million upon reaching milestones reduced valuation milestones 126 million remaining liability 31 million paid february 2017 first quarter 2016 recognized contingent consideration liability upon acquisition high performance analytical flow cytometer platform propel acquisition date amount contingent consideration determined based probabilityweighted income approach related achievement sales milestones ranging 39 20 calendar years 2017 2020 sales milestones could potentially range 0 unlimited amount current contingent consideration built sales forecast 78 million december 31 2020 third quarter 2017 paid 06 million upon reaching first milestone since 2016 decreased valuation sales milestones 60 million contingent consideration accrued estimated fair value 167 million december 31 2017 following table provides reconciliation level 3 cell sorting system analytical flow cytometer platform contingent consideration liabilities measured estimated fair value based original valuations updated quarterly year ended december 31 2017 millions following table provides quantitative information level 3 inputs fair value measurement analytical flow cytometer platform contingent consideration liability december 31 2017 significant increases decreases inputs isolation could result significantly lower higher fair value measurement 2014 recognized contingent consideration liability upon acquisition gnubio inc contingent consideration milestones valued 107 million acquisition date based assumptions regarding probability achieving milestones amounts discounted present value amount accounted contingent liability december 31 2016 amount 100 million reversed selling general administrative expense first quarter 2017 due reaching favorable resolution contingency previous owners gnubio inc estimate fair value level 2 debt securities december 31 2017 2016 primary pricing provider uses securities evaluations primary pricing source pricing process allows us select hierarchy pricing sources securities held chosen pricing hierarchy level 2 securities certificates deposit commercial paper securities evaluations primary pricing source custodian secondary pricing source securities evaluations price level 2 security hold pricing provider utilize custodian supplied pricing commercial paper december 31 2017 2016 pricing determined straightline calculation starting purchase price date purchase increasing par maturity interest bearing certificates deposit commercial paper priced par event additional lot commercial paper issue purchased within account price holdings issue account price recent lot purchased primary pricing provider performs daily reasonableness testing securities evaluations prices price changes 5 greater investigated resolved addition perform quarterly testing securities evaluations prices custodian reported prices outside tolerable variance approximately 1 investigated resolved availableforsale investments consist following millions unrealized gains longterm marketable equity securities primarily due investment sartorius ag preferred shares following summary investments gross unrealized losses associated fair value millions unrealized losses securities due number factors including changes interest rates changes economic conditions changes market outlook various industries among others biorad ability intent hold investments unrealized losses recovery fair value reasonable period time sufficient forecasted recovery fair value may maturity consider investments otherthantemporarily impaired december 31 2017 december 31 2016 part distributing products regularly enter intercompany transactions enter forward foreign exchange contracts manage foreign exchange risk future movements foreign exchange rates affect foreign currency denominated intercompany receivables payables use derivative financial instruments speculative trading purposes seek hedge accounting treatment contracts result contracts generally maturity dates 90 days less denominated primarily currencies industrial countries recorded fair value balance sheet date notional principal amounts provide one measure transaction volume outstanding december 31 2017 represent amount biorads exposure loss estimated fair value contracts derived using spot rates reuters last business day quarter points provided counterparties resulting gains losses offset exchange gains losses related receivables payables included foreign exchange losses net consolidated statements income following summary forward foreign currency exchange contracts millions following summary amortized cost estimated fair value debt securities december 31 2017 contractual maturity date millions estimated fair value financial instruments recognized fair value consolidated balance sheets included investments presented table fair value determined using significant observable inputs including quoted prices active markets similar instruments estimates necessarily indicative amounts could realized current market exchange considerable judgment required interpreting market data used develop estimates fair value use different market assumptions estimation techniques could material effect estimated fair value investments include financial instruments majority fair value based similar actively traded stock adjusted various discounts including discount marketability longterm debt excluding leases current maturities estimated fair value based quoted market prices similar issues estimated fair value financial instruments discussed level fair value hierarchy within fair value measurement categorized follows millions shares ordinary voting stock sartorius ag sartorius goettingen germany process technology supplier biotechnology pharmaceutical chemical food beverage industries 35 outstanding voting shares excluding treasury shares sartorius december 31 2017 sartorius family trust sartorius family members hold controlling interest outstanding voting shares representative designee sartorius’ board directors ability exercise significant influence operating financial policies sartorius account investment using cost method carrying value investment included investments consolidated balance sheets stock thinly traded fair value readily determinable conjunction valuation method discussed classified estimated fair value level 2 level 2 classification appropriate given valuation method employed incorporates observable input fair value sartorius’ actively traded preferred stock 4 goodwill purchased intangible assets changes goodwill segment follows millions conjunction purchase issued outstanding stock raindance technologies inc february 2017 see note 2 acquisitions recorded 262 million goodwill 376 million definitelived intangible assets 364 million licenses 10 million developed product technology 02 million tradenames conjunction purchase certain assets propel january 2016 see note 2 acquisitions recorded 01 million goodwill 327 million definitelived intangible assets 297 million developed product technology 30 million covenants compete 2017 impaired goodwill associated 1999 acquisition pasteur sanofi diagnostics sa 2013 acquisition abd serotec amounts 28 million 87 million respectively impairment pasteur sanofi diagnostics sa included clinical diagnostics segments results operations impairment abd serotec included life science segments results operations 2016 fully impaired goodwill inprocess research development amounts 135 million 464 million respectively associated 2014 acquisition gnubio inc included clinical diagnostics segments results operations impairments based upon revision level 3 valuation inputs ie expected future cash flows goodwill intangible assets indefinite lives information regarding identifiable purchased intangible assets definite lives follows millions amortization expense related purchased intangible assets years ended december 31 2017 2016 2015 308 million 352 million 365 million respectively estimated future amortization expense based existing purchased intangible assets years ending december 31 2018 2019 2020 2021 2022 thereafter 284 million 250 million 229 million 221 million 180 million 577 million respectively 5notes payable longterm debt domestic international lines credit standby letters credit guarantee arrangements 2084 million available borrowing usage december 31 2017 reduced 42 million utilized standby letters credit guarantee arrangements issued banks support obligations principal components longterm debt follows millions senior notes due 2020 december 2010 biorad sold 4250 million principal amount senior notes due 2020 4875 notes sale yielded net cash proceeds 4226 million effective rate 4946 4875 notes pay fixed rate interest 4875 per year option redeem 4875 notes time redemption price 100 principal amount plus specified makewhole premium defined indenture governing 4875 notes accrued unpaid interest thereon redemption date obligations 4875 notes secured rank equal right payment existing future unsubordinated indebtedness certain covenants apply year end 4875 notes including limitations following liens sale leaseback transactions mergers consolidations sales assets covenants compliance covenants december 31 2017 restrictive covenants relating total indebtedness interest coverage stock repurchases recapitalizations dividends distributions shareholders current ratios credit agreement june 2014 biorad entered 2000 million unsecured credit agreement borrowings credit agreement revolving basis used make permitted acquisitions working capital general corporate purposes outstanding borrowings credit agreement december 31 2017 2016 however 05 million 08 million utilized domestic standby letters credit reduced borrowing availability december 31 2017 2016 respectively credit agreement matures june 2019 borrowed credit agreement borrowing rate would 294 december 31 2017 credit agreement requires biorad comply certain financial ratios covenants among things ratios covenants include leverage ratio test interest coverage test well restrictions ability declare pay dividends incur debt guarantee debt enter transactions affiliates merge consolidate sell assets make investments create liens compliance ratios covenants december 31 2017 maturities longterm debt december 31 2017 follows 2018 04 million 2019 03 million 2020 4253 million 2021 03 million 2022 03 million thereafter 103 million 6 income taxes december 22 2017 comprehensive tax legislation “tax act” enacted law tax act made broad complex changes us tax code affect 2017 financial statements including limited 1 onetime mandatory deemed repatriation tax certain unrepatriated foreign earnings “transition tax” payable eight years 2 bonus depreciation allows full expensing qualified property 3 reduction us federal corporate tax rate 35 21 effective 2018 requires us remeasure deferred tax assets liabilities december 31 2017 tax act also includes provisions may affect 2018 financial statements including limited 1 elimination corporate alternative minimum tax 2 creation base erosion antiabuse tax new minimum tax 3 change worldwide tax system modified territorial system 4 new provision designed tax global intangible lowtaxed income allows possibility using foreign tax credits deduction 50 percent offset income tax liability subject limitations 5 new limitation deductible interest expense 6 repeal domestic production activity deduction 7 limitations deductibility certain executive compensation 8 limitations use foreign tax credits reduce us income tax liability 9 limitations net operating losses generated december 31 2017 80 percent taxable income currently reviewing evaluating tax act impacts financial statements subsequent enactment tax act sec staff issued staff accounting bulletin 118 income tax accounting implications tax cuts jobs act “sab 118” provides guidance accounting tax effects tax act sab 118 provides measurement period extend beyond one year tax act enactment date companies complete accounting standards codification asc 740 income taxes accordance sab 118 company must reflect income tax effects aspects tax act accounting asc 740 complete extent company’s accounting certain income tax effects tax act incomplete reasonable estimate determined company must record provisional estimate financial statements year ended december 31 2017 recorded amounts accounting complete able make reasonable estimates provisional estimates transition tax remeasurement deferred tax assets liabilities adjusted additional information guidance become available us international components income taxes follows millions provision income taxes consists following millions prior year amounts revised see note 1 consolidated financial statements reconciliation effective tax rate income taxes statutory tax rate follows prior year amounts revised see note 1 consolidated financial statements effective income tax rate 25 37 25 2017 2016 2015 respectively lower effective tax rate 2017 primarily due estimated provisional tax benefit tax act approximately 70 million effective tax rates 2016 2015 included tax benefits repatriation foreign earnings effective tax rate 2016 included additional tax liabilities unrecognized tax benefits related nondeductibility interest expense foreign jurisdictions accordance sab 118 accounting following elements tax act incomplete however able make reasonable estimates certain effects therefore recorded provisional estimates follows deferred tax assets liabilities measured enacted tax rate apply temporary differences expected realized settled connection tax act provisionally recorded deferred income tax benefit 125 million statutory corporate tax rate reduction us federal deferred tax liabilities exceed deferred tax assets deferred tax benefit primarily related remeasurement deferred tax liability investment preferred shares sartorius ag tax act imposes transition tax payable eight years transition tax assessed us shareholders’ share certain foreign corporations’ accumulated untaxed foreign earnings form cash equivalents taxed rate 155 earnings taxed rate 80 recorded provisional income tax expense 55 million transition tax additional information guidance become available determination transition tax completed within measurement period accordance sab 118 accounting certain elements tax act incomplete yet able make reasonable estimates effects example made determination accounting policy respect new global intangible low tax income gilti therefore provisional adjustments recorded many jurisdictions operate statutory tax rates significantly lower us statutory tax rate 35 effective tax rate impacted either favorably unfavorably many factors including limited jurisdictional mix income tax changes statutory tax rates changes tax laws regulations tax audits settlements generation tax credits deferred tax assets liabilities reflect tax effects losses credits temporary differences carrying amounts assets liabilities financial reporting purposes amounts used income tax purposes significant components deferred tax assets liabilities follows millions prior year amounts revised see note 1 consolidated financial statements december 31 2017 biorad’s international subsidiaries combined net operating loss carryforwards 2072 million loss carryforwards 1506 million expiration date believe likely benefit approximately half net operating loss carryforwards realized provided valuation allowance 278 million relating net operating loss carryforwards december 31 2017 biorad approximately 53 million california net operating loss carryforwards related acquisition quantalife believe likely benefit net operating loss carryforwards realized recorded full valuation allowance losses december 31 2017 biorad deferred tax asset 296 million relating california research tax credit carryforwards including 20 million acquisition quantalife may carried forward indefinitely based judgment consistent prior years recorded full valuation allowance deferred tax asset although believe likely certain deferred tax assets described realized foreseeable future recognized tax benefits relating reversal valuation allowance recognized reduction income tax expense income tax returns audited us federal state foreign tax authorities currently examination many tax authorities tax years open examination include years 2014 forward us years 2012 forward certain foreign jurisdictions including france germany india switzerland differing interpretations tax laws regulations result significant disputes may arise tax authorities involving issues timing amount deductions allocations income among various tax jurisdictions evaluate exposures associated tax filing positions quarterly basis record liabilities unrecognized tax benefits related uncertain tax positions believe currently pending uncertain tax positions material adverse effect consolidated financial statements although adverse resolution one uncertain tax positions period may material impact results operations period following tabular reconciliation total amounts unrecognized tax benefits millions prior year amounts revised see note 1 consolidated financial statements biorad recognizes accrued interest penalties related unrecognized tax benefits income tax expense related unrecognized tax benefits noted cumulative amount accrued interest penalties december 31 2017 2016 2015 respectively 109 million 118 million 31 million biorad accrued interest penalties 09 million 87 million 07 million 2017 2016 2015 respectively total unrecognized tax benefits interest penalties 658 million 2017 partially offset deferred tax assets 28 million prepaid taxes 145 million net amount 485 million december 31 2017 based expected outcome certain examinations result expiration statutes limitation certain jurisdictions believe within next twelve months reasonably possible previously unrecognized tax benefits could decrease approximately 23 million substantially amounts impact effective income tax rate recognized certain foreign subsidiary earnings subject us taxation tax act also repeals us taxation subsequent repatriation earnings generally intention repatriate foreign earnings extent repatriations restricted local laws accounting rules substantial incremental costs currently estimate repatriation earnings would trigger material costs estimates provisional still evaluating full impact potential repatriations accordance sab 118 7 stockholders equity biorad’s issued outstanding stock consists class common stock class b common stock class b share class b participates equally earnings biorad identical respects except follows class limited voting rights share class entitled one tenth vote matters share class b entitled one vote additionally class stockholders entitled elect 25 board directors class b stockholders entitled elect 75 directors cash dividends may paid class shares without paying cash dividend class b shares cash dividend may paid class b shares unless least equal cash dividend paid class shares class b shares convertible time class shares oneforone basis option stockholder founders biorad schwartz family collectively hold majority biorad’s voting stock result schwartz family able exercise significant influence biorad changes biorads issued common stock shares follows thousands treasury shares november 28 2017 announced board directors authorized new share repurchase program granting biorad authority repurchase discretionary basis 2500 million outstanding shares common stock new authorization superseded prior authorization 180 million biorads common stock second third quarters 2017 made open market purchases 13200 shares class common stock september 2017 used 12740 repurchased shares connection vesting restricted stock units 2007 incentive award plan order obtain tax deduction foreign entities credit agreement may limit ability repurchase stock accordance terms awards 2007 incentive award plan june 2012 withheld 122 shares class common stock 917 shares class b common stock satisfy tax obligations due upon vesting restricted stock certain employees considered repurchase stock repurchases stock 2017 2016 8 accumulated comprehensive income accumulated comprehensive income included consolidated balance sheets consolidated statements changes stockholders equity consists following components millions see note 1 significant accounting policies recent accounting standards update increases 2017 2016 net unrealized holding gains availableforsale investments primarily ownership preferred shares sartorius amounts reclassified accumulated comprehensive income consolidated statements income presentation location follows reclassification adjustments calculated using specific identification method 9 sharebased compensationequity award purchase plans description sharebased compensation plans believe sharebased compensation plans align interests employees shareholders equity award plans three equity award plans officers certain employees 2003 stock option plan 2003 plan 2007 incentive award plan 2007 plan 2017 incentive award plan 2017 plan 2003 plan authorized grant incentive stock options nonqualified stock options employees 2007 plan authorized grant stock options restricted stock restricted stock units stock appreciation rights types equity awards employees longer grant equity 2003 plan 2007 plan 2007 2016 sharebased compensation grants 2007 plan april 2017 stockholders approved 2017 plan 2017 plan authorizes grant employees stock options stock appreciation rights restricted stock restricted stock units types equity awards total 1999714 shares reserved issuance equity awards 2017 plan may either class b common stock december 31 2017 1771794 shares available granted plans class b options granted prices less fair market value underlying common stock date grant generally options granted term 10 years vest increments 20 per year fiveyear period yearly anniversary date grant stock awards issued 2007 plan 2017 plan generally vest increments 20 per year fiveyear period yearly anniversary date grant employee stock purchase plans 2011 employee stock purchase plan 2011 espp provides eligible employees may contribute 10 compensation 25000 annually toward quarterly purchase class common stock employees’ purchase price 85 lesser fair market value stock first business day last business day calendar quarter 2011 espp includes two components code section 423 component intend qualify “employee stock purchase plan” section 423 us internal revenue code 1986 amended “code” non423 component authorizes grant purchase rights qualify “employee stock purchase plan” section 423 code authorized sale 1300000 shares class common stock 2011 espp sharebased compensation included sharebased compensation expense cost related stock option grants espp stock purchases restricted stock unit awards sharebased compensation expense allocated cost goods sold research development expense selling general administrative expense consolidated statements income 2017 2016 2015 recognized sharebased compensation expense 234 million 197 million 170 million respectively income tax benefit related sharebased compensation expense 58 million 51 million 43 million 2017 2016 2015 respectively capitalize sharebased compensation expense inventory tax benefit sharebased compensation vested exercised 2017 2016 2015 63 million 15 million 36 million respectively actual tax benefit realized tax deductions sharebased compensation vested exercised including excess tax benefits recognized stockholders’ equity totaled 60 million 93 million 2016 2015 respectively options awards amortize fair value straightline basis stock compensation awards amortized requisite service periods awards generally vesting periods stock options following table summarizes stock option activity intrinsic value stock options defined difference current market value exercise price total intrinsic value date exercise stock options exercised 2017 2016 2015 approximately 10 million 1 million 13 million respectively total fair value options vested 2017 2016 2015 42 million 21 million 16 million respectively cash received stock options exercised 2017 2016 2015 16 million 12 million 29 million respectively december 31 2017 55 million total unrecognized compensation cost stock options amount expected recognized future weightedaverage period approximately 3 years weightedaverage fair value stock options granted estimated using blackscholes optionpricing model following weightedaverage assumptions volatility based historical volatilities common stock period equal stock option’s expected life riskfree interest rate based us treasury yield curve effect time grant expected life represents number years estimate based primarily historical experience options outstanding prior exercise anticipate paying cash dividends future therefore use expected dividend yield zero restricted stock units restricted stock units rights receive shares company stock granted 2009 2016 2007 plan 2017 plan fair value restricted stock unit market value determined closing price stock day grant following table summarizes restricted stock unit activity total fair value restricted stock units vested 2017 2016 2015 277 million 187 million 158 million respectively december 31 2017 approximately 747 million total unrecognized compensation cost related restricted stock units amount expected recognized remaining weightedaverage period approximately 4 years employee stock purchase plans fair value employees’ purchase rights 2011 espp estimated using blackscholes model following weightedaverage assumptions major assumptions primarily based historical data volatility based historical volatilities common stock period equal expected life purchase rights riskfree interest rate based us treasury yield curve effect time grant anticipate paying cash dividends future therefore use expected dividend yield zero sold 74409 shares 130 million 93605 shares 115 million 96634 shares 108 million 2011 espp employees 2017 2016 2015 respectively december 31 2017 721712 shares remain authorized available issuance 2011 espp currently issue new shares treasury shares available satisfy stock option exercises restricted stock issuances espp stock purchases 10 income expense net income expense net includes following components millions otherthantemporary impairment losses investments recorded 2017 2016 2015 light continuing declines investment market prices investees financial conditions time 11 supplemental cash flow information reconciliation net income net cash provided operating activities follows millions 12 commitments contingent liabilities rents leases rental expense operating leases 436 million 444 million 450 million 2017 2016 2015 respectively leases principally facilities automobiles sublease income annual future minimum lease payments december 31 2017 operating leases follows 2018 393 million 2019 332 million 2020 271 million 2021 178 million 2022 beyond 275 million deferred profit sharing retirement plan profit sharing plan covering substantially us employees contributions made discretion board directors biorad liability current year’s contribution expense 160 million 151 million 147 million 2017 2016 2015 respectively postemployment benefits several foreign locations statutorily required provide retirement benefits lump sum termination indemnity employees upon termination virtually reason plans accounted defined benefit plans associated net benefit obligation december 31 2017 2016 749 million 639 million respectively included accrued payroll employee benefits longterm liabilities consolidated balance sheets plans required funded trust device used accumulate assets settle obligations however plans require funding based local laws trust device administered external plan manager used accumulate assets assist settling obligations following disclosures include plans located france switzerland germany korea india thailand italy dubai japan obligations funded status following table sets forth change benefit obligations fair value plan assets amounts recognized consolidated balance sheets plans millions components net periodic benefit cost following sets forth net periodic benefit cost income periods indicated millions assumptions weightedaverage assumptions used computing benefit obligations follows weightedaverage assumptions used computing net periodic benefit costs follows foreign locations service award plans paid based upon number years employment plans liability december 31 2017 2016 37 million 35 million respectively included accrued payroll employee benefits longterm liabilities consolidated balance sheets purchase obligations december 31 2017 obligations recognized balance sheet 1312 million include purchases goods services enforceable legally binding biorad specify significant terms exclude agreements cancelable without penalty obligations also include postemployment benefits foreign locations indicated annual future fixed determinable portion purchase obligations recognized balance sheet december 31 2017 follows 2018 103 million 2019 143 million 2020 106 million 2021 69 million 2022 26 million 2022 865 million december 31 2017 purchase obligations recognized balance sheet 245 million include agreements purchase goods services enforceable legally binding biorad specify significant terms exclude agreements cancelable without penalty annual future fixed determinable portion purchase obligations recognized balance sheet december 31 2017 follows 2018 37 million 2019 38 million 2020 37 million 2021 38 million 2022 37 million 2022 58 million letters creditguarantees ordinary course business times required post letters creditguarantees letters creditguarantees issued financial institutions guarantee obligations various parties contingently liable 42 million standby letters creditguarantees financial institutions december 31 2017 contingent consideration first quarter 2016 recognized contingent consideration liability upon acquisition high performance analytical flow cytometer platform propel acquisition date amount contingent consideration determined based probabilityweighted income approach related achievement sales milestones ranging 39 20 calendar years 2017 2020 sales milestones could potentially range 0 unlimited amount current contingent consideration built sales forecast 78 million december 31 2020 third quarter 2017 paid 06 million upon reaching first milestone since 2016 decreased valuation sales milestones 60 million contingent consideration accrued estimated fair value 167 million december 31 2017 2014 recognized contingent consideration liability upon acquisition gnubio inc contingent consideration milestones valued 107 million acquisition date based assumptions regarding probability achieving milestones amounts discounted present value amount accounted contingent liability december 31 2016 amount 100 million reversed selling general administrative expense first quarter 2017 due reaching favorable resolution contingency previous owners gnubio inc 2012 recognized contingent consideration liability certain milestones 446 million upon acquisition new cell sorting system propel since 2012 paid 320 million upon reaching milestones reduced valuation milestones 126 million remaining liability 31 million paid february 2017 concentrations labor subject collective bargaining agreements december 31 2017 approximately seven percent biorads approximately 3270 us employees covered collective bargaining agreement expire november 7 2019 many biorads nonus fulltime employees especially france covered collective bargaining agreements 13 legal proceedings january 23 2015 city riviera beach general employees’ retirement system filed shareholder derivative lawsuit superior court california contra costa county three current directors one former director also named nominal defendant complaint plaintiff alleged directors breached fiduciary duty loyalty failing ensure sufficient internal controls systems compliance foreign corrupt practices act fcpa failed provide adequate training fcpa based actions directors unjustly enriched purportedly seeking relief behalf plaintiff sought award restitution unspecified damages costs expenses including attorneys’ fees april 23 2015 individual defendants filed demurrer requesting dismissal complaint case demurrer heard august 6 2015 court granted demurrer failure make demand board directors august 17 2015 provided leave amend september 4 2015 plaintiff filed amended complaint simultaneously served litigation demand letter board directors board via counsel action letter demanded investigate bring appropriate legal action certain individuals including defendants city riviera beach case six current former employees plaintiff also moved temporary stay proceedings purportedly enable board respond demand board formed demand review committee respond demand february 24 2016 demand review committee reported board concluded investigation unanimously determined best interests company stockholders pursue litigation individuals named city riviera beach’s litigation demand letter october 6 2015 individual defendants filed second demurrer seeking dismiss case failure make timely presuit demand case stayed pending mediation caption city riviera beach general employees’ retirement system v schwartz et al case c1500140 lawsuit demand letter referred collectively “california action” august 13 2015 august 18 2015 respectively international brotherhood electrical workers local 38 pension fund wayne county employees’ retirement system filed stockholder derivative complaint delaware court chancery four current directors one former director named nominal defendant complaints alleged defendants failed cause us develop internal controls sufficient ensure compliance fcpa plaintiffs asserted claims breach fiduciary duty unjust enrichment requested award damages sustained result alleged violations among relief two lawsuits consolidated august 27 2015 case stayed pending mediation caption consolidated case biorad laboratories inc stockholder litigation consol ca 11387vcn del ch cases filed delaware court chancery together california action referred collectively “derivative actions” parties filed stipulation dated november 4 2016 superior court california contra costa county set forth terms proposed settlement derivative actions proposed settlement included dismissal prejudice claims asserted derivative actions agreedupon set revised corporate procedures monetary payment award attorneys’ fees costs plaintiffs’ counsel defendants admit liability fault connection proposed settlement december 22 2016 superior court california contra costa county issued order granting preliminary approval proposed settlement court held hearing final approval settlement march 2 2017 court approved settlement may 27 2015 former general counsel sanford wadler filed lawsuit us district court northern district california us four current directors one former director plaintiff’s suit alleged whistleblower retaliation violation sarbanesoxley act doddfrank act raising fcparelated concerns mr wadler also alleged wrongful termination violation public policy nonpayment wages waiting time penalties violation california labor code plaintiff sought back pay compensatory damages lost wages earnings retirement benefits employee benefits compensation mental pain anguish emotional distress waiting time penalties punitive damages litigation costs including attorneys’ fees reinstatement employment july 28 2015 filed motion dismiss plaintiffs complaint specifically requested dismissal claims alleged us doddfrank act california labor code 11025 claims directors sarbanesoxley act doddfrank act october 23 2015 district court granted motion respect alleged violations sarbanesoxley act director defendants except norman schwartz prejudice court denied motion dismiss claims doddfrank act us director defendants trial commenced january 17 2017 concluded february 6 2017 mr wadler awarded 1092 million plus prejudgment interest 141608 postjudgment interest mr wadler’s litigation costs expert witness fees reasonable attorneys’ fees approved court provided judgment interest mr wadlers litigation costs june 6 2017 filed notice appeal united states court appeals ninth circuit biorad received three notices violations bay area air quality management district “district” district alleged operated three 3 power generation units without appropriate monitoring recordkeeping exceeded permissible levels emissions operations january 2018 entered settlement agreement district pursuant paid district 990000 settle claims andor potential claims arising use three power generation units settlement amount accrued december 31 2017 also party various claims legal actions complaints arising ordinary course business cannot time reasonably estimate range exposure potential liability respect matters believe time ultimate liability resulting matters material adverse effect results operations financial position liquidity cannot give assurance regarding ultimate outcome matters resolution could material operating results particular period depending level income period 14 segment information biorad multinational manufacturer worldwide distributor life science research products clinical diagnostics products two reportable segments life science clinical diagnostics reportable segments strategic business lines offer 9000 different products services require different marketing strategies disclose quantitative information different products services impractical based primarily numerous products services sell global markets serve life science segment develops manufactures sells services reagents apparatus instruments used biological research products sold university medical school laboratories pharmaceutical biotechnology companies food testing laboratories government industrial research facilities clinical diagnostics segment develops manufactures sells services automated test systems informatics systems test kits specialized quality controls healthcare market products sold reference laboratories hospital laboratories state newborn screening facilities physicians’ office laboratories transfusion laboratories insurance forensic testing laboratories operations include remainder analytical instruments segment results presented manner present operations internally make operating decisions assess performance accounting policies segments described significant accounting policies see note 1 segment profit loss includes allocation corporate expense based upon sales allocation interest expense based upon accounts receivable inventories difference total segment allocated interest expense depreciation amortization capital expenditures corresponding consolidated amounts attributable corporate headquarters segments expected manage assets completely control accordingly segment assets include primarily accounts receivable inventories gross machinery equipment goodwill balances included corporate segment reporting purposes information regarding industry segments december 31 2017 2016 2015 years ended follows millions prior year amounts revised see note 1 consolidated financial statements net corporate operating expense consists receipts expenditures primary responsibility segment operating management therefore allocated segments performance assessment chief operating decision maker following reconciles total segment profit consolidated income taxes millions following reconciles total segment assets consolidated total assets millions prior year amounts revised see note 1 consolidated financial statements following presents net sales external customers geographic region based primarily location use product service millions following presents property plant equipment net investments assets excluding deferred income taxes geographic region based upon location asset millions 15 restructuring costs restructuring costs european reorganization may 2016 announced would take certain actions europe geographic region designed better align expenses revenue gross margin profile position us improved operating performance actions aligned creation evolution organization structure coordinated implementation global single instance erp platform expected incurred 2019 result recorded approximately 05 million 125 million restructuring charges related severance employee benefits years ended december 31 2017 2016 respectively liability 63 million december 31 2017 consisted 62 million recorded accrued payroll employee benefits 01 million recorded longterm liabilities consolidated balance sheets amounts recorded reflected cost goods sold 02 million 21 million selling general administrative expense 07 million 104 million consolidated statements income years ended december 31 2017 2016 respectively amounts adjusted primarily additional positions identified elimination partially offset employees finding positions within biorad leaving prematurely following table summarizes activity european reorganization restructuring reserves severance millions restructuring costs gnubio inc 2014 acquired gnubio inc gnubio business acquisition included clinical diagnostics segment’s results operations division primarily based massachusetts september 2017 announced closing gnubio research program facilities massachusetts result recorded restructuring charges september 2017 related severance employee benefits 29 million asset writeoffs 55 million amounts recorded reflected selling general administrative expense 08 million research development expense 76 million consolidated statements income year ended december 31 2017 liability balance december 31 2017 14 million recorded accrued payroll employee benefits consolidated balance sheets expect remainder paid early 2018 restructuring costs termination infectious disease research development project december 2017 announced termination infectious disease research development project included clinical diagnostics segments results operations result recorded restructuring charges related severance employee benefits 110 million asset writeoffs exit costs 101 million year ended december 31 2017 amounts recorded reflected cost goods sold 23 million selling general administrative expense 33 million research development expense 155 million consolidated statements income year ended december 31 2017 liability 141 million december 31 2017 consisted 111 million recorded accrued payroll employee benefits 30 million recorded current liabilities consolidated balance sheets following table summarizes activity termination infectious disease research development project restructuring reserves severance exit costs millions 16 quarterly financial data unaudited 2016 2015 three different misstatements associated income taxes first misstatement related second implementation global single instance erp platform us third quarter 2015 part data migrated reconciled timely resulting double counting deferred tax asset second misstatement related misapplication tax rule related foreign dividend income third misstatement related design deficiency associated transfer pricing management evaluated materiality errors described qualitative quantitative perspective based evaluation concluded material individual prior period effect trend financial results taking account requirements securities exchange commission sec staff accounting bulletin 108 considering effect prior year misstatements quantifying misstatements current year financial statements sab 108 accordingly correcting errors every affected period 2015 2016 consolidated financial statements included form 10k fourth quarter 2017 identified errors unaudited interim condensed consolidated financial statements three months ended september 30 2017 identified error recording deferred revenue acquired acquisition raindance see note 2 acquisitions resulted overstatement revenue recorded third quarter 2017 09 million corrected fourth quarter 2017 addition identified error estimated employee benefit expense resulted understatement expenses reported cost goods sold selling general administrative expense research development expense net third quarter 2017 38 million corrected fourth quarter 2017 finally identified error reconciliation various inventory accounts resulted understatement cost goods sold third quarter 2017 35 million corrected fourth quarter 2017 impact errors resulted overstatement provision income taxes reported third quarter 2017 29 million corrected fourth quarter 2017 management evaluated materiality errors described previous paragraph qualitative quantitative perspective based evaluation concluded material individual prior period effect trend financial results taking account requirements sab 108 accordingly correcting errors financial statements quarter ended september 30 2017 included form 10k impact immaterial error corrections described presented reported adjustment revised basis following summarized quarterly financial data 2017 2016 millions except per share data note result net loss three months ended december 31 2016 potentially issuable common shares excluded diluted shares used computation earnings per share effect antidilutive 17 subsequent event subsequent december 31 2017 company obtained extension time provide annual audited financial statements 2017 fiscal year related compliance certificate deliveries currently required credit agreement discussed note 5 extension provides company may provide annual audited financial statements 2017 fiscal year within 120 days end 2017 fiscal year compliance certificate respect 2017 fiscal year within 130 days end 2017 fiscal year amounts outstanding credit agreement december 31 2017 amounts borrowed since item 9item 8 financial statements supplementary data report independent registered public accounting firm stockholders board directors biorad laboratories inc opinion consolidated financial statements audited accompanying consolidated balance sheets biorad laboratories inc subsidiaries company december 31 2019 2018 related consolidated statements income comprehensive income changes stockholders’ equity cash flows years threeyear period ended december 31 2019 related notes financial statement schedule collectively consolidated financial statements opinion consolidated financial statements present fairly material respects financial position company december 31 2019 2018 results operations cash flows years threeyear period ended december 31 2019 conformity us generally accepted accounting principles also audited accordance standards public company accounting oversight board united states pcaob companys internal control financial reporting december 31 2019 based criteria established internal control integrated framework 2013 issued committee sponsoring organizations treadway commission report dated february 28 2020 expressed unqualified opinion effectiveness companys internal control financial reporting changes accounting principle discussed note 1 consolidated financial statements company changed method accounting leases effective january 1 2019 due adoption accounting standard update asu 201602 leases related accounting standard updates also discussed note 1 consolidated financial statements company changed method accounting revenue recognition effective january 1 2018 due adoption accounting standards codification asc 606 revenue contracts customers also discussed note 1 consolidated financial statements company changed method accounting equity instruments effective january 1 2018 due adoption asu 201601 recognition measurement financial assets financial liabilities asu 201803 technical corrections improvements financial instruments recognition measurement financial assets financial liabilities basis opinion consolidated financial statements responsibility company’s management responsibility express opinion consolidated financial statements based audits public accounting firm registered pcaob required independent respect company accordance us federal securities laws applicable rules regulations securities exchange commission pcaob conducted audits accordance standards pcaob standards require plan perform audit obtain reasonable assurance whether consolidated financial statements free material misstatement whether due error fraud audits included performing procedures assess risks material misstatement consolidated financial statements whether due error fraud performing procedures respond risks procedures included examining test basis evidence regarding amounts disclosures consolidated financial statements audits also included evaluating accounting principles used significant estimates made management well evaluating overall presentation consolidated financial statements believe audits provide reasonable basis opinion critical audit matter critical audit matter communicated matter arising current period audit consolidated financial statements communicated required communicated audit committee 1 relate accounts disclosures material consolidated financial statements 2 involved especially challenging subjective complex judgments communication critical audit matter alter way opinion consolidated financial statements taken whole communicating critical audit matter providing separate opinions critical audit matter accounts disclosures relate assessment lease term reagent rental arrangements discussed note 1 consolidated financial statements company earns revenue reagent rental agreements customers agreement generally includes lease elements subject lease accounting standards nonlease elements subject revenue accounting standards classification lease component operating salestype lease impact timing revenue recognition cost attributable underlying lease elements reagent rental arrangements contain option lessee extend option lessee cancel period contract enforceable generally short lease term limited noncancellable period revenue allocated reagent rental lease elements approximately 3 total revenue included part net sales consolidated statement income identified assessment lease term reagent rental agreements including impact associated contractual termination penalties critical audit matter company’s determination lease classification operating salestype lease primarily dependent initial determination lease term company’s process based manual examination high volume agreements negotiated individually across world diverse terms testing determination lease term including consideration contractual termination penalties required high degree auditor judgment design execute audit procedures primary procedures performed address critical audit matter included following tested certain internal controls company’s process determining lease term including consideration contractual termination penalties assessed company’s policies determining lease term reagent rental arrangements accordance us generally accepted accounting principles additionally selection reagent rental agreements read underlying contract compared relevant terms within contract company’s determination lease term analysis report independent registered public accounting firm stockholders board directors biorad laboratories inc opinion internal control financial reporting audited biorad laboratories inc subsidiaries company internal control financial reporting december 31 2019 based criteria established internal control integrated framework 2013 issued committee sponsoring organizations treadway commission opinion company maintained material respects effective internal control financial reporting december 31 2019 based criteria established internal control integrated framework 2013 issued committee sponsoring organizations treadway commission also audited accordance standards public company accounting oversight board united states pcaob consolidated balance sheets company december 31 2019 2018 related consolidated statements income comprehensive income changes stockholders equity cash flows years threeyear period ended december 31 2019 related notes financial statement schedule collectively consolidated financial statements report dated february 28 2020 expressed unqualified opinion consolidated financial statements basis opinion companys management responsible maintaining effective internal control financial reporting assessment effectiveness internal control financial reporting included accompanying managements report internal control financial reporting responsibility express opinion companys internal control financial reporting based audit public accounting firm registered pcaob required independent respect company accordance us federal securities laws applicable rules regulations securities exchange commission pcaob conducted audit accordance standards pcaob standards require plan perform audit obtain reasonable assurance whether effective internal control financial reporting maintained material respects audit internal control financial reporting included obtaining understanding internal control financial reporting assessing risk material weakness exists testing evaluating design operating effectiveness internal control based assessed risk audit also included performing procedures considered necessary circumstances believe audit provides reasonable basis opinion definition limitations internal control financial reporting companys internal control financial reporting process designed provide reasonable assurance regarding reliability financial reporting preparation financial statements external purposes accordance generally accepted accounting principles companys internal control financial reporting includes policies procedures 1 pertain maintenance records reasonable detail accurately fairly reflect transactions dispositions assets company 2 provide reasonable assurance transactions recorded necessary permit preparation financial statements accordance generally accepted accounting principles receipts expenditures company made accordance authorizations management directors company 3 provide reasonable assurance regarding prevention timely detection unauthorized acquisition use disposition companys assets could material effect financial statements inherent limitations internal control financial reporting may prevent detect misstatements also projections evaluation effectiveness future periods subject risk controls may become inadequate changes conditions degree compliance policies procedures may deteriorate accompanying notes integral part consolidated financial statements accompanying notes integral part consolidated financial statements biorad laboratories inc consolidated statements income thousands except per share data accompanying notes integral part consolidated financial statements biorad laboratories inc consolidated statements comprehensive income thousands asu 201802 reclassification certain tax effects accumulated comprehensive income disclosed december 31 2017 form 10k accompanying notes integral part consolidated financial statements biorad laboratories inc consolidated statements cash flows thousands following table provides reconciliation cash equivalents restricted cash reported within consolidated balance sheets agrees amounts shown consolidated statements cash flows thousands restricted cash items primarily related performance guarantees accompanying notes integral part consolidated financial statements asu 201609 improvements employee sharedbased payment accounting disclosed december 31 2017 form 10k asu 201802reclassification certain tax effects accumulated comprehensive income disclosed december 31 2017 form 10k asu 201601 recognition measurement financial assets financial liabilities asu 201803 technical corrections improvements financial instruments recognition measurement financial assets financial liabilities disclosed december 31 2018 form 10k asu 201616 intraentity transfers assets inventory disclosed december 31 2018 form 10k see note 1 significant accounting policies revenue recognition accompanying notes integral part consolidated financial statements biorad laboratories inc notes consolidated financial statements 1significant accounting policies basis presentation consolidated financial statements include accounts biorad laboratories inc wholly majority owned subsidiaries referred report “biorad” “we” “us” “our” elimination intercompany balances transactions preparation financial statements conformity us generally accepted accounting principles requires management make estimates assumptions affect amounts reported financial statements accompanying notes actual results could differ estimates evaluate subsequent events evidence provide conditions existing date balance sheet well conditions arose balance sheet date financial statements issued effects conditions existed balance sheet date recognized financial statements events conditions arising balance sheet date financial statements issued evaluated determine disclosure required keep financial statements misleading extent events conditions exist disclosures made regarding nature events estimated financial effects events conditions cash equivalents cash equivalents consist cash highly liquid investments original maturities three months less readily convertible cash equivalents stated cost approximates fair value shortterm restricted investments shortterm restricted investments 56 million december 31 2019 2018 represent money market fund renewed annually collateral secures workers compensation general liability insurance investment income accrues biorad recorded cash equivalents consolidated balance sheets availableforsale investments availableforsale investments consist corporate obligations municipal securities asset backed securities us government sponsored agencies marketable equity securities management classifies investments time purchase reevaluates classification balance sheet date investments maturities beyond one year may classified shortterm based liquid nature marketable securities represent investment cash available current operations availableforsale investments reported fair value based quoted market prices observable market data unrealized gains losses reported component comprehensive income net related tax effect effective january 1 2018 changes fair value equity securities reported change fair market value equity securities consolidated statements income due adoption asu 201601 recognition measurement financial assets financial liabilities unrealized losses charged income decline fair value individual security determined otherthantemporary review availableforsale debt securities otherthantemporary losses quarterly basis realized gains losses otherthantemporary impairments investments included income expense net see note 10 concentration credit risk financial instruments potentially subject us concentration credit risk consist primarily cash equivalents investments foreign exchange contracts trade accounts receivable cash equivalents investments placed various highly rated major financial institutions located different geographic regions forward contracts used managing foreign currency exposures element risk counterparties may unable meet terms agreements attempt minimize risk limiting counterparties diverse group highlyrated domestic international financial institutions event nonperformance counterparties carrying values financial instruments represent maximum amount loss would incurred fiscal yearend perform credit evaluation procedures related trade receivables exception certain developing countries generally require collateral result increased risk certain developing countries biorad sales subject collateral letters credit customers credit risk trade accounts receivable generally limited due large number customers dispersion across many geographic areas however significant amount trade receivables national healthcare systems countries within european union accounts receivable maintain allowance doubtful accounts estimated losses resulting inability customers make required payments amount allowance determined analyzing known uncollectible accounts aged receivables economic conditions customers’ country industry historical losses customers’ creditworthiness amounts later determined specifically identified uncollectible charged written allowance inventory inventories valued lower cost net realizable value include material labor overhead costs firstin firstout method used relieve inventory products sold property plant equipment property plant equipment carried cost less accumulated depreciation amortization included property plant equipment buildings equipment acquired capital lease arrangements reagent rental equipment capitalized software including costs software developed obtained internal use property plant equipment assessed impairment quarterly whenever events changes circumstances indicate carrying amount may recoverable depreciation computed straightline basis estimated useful lives assets estimated useful lives property plant equipment generally follows buildings leasehold improvements 1039 years term leases life improvements whichever shorter reagent rental equipment 15 years equipment 312 years leases determine arrangement lease inception operating leases included operating lease rightofuse “rou” assets current operating lease liabilities operating lease liabilities consolidated balance sheet december 31 2019 finance leases included property plant equipment current maturities longterm debt longterm debt net current maturities consolidated balance sheet december 31 2019 rou assets represent right use underlying asset lease term lease liabilities represent obligation make lease payments arising lease operating lease rou assets liabilities recognized commencement date based present value lease payments lease term leases provide implicit rate use incremental borrowing rate based information available commencement date determining present value lease payments operating lease rou asset also includes lease payments made excludes lease incentives lease terms may include options extend terminate lease purposes determining lease term used measurement operating lease rou assets operating lease liabilities include noncancellable period lease together periods covered option extend lease reasonably certain exercise option periods covered option terminate lease reasonably certain exercise option periods covered option extend terminate lease exercise option controlled lessor lease expense lease payments recognized straightline basis lease term act lessee elected separate lease nonlease components act lessor reagent rental arrangements allocate consideration contract separate lease components nonlease components allocation amount variable payments allocated lease components recognized income lease accounting standard asc 842 amount variable payments allocated nonlease components recognized income accordance asc 606 reagent rental arrangements fully described caption reagent rental agreements goodwill represents excess cost fair value net tangible identifiable intangible assets acquired businesses goodwill assessed impairment applying fair value based tests annually fourth quarter whenever events changes circumstances indicate carrying amount may recoverable perform impairment tests goodwill reporting unit level one level operating segments reporting units identified components discrete financial information available regularly reviewed management goodwill amounts assigned reporting units time acquisition goodwill impairment amount reporting units carrying value exceeds fair value exceed carrying amount goodwill use projected discounted cash flow model determine fair value reporting unit longlived assets purposes recognition measurement impairment loss longlived asset assets grouped assets liabilities lowest level identifiable cash flows largely independent cash flows assets liabilities assess impairment longlived assets including identifiable intangible assets operating lease rightofuse assets quarterly whenever events changes circumstances indicate carrying value may recoverable factors consider important could trigger impairment review include • significant underperformance relative expected historical projected future operating results • significant changes manner use longlived assets intangible assets strategy overall business • current expectation likely longlived asset sold otherwise disposed loss end previously estimated useful life • significant negative industry legal regulatory economic trends management determines carrying value longlived assets may recoverable based upon existence one indicators impairment test impairment based projected undiscounted cash flow method projected future operating results cash flows asset group used establish fair value used evaluating carrying value longlived intangible assets estimate future cash flows longlived assets using current longterm financial forecasts carrying amount longlived asset recoverable exceeds sum undiscounted cash flows expected result use eventual disposition asset case impairment loss would recognized impairment loss recognized amount carrying amount exceeds fair value income taxes account income taxes asset liability method requires recognition deferred tax assets liabilities expected future tax consequences events included financial statements method deferred tax assets liabilities reflect tax effects net operating losses tax credits temporary differences carrying amounts assets liabilities financial reporting purposes amounts used income tax purposes determined using enacted tax rates effect year temporary differences expected reverse effect change tax rates deferred tax assets liabilities recognized income period includes enactment date record deferred tax assets extent believe assets likely realized making determination consider available positive negative evidence including scheduled reversals deferred tax liabilities projected future taxable income tax planning strategies recent financial operations establish reduce valuation allowance deferred tax assets provision income taxes increase decrease respectively period determination change valuation allowance made recognize tax benefit uncertain tax position likely tax position sustained examination taxing authorities based technical merits position tax benefits recognized financial statements particular tax position measured based largest benefit greater 50 likelihood realized upon settlement amount unrecognized tax benefits adjusted appropriate changes facts circumstances significant amendments existing tax law new regulations interpretations taxing authorities new information obtained tax examination resolution examination recognize accrued interest penalties appropriate related unrecognized tax benefits provision income taxes december 22 2017 us enacted comprehensive tax legislation “tax act” tax act made broad complex changes us tax code including imposition onetime mandatory deemed repatriation tax “transition tax” certain earnings accumulated offshore since 1986 reduction corporate tax rate 35 21 us taxable income resulting onetime remeasurement us federal deferred tax assets liabilities 2017 recorded income tax benefit 70 million related transition tax remeasurement us federal deferred tax assets liabilities completed accounting tax act staff accounting bulletin 118 income tax accounting implications tax cuts jobs act “sab 118” 2018 resulted additional income tax benefit 49 million revenue recognition january 1 2018 adopted accounting standards codification asc 606 revenue contracts customers using modified retrospective method applied contracts completed january 1 2018 recorded net reduction opening retained earnings 01 million january 1 2018 due cumulative impact adopting asc 606 impact primarily related customer loyalty program united states resulting noncash consideration treated variable consideration new revenue recognition accounting standard recognize revenue operations sale products services rental instruments revenue contracts customers recognized upon transfer control promised products services customers amount reflects consideration expect receive exchange products services enter contracts include various combinations products services generally accounted distinct performance obligations revenue recognized net taxes collected customers sales tax value added tax etc subsequently remitted government authorities contracts customers often include promises transfer multiple products services customer determining whether products services considered distinct performance obligations accounted separately versus together may require significant judgment may impact timing revenue recognition revenue associated equipment requires factory installation recorded installation complete customer acceptance required occurred certain equipment requires installation due fact instruments operated clinicallaboratory environment installation services could result modification equipment order ensure instruments working according specifications customer subject validation tests upon completion installation arrangements require factory installation delivery equipment installation separate performance obligations recognize transaction price allocated equipment upon customer acceptance transfer control occurred relation equipment point time customer ability direct use obtain substantially remaining benefits asset transaction price allocated installation services also recognized upon completion services without completion installation services related customer acceptance customer cannot receive benefits service time revenue recognized provision recognized estimated product returns right considered variable consideration accordingly product revenues recognized transaction price reduced estimated amount product returns service revenues extended warranty contracts recognized ratably life service agreement standready performance obligation arrangements include combination products services transaction prices allocated performance obligations based standalone selling prices method used determine standalone selling prices service revenues based observable prices services sold separately instances timing revenue recognition differs timing invoicing determined contracts generally include significant financing component primary purpose invoicing terms provide customers simple predictable methods purchasing products services either provide receive financing customers record contract liabilities cash payments received due advance performance disclose value unsatisfied performance obligations contracts original expected length one year less payment terms vary type location customer products services offered term invoicing payment due significant reagent rental agreements reagent rental agreements diagnostic industry sales method provides use instrument consumables reagents customer per test basis agreements may also include maintenance underlying instruments retained customer locations well initial training initially determine reagent rental arrangement contains lease commencement determined arrangement contains lease next must ascertain lease classification purposes applying appropriate accounting treatment operating salestype direct financing lease addition purposes determining lease term used performing lease classification test include noncancellable period lease together periods covered option extend lease customer reasonably certain exercise option periods covered option terminate lease customer reasonably certain exercise option periods covered option extend terminate lease exercise option controlled company reagent rental arrangements contain either option lessee extend andor cancel period contract enforceable short period therefore lease term limited noncancellable period furthermore historically rare arrangements contain option lessee purchase underlying asset discussed caption “leases” caption “recent accounting pronouncements adopted” well note 16 leases adopted asc 842 “leases” modified retrospective basis effective january 1 2019 practical expedients restate comparative prior periods concluded use instrument referred “lease elements” within guidance asc 606 rather asc 842 accordingly first allocate transaction price lease elements nonlease elements based relative standalone selling prices determination transaction price requires judgment consideration fixedminimum payments well estimates variable consideration allocation amount variable payments allocated lease components recognized income asc 842 amount variable payments allocated nonlease components recognized income accordance asc 606 upon adoption asc 842 2019 maintenance services along reagents allocated nonlease elements recognized income accordance asc 606 change alignment requirements asc 842 resulted decrease amount rental income corresponding increase amount maintenance service revenue included total reported net sales consolidated income statements generally terms arrangements result transfer control reagents upon either consumables delivered ii consumables consumed customer historically reagent rental arrangements predominantly comprised variable lease payments fluctuate depending volume reagents purchased arrangements contain fixedminimum lease payments result lease income heavily variable nature reagent rental arrangements predominantly classified operating leases salestype leases represent aggregate insignificant amount lease income hence reported lease income primarily variable nature recognized reagents consumed customer delivered revenue allocated lease elements reagent rental arrangements represents approximately 3 5 total revenue 2019 2018 respectively included part net sales consolidated statements income contract costs practical expedient expense incurred costs obtain contracts amortization period would one year less costs recorded within selling general administrative expense include internal sales force compensation programs certain partner sales incentive programs determined annual compensation commensurate annual selling activities disaggregation revenue disaggregation revenue geographic region based primarily location use product service industry segment sources disaggregation revenues industry segment sources presented segment information footnote see note 14 deferred revenues represent mostly unrecognized fees billed collected extended service arrangements deferred revenues generally recognized ratably term service contract performance extends life arrangement majority deferred revenue balance classified current expected length one year less increase total deferred revenue balance 373 million december 31 2018 458 million december 31 2019 primarily driven 331 million net cash payments received due advance satisfying performance obligations partially offset 246 million revenue recognized included deferred revenue balance december 31 2018 warrant certain equipment defects design materials workmanship generally period one year upon revenue recognition equipment establish part cost goods sold provision expected costs warranty based historical experience specific warranty terms customer feedback review performed quarterly basis assess adequacy warranty accrual components warranty accrual included current liabilities longterm liabilities consolidated balance sheets follows millions shipping handling classify freight costs billed customers net sales related freight costs recognized upon transfer control promised products customers fulfillment cost included cost goods sold research development internal research development costs expensed incurred thirdparty research development costs expensed contracted work performed conduct extensive research development activities areas business employing approximately 780 employees worldwide activities including degreed scientists technical support staff research development played major role biorad’s growth expected continue future research teams continuously developing new products new applications existing products development new products applications interact scientific medical professionals universities hospitals medical schools within industry foreign currency balance sheet accounts international subsidiaries translated current exchange rates end accounting period income statement items translated average exchange rates period resulting translation adjustments recorded separate component stockholders’ equity foreign currency transaction gains losses included foreign exchange losses net consolidated statements income transaction gains losses result primarily fluctuations exchange rates intercompany receivables payables denominated currencies functional currency subsidiary recorded transaction forward foreign exchange contracts part distributing products regularly enter intercompany transactions enter forward foreign exchange contracts manage foreign exchange risk future movements exchange rates affect foreign currency denominated intercompany receivables payables use derivative financial instruments speculative trading purposes seek hedge accounting treatment contracts result contracts generally maturity dates 90 days less denominated primarily currencies industrial countries recorded asset liability measured fair value balance sheet date resulting gains losses offset exchange gains losses related receivables payables recorded foreign exchange losses net consolidated statements income sharebased compensation plans sharebased compensation expense sharebased payment awards granted determined based grantdate fair value recognize compensation costs requisite service period award generally vesting term sharebased payment awards forfeitures recognized occur plans described fully note 9 earnings per share basic earnings per share computed dividing net income attributable biorad weighted average number common shares outstanding period diluted earnings per share takes account effect dilutive instruments stock options restricted stock uses average share price period determining number potential common shares added weighted average number shares outstanding potential common shares excluded diluted earnings per share calculation effect would antidilutive weighted average number common shares outstanding used calculate basic diluted earnings per share antidilutive shares follows thousands fair value financial instruments certain financial instruments including cash equivalents shortterm investments accounts receivable marketable securities notes payable accounts payable foreign exchange contracts carrying amounts approximate fair value estimated fair value financial instruments based exchange price would received asset paid transfer liability exit price using available market information appropriate valuation methodologies principal advantageous market asset liability orderly transaction market participants estimates necessarily indicative amounts could realized current market exchange considerable judgment required interpreting market data used develop estimates fair value use different market assumptions estimation techniques could material effect estimated fair value see note 3 recent accounting pronouncements adopted august 2018 fasb issued asu 201815 customers accounting implementation costs incurred cloud computing arrangement service contract asu 201815 amends definition hosting arrangement requires customer hosting arrangement service contract capitalize certain implementation costs arrangement internaluse software project internaluse software guidance states qualifying costs incurred application development stage capitalized prospectively adopted asu 201815 effective january 1 2019 december 31 2019 capitalized 31 million implementation costs cloud computing arrangements net accumulated amortization primarily business analytics software costs recorded current assets consolidated balance sheet august 2018 sec issued final rule release 3310532 disclosure update simplification extends interim periods annual disclosure requirement presenting changes stockholders equity effective first quarter 2019 february 2016 fasb issued asu 201602 leases related accounting standard updates requires among items lease accounting recognize leases assets liabilities balance sheet qualitative quantitative disclosures enhanced better understand amount timing uncertainty cash flows arising leases adopted asu 201602 modified retrospective basis effective january 1 2019 practical expedients restate comparative prior periods practical expedients elected transition included among items leases existed prior january 1 2019 reassessing whether contracts contain embedded leases reassessing classification existing leases reassessing whether previously capitalized initial direct costs qualify capitalization act lessee adoption standard resulted material additions balance sheet rightofuse assets associated liabilities see note 16 leases act lessee also elected separate lease nonlease components act lessor reagent rental arrangements insignificant impact consolidated financial statements fully described caption reagent rental agreements recent accounting pronouncements adopted january 2020 fasb issued asu 202001 clarifying interactions topic 321 investmentsequity securities topic 323 investmentsequity method joint ventures topic 815 derivatives hedging asu 202001 clarifies company consider observable transactions require company either apply discontinue equity method accounting topic 323 purposes applying measurement alternative accordance topic 321 immediately applying upon discontinuing equity method asu 202001 also clarifies determining accounting certain forward contracts purchased options company consider whether upon settlement exercise underlying securities would accounted equity method fair value option asu 202001 effective january 1 2021 early adoption permitted beginning interim period prospective basis currently evaluating effect asu 202001 consideration early adoption december 2019 fasb issued asu 201912 simplifying accounting income taxes eliminates certain exceptions within asc 740 income taxes clarifies aspects current guidance promote consistency among reporting entities asu 201912 effective fiscal years beginning december 15 2020 early adoption permitted interim annual period adjustments reflected beginning fiscal year adoption currently evaluating effect adopting pronouncement financial statements disclosures november 2018 fasb issued asu 201818 clarifying interaction topic 808 topic 606 topic 808 collaborative arrangements topic 606 revenue contracts customers asu 201818 clarifies certain transactions collaborative partners accounted revenue asc 606 collaborative partner customer currently customers collaborative partners anticipate near future asu 201818 effective january 1 2020 august 2018 fasb issued asu 201814 disclosure framework changes disclosure requirements defined benefit plans asu 201814 eliminates adds certain disclosures defined benefit plans asu 201814 effective fiscal years ending december 15 2020 using retrospective approach currently evaluating disclosures expect asu 201814 material impact disclosures defined benefit plans august 2018 fasb issued asu 201813 disclosure framework changes disclosure requirements fair value measurement asu 201813 eliminates adds modifies certain disclosures fair value measurements asu 201813 effective fiscal years beginning december 15 2019 interim periods within fiscal years expect asu 201813 material impact fair value disclosures june 2016 fasb issued asu 201613 measurement credit losses financial instruments asu 201613 replace current incurred loss approach expected loss model instruments measured amortized cost require entities record allowances availableforsale debt securities rather reduce carrying amount current otherthantemporary impairment model asu 201613 effective fiscal years beginning december 15 2019 interim periods within fiscal years currently evaluating effect asu 201613 consolidated financial statements however due generally short duration customers trade receivables expect asu 201613 material impact 2 acquisitions october 2019 acquired issued outstanding shares foreign distributor approximately 42 million included cash payments closing net closing cash 36 million 06 million contingent consideration potentially payable sellers addition recorded net gain 04 million settlement preexisting conditions concurrent acquisition recorded selling general administrative expense acquisition included clinical diagnostics segments results operations acquisition date accounted business combination amount acquisitionrelated costs minimal biorad primarily represented acquisition process proforma financial statements provided acquisition immaterial biorad taken whole periods presented december 31 2019 preliminary allocation payments 34 million customer relationships definitelived intangible 02 million deferred tax asset 08 million deferred tax liability related purchased intangible 14 million acquired net assets august 2019 acquired issued outstanding membership interests exact diagnostics llc approximately 600 million cash payments closing net closing cash 597 million acquisition included clinical diagnostics segments results operations acquisition date accounted business combination amount acquisitionrelated costs minimal biorad primarily represented acquisition process goodwill related acquisition deductible income tax purposes proforma financial statements provided acquisition immaterial biorad taken whole periods presented final allocation payments 268 million purchased intangibles consisting primarily customer relationships developed product technology tradenames 42 million acquired net assets 287 million goodwill believe acquisition accelerate market penetration areas quality controls assay verification panels clinical diagnostics operations march 2019 completed acquisition issued outstanding stock small us private company approximately 200 million cash payments net closing cash consisted 40 million paid november 2018 remaining 160 million paid march 2019 acquisition included life science segments results operations acquisition date accounted business combination amount acquisitionrelated costs minimal biorad primarily represented acquisition process goodwill related acquisition deductible income tax purposes pro forma financial statements provided acquisition immaterial biorad taken whole periods presented final allocation payments 156 million goodwill included workforce timetomarket advantage 55 million definitelived intangibles 02 million inprocess research development indefinitelived intangible asset deferred tax liability 13 million related purchased intangibles believe acquisition expand reagents suite offerings life science operations 3 fair value measurements determine fair value asset liability based assumptions market participants would use pricing asset liability orderly transaction market participants measurement date identification market participant assumptions provides basis determining inputs used pricing asset liability fair value hierarchy established gives precedence fair value measurements calculated using observable inputs using unobservable inputs hierarchy prioritizes inputs three broad levels follows • level 1 quoted prices active markets identical instruments • level 2 significant observable inputs including quoted prices active markets similar instruments • level 3 significant unobservable inputs including assumptions determining fair value certain investments financial assets liabilities carried fair value measured recurring basis december 31 2019 classified hierarchy follows millions financial assets liabilities carried fair value measured recurring basis december 31 2018 classified hierarchy follows millions cash equivalents included cash equivalents consolidated balance sheets b equity securities included following accounts consolidated balance sheets millions yeartodate unrealized gains equity securities still held december 31 2019 20311 million primarily due investment sartorius ag recorded consolidated statements income c availableforsale investments included following accounts consolidated balance sheets millions forward foreign exchange contracts asset position included current assets consolidated balance sheets e forward foreign exchange contracts liability position included current liabilities consolidated balance sheets f contingent consideration liabilities included following accounts consolidated balance sheets millions first quarter 2016 recognized contingent consideration liability upon acquisition high performance analytical flow cytometer platform propel labs acquisition date amount contingent consideration determined based probabilityweighted income approach related achievement sales milestones ranging 39 20 calendar years 2017 2020 sales milestones could potentially range 0 unlimited amount first third quarters 2019 paid 14 million 11 million respectively per purchase agreement since 2016 net decrease cumulative valuation sales milestones 139 million contingent consideration accrued estimated fair value 43 million december 31 2019 fourth quarter 2019 recognized contingent consideration liability earnout targets related acquisition foreign distributor first earnout payment 07 million paid acquisition date remaining payment due second quarter 2020 maximum earnout payment due 14 million contingent consideration accrued estimated fair value 06 million december 31 2019 following table provides reconciliation level 3 contingent consideration liabilities measured estimated fair value millions following table provides quantitative information level 3 inputs fair value measurement analytical flow cytometer platform contingent consideration liability december 31 2019 significant increases decreases inputs isolation could result significantly lower higher fair value measurement estimate fair value level 2 debt securities primary pricing provider used reuters december 31 2019 securities evaluations december 31 2018 primary pricing sources pricing process allowed us select hierarchy pricing sources securities held reuters securities evaluations price level 2 security held pricing provider utilized custodian supplied pricing secondary pricing source commercial paper december 31 2019 primary pricing provider used leading pricing source hierarchy determine pricing primary pricing provider performed daily reasonableness testing reuters securities evaluations prices price changes 5 greater investigated resolved addition performed quarterly testing reuters securities evaluations prices custodian reported prices price differences outside tolerable variance approximately 1 investigated resolved availableforsale investments consist following millions following summary amortized cost estimated fair value debt securities december 31 2019 contractual maturity date millions availableforsale investments consist following millions following summary investments gross unrealized losses associated fair value millions unrealized losses securities due number factors including changes interest rates changes economic conditions changes market outlook various industries among others biorad ability intent hold investments unrealized losses recovery fair value reasonable period time sufficient forecasted recovery fair value may maturity consider investments otherthantemporarily impaired december 31 2019 december 31 2018 part distributing products regularly enter intercompany transactions enter forward foreign exchange contracts manage foreign exchange risk future movements foreign exchange rates affect foreign currency denominated intercompany receivables payables use derivative financial instruments speculative trading purposes seek hedge accounting treatment contracts result contracts generally maturity dates 90 days less denominated primarily currencies industrial countries recorded fair value balance sheet date notional principal amounts provide one measure transaction volume outstanding december 31 2019 represent amount biorads exposure loss estimated fair value contracts derived using spot rates reuters last business day quarter points provided counterparties resulting gains losses offset exchange gains losses related receivables payables included foreign exchange losses net consolidated statements income following summary forward foreign currency exchange contracts millions estimated fair value current maturities longterm debt excluding leases december 31 2019 longtermdebt excluding lease current maturities december 31 2018 recognized fair value consolidated balance sheets estimated fair value based quoted market prices similar issues estimated fair value debt discussed level fair value hierarchy within fair value measurement categorized follows millions included investments consolidated balance sheet investments without readily determinable fair value measured cost adjustments observable price changes price impairments carrying value investments 03 million 06 million december 31 2019 december 31 2018 respectively shares ordinary voting stock sartorius ag sartorius goettingen germany process technology supplier biotechnology pharmaceutical chemical food beverage industries 37 outstanding voting shares excluding treasury shares sartorius december 31 2019 sartorius family trust sartorius family members hold controlling interest outstanding voting shares representative designee sartorius board directors ability exercise significant influence operating financial policies sartorius december 31 2019 due adoption asu 201601 asu 201803 january 1 2018 account investment fair market value determined period end quoted price organized exchange 4 goodwill purchased intangible assets changes goodwill segment follows millions conjunction purchase issued outstanding shares foreign distributor october 2019 see note 2 acquisitions recorded 34 million customer relationships definitelived intangible assets conjunction purchase issued outstanding membership interests exact diagnostics llc august 2019 see note 2 acquisitions recorded 287 million goodwill 268 million definitelived intangible assets 161 million customer relationships 81 million developed product technology 25 million tradenames 01 million backlog conjunction purchase issued outstanding stock small us private company march 2019 see note 2 acquisitions recorded 156 million goodwill included workforce timetomarket advantage 55 million developed product technology definitelived intangible asset 02 million inprocess research development indefinitelived intangible asset march 2018 wrote 14 million goodwill clinical diagnostics segment result divestiture product line 2018 impaired goodwill associated 1999 acquisition pasteur sanofi diagnostics sa 2007 2012 acquisitions diamed holding ag diamed fennica oy diamed gb limited diamed benelux collectively diamed 2010 acquisition biotest ag 2013 acquisition abd serotec amounts 181 million 2472 million 108 million 59 million respectively goodwill diamed biotest ag abd serotec fully impaired december 31 2018 impairments pasteur sanofi diagnostics sa diamed biotest ag included clinical diagnostics segments results operations impairment abd serotec included life science segments results operations impairments based upon revision level 3 valuation inputs ie expected future cash flows information regarding identifiable purchased intangible assets definite indefinite lives follows millions 2018 impaired developed product technology fully impaired covenants compete amounts 88 million 17 million respectively associated 2012 acquisition cell sorting system propel labs inc impairments included life science segments results operations impairments based upon revision level 3 valuation inputs ie expected future cash flows amortization expense related purchased intangible assets years ended december 31 2019 2018 2017 235 million 283 million 308 million respectively estimated future amortization expense based existing purchased intangible assets years ending december 31 2020 2021 2022 2023 2024 thereafter 235 million 228 million 196 million 187 million 166 million 441 million respectively 5notes payable longterm debt domestic international lines credit standby letters credit guarantee arrangements 2075 million available borrowing usage december 31 2019 reduced 42 million utilized standby letters credit guarantee arrangements issued banks support obligations principal components longterm debt follows millions senior notes due 2020 december 2010 biorad sold 4250 million principal amount senior notes due december 2020 4875 notes sale yielded net cash proceeds 4226 million effective rate 4946 4875 notes pay fixed rate interest 4875 per year option redeem 4875 notes time redemption price 100 principal amount plus specified makewhole premium defined indenture governing 4875 notes accrued unpaid interest thereon redemption date obligations 4875 notes secured rank equal right payment existing future unsubordinated indebtedness certain covenants apply year end 4875 notes including limitations following liens sale leaseback transactions mergers consolidations sales assets covenants compliance covenants december 31 2019 restrictive covenants relating total indebtedness interest coverage stock repurchases recapitalizations dividends distributions shareholders current ratios credit agreement april 2019 biorad entered 2000 million unsecured credit agreement borrowings credit agreement revolving basis used make permitted acquisitions working capital general corporate purposes outstanding borrowings credit agreement december 31 2019 however 02 million utilized domestic standby letters credit reduced borrowing availability december 31 2019 credit agreement matures april 2024 borrowed credit agreement borrowing rate would 3035 december 31 2019 credit agreement requires biorad comply certain financial ratios covenants among things ratios covenants include leverage ratio test interest coverage test well restrictions ability declare pay dividends incur debt guarantee debt enter transactions affiliates merge consolidate sell assets make investments create liens compliance ratios covenants december 31 2019 maturities longterm debt december 31 2019 follows 2020 4268 million 2021 16 million 2022 15 million 2023 04 million 2024 04 million thereafter 97 million 6 income taxes us international components income taxes follows millions provision income taxes consists following millions reconciliation effective tax rate income taxes statutory tax rate follows december 22 2017 us enacted comprehensive tax legislation “tax act” tax act made broad complex changes us tax code including imposition onetime mandatory deemed repatriation tax “transition tax” certain earnings accumulated offshore since 1986 reduction corporate tax rate 35 21 us taxable income resulting onetime remeasurement us federal deferred tax assets liabilities 2017 recorded income tax benefit 70 million related transition tax remeasurement us federal deferred tax assets liabilities completed accounting tax act staff accounting bulletin 118 income tax accounting implications tax cuts jobs act “sab 118” 2018 resulted additional income tax benefit 49 million effective income tax rate 222 287 250 2019 2018 2017 respectively effective tax rate 2018 driven detriments due nondeductible impairment charges taxation foreign operations partially offset 49 million benefit recorded result completion accounting tax act sab 118 effective tax rate 2017 driven 70 million benefit recorded provisional estimate accounting tax act many jurisdictions operate statutory tax rates differ us statutory tax rate 21 effective tax rate impacted either favorably unfavorably many factors including limited jurisdictional mix income tax changes statutory tax rates changes tax laws regulations tax audits settlements generation tax credits deferred tax assets liabilities reflect tax effects losses credits temporary differences carrying amounts assets liabilities financial reporting purposes amounts used income tax purposes significant components deferred tax assets liabilities follows millions realization deferred tax assets dependent upon generation sufficient taxable income appropriate character future periods regularly assess ability realize deferred tax assets establish valuation allowance likely portion deferred tax assets realized assessing realizability deferred tax assets weigh available positive negative evidence due weight objectively verifiable negative evidence believe likely california certain foreign deferred tax assets realized december 31 2019 maintained valuation allowance deferred tax assets valuation allowance deferred tax assets california certain foreign jurisdictions decreased 36 million 2019 december 31 2019 foreign california net operating loss carryforwards approximately 2390 million 527 million respectively foreign net operating losses 1247 million may carried forward indefinitely majority remaining foreign net operating losses utilized begin expire 2025 california net operating loss carryforwards utilized begin expire 2028 december 31 2019 california research tax credit carryforwards approximately 357 million may carried forward indefinitely income tax returns audited us federal state foreign tax authorities currently examination many tax authorities tax years open examination include years 2012 forward us certain foreign jurisdictions including france germany india switzerland differing interpretations tax laws regulations result significant disputes may arise tax authorities involving issues timing amount deductions allocations income among various tax jurisdictions evaluate exposures associated tax filing positions quarterly basis record liabilities unrecognized tax benefits related uncertain tax positions believe currently pending uncertain tax positions material adverse effect consolidated financial statements although adverse resolution one uncertain tax positions period may material impact results operations period following tabular reconciliation total amounts unrecognized tax benefits millions biorad recognizes accrued interest penalties related unrecognized tax benefits income tax expense related unrecognized tax benefits noted cumulative amount accrued interest penalties december 31 2019 2018 2017 respectively 112 million 95 million 109 million biorad accrued interest penalties 17 million 14 million 09 million 2019 2018 2017 respectively total unrecognized tax benefits interest penalties 504 million 2019 partially offset deferred tax assets 14 million prepaid taxes 54 million net amount 436 million december 31 2019 based expected outcome certain examinations result expiration statutes limitation certain jurisdictions believe within next twelve months reasonably possible previously unrecognized tax benefits could decrease approximately 28 million substantially amounts impact effective income tax rate recognized generally intention repatriate certain foreign earnings extent repatriations restricted local laws accounting rules substantial incremental costs determination amount unrecognized deferred tax liability foreign earnings indefinitely reinvested practicable estimate 7 stockholders equity biorad’s issued outstanding stock consists class common stock class b common stock class b share class b participates equally earnings biorad identical respects except follows class limited voting rights share class entitled one tenth vote matters share class b entitled one vote additionally class stockholders entitled elect 25 board directors class b stockholders entitled elect 75 directors cash dividends may paid class shares without paying cash dividend class b shares cash dividend may paid class b shares unless least equal cash dividend paid class shares class b shares convertible time class shares oneforone basis option stockholder founders biorad schwartz family collectively hold majority biorad’s voting stock result schwartz family able exercise significant influence biorad changes biorads issued common stock shares follows thousands treasury shares november 2017 board directors authorized new share repurchase program granting biorad authority repurchase discretionary basis 2500 million outstanding shares common stock repurchases may made managements discretion time open market privately negotiated transactions share repurchase activity share repurchase program open market transactions 2018 2019 summarized follows 2019 used 118910 repurchased shares connection vesting restricted stock units 19755 shares connection espp stock purchases credit agreement may limit ability repurchase stock 8 accumulated comprehensive income loss accumulated comprehensive income loss included consolidated balance sheets consolidated statements changes stockholders equity consists following components millions amounts reclassified accumulated comprehensive income consolidated statements income presentation location follows reclassification adjustments calculated using specific identification method 9 sharebased compensationequity award purchase plans description sharebased compensation plans believe sharebased compensation plans align interests employees shareholders equity award plans two equity award plans officers certain employees 2007 incentive award plan 2007 plan 2017 incentive award plan 2017 plan 2007 plan authorized grant stock options restricted stock restricted stock units stock appreciation rights types equity awards employees longer grant equity 2007 plan 2017 plan authorizes grant employees stock options stock appreciation rights restricted stock restricted stock units types equity awards total 2095049 shares reserved issuance equity awards 2017 plan may either class b common stock december 31 2019 1507489 shares available granted plans class b options granted prices less fair market value underlying common stock date grant generally options granted maximum term 10 years vest increments 20 per year fiveyear period yearly anniversary date grant employee stock purchase plans 2011 employee stock purchase plan 2011 espp provides eligible employees may contribute 10 compensation 25000 annually toward quarterly purchase class common stock employees’ purchase price 85 lesser fair market value stock first business day last business day calendar quarter 2011 espp includes two components code section 423 component intend qualify “employee stock purchase plan” section 423 us internal revenue code 1986 amended “code” non423 component authorizes grant purchase rights qualify “employee stock purchase plan” section 423 code authorized sale 1300000 shares class common stock 2011 espp sharebased compensation included sharebased compensation expense cost related stock option grants espp stock purchases restricted stock unit awards sharebased compensation expense allocated cost goods sold research development expense selling general administrative expense consolidated statements income 2019 2018 2017 recognized sharebased compensation expense 356 million 278 million 234 million respectively income tax benefit related sharebased compensation expense 56 million 44 million 58 million 2019 2018 2017 respectively capitalize sharebased compensation expense inventory tax benefit sharebased compensation vested exercised 2019 2018 2017 54 million 54 million 63 million respectively options awards amortize fair value straightline basis stock compensation awards amortized requisite service periods awards generally vesting periods recognize forfeitures occur stock options following table summarizes stock option activity intrinsic value stock options defined difference current market value exercise price total intrinsic value date exercise stock options exercised 2019 2018 2017 approximately 12 million 8 million 10 million respectively cash received stock options exercised 2019 2018 2017 26 million 05 million 16 million respectively december 31 2019 70 million total unrecognized compensation cost stock options amount expected recognized future weightedaverage period approximately 3 years weightedaverage fair value stock options granted estimated using blackscholes optionpricing model following weightedaverage assumptions volatility based historical volatilities common stock period equal stock option’s expected life riskfree interest rate based us treasury yield curve effect time grant expected life represents number years estimate based primarily historical experience options outstanding prior exercise anticipate paying cash dividends future therefore use expected dividend yield zero restricted stock units restricted stock units rights receive shares company stock granted 2009 2016 2007 plan since 2017 plan fair value restricted stock unit market value determined closing price stock day grant following table summarizes restricted stock unit activity total fair value restricted stock units vested 2019 2018 2017 448 million 400 million 277 million respectively december 31 2019 approximately 1195 million total unrecognized compensation cost related restricted stock units amount expected recognized remaining weightedaverage period approximately 3 years employee stock purchase plans fair value employees’ purchase rights 2011 espp estimated using blackscholes model following weightedaverage assumptions major assumptions primarily based historical data volatility based historical volatilities common stock period equal expected life purchase rights riskfree interest rate based us treasury yield curve effect time grant anticipate paying cash dividends future therefore use expected dividend yield zero sold 58717 shares 143 million 63464 shares 136 million 74409 shares 130 million 2011 espp employees 2019 2018 2017 respectively december 31 2019 599531 shares remain authorized available issuance 2011 espp currently issue new shares treasury shares available satisfy stock option exercises restricted stock issuances espp stock purchases 10 income expense net income expense net includes following components millions otherthantemporary impairment losses equity method investments recorded light investees financial condition first fourth quarters 2019 11 supplemental cash flow information reconciliation net income net cash provided operating activities follows millions 12 commitments contingent liabilities deferred profit sharing retirement plan profit sharing plan covering substantially us employees contributions made discretion board directors biorad liability current year’s contribution expense 161 million 159 million 160 million 2019 2018 2017 respectively purchase obligations december 31 2019 purchase obligations recognized balance sheet 358 million include agreements purchase goods services enforceable legally binding biorad specify significant terms exclude agreements cancelable without penalty recognition purchase obligations occurs products services delivered biorad annual future fixed determinable portion purchase obligations recognized balance sheet december 31 2019 follows 2020 340 million 2021 10 million 2022 02 million 2023 02 million 2024 02 million 2024 02 million longterm liabilities december 31 2019 obligations recognized balance sheet 1184 million primarily represent recognized longterm obligations postemployment benefits indicated mostly due 5 years longterm deferred revenue excluded tax liabilities uncertain tax positions contingencies able reasonably estimate timing future cash flows tax liabilities therefore income tax obligations excluded annual future fixed determinable portion obligations recognized balance sheet december 31 2019 follows 2020 52 million 2021 128 million 2022 45 million 2023 43 million 2024 33 million 2024 883 million letters creditguarantees ordinary course business times required post letters creditguarantees letters creditguarantees issued financial institutions guarantee obligations various parties contingently liable 42 million standby letters creditguarantees financial institutions december 31 2019 postemployment benefits several foreign locations statutorily required provide retirement benefits lump sum termination indemnity employees upon termination virtually reason plans accounted defined benefit plans associated net benefit obligation december 31 2019 2018 815 million 704 million respectively included accrued payroll employee benefits longterm liabilities consolidated balance sheets plans required funded trust device used accumulate assets settle obligations however plans require funding based local laws trust device administered external plan manager used accumulate assets assist settling obligations following disclosures include plans located france switzerland germany korea india thailand italy dubai japan obligations funded status following table sets forth change benefit obligations fair value plan assets amounts recognized consolidated balance sheets plans millions components net periodic benefit cost following sets forth net periodic benefit cost income periods indicated millions assumptions weightedaverage assumptions used computing benefit obligations follows weightedaverage assumptions used computing net periodic benefit costs follows foreign locations service award plans paid based upon number years employment plans liability december 31 2019 2018 35 million 31 million respectively included accrued payroll employee benefits longterm liabilities consolidated balance sheets concentrations labor subject collective bargaining agreements december 31 2019 approximately seven percent biorads approximately 3180 us employees covered collective bargaining agreement expire november 14 2023 many biorads nonus fulltime employees especially france covered collective bargaining agreements 13 legal proceedings may 27 2015 former general counsel sanford wadler filed lawsuit us district court northern district california us four current directors one former director plaintiff’s suit alleged whistleblower retaliation violation sarbanesoxley act doddfrank act raising fcparelated concerns mr wadler also alleged wrongful termination violation public policy nonpayment wages waiting time penalties violation california labor code plaintiff sought back pay compensatory damages lost wages earnings retirement benefits employee benefits compensation mental pain anguish emotional distress waiting time penalties punitive damages litigation costs including attorneys’ fees reinstatement employment july 28 2015 filed motion dismiss plaintiffs complaint specifically requested dismissal claims alleged us doddfrank act california labor code 11025 claims directors sarbanesoxley act doddfrank act october 23 2015 district court granted motion respect alleged violations sarbanesoxley act director defendants except norman schwartz prejudice court denied motion dismiss claims doddfrank act us director defendants trial commenced january 17 2017 concluded february 6 2017 mr wadler awarded 1092 million plus prejudgment interest 141608 postjudgment interest mr wadler’s litigation costs expert witness fees reasonable attorneys’ fees approved court previously accrued judgment interest mr wadlers litigation costs june 6 2017 filed notice appeal united states court appeals ninth circuit oral arguments occurred november 14 2018 february 26 2019 united states court appeals ninth circuit issued decision reversing part vacating part affirming part specifically court 1 reversed doddfrank claim amounts 296 million plus interest directed district court enter judgment biorad’s favor claim 2 vacated sox claim due instructional error remanded proceedings including whether new trial needed 3 affirmed california public policy claim 796 million damages attributable march 12 2019 filed petition panel rehearing en banc united states court appeals ninth circuit petition denied april 8 2019 september 24 2019 mr wadler filed dismissal prejudice remaining claims lawsuit us district court northern district california result confidential settlement agreement satisfaction judgment parties entered last executed september 6 2019 matter material impact 2019 results operations closed also party various claims legal actions complaints arising ordinary course business cannot time reasonably estimate range exposure potential liability respect matters believe time ultimate liability resulting matters material adverse effect results operations financial position liquidity cannot give assurance regarding ultimate outcome matters resolution could material operating results particular period depending level income period 14 segment information biorad multinational manufacturer worldwide distributor life science research products clinical diagnostics products two reportable segments life science clinical diagnostics reportable segments strategic business lines offer 9000 different products services require different marketing strategies disclose quantitative information different products services impractical based primarily numerous products services sell global markets serve life science segment develops manufactures sells services reagents apparatus instruments used biological research products sold university medical school laboratories pharmaceutical biotechnology companies food testing laboratories government industrial research facilities clinical diagnostics segment develops manufactures sells services automated test systems informatics systems test kits specialized quality controls healthcare market products sold reference laboratories hospital laboratories state newborn screening facilities physicians’ office laboratories transfusion laboratories insurance forensic testing laboratories operations include remainder analytical instruments segment results presented manner present operations internally make operating decisions assess performance accounting policies segments described significant accounting policies see note 1 segment profit loss includes allocation corporate expense based upon sales allocation interest expense based upon accounts receivable inventories difference total segment allocated interest expense depreciation amortization capital expenditures corresponding consolidated amounts attributable corporate headquarters segments expected manage assets completely control accordingly segment assets include primarily accounts receivable inventories gross machinery equipment goodwill balances included corporate segment reporting purposes information regarding industry segments december 31 2019 2018 2017 years ended follows millions clinical diagnostics segment loss 2018 due impairment losses taken goodwill 2761 million see note 4 consolidated financial statements segment assets december 31 2019 increased december 31 2018 balances due inclusion operating lease rightofuse assets segment assets see note 16 consolidated financial statements net corporate operating expense consists receipts expenditures primary responsibility segment operating management therefore allocated segments performance assessment chief operating decision maker following reconciles total segment profit consolidated income taxes millions following reconciles total segment assets consolidated total assets millions longterm assets december 31 2019 increased december 31 2018 balance due increase fair market value equity securities see note 3 consolidated financial statements following presents net sales external customers geographic region based primarily location use product service millions following presents property plant equipment net operating lease rightofuse assets excluding deferred income taxes geographic region based upon location asset millions prior year amounts adjusted exclude investments 15 restructuring costs restructuring costs european reorganization may 2016 announced would take certain actions europe geographic region designed better align expenses revenue gross margin profile position us improved operating performance actions aligned creation evolution organization structure coordinated implementation global single instance enterprise resource planning erp platform incurred completed december 2019 recorded approximately 01 million 02 million 05 million restructuring charges adjustments related severance employee benefits years ended december 31 2019 2018 2017 respectively may 2016 december 31 2019 total expenses 127 million amounts recorded reflected cost goods sold 01 million 01 million 02 million selling general administrative expense zero 01 million 07 million consolidated statements income years ended december 31 2019 2018 2017 respectively amounts adjusted primarily additional positions identified elimination partially offset employees finding positions within biorad leaving prematurely following table summarizes activity european reorganization restructuring reserves severance millions restructuring costs termination diagnostics research development project facility closures december 2017 announced termination diagnostics research development project europe recorded restructuring charges adjustments related severance employee benefits less 01 million 04 million 110 million asset writeoffs exit costs zero 01 million 101 million years ended december 31 2019 2018 2017 respectively december 2017 december 31 2019 total expenses 214 million restructuring plan completed december 2019 june 2018 announced closure small manufacturing operation munich germany recorded restructuring charges adjustments related severance employee benefits 03 million 17 million years ended december 31 2019 2018 respectively june 2018 december 31 2019 total expenses 14 million restructuring plan completed november 2019 december 2018 announced closure small manufacturing facility outside paris france recorded restructuring charges adjustments related severance employee benefits 01 million 39 million exit costs zero 02 million years ended december 31 2019 2018 respectively december 2018 december 31 2019 total expenses 40 million restructuring charges termination diagnostics research development project facility closures included clinical diagnostics segments results operations amounts recorded reflected cost goods sold 03 million 54 million 23 million selling general administrative expense zero 04 million 33 million research development expense 01 million 03 million 155 million consolidated statements income years ended december 31 2019 2018 2017 respectively liability 32 million december 31 2019 consisted 18 million recorded accrued payroll employee benefits 02 million recorded current liabilities 12 million recorded longterm liabilities consolidated balance sheets following table summarizes activity termination diagnostics research development project facility closures restructuring reserves severance exit costs millions restructuring costs european north american reorganization november 2019 announced strategydriven restructuring plan expect significant portion net savings resulting restructuring plan repurposed alignment portfolio strategy restructuring plan includes workforce reduction europe united states canada expected incurred 2020 recorded 253 million expense restructuring charges related severance employee benefits year ended december 31 2019 liability 253 million december 31 2019 recorded accrued payroll employee benefits consolidated balance sheets amounts recorded reflected cost goods sold 48 million selling general administrative expense 144 million research development expense 61 million consolidated statements income year ended december 31 2019 following table summarizes activity european north american reorganization restructuring reserves severance millions 16 leases operating leases lesser extent finance leases buildings vehicles equipment leases remaining lease terms 1 year 19 years includes determination exercise renewal options components lease expense follows millions sublease building term ends 2025 options extend renew operating lease cost includes original reduction carrying amount rightofuse assets impact remeasurements modifications impairments abandonments historically shortterm leases reflecting leases lease term one year less predominantly comprised leases lease term one month less significant operating lease variable cost primarily comprised reimbursed actual common area maintenance property taxes insurance immaterial supplemental cash flow information related leases follows millions supplemental balance sheet information related leases follows millions maturities lease liabilities follows millions value operating lease portfolio principally facilities longer durations lesser value vehicles equipment shorter terms higherturn december 31 2019 additional lease facility texas commenced 16 million operating lease commence either second third quarter 2020 lease term four years operating capital lease commitments asc 840 leases rents leases rental expense operating leases 474 million 436 million 2018 2017 respectively leases principally facilities automobiles annual future minimum lease payments december 31 2018 operating leases follows 2019 444 million 2020 378 million 2021 274 million 2022 197 million 2023 139 million 2024 beyond 256 million total minimum rentals received future sublease december 31 2018 178 million ends 2025 maturities capital lease obligations december 31 2018 follows 2019 05 million 2020 02 million 2021 05 million 2022 04 million 2023 04 million thereafter 99 million 17 quarterly financial data unaudited summarized quarterly financial data 2019 2018 follows millions except per share data result net losses three months ended september 30 2019 december 31 2018 potentially issuable common shares excluded diluted shares used computation earnings per share effects antidilutive financial data fourth quarter 2019 negatively affected december 2019 cyberattack restructuring costs european north american reorganization described item 7 note 15 consolidated financial statements respectively negative effects offset 6460 million increase fair market value equity securities net losses three months ended september 30 2019 december 31 2018 primarily due 3906 million 8141 million decrease fair market value equity securities respectively changes fair market value equity securities mostly consisted holding gains losses investment sartorius ag net loss three months ended december 31 2018 also included impairment losses goodwill longlived assets amount 2925 million see note 4 consolidated financial statements item 9item 8 financial statements supplementary data consolidated financial statements notes thereto report independent public accountants appearing pages 2 27 exhibit 131 incorporated herein reference item 9item 8 financial statements supplementary data report independent registered public accounting firm stockholders board directors biorad laboratories inc opinion consolidated financial statements audited accompanying consolidated balance sheets biorad laboratories inc subsidiaries company december 31 2018 2017 related consolidated statements income comprehensive income changes stockholders’ equity cash flows years threeyear period ended december 31 2018 related notes financial statement schedule collectively consolidated financial statements opinion consolidated financial statements present fairly material respects financial position company december 31 2018 2017 results operations cash flows years threeyear period ended december 31 2018 conformity us generally accepted accounting principles also audited accordance standards public company accounting oversight board united states pcaob companys internal control financial reporting december 31 2018 based criteria established internal control integrated framework 2013 issued committee sponsoring organizations treadway commission report dated march 29 2019 expressed unqualified opinion effectiveness companys internal control financial reporting changes accounting principle discussed note 1 consolidated financial statements company changed method accounting revenue contracts customers effective january 1 2018 due adoption accounting standards codification 606 asc 606 revenue contracts customers company also changed method accounting equity instruments effective january 1 2018 due adoption financial accounting standards board “fasb” issued accounting standards update asu 201601 recognition measurement financial assets financial liabilities basis opinion consolidated financial statements responsibility company’s management responsibility express opinion consolidated financial statements based audits public accounting firm registered pcaob required independent respect company accordance us federal securities laws applicable rules regulations securities exchange commission pcaob conducted audits accordance standards pcaob standards require plan perform audit obtain reasonable assurance whether consolidated financial statements free material misstatement whether due error fraud audits included performing procedures assess risks material misstatement consolidated financial statements whether due error fraud performing procedures respond risks procedures included examining test basis evidence regarding amounts disclosures consolidated financial statements audits also included evaluating accounting principles used significant estimates made management well evaluating overall presentation consolidated financial statements believe audits provide reasonable basis opinion report independent registered public accounting firm stockholders board directors biorad laboratories inc opinion internal control financial reporting audited biorad laboratories inc subsidiaries company internal control financial reporting december 31 2018 based criteria established internal control integrated framework 2013 issued committee sponsoring organizations treadway commission opinion company maintained material respects effective internal control financial reporting december 31 2018 based criteria established internal control integrated framework 2013 issued committee sponsoring organizations treadway commission also audited accordance standards public company accounting oversight board united states pcaob consolidated balance sheets company december 31 2018 2017 related consolidated statements income comprehensive income changes stockholders equity cash flows years threeyear period ended december 31 2018 related notes financial statement schedule collectively consolidated financial statements report dated march 29 2019 expressed unqualified opinion consolidated financial statements basis opinion companys management responsible maintaining effective internal control financial reporting assessment effectiveness internal control financial reporting included accompanying managements report internal control financial reporting responsibility express opinion companys internal control financial reporting based audit public accounting firm registered pcaob required independent respect company accordance us federal securities laws applicable rules regulations securities exchange commission pcaob conducted audit accordance standards pcaob standards require plan perform audit obtain reasonable assurance whether effective internal control financial reporting maintained material respects audit internal control financial reporting included obtaining understanding internal control financial reporting assessing risk material weakness exists testing evaluating design operating effectiveness internal control based assessed risk audit also included performing procedures considered necessary circumstances believe audit provides reasonable basis opinion definition limitations internal control financial reporting companys internal control financial reporting process designed provide reasonable assurance regarding reliability financial reporting preparation financial statements external purposes accordance generally accepted accounting principles companys internal control financial reporting includes policies procedures 1 pertain maintenance records reasonable detail accurately fairly reflect transactions dispositions assets company 2 provide reasonable assurance transactions recorded necessary permit preparation financial statements accordance generally accepted accounting principles receipts expenditures company made accordance authorizations management directors company 3 provide reasonable assurance regarding prevention timely detection unauthorized acquisition use disposition companys assets could material effect financial statements inherent limitations internal control financial reporting may prevent detect misstatements also projections evaluation effectiveness future periods subject risk controls may become inadequate changes conditions degree compliance policies procedures may deteriorate accompanying notes integral part consolidated financial statements accompanying notes integral part consolidated financial statements biorad laboratories inc consolidated statements income thousands except per share data accompanying notes integral part consolidated financial statements biorad laboratories inc consolidated statements comprehensive income thousands see note 8 accumulated comprehensive income loss reclassification adjustments calculated using specific identification method accompanying notes integral part consolidated financial statements biorad laboratories inc consolidated statements cash flows thousands following table provides reconciliation cash equivalents restricted cash reported within consolidated balance sheets agrees amounts shown consolidated statements cash flows thousands accompanying notes integral part consolidated financial statements see note 1 significant accounting policies recent accounting pronouncements adopted see note 9 sharebased compensationequity award purchase plans sharebased compensation see note 8 accumulated comprehensive income loss accompanying notes integral part consolidated financial statements biorad laboratories inc notes consolidated financial statements 1significant accounting policies basis presentation consolidated financial statements include accounts biorad laboratories inc wholly majority owned subsidiaries referred report “biorad” “we” “us” “our” elimination intercompany balances transactions preparation financial statements conformity us generally accepted accounting principles requires management make estimates assumptions affect amounts reported financial statements accompanying notes actual results could differ estimates evaluate subsequent events evidence provide conditions existing date balance sheet well conditions arose balance sheet date financial statements issued effects conditions existed balance sheet date recognized financial statements events conditions arising balance sheet date financial statements issued evaluated determine disclosure required keep financial statements misleading extent events conditions exist disclosures made regarding nature events estimated financial effects events conditions cash equivalents cash equivalents consist cash highly liquid investments original maturities three months less readily convertible cash equivalents stated cost approximates fair value shortterm restricted investments shortterm restricted investments 56 million december 31 2018 2017 represent money market fund renewed annually collateral secures workers compensation general liability insurance investment income accrues biorad recorded cash equivalents consolidated balance sheets availableforsale investments availableforsale investments consist corporate obligations municipal securities asset backed securities us government sponsored agencies marketable equity securities management classifies investments time purchase reevaluates classification balance sheet date investments maturities beyond one year may classified shortterm based liquid nature marketable securities represent investment cash available current operations availableforsale investments reported fair value based quoted market prices observable market data unrealized gains losses reported component comprehensive income net related tax effect effective january 1 2018 changes fair value equity securities reported change fair market value equity securities consolidated statements income due adoption asu 201601 see recent accounting pronouncement adopted end note 3 unrealized losses charged income decline fair value individual security determined otherthantemporary review availableforsale debt securities otherthantemporary losses quarterly basis realized gains losses otherthantemporary impairments investments included income expense net see note 10 concentration credit risk financial instruments potentially subject us concentration credit risk consist primarily cash equivalents investments foreign exchange contracts trade accounts receivable cash equivalents investments placed various highly rated major financial institutions located different geographic regions forward contracts used managing foreign currency exposures element risk counterparties may unable meet terms agreements attempt minimize risk limiting counterparties diverse group highlyrated domestic international financial institutions event nonperformance counterparties carrying values financial instruments represent maximum amount loss would incurred fiscal yearend perform credit evaluation procedures related trade receivables exception certain developing countries generally require collateral result increased risk certain developing countries biorad sales subject collateral letters credit customers credit risk trade accounts receivable generally limited due large number customers dispersion across many geographic areas however significant amount trade receivables national healthcare systems countries within european union accounts receivable maintain allowance doubtful accounts estimated losses resulting inability customers make required payments amount allowance determined analyzing known uncollectible accounts aged receivables economic conditions customers’ country industry historical losses customers’ creditworthiness amounts later determined specifically identified uncollectible charged written allowance inventory inventories valued lower cost net realizable value include material labor overhead costs firstin firstout method used relieve inventory products sold property plant equipment property plant equipment carried cost less accumulated depreciation amortization included property plant equipment buildings equipment acquired capital lease arrangements reagent rental equipment capitalized software including costs software developed obtained internal use property plant equipment assessed impairment quarterly whenever events changes circumstances indicate carrying amount may recoverable depreciation computed straightline basis estimated useful lives assets estimated useful lives property plant equipment generally follows buildings leasehold improvements 1539 years term leases life improvements whichever shorter reagent rental equipment 15 years equipment capitalized software 312 years goodwill represents excess cost fair value net tangible identifiable intangible assets acquired businesses goodwill assessed impairment applying fair value based tests annually fourth quarter whenever events changes circumstances indicate carrying amount may recoverable perform impairment tests goodwill reporting unit level one level operating segments reporting units identified components discrete financial information available regularly reviewed management goodwill amounts assigned reporting units time acquisition effective january 1 2017 accordance accounting standards update 201704 simplifying test goodwill impairment goodwill impairment amount reporting units carrying value exceeds fair value exceed carrying amount goodwill use projected discounted cash flow model determine fair value reporting unit prior january 1 2017 goodwill impairment test consisted twostep process first step goodwill impairment test used identify potential impairment compared fair value reporting unit carrying value including goodwill used projected discounted cash flow model determine fair value reporting unit fair value reporting unit exceeded carrying amount goodwill reporting unit considered impaired second step impairment test required second step required compared implied fair value reporting unit goodwill carrying amount goodwill fair value reporting unit allocated assets liabilities unit including unrecognized intangible assets reporting unit acquired business combination fair value reporting unit price paid acquire reporting unit carrying amount reporting unit’s goodwill exceeded implied fair value impairment charge recognized amount equal excess longlived assets purposes recognition measurement impairment loss longlived asset assets grouped assets liabilities lowest level identifiable cash flows largely independent cash flows assets liabilities assess impairment longlived assets including identifiable intangible assets quarterly whenever events changes circumstances indicate carrying value may recoverable factors consider important could trigger impairment review include • significant underperformance relative expected historical projected future operating results • significant changes manner use longlived assets intangible assets strategy overall business • current expectation likely longlived asset sold otherwise disposed loss end previously estimated useful life • significant negative industry legal regulatory economic trends management determines carrying value longlived assets may recoverable based upon existence one indicators impairment test impairment based projected undiscounted cash flow method projected future operating results cash flows asset group used establish fair value used evaluating carrying value longlived intangible assets estimate future cash flows longlived assets using current longterm financial forecasts carrying amount longlived asset recoverable exceeds sum undiscounted cash flows expected result use eventual disposition asset case impairment loss would recognized impairment loss recognized amount carrying amount exceeds fair value income taxes account income taxes asset liability method requires recognition deferred tax assets liabilities expected future tax consequences events included financial statements method deferred tax assets liabilities reflect tax effects losses credits temporary differences carrying amounts assets liabilities financial reporting purposes amounts used income tax purposes determined using enacted tax rates effect year differences expected reverse effect change tax rates deferred tax assets liabilities recognized income period includes enactment date record deferred tax assets extent believe assets likely realized making determination consider available positive negative evidence including scheduled reversals deferred tax liabilities projected future taxable income tax planning strategies recent financial operations extent determine able realize deferred income tax assets future excess net recorded amount make adjustment valuation allowance may reduce provision income taxes establish reduce valuation allowance deferred tax assets provision income taxes increase decrease respectively period determination change valuation allowance made recognize tax benefit uncertain tax position likely tax position sustained examination taxing authorities based technical merits position tax benefits recognized financial statements particular tax position measured based largest benefit greater 50 likelihood realized upon settlement amount unrecognized tax benefits adjusted appropriate changes facts circumstances significant amendments existing tax law new regulations interpretations taxing authorities new information obtained tax examination resolution examination recognize accrued interest penalties appropriate related unrecognized tax benefits provision income taxes december 22 2017 us enacted comprehensive tax legislation “tax act” new legislation contains significant tax provisions affect us including onetime mandatory deemed repatriation tax certain unrepatriated foreign earnings transition tax reduction corporate income tax rate 35 21 effective january 1 2018 change worldwide tax system modified territorial system required recognize effect tax law changes period enactment computation transition tax remeasurement us federal deferred tax assets liabilities well reassessment net realizability deferred tax assets liabilities subsequent enactment tax act sec staff issued staff accounting bulletin 118 income tax accounting implications tax cuts jobs act sab 118 provides guidance accounting tax effects tax act sab 118 provides measurement period extend beyond one year tax act enactment date companies complete accounting standards codification asc 740 income taxes completed accounting income tax effects tax act sab 118 december 31 2018 noted 2017 annual report able make reasonable estimates provisionally recorded income tax benefit 70 million related transition tax remeasurement us federal deferred tax assets liabilities final accounting tax act resulted additional income tax benefit 49 million final income tax benefit 119 million comprised 169 million tax benefit related remeasurement us federal deferred tax assets liabilities offset 50 million tax detriment transition tax elected account tax effect global intangible lowtaxed income “gilti” period incurred fourth quarter 2017 early adopted asu 201802 reclassification certain tax effects accumulated comprehensive income respect stranded income tax effects accumulated comprehensive income policy use portfolio method reclassify amounts revenue recognition january 1 2018 adopted accounting standards codification asc 606 revenue contracts customers using modified retrospective method applied contracts completed january 1 2018 results reporting periods beginning january 1 2018 presented asc 606 prior period amounts adjusted continue reported prior revenue guidance asc 605 revenue recognition recorded net reduction opening retained earnings 01 million january 1 2018 due cumulative impact adopting asc 606 impact primarily related customer loyalty program united states resulting noncash consideration treated variable consideration new revenue recognition accounting standard impact revenue result applying asc 606 compared asc 605 2018 significant recognize revenue operations sale products services rental instruments revenue contracts customers recognized upon transfer control promised products services customers amount reflects consideration expect receive exchange products services enter contracts include various combinations products services generally accounted distinct performance obligations revenue recognized net taxes collected customers sales tax value added tax etc subsequently remitted government authorities contracts customers often include promises transfer multiple products services customer determining whether products services considered distinct performance obligations accounted separately versus together may require significant judgment may impact timing revenue recognition revenue associated equipment requires factory installation recorded installation complete customer acceptance required occurred certain equipment requires installation due fact instruments operated clinicallaboratory environment installation services could result modification equipment order ensure instruments working according specifications customer subject validation tests upon completion installation arrangements require factory installation delivery equipment installation separate performance obligations recognize transaction price allocated equipment upon customer acceptance transfer control occurred relation equipment point time customer ability direct use obtain substantially remaining benefits asset transaction price allocated installation services also recognized upon completion services without completion installation services related customer acceptance customer cannot receive benefits service time revenue recognized provision recognized estimated product returns right considered variable consideration accordingly product revenues recognized transaction price reduced estimated amount expect receive exchange transferring control products service revenues extended warranty contracts recognized ratably life service agreement standready performance obligation arrangements include combination products services transaction prices allocated performance obligations based standalone selling prices method used determine standalone selling prices service revenues based observable prices services sold separately instances timing revenue recognition differs timing invoicing determined contracts generally include significant financing component primary purpose invoicing terms provide customers simple predictable methods purchasing products services either provide receive financing customers record contract liabilities cash payments received due advance performance disclose value unsatisfied performance obligations contracts original expected length one year less contracts recognize revenue amount right invoice services performed payment terms vary type location customer products services offered term invoicing payment due significant reagent rental agreements reagent rental agreements diagnostic industry sales method provides use instrument consumables reagents customer per test basis agreements may also include maintenance underlying instruments retained customer locations well initial training concluded use instrument related maintenance services collectively known “lease elements” within guidance asc 606 rather asc 840 leases accordingly first allocate transaction price lease elements nonlease elements based relative standalone selling prices determination transaction price requires judgment requires consideration fixedminimum payments well estimates variable consideration determining portion transaction price allocated lease elements fixed consideration would considered minimum lease payment amortized straight line lease term variable consideration would contingent rent recognized monthly earned coincides transfer control nonlease elements portion transaction price allocated nonlease elements principally reagents related revenue recognized point time control transfers generally terms arrangements result transfer control upon either consumables delivered ii consumables consumed customer revenue allocated lease elements reagent rental arrangements represents approximately 5 total revenue included part net sales consolidated statements income contract costs practical expedient expense incurred costs obtain contracts amortization period would one year less costs recorded within selling general administrative expense include internal sales force compensation programs certain partner sales incentive programs determined annual compensation commensurate annual selling activities disaggregation revenue disaggregation revenue geographic region based primarily location use product service industry segment sources disaggregation revenues industry segment sources presented segment information footnote see note 14 deferred revenues represent mostly unrecognized fees billed collected extended service arrangements deferred revenues generally recognized ratably term service contract performance extends life arrangement majority deferred revenue balance classified current expected length one year less increase total deferred revenue balance 367 million december 31 2017 373 million december 31 2018 primarily driven 280 million net cash payments received due advance satisfying performance obligations partially offset 274 million revenue recognized included deferred revenue balance december 31 2017 warrant certain equipment defects design materials workmanship generally period one year upon revenue recognition equipment establish part cost goods sold provision expected costs warranty based historical experience specific warranty terms customer feedback review performed quarterly basis assess adequacy warranty accrual components warranty accrual included current liabilities longterm liabilities consolidated balance sheets follows millions shipping handling classify freight costs billed customers net sales related freight costs recognized upon transfer control promised products customers fulfillment cost included cost goods sold research development internal research development costs expensed incurred thirdparty research development costs expensed contracted work performed conduct extensive research development activities areas business employing approximately 800 employees worldwide activities including degreed scientists technical support staff research development played major role biorad’s growth expected continue future research teams continuously developing new products new applications existing products development new products applications interact scientific medical professionals universities hospitals medical schools within industry foreign currency balance sheet accounts international subsidiaries translated current exchange rates end accounting period income statement items translated average exchange rates period resulting translation adjustments recorded separate component stockholders’ equity foreign currency transaction gains losses included foreign exchange losses net consolidated statements income transaction gains losses result primarily fluctuations exchange rates intercompany receivables payables denominated currencies functional currency subsidiary recorded transaction forward foreign exchange contracts part distributing products regularly enter intercompany transactions enter forward foreign exchange contracts manage foreign exchange risk future movements exchange rates affect foreign currency denominated intercompany receivables payables use derivative financial instruments speculative trading purposes seek hedge accounting treatment contracts result contracts generally maturity dates 90 days less denominated primarily currencies industrial countries recorded asset liability measured fair value balance sheet date resulting gains losses offset exchange gains losses related receivables payables recorded foreign exchange losses net consolidated statements income sharebased compensation plans sharebased compensation expense sharebased payment awards granted determined based grantdate fair value recognize compensation costs net forfeitures requisite service period award generally vesting term sharebased payment awards starting 2017 recognize forfeitures occur due change accounting principle prior periods estimated forfeiture rate based historical experience plans described fully note 9 earnings per share basic earnings per share computed dividing net income attributable biorad weighted average number common shares outstanding period diluted earnings per share takes account effect dilutive instruments stock options restricted stock uses average share price period determining number potential common shares added weighted average number shares outstanding potential common shares excluded diluted earnings per share calculation effect would antidilutive weighted average number common shares outstanding used calculate basic diluted earnings per share antidilutive shares follows thousands fair value financial instruments certain financial instruments including cash equivalents shortterm investments accounts receivable marketable securities notes payable accounts payable foreign exchange contracts carrying amounts approximate fair value estimated fair value financial instruments based exchange price would received asset paid transfer liability exit price using available market information appropriate valuation methodologies principal advantageous market asset liability orderly transaction market participants estimates necessarily indicative amounts could realized current market exchange considerable judgment required interpreting market data used develop estimates fair value use different market assumptions estimation techniques could material effect estimated fair value see note 3 recent accounting pronouncements adopted february 2018 financial accounting standards board fasb issued accounting standards update asu 201803 technical corrections improvements financial instruments recognition measurement financial assets financial liabilities asu 201803 amends certain items asu 201601 see equity securities without readily determinable fair value asu 201803 clarifies entity uses measurement alternative equity securities without readily determinable fair values change measurement approach fair value made election irrevocable entity measures equity securities without readily determinable fair values fair value must record cumulativeeffect adjustment retained earnings beginning fiscal year guidance adopted asu 201803 january 1 2018 made irrevocable election account investment ordinary shares sartorius ag fair value see asu 201601 january 2016 fasb issued asu 201601 recognition measurement financial assets financial liabilities amendments asu 201601 among items require equity investments unconsolidated entities accounted using equity method accounting generally measured fair value earnings changes fair value equity securities longer reported comprehensive income equity investments without readily determinable fair values cost method also eliminated adopted asu 201601 january 1 2018 record equity investments without readily determinable fair values cost less impairment plus minus subsequent adjustments observable price changes valued 06 million december 31 2018 changes basis equity investments reported current earnings equity securities affected asu 201601 asu 201803 see note 3 consolidated financial statements primarily consists investment sartorius ag impact adoption asu 201601 asu 201803 january 1 2018 cumulativeeffect adjustment 8645 million total stockholders equity increasing retained earnings 15437 million decreasing accumulated comprehensive income 6792 million including increase deferred income taxes 2329 million increase investments 10974 million consolidated balance sheet result asu 201601 asu 201803 2018 recorded gain 6062 million change fair market value equity securities consolidated statement income resulted deferred tax expense 1339 million march 2017 fasb issued asu 201707 improving presentation net periodic pension cost net periodic postretirement benefit cost changed present net periodic benefit cost defined benefit pension andor postretirement plans adopted asu 201707 january 1 2018 applied practical expedient estimate amounts comparative purposes utilizing information disclosed note 12 consolidated financial statements form 10k year ended december 31 2017 interest costs recorded interest expense costs recorded income expense net consolidated statements income 2017 interest costs reclassified 0304 million 2152 million 0144 million cost goods sold cogs selling general administrative expense sga research development expense rd respectively interest expense 11 million income expense net 15 million 2016 interest costs reclassified 0341 million 2027 million 0156 million cogs sga rd respectively interest expense 1438 million income expense net 1086 million november 2016 fasb issued asu 201618 restricted cash required us cease present transfers cash equivalents restricted cash restricted cash equivalents statement cash flows adopted asu 201618 january 1 2018 updated consolidated statements cash flows incorporate restricted cash included current assets 26 million december 31 2018 12 million december 31 2017 october 2016 fasb issued asu 201616 intraentity transfers assets inventory required immediate recognition income tax consequences intercompany asset transfers inventory transfers adopted asu 201616 january 1 2018 modified retrospective basis cumulativeeffect adjustment decreasing retained earnings 176 million decreasing prepaid taxes 228 million increasing deferred tax assets 52 million recorded assets consolidated balance sheet august 2016 fasb issued asu 201615 classification certain cash receipts cash payments adopted january 1 2018 impact statement cash flows presentation may 2014 fasb issued asu 201409 revenue contracts customers asc 606 updated standard revenue recognition new standard provides enhancements quality consistency revenue reported principle revenue recognized amount reflects consideration expect entitled exchange transfer promised goods services adopted asc 606 january 1 2018 using cumulative effect transition method fully described caption “revenue recognition” recent accounting pronouncements adopted november 2018 fasb issued asu 201818 clarifying interaction topic 808 topic 606 topic 808 collaborative arrangements topic 606 revenue contracts customers asu 201818 clarifies certain transactions collaborative partners accounted revenue asc 606 collaborative partner customer currently customers collaborative partners anticipate near future asu 201818 effective january 1 2020 early adopt august 2018 fasb issued asu 201815 customers accounting implementation costs incurred cloud computing arrangement service contract asu 201815 amends definition hosting arrangement requires customer hosting arrangement service contract capitalize certain implementation costs arrangement internaluse software project internaluse software guidance states qualifying costs incurred application development stage capitalized prospectively adopt asu 201815 effective january 1 2019 expect asu 201815 material impact consolidated financial statements august 2018 fasb issued asu 201814 disclosure framework changes disclosure requirements defined benefit plans asu 201814 eliminates adds certain disclosures defined benefit plans asu 201814 effective fiscal years ending december 15 2020 using retrospective approach early adoption permitted currently evaluating disclosures timing adoption expect asu 201814 material impact disclosures defined benefit plans august 2018 fasb issued asu 201813 disclosure framework changes disclosure requirements fair value measurement asu 201813 eliminates adds modifies certain disclosures fair value measurements asu 201813 effective fiscal years beginning december 15 2019 interim periods within fiscal years early adoption permitted interim periods including periods financial statements yet issued expect asu 201813 material impact fair value disclosures currently plan early adopt june 2016 fasb issued asu 201613 measurement credit losses financial instruments asu 201613 replace current incurred loss approach expected loss model instruments measured amortized cost require entities record allowances availableforsale debt securities rather reduce carrying amount current otherthantemporary impairment model november 2018 fasb issued asu 201819 codification improvements topic 326 financial instrumentscredit losses clarifies receivables arising operating leases within scope topic 326 asu 201613 effective fiscal years beginning december 15 2019 interim periods within fiscal years currently evaluating effect asu 201613 consolidated financial statements february 2016 fasb issued asu 201602 leases related accounting standard updates require among items lease accounting recognize leases assets liabilities balance sheet qualitative quantitative disclosures enhanced better understand amount timing uncertainty cash flows arising leases adopt asu 201602 modified retrospective basis effective january 1 2019 practical expedients restate comparative prior periods practical expedients include among items leases existed prior january 1 2019 reassess whether contracts contain embedded leases reassessing classification existing leases reassessing whether previously capitalized initial direct costs qualify capitalization act lessee also elected separate lease nonlease components act lessor reagent rental arrangements allocate consideration contract separate lease components nonlease components allocation amount variable payments allocated lease components recognized income accordance new lease accounting standard updates amount variable payments allocated nonlease components recognized income accordance asc 606 reagent rental arrangements fully described caption reagent rental agreements act lessee adoption standard result material additions balance sheet rightofuse assets associated liabilities complete review completeness accuracy lease data discount rate finalize updated controls accordance new standard first quarter 2019 act lessor reagent rental arrangements estimate insignificant impact consolidated financial statements 2 acquisitions raindance technologies inc february 2017 acquired issued outstanding stock raindance technologies inc raindance approximately 727 million cash payments closing 729 million addition cash payment 100 million preexisting condition concurrent acquisition recorded cost goods sold acquisition included life science segment’s results operations acquisition date accounted business combination amount acquisitionrelated costs minimal biorad primarily represented acquisition process goodwill related acquisition deductible income tax purposes pro forma financial statements provided acquisition immaterial biorad taken whole periods presented final allocation payments 729 million 376 million definitelived intangibles 02 million acquired net assets 262 million goodwill deferred tax liability 136 million primarily related purchased intangibles deferred tax asset 225 million primarily related acquired net operating losses raindances foundational intellectual property portfolio product lines encompass wide range biological reactions droplets potential applications life science research clinical research genomic tools provide ultrasensitive detection genetic variations cancer well inherited infectious diseases enabling research areas noninvasive liquid biopsy believe raindances dropletbased solutions extend reach nextgeneration sequencing applications strengthen position area droplet digital™ pcr offering customers solutions wide range nucleic acid detection applications 3 fair value measurements determine fair value asset liability based assumptions market participants would use pricing asset liability orderly transaction market participants measurement date identification market participant assumptions provides basis determining inputs used pricing asset liability fair value hierarchy established gives precedence fair value measurements calculated using observable inputs using unobservable inputs hierarchy prioritizes inputs three broad levels follows • level 1 quoted prices active markets identical instruments • level 2 significant observable inputs including quoted prices active markets similar instruments • level 3 significant unobservable inputs including assumptions determining fair value certain investments financial assets liabilities carried fair value measured recurring basis december 31 2018 classified hierarchy follows millions first quarter 2018 equity securities longer reported availableforsale investments due implementation asu 201601 changes fair value equity securities reported consolidated statements income rather comprehensive income see note 1 financial assets liabilities carried fair value measured recurring basis december 31 2017 classified hierarchy follows millions cash equivalents included cash equivalents consolidated balance sheets b equity securities included following accounts consolidated balance sheets millions unrealized gains equity securities still held december 31 2018 6077 million primarily due investment sartorius ag recorded consolidated statements income due adoption asu 201601 see note 1 c availableforsale investments included following accounts consolidated balance sheets millions accordance adoption asu 201601 january 1 2018 investment sartorius ag preferred shares reported within marketable equity securities availableforsale december 31 2017 reported equity security december 31 2018 see note 1 footnote b forward foreign exchange contracts asset position included current assets consolidated balance sheets e forward foreign exchange contracts liability position included current liabilities consolidated balance sheets f contingent consideration liabilities included following accounts consolidated balance sheets millions first quarter 2016 recognized contingent consideration liability upon acquisition high performance analytical flow cytometer platform propel acquisition date amount contingent consideration determined based probabilityweighted income approach related achievement sales milestones ranging 39 20 calendar years 2017 2020 sales milestones could potentially range 0 unlimited amount first third quarters 2018 paid 13 million 08 million respectively per purchase agreement since 2016 net decrease cumulative valuation sales milestones 122 million contingent consideration accrued estimated fair value 84 million december 31 2018 following table provides reconciliation level 3 analytical flow cytometer platform contingent consideration liabilities measured estimated fair value millions following table provides quantitative information level 3 inputs fair value measurement analytical flow cytometer platform contingent consideration liability december 31 2018 significant increases decreases inputs isolation could result significantly lower higher fair value measurement estimate fair value level 2 debt securities december 31 2018 2017 primary pricing provider uses securities evaluations primary pricing source pricing process allows us select hierarchy pricing sources securities held securities evaluations price level 2 security hold pricing provider utilize custodian supplied pricing secondary pricing source commercial paper december 31 2018 primary pricing provider uses leading pricing source hierarchy determine pricing discount commercial paper december 31 2017 pricing determined straightline calculation starting purchase price date purchase increasing par maturity december 31 2017 interest bearing certificates deposit commercial paper priced par primary pricing provider performs daily reasonableness testing securities evaluations prices price changes 5 greater investigated resolved addition perform quarterly testing securities evaluations prices custodian reported prices price differences outside tolerable variance approximately 1 investigated resolved availableforsale investments consist following millions following summary amortized cost estimated fair value debt securities december 31 2018 contractual maturity date millions availableforsale investments consist following millions following summary investments gross unrealized losses associated fair value millions unrealized losses securities due number factors including changes interest rates changes economic conditions changes market outlook various industries among others biorad ability intent hold investments unrealized losses recovery fair value reasonable period time sufficient forecasted recovery fair value may maturity consider investments otherthantemporarily impaired december 31 2018 december 31 2017 part distributing products regularly enter intercompany transactions enter forward foreign exchange contracts manage foreign exchange risk future movements foreign exchange rates affect foreign currency denominated intercompany receivables payables use derivative financial instruments speculative trading purposes seek hedge accounting treatment contracts result contracts generally maturity dates 90 days less denominated primarily currencies industrial countries recorded fair value balance sheet date notional principal amounts provide one measure transaction volume outstanding december 31 2018 represent amount biorads exposure loss estimated fair value contracts derived using spot rates reuters last business day quarter points provided counterparties resulting gains losses offset exchange gains losses related receivables payables included foreign exchange losses net consolidated statements income following summary forward foreign currency exchange contracts millions estimated fair value financial instruments recognized fair value consolidated balance sheets included investments presented table fair value determined using significant observable inputs including quoted prices active markets similar instruments estimates necessarily indicative amounts could realized current market exchange considerable judgment required interpreting market data used develop estimates fair value use different market assumptions estimation techniques could material effect estimated fair value investments include financial instruments majority fair value based similar actively traded stock adjusted various discounts including discount marketability longterm debt excluding leases current maturities estimated fair value based quoted market prices similar issues estimated fair value financial instruments discussed level fair value hierarchy within fair value measurement categorized follows millions shares ordinary voting stock sartorius ag sartorius goettingen germany process technology supplier biotechnology pharmaceutical chemical food beverage industries 37 outstanding voting shares excluding treasury shares sartorius december 31 2018 sartorius family trust sartorius family members hold controlling interest outstanding voting shares representative designee sartorius’ board directors ability exercise significant influence operating financial policies sartorius december 31 2018 due adoption asu 201601 asu 201803 january 1 2018 account investment fair market value determined period end quoted price organized exchange see note 1 4 goodwill purchased intangible assets changes goodwill segment follows millions march 2018 wrote 14 million goodwill clinical diagnostics segment result divestiture product line conjunction purchase issued outstanding stock raindance technologies inc february 2017 see note 2 acquisitions recorded 262 million goodwill 376 million definitelived intangible assets 364 million licenses 10 million developed product technology 02 million tradenames 2018 impaired goodwill associated 1999 acquisition pasteur sanofi diagnostics sa 2007 2012 acquisitions diamed holding ag diamed fennica oy diamed gb limited diamed benelux collectively diamed 2010 acquisition biotest ag 2013 acquisition abd serotec amounts 181 million 2472 million 108 million 59 million respectively goodwill diamed biotest ag abd serotec fully impaired december 31 2018 impairments pasteur sanofi diagnostics sa diamed biotest ag included clinical diagnostics segments results operations impairment abd serotec included life science segments results operations 2017 impaired goodwill associated 1999 acquisition pasteur sanofi diagnostics sa 2013 acquisition abd serotec amounts 28 million 87 million respectively impairment pasteur sanofi diagnostics sa included clinical diagnostics segments results operations impairment abd serotec included life science segments results operations impairments based upon revision level 3 valuation inputs ie expected future cash flows goodwill intangible assets indefinite lives information regarding identifiable purchased intangible assets definite lives follows millions 2018 impaired developed product technology fully impaired covenants compete amounts 88 million 17 million respectively associated 2012 acquisition cell sorting system propel labs inc impairments included life science segments results operations impairments based upon revision level 3 valuation inputs ie expected future cash flows amortization expense related purchased intangible assets years ended december 31 2018 2017 2016 283 million 308 million 352 million respectively estimated future amortization expense based existing purchased intangible assets years ending december 31 2019 2020 2021 2022 2023 thereafter 217 million 197 million 189 million 157 million 148 million 423 million respectively 5notes payable longterm debt domestic international lines credit standby letters credit guarantee arrangements 2082 million available borrowing usage december 31 2018 reduced 31 million utilized standby letters credit guarantee arrangements issued banks support obligations principal components longterm debt follows millions senior notes due 2020 december 2010 biorad sold 4250 million principal amount senior notes due december 2020 4875 notes sale yielded net cash proceeds 4226 million effective rate 4946 4875 notes pay fixed rate interest 4875 per year option redeem 4875 notes time redemption price 100 principal amount plus specified makewhole premium defined indenture governing 4875 notes accrued unpaid interest thereon redemption date obligations 4875 notes secured rank equal right payment existing future unsubordinated indebtedness certain covenants apply year end 4875 notes including limitations following liens sale leaseback transactions mergers consolidations sales assets covenants compliance covenants december 31 2018 restrictive covenants relating total indebtedness interest coverage stock repurchases recapitalizations dividends distributions shareholders current ratios credit agreement june 2014 biorad entered 2000 million unsecured credit agreement borrowings credit agreement revolving basis used make permitted acquisitions working capital general corporate purposes outstanding borrowings credit agreement december 31 2018 2017 however 02 million 05 million utilized domestic standby letters credit reduced borrowing availability december 31 2018 2017 respectively credit agreement matures june 2019 borrowed credit agreement borrowing rate would 3925 december 31 2018 credit agreement requires biorad comply certain financial ratios covenants among things ratios covenants include leverage ratio test interest coverage test well restrictions ability declare pay dividends incur debt guarantee debt enter transactions affiliates merge consolidate sell assets make investments create liens compliance ratios covenants december 31 2018 maturities longterm debt december 31 2018 follows 2019 05 million 2020 4266 million 2021 17 million 2022 16 million 2023 04 million thereafter 99 million 6 income taxes us international components income taxes follows millions provision income taxes consists following millions reconciliation effective tax rate income taxes statutory tax rate follows december 22 2017 us enacted comprehensive tax legislation “tax act” tax act made broad complex changes us tax code affect 2017 financial statements including imposition onetime mandatory deemed repatriation tax “transition tax” certain earnings accumulated offshore since 1986 reduction corporate tax rate 35 21 us taxable income resulting onetime remeasurement us federal deferred tax assets liabilities subsequent enactment tax act sec staff issued staff accounting bulletin 118 income tax accounting implications tax cuts jobs act sab 118 provides guidance accounting tax effects tax act sab 118 provides measurement period extend beyond one year tax act enactment date companies complete accounting standards codification asc 740 income taxes completed accounting income tax effects tax act sab 118 december 31 2018 noted 2017 annual report able make reasonable estimates provisionally recorded income tax benefit 70 million related transition tax remeasurement us federal deferred tax assets liabilities final accounting tax act resulted additional income tax benefit 49 million final income tax benefit 119 million comprised 169 million tax benefit related remeasurement us federal deferred tax assets liabilities offset 50 million tax detriment transition tax elected account tax effect global intangible lowtaxed income “gilti” period incurred effective income tax rate 29 25 37 2018 2017 2016 respectively effective tax rate 2018 driven detriments due nondeductible impairment charges taxation foreign operations partially offset 49 million benefit recorded result completion accounting tax act sab 118 effective tax rate 2017 driven 70 million benefit recorded provisional estimate accounting tax act effective tax rate 2016 included additional tax liabilities unrecognized tax benefits related nondeductibility interest expense foreign jurisdictions many jurisdictions operate statutory tax rates differ us statutory tax rate 21 effective tax rate impacted either favorably unfavorably many factors including limited jurisdictional mix income tax changes statutory tax rates changes tax laws regulations tax audits settlements generation tax credits deferred tax assets liabilities reflect tax effects losses credits temporary differences carrying amounts assets liabilities financial reporting purposes amounts used income tax purposes significant components deferred tax assets liabilities follows millions realization deferred tax assets dependent upon generation sufficient taxable income appropriate character future periods regularly assess ability realize deferred tax assets establish valuation allowance likely portion deferred tax assets realized assessing realizability deferred tax assets weigh available positive negative evidence due weight objectively verifiable negative evidence believe likely california certain foreign deferred tax assets realized december 31 2018 maintained valuation allowance deferred tax assets valuation allowance deferred tax assets california certain foreign jurisdictions increased 44 million 2018 december 31 2018 foreign california net operating loss carryforwards approximately 2050 million 527 million respectively foreign net operating losses 1188 million may carried forward indefinitely majority remaining foreign net operating losses utilized begin expire 2025 california net operating loss carryforwards utilized begin expire 2029 december 31 2018 california research tax credit carryforwards approximately 321 million may carried forward indefinitely income tax returns audited us federal state foreign tax authorities currently examination many tax authorities tax years open examination include years 2014 forward us years 2012 forward certain foreign jurisdictions including france germany india switzerland differing interpretations tax laws regulations result significant disputes may arise tax authorities involving issues timing amount deductions allocations income among various tax jurisdictions evaluate exposures associated tax filing positions quarterly basis record liabilities unrecognized tax benefits related uncertain tax positions believe currently pending uncertain tax positions material adverse effect consolidated financial statements although adverse resolution one uncertain tax positions period may material impact results operations period following tabular reconciliation total amounts unrecognized tax benefits millions biorad recognizes accrued interest penalties related unrecognized tax benefits income tax expense related unrecognized tax benefits noted cumulative amount accrued interest penalties december 31 2018 2017 2016 respectively 95 million 109 million 118 million biorad accrued interest penalties 14 million 09 million 87 million 2018 2017 2016 respectively total unrecognized tax benefits interest penalties 393 million 2018 partially offset deferred tax assets 16 million prepaid taxes 55 million net amount 322 million december 31 2018 based expected outcome certain examinations result expiration statutes limitation certain jurisdictions believe within next twelve months reasonably possible previously unrecognized tax benefits could decrease approximately 31 million substantially amounts impact effective income tax rate recognized generally intention repatriate certain foreign earnings extent repatriations restricted local laws accounting rules substantial incremental costs current year recorded approximately 67 million deferred tax liability earnings certain foreign jurisdictions may repatriate future determination amount unrecognized deferred tax liability foreign earnings indefinitely reinvested practicable estimate 7 stockholders equity biorad’s issued outstanding stock consists class common stock class b common stock class b share class b participates equally earnings biorad identical respects except follows class limited voting rights share class entitled one tenth vote matters share class b entitled one vote additionally class stockholders entitled elect 25 board directors class b stockholders entitled elect 75 directors cash dividends may paid class shares without paying cash dividend class b shares cash dividend may paid class b shares unless least equal cash dividend paid class shares class b shares convertible time class shares oneforone basis option stockholder founders biorad schwartz family collectively hold majority biorad’s voting stock result schwartz family able exercise significant influence biorad changes biorads issued common stock shares follows thousands treasury shares november 2017 board directors authorized new share repurchase program granting biorad authority repurchase discretionary basis 2500 million outstanding shares common stock repurchases may made managements discretion time open market privately negotiated transactions new authorization superseded prior authorization 180 million biorads common stock expiration share repurchase activity share repurchase program open market transactions 2017 2018 summarized follows september 2017 used 12740 repurchased shares connection vesting restricted stock units 2007 incentive award plan order obtain tax deduction foreign entities credit agreement may limit ability repurchase stock 8 accumulated comprehensive income loss accumulated comprehensive income loss included consolidated balance sheets consolidated statements changes stockholders equity consists following components millions see note 1 significant accounting policies recent accounting pronouncements adopted 2017 adopted asu 201802 reclassification certain tax effects accumulated comprehensive income gave entities option reclassify retained earnings tax effects related items accumulated comprehensive income oci fasb refers stranded accumulated oci result tax act reclassified income tax effects tax act remeasurement deferred tax liabilities related availableforsale equity securities increasing oci decreasing retained earnings 1201 million increase 2017 net unrealized holding gains availableforsale investments primarily ownership preferred shares sartorius amounts reclassified accumulated comprehensive income consolidated statements income presentation location follows reclassification adjustments calculated using specific identification method 9 sharebased compensationequity award purchase plans description sharebased compensation plans believe sharebased compensation plans align interests employees shareholders equity award plans three equity award plans officers certain employees 2003 stock option plan 2003 plan 2007 incentive award plan 2007 plan 2017 incentive award plan 2017 plan 2003 plan authorized grant incentive stock options nonqualified stock options employees 2007 plan authorized grant stock options restricted stock restricted stock units stock appreciation rights types equity awards employees longer grant equity 2003 plan 2007 plan 2007 2016 sharebased compensation grants 2007 plan 2017 plan authorizes grant employees stock options stock appreciation rights restricted stock restricted stock units types equity awards total 1999714 shares reserved issuance equity awards 2017 plan may either class b common stock december 31 2018 1584834 shares available granted plans class b options granted prices less fair market value underlying common stock date grant generally options granted maximum term 10 years vest increments 20 per year fiveyear period yearly anniversary date grant stock awards issued 2007 plan 2017 plan generally vest increments 20 per year fiveyear period yearly anniversary date grant employee stock purchase plans 2011 employee stock purchase plan 2011 espp provides eligible employees may contribute 10 compensation 25000 annually toward quarterly purchase class common stock employees’ purchase price 85 lesser fair market value stock first business day last business day calendar quarter 2011 espp includes two components code section 423 component intend qualify “employee stock purchase plan” section 423 us internal revenue code 1986 amended “code” non423 component authorizes grant purchase rights qualify “employee stock purchase plan” section 423 code authorized sale 1300000 shares class common stock 2011 espp sharebased compensation included sharebased compensation expense cost related stock option grants espp stock purchases restricted stock unit awards sharebased compensation expense allocated cost goods sold research development expense selling general administrative expense consolidated statements income 2018 2017 2016 recognized sharebased compensation expense 278 million 234 million 197 million respectively income tax benefit related sharebased compensation expense 44 million 58 million 51 million 2018 2017 2016 respectively capitalize sharebased compensation expense inventory tax benefit sharebased compensation vested exercised 2018 2017 2016 54 million 63 million 15 million respectively actual tax benefit realized tax deductions sharebased compensation vested exercised including excess tax benefits recognized stockholders’ equity totaled 60 million 2016 options awards amortize fair value straightline basis stock compensation awards amortized requisite service periods awards generally vesting periods adoption 2017 asu 201609 improvements employee sharebased payment accounting made policy election recognize forfeitures occur prior 2017 recognized compensation expense net estimated forfeitures stock options following table summarizes stock option activity intrinsic value stock options defined difference current market value exercise price total intrinsic value date exercise stock options exercised 2018 2017 2016 approximately 8 million 10 million 1 million respectively total fair value options vested 2018 2017 2016 60 million 42 million 21 million respectively cash received stock options exercised 2018 2017 2016 05 million 16 million 12 million respectively december 31 2018 63 million total unrecognized compensation cost stock options amount expected recognized future weightedaverage period approximately 3 years weightedaverage fair value stock options granted estimated using blackscholes optionpricing model following weightedaverage assumptions volatility based historical volatilities common stock period equal stock option’s expected life riskfree interest rate based us treasury yield curve effect time grant expected life represents number years estimate based primarily historical experience options outstanding prior exercise anticipate paying cash dividends future therefore use expected dividend yield zero restricted stock units restricted stock units rights receive shares company stock granted 2009 2016 2007 plan since 2017 plan fair value restricted stock unit market value determined closing price stock day grant following table summarizes restricted stock unit activity total fair value restricted stock units vested 2018 2017 2016 400 million 277 million 187 million respectively december 31 2018 approximately 1024 million total unrecognized compensation cost related restricted stock units amount expected recognized remaining weightedaverage period approximately 4 years employee stock purchase plans fair value employees’ purchase rights 2011 espp estimated using blackscholes model following weightedaverage assumptions major assumptions primarily based historical data volatility based historical volatilities common stock period equal expected life purchase rights riskfree interest rate based us treasury yield curve effect time grant anticipate paying cash dividends future therefore use expected dividend yield zero sold 63464 shares 136 million 74409 shares 130 million 93605 shares 115 million 2011 espp employees 2018 2017 2016 respectively december 31 2018 658248 shares remain authorized available issuance 2011 espp currently issue new shares treasury shares available satisfy stock option exercises restricted stock issuances espp stock purchases 10 income expense net income expense net includes following components millions prior year amounts adjusted see note 1 consolidated financial statements regard asu 201707 pension postretirement benefits 11 supplemental cash flow information reconciliation net income net cash provided operating activities follows millions 12 commitments contingent liabilities rents leases rental expense operating leases 474 million 436 million 444 million 2018 2017 2016 respectively leases principally facilities automobiles annual future minimum lease payments december 31 2018 operating leases follows 2019 444 million 2020 378 million 2021 274 million 2022 197 million 2023 139 million 2024 beyond 256 million total minimum rentals received future subleases december 31 2018 178 million deferred profit sharing retirement plan profit sharing plan covering substantially us employees contributions made discretion board directors biorad liability current year’s contribution expense 159 million 160 million 151 million 2018 2017 2016 respectively postemployment benefits several foreign locations statutorily required provide retirement benefits lump sum termination indemnity employees upon termination virtually reason plans accounted defined benefit plans associated net benefit obligation december 31 2018 2017 704 million 749 million respectively included accrued payroll employee benefits longterm liabilities consolidated balance sheets plans required funded trust device used accumulate assets settle obligations however plans require funding based local laws trust device administered external plan manager used accumulate assets assist settling obligations following disclosures include plans located france switzerland germany korea india thailand italy dubai japan obligations funded status following table sets forth change benefit obligations fair value plan assets amounts recognized consolidated balance sheets plans millions components net periodic benefit cost following sets forth net periodic benefit cost income periods indicated millions assumptions weightedaverage assumptions used computing benefit obligations follows weightedaverage assumptions used computing net periodic benefit costs follows foreign locations service award plans paid based upon number years employment plans liability december 31 2018 2017 31 million 37 million respectively included accrued payroll employee benefits longterm liabilities consolidated balance sheets purchase obligations december 31 2018 obligations recognized balance sheet 1109 million include purchases goods services enforceable legally binding biorad specify significant terms exclude agreements cancelable without penalty obligations also include postemployment benefits foreign locations indicated annual future fixed determinable portion purchase obligations recognized balance sheet december 31 2018 follows 2019 58 million 2020 164 million 2021 62 million 2022 24 million 2022 35 million 2023 766 million december 31 2018 purchase obligations recognized balance sheet 125 million include agreements purchase goods services enforceable legally binding biorad specify significant terms exclude agreements cancelable without penalty annual future fixed determinable portion purchase obligations recognized balance sheet december 31 2018 follows 2019 65 million 2020 53 million 2021 01 million 2022 02 million 2022 02 million 2023 02 million letters creditguarantees ordinary course business times required post letters creditguarantees letters creditguarantees issued financial institutions guarantee obligations various parties contingently liable 31 million standby letters creditguarantees financial institutions december 31 2018 contingent consideration first quarter 2016 recognized contingent consideration liability upon acquisition high performance analytical flow cytometer platform propel acquisition date amount contingent consideration determined based probabilityweighted income approach related achievement sales milestones ranging 39 20 calendar years 2017 2020 sales milestones could potentially range 0 unlimited amount first third quarters 2018 paid 13 million 08 million respectively per purchase agreement since 2016 net decrease cumulative valuation sales milestones 122 million contingent consideration accrued estimated fair value 84 million december 31 2018 concentrations labor subject collective bargaining agreements december 31 2018 approximately eight percent biorads approximately 3265 us employees covered collective bargaining agreement expire november 7 2019 many biorads nonus fulltime employees especially france covered collective bargaining agreements 13 legal proceedings may 27 2015 former general counsel sanford wadler filed lawsuit us district court northern district california us four current directors one former director plaintiff’s suit alleged whistleblower retaliation violation sarbanesoxley act doddfrank act raising fcparelated concerns mr wadler also alleged wrongful termination violation public policy nonpayment wages waiting time penalties violation california labor code plaintiff sought back pay compensatory damages lost wages earnings retirement benefits employee benefits compensation mental pain anguish emotional distress waiting time penalties punitive damages litigation costs including attorneys’ fees reinstatement employment july 28 2015 filed motion dismiss plaintiffs complaint specifically requested dismissal claims alleged us doddfrank act california labor code 11025 claims directors sarbanesoxley act doddfrank act october 23 2015 district court granted motion respect alleged violations sarbanesoxley act director defendants except norman schwartz prejudice court denied motion dismiss claims doddfrank act us director defendants trial commenced january 17 2017 concluded february 6 2017 mr wadler awarded 1092 million plus prejudgment interest 141608 postjudgment interest mr wadler’s litigation costs expert witness fees reasonable attorneys’ fees approved court provided judgment interest mr wadlers litigation costs june 6 2017 filed notice appeal united states court appeals ninth circuit oral arguments occurred november 14 2018 february 26 2019 united states court appeals ninth circuit issued decision reversing part vacating part affirming part specifically court 1 reversed doddfrank claim amounts 296 million plus interest directed district court enter judgment biorad’s favor claim 2 vacated sox claim due instructional error remanded proceedings including whether new trial needed 3 affirmed california public policy claim 796 million damages attributable march 12 2019 filed petition panel rehearing en banc united states court appeals ninth circuit also party various claims legal actions complaints arising ordinary course business cannot time reasonably estimate range exposure potential liability respect matters believe time ultimate liability resulting matters material adverse effect results operations financial position liquidity cannot give assurance regarding ultimate outcome matters resolution could material operating results particular period depending level income period 14 segment information biorad multinational manufacturer worldwide distributor life science research products clinical diagnostics products two reportable segments life science clinical diagnostics reportable segments strategic business lines offer 9000 different products services require different marketing strategies disclose quantitative information different products services impractical based primarily numerous products services sell global markets serve life science segment develops manufactures sells services reagents apparatus instruments used biological research products sold university medical school laboratories pharmaceutical biotechnology companies food testing laboratories government industrial research facilities clinical diagnostics segment develops manufactures sells services automated test systems informatics systems test kits specialized quality controls healthcare market products sold reference laboratories hospital laboratories state newborn screening facilities physicians’ office laboratories transfusion laboratories insurance forensic testing laboratories operations include remainder analytical instruments segment results presented manner present operations internally make operating decisions assess performance accounting policies segments described significant accounting policies see note 1 segment profit loss includes allocation corporate expense based upon sales allocation interest expense based upon accounts receivable inventories difference total segment allocated interest expense depreciation amortization capital expenditures corresponding consolidated amounts attributable corporate headquarters segments expected manage assets completely control accordingly segment assets include primarily accounts receivable inventories gross machinery equipment goodwill balances included corporate segment reporting purposes information regarding industry segments december 31 2018 2017 2016 years ended follows millions prior year amounts adjusted see note 1 consolidated financial statements regard asu 201707 pension postretirement benefits clinical diagnostics segment loss 2018 due impairment losses taken goodwill 2761 million see note 4 consolidated financial statements net corporate operating expense consists receipts expenditures primary responsibility segment operating management therefore allocated segments performance assessment chief operating decision maker following reconciles total segment profit consolidated income taxes millions prior year amounts adjusted see note 1 consolidated financial statements regard asu 201707 pension postretirement benefits following reconciles total segment assets consolidated total assets millions following presents net sales external customers geographic region based primarily location use product service millions following presents property plant equipment net investments assets excluding deferred income taxes geographic region based upon location asset millions amounts primarily include investment ordinary voting stock sartorius ag goettingen germany see note 3 2017 investment accounted cost method 2018 accounted fair value accordance asu 201601 see note 1 15 restructuring costs restructuring costs european reorganization may 2016 announced would take certain actions europe geographic region designed better align expenses revenue gross margin profile position us improved operating performance actions aligned creation evolution organization structure coordinated implementation global single instance enterprise resource planning erp platform expected incurred 2019 recorded approximately 02 million 05 million 125 million restructuring charges adjustments related severance employee benefits years ended december 31 2018 2017 2016 respectively may 2016 december 31 2018 total expenses 128 million liability 16 million december 31 2018 recorded accrued payroll employee benefits consolidated balance sheets amounts recorded reflected cost goods sold 01 million 02 million 21 million selling general administrative expense 01 million 07 million 104 million consolidated statements income years ended december 31 2018 2017 2016 respectively amounts adjusted primarily additional positions identified elimination partially offset employees finding positions within biorad leaving prematurely following table summarizes activity european reorganization restructuring reserves severance millions restructuring costs termination diagnostics research development project facility closures december 2017 announced termination diagnostics research development project europe december 2017 december 31 2018 total expenses 214 million recorded restructuring charges adjustments related severance employee benefits 04 million 110 million asset writeoffs exit costs 01 million 101 million years ended december 31 2018 2017 respectively june 2018 announced closure small manufacturing operation munich germany recorded 17 million expense restructuring charges related severance employee benefits year ended december 31 2018 december 2018 announced closure small manufacturing facility outside paris france recorded restructuring charges related severance employee benefits 39 million exit costs 02 million year ended december 31 2018 restructuring charges termination diagnostics research development project facility closures included clinical diagnostics segments results operations facility closures natural evolution larger consolidations began 2016 european reorganization activities described amounts recorded reflected cost goods sold 54 million 23 million selling general administrative expense 04 million 33 million research development expense 03 million 155 million consolidated statements income years ended december 31 2018 2017 respectively liability 115 million december 31 2018 consisted 73 million recorded accrued payroll employee benefits 42 million recorded longterm liabilities consolidated balance sheets following table summarizes activity termination diagnostics research development project facility closures restructuring reserves severance exit costs millions restructuring costs gnubio inc 2014 acquired gnubio inc gnubio business acquisition included clinical diagnostics segment’s results operations division primarily based massachusetts september 2017 announced closing gnubio research program facilities massachusetts recorded restructuring charges september 2017 related severance employee benefits 29 million asset writeoffs 55 million amounts recorded reflected selling general administrative expense 08 million research development expense 76 million consolidated statements income year ended december 31 2017 liability balance december 31 2017 14 million recorded accrued payroll employee benefits consolidated balance sheets liability paid early 2018 16 quarterly financial data unaudited summarized quarterly financial data 2018 2017 follows millions except per share data result net loss three months ended december 31 2018 potentially issuable common shares excluded diluted shares used computation earnings per share effect antidilutive net loss three months ended december 31 2018 primarily due 8141 million decrease fair market value equity securities primarily due adoption asu 201601 see note 1 consolidated financial statements mostly consisted holding losses investment sartorius ag net loss three months ended december 31 2018 also included impairment losses goodwill longlived assets amount 2925 million see note 4 consolidated financial statements prior year amounts adjusted see note 1 consolidated financial statements regard asu 201707 pension postretirement benefits 17 subsequent event march 4 2019 acquired issued outstanding stock small commercialstage company approximately 20 million believe acquisition complement offerings life science products acquisition included life science segments results operations acquisition date accounted business acquisition amount acquisitionrelated costs minimal biorad primarily represented acquisition process presently unable report purchase price allocation evaluation transaction time needed complete information transfer seller include information valuation individual assets liabilities item 9item 8 financial statements supplementary data consolidated financial statements notes thereto report independent public accountants appearing pages 1 27 exhibit 131 incorporated herein reference item 9item 8 financial statements supplementary data report independent registered public accounting firm board directors stockholders biorad laboratories inc audited accompanying consolidated balance sheets biorad laboratories inc subsidiaries company december 31 2015 2014 related consolidated statements income comprehensive income stockholders’ equity cash flows years threeyear period ended december 31 2015 connection audits consolidated financial statements also audited financial statement schedule consolidated financial statements financial statement schedule responsibility company’s management responsibility express opinion consolidated financial statements financial statement schedule based audits conducted audits accordance standards public company accounting oversight board united states standards require plan perform audit obtain reasonable assurance whether financial statements free material misstatement audit includes examining test basis evidence supporting amounts disclosures financial statements audit also includes assessing accounting principles used significant estimates made management well evaluating overall financial statement presentation believe audits provide reasonable basis opinion consolidated financial statements referred present fairly material respects financial position biorad laboratories inc subsidiaries december 31 2015 2014 results operations cash flows years threeyear period ended december 31 2015 conformity us generally accepted accounting principles also opinion related financial statement schedule considered relation basic consolidated financial statements taken whole present fairly material respects information set forth therein also audited accordance standards public company accounting oversight board united states biorad laboratories inc’s internal control financial reporting december 31 2015 based criteria established internal control integrated framework 2013 issued committee sponsoring organizations treadway commission coso report dated february 29 2016 expressed unqualified opinion effectiveness company’s internal control financial reporting report independent registered public accounting firm board directors stockholders biorad laboratories inc audited biorad laboratories inc’s company internal control financial reporting december 31 2015 based criteria established internal control integrated framework 2013 issued committee sponsoring organizations treadway commission coso biorad laboratories inc’s management responsible maintaining effective internal control financial reporting assessment effectiveness internal control financial reporting included accompanying management’s report internal control financial reporting item 9ab responsibility express opinion company’s internal control financial reporting based audit conducted audit accordance standards public company accounting oversight board united states standards require plan perform audit obtain reasonable assurance whether effective internal control financial reporting maintained material respects audit included obtaining understanding internal control financial reporting assessing risk material weakness exists testing evaluating design operating effectiveness internal control based assessed risk audit also included performing procedures considered necessary circumstances believe audit provides reasonable basis opinion company’s internal control financial reporting process designed provide reasonable assurance regarding reliability financial reporting preparation financial statements external purposes accordance generally accepted accounting principles company’s internal control financial reporting includes policies procedures 1 pertain maintenance records reasonable detail accurately fairly reflect transactions dispositions assets company 2 provide reasonable assurance transactions recorded necessary permit preparation financial statements accordance generally accepted accounting principles receipts expenditures company made accordance authorizations management directors company 3 provide reasonable assurance regarding prevention timely detection unauthorized acquisition use disposition company’s assets could material effect financial statements inherent limitations internal control financial reporting may prevent detect misstatements also projections evaluation effectiveness future periods subject risk controls may become inadequate changes conditions degree compliance policies procedures may deteriorate opinion biorad laboratories inc maintained material respects effective internal control financial reporting december 31 2015 based criteria established internal control integrated framework 2013 issued committee sponsoring organizations treadway commission coso also audited accordance standards public company accounting oversight board united states consolidated balance sheets biorad laboratories inc subsidiaries december 31 2015 2014 related consolidated statements operations comprehensive income stockholders’ equity cash flows years threeyear period ended december 31 2015 report dated february 29 2016 expressed unqualified opinion consolidated financial statements financial statement schedule accompanying notes integral part consolidated financial statements accompanying notes integral part consolidated financial statements biorad laboratories inc consolidated statements income thousands except per share data accompanying notes integral part consolidated financial statements biorad laboratories inc consolidated statements comprehensive income thousands reclassification adjustments calculated using specific identification method accompanying notes integral part consolidated financial statements biorad laboratories inc consolidated statements cash flows thousands accompanying notes integral part consolidated financial statements accompanying notes integral part consolidated financial statements biorad laboratories inc notes consolidated financial statements 1significant accounting policies basis presentation consolidated financial statements include accounts biorad laboratories inc wholly majority owned subsidiaries referred report “biorad” “we” “us” “our” elimination intercompany balances transactions preparation financial statements conformity us generally accepted accounting principles requires management make estimates assumptions affect amounts reported financial statements accompanying notes actual results could differ estimates evaluate subsequent events evidence provide conditions existing date balance sheet well conditions arose balance sheet date financial statements issued effects conditions existed balance sheet date recognized financial statements events conditions arising balance sheet date financial statements issued evaluated determine disclosure required keep financial statements misleading extent events conditions exist disclosures made regarding nature events estimated financial effects events conditions cash equivalents cash equivalents consist cash highly liquid investments original maturities three months less readily convertible cash equivalents stated cost approximates fair value shortterm restricted investments shortterm restricted investments 421 million december 31 2015 represent money market fund collateral secures workers compensation general liability insurance investment income accrues biorad recorded cash equivalents consolidated balance sheet availableforsale investments availableforsale investments consist corporate obligations municipal securities asset backed securities us government sponsored agencies marketable equity securities management classifies investments time purchase reevaluates classification balance sheet date investments maturities beyond one year may classified shortterm based liquid nature marketable securities represent investment cash available current operations availableforsale investments reported fair value based quoted market prices observable market data unrealized gains losses reported component comprehensive income net related tax effect unrealized losses charged income decline fair value individual security determined otherthantemporary review availableforsale investments otherthantemporary losses quarterly basis realized gains losses otherthantemporary impairments investments included income expense net see note 10 concentration credit risk financial instruments potentially subject us concentration credit risk consist primarily cash equivalents investments foreign exchange contracts trade accounts receivable cash equivalents investments placed various highly rated major financial institutions located different geographic regions biorad sustained significant losses instruments held financial institutions forward contracts used managing foreign currency exposures element risk counterparties may unable meet terms agreements attempt minimize risk limiting counterparties diverse group highlyrated domestic international financial institutions event nonperformance counterparties carrying values financial instruments represent maximum amount loss would incurred fiscal yearend however expect record losses result counterparty default perform credit evaluation procedures related trade receivables exception certain developing countries generally require collateral result increased risk certain developing countries biorad sales subject collateral letters credit customers credit risk trade accounts receivable generally limited due large number customers dispersion across many geographic areas however significant amount trade receivables national healthcare systems countries within european union accounts receivable maintain allowance doubtful accounts estimated losses resulting inability customers make required payments amount allowance determined analyzing known uncollectible accounts aged receivables economic conditions customers’ country industry historical losses customers’ creditworthiness amounts later determined specifically identified uncollectible charged written allowance inventory inventories valued lower actual cost market net realizable value include material labor overhead costs firstin firstout method used relieve inventory products sold property plant equipment property plant equipment carried cost less accumulated depreciation amortization included property plant equipment buildings equipment acquired capital lease arrangements reagent rental equipment capitalized software including costs software developed obtained internal use property plant equipment assessed impairment quarterly whenever events changes circumstances indicate carrying amount may recoverable depreciation computed straightline basis estimated useful lives assets buildings leasehold improvements amortized 1530 years term leases life improvements whichever shorter exception reagent rental equipment amortized 15 year period equipment capitalized software depreciated 312 years goodwill represents excess cost fair value net tangible identifiable intangible assets acquired businesses goodwill assessed impairment applying fair value based tests annually fourth quarter whenever events changes circumstances indicate carrying amount may recoverable perform impairment tests goodwill reporting unit level one level operating segments reporting units identified components discrete financial information available regularly reviewed management goodwill amounts assigned reporting units time acquisition goodwill impairment test consists twostep process first step goodwill impairment test used identify potential impairment compares fair value reporting unit carrying value including goodwill use projected discounted cash flow model determine fair value reporting unit fair value reporting unit exceeds carrying amount goodwill reporting unit considered impaired second step impairment test required second step required compares implied fair value reporting unit goodwill carrying amount goodwill fair value reporting unit allocated assets liabilities unit including unrecognized intangible assets reporting unit acquired business combination fair value reporting unit price paid acquire reporting unit carrying amount reporting unit’s goodwill exceeds implied fair value impairment charge recognized amount equal excess longlived assets purposes recognition measurement impairment loss longlived asset assets grouped assets liabilities lowest level identifiable cash flows largely independent cash flows assets liabilities assess impairment longlived assets including identifiable intangible assets quarterly whenever events changes circumstances indicate carrying value may recoverable factors consider important could trigger impairment review include • significant underperformance relative expected historical projected future operating results • significant changes manner use longlived assets intangible assets strategy overall business • current expectation likely longlived asset sold otherwise disposed loss end previously estimated useful life • significant negative industry legal regulatory economic trends management determines carrying value longlived assets may recoverable based upon existence one indicators impairment test impairment based projected undiscounted cash flow method projected future operating results cash flows asset group used establish fair value used evaluating carrying value longlived intangible assets estimate future cash flows longlived assets using current longterm financial forecasts carrying amount longlived asset recoverable exceeds sum undiscounted cash flows expected result use eventual disposition asset case impairment loss would recognized impairment loss recognized amount carrying amount exceeds fair value income taxes account income taxes asset liability method requires recognition deferred tax assets liabilities expected future tax consequences events included financial statements method deferred tax assets liabilities reflect tax effects losses credits temporary differences carrying amounts assets liabilities financial reporting purposes amounts used income tax purposes determined using enacted tax rates effect year differences expected reverse effect change tax rates deferred tax assets liabilities recognized income period includes enactment date deferred tax assets liabilities presented noncurrent taxpaying jurisdiction balance sheet result early adoption accounting standards update 201517 “balance sheet classification deferred taxes” record deferred tax assets extent believe assets likely realized making determination consider available positive negative evidence including scheduled reversals deferred tax liabilities projected future taxable income tax planning strategies recent financial operations extent determine able realize deferred income tax assets future excess net recorded amount make adjustment valuation allowance may reduce provision income taxes establish reduce valuation allowance deferred tax assets provision income taxes increase decrease respectively period determination change valuation allowance made recognize tax benefit uncertain tax position likely tax position sustained examination taxing authorities based technical merits position tax benefits recognized financial statements particular tax position measured based largest benefit greater 50 likelihood realized upon settlement amount unrecognized tax benefits adjusted appropriate changes facts circumstances significant amendments existing tax law new regulations interpretations taxing authorities new information obtained tax examination resolution examination recognize accrued interest penalties appropriate related unrecognized tax benefits provision income taxes revenue recognition revenue recognized pervasive evidence arrangement exists price buyer fixed determinable collectability reasonably assured title passed customer product delivered absent specific contractual specifications revenue associated equipment requires factory installation recorded installation complete customer acceptance required contractually occurred time revenue recognized provision recognized estimated product returns service revenues extended warranty contracts recognized ratably life service agreement services performed contract net sales actual selling price products customers taxes billed customer sales tax value added tax etc shall credited tax liability accounts excluded net sales reagent agreements diagnostic industry sales method provides use instrument consumables reagents customer per test basis evaluate reagent agreements account contracts guidance pertaining accounting revenue arrangements multiple deliverables reagent agreements represent one unit accounting instrument consumables interdependent producing diagnostic result neither standalone value respect agreements revenues earn reagent agreements recognized pursuant terms agreement based entirely contingent upon either consumables conduct fixed number tests delivered ii reported customer per test basis shipping handling classify freight costs billed customers net sales related freight costs included cost goods sold warranty warrant certain equipment defects design materials workmanship mostly period one year upon delivery equipment establish part cost goods sold provision expected costs warranty based historical experience specific warranty terms customer feedback review performed quarterly basis assess adequacy warranty accrual changes warranty accrual included current liabilities longterm liabilities follows millions research development internal research development costs expensed incurred thirdparty research development costs expensed contracted work performed foreign currency balance sheet accounts international subsidiaries translated current exchange rates end accounting period income statement items translated average exchange rates period resulting translation adjustments recorded separate component stockholders’ equity foreign currency transaction gains losses included foreign exchange losses net consolidated statements income transaction gains losses result primarily fluctuations exchange rates intercompany receivables payables denominated currencies functional currency subsidiary recorded transaction forward foreign exchange contracts part distributing products regularly enter intercompany transactions enter forward foreign exchange contracts manage foreign exchange risk future movements exchange rates affect foreign currency denominated intercompany receivables payables use derivative financial instruments speculative trading purposes seek hedge accounting treatment contracts result contracts generally maturity dates 90 days less denominated primarily currencies industrial countries recorded asset liability measured fair value balance sheet date resulting gains losses offset exchange gains losses related receivables payables recorded foreign exchange losses net consolidated statements income noncontrolling interests noncontrolling interest subsidiary ownership interest consolidated entity reported equity consolidated financial statements separate biorad’s equity addition net income attributable noncontrolling interests reported separately net income attributable biorad consolidated financial statements consolidated statements presented full amount assets liabilities income expenses consolidated subsidiaries partially offsetting amount shown noncontrolling interests portion assets liabilities controlled us february 2013 acquired remaining outstanding shares distribuidora de analitica para medicina iberica sa diamed spain remaining noncontrolling shareholder approximately 06 million euros 09 million cash acquisition accounted equity transaction reduced biorads noncontrolling interests additional paidin capital 06 million 03 million respectively therefore since date noncontrolling interests biorad sharebased compensation plans stockbased compensation expense sharebased payment awards granted determined based grantdate fair value recognize compensation costs net estimated forfeitures requisite service period award generally vesting term sharebased payment awards estimated forfeiture rate based historical experience plans described fully note 9 earnings per share basic earnings per share computed dividing net income attributable biorad weighted average number common shares outstanding period diluted earnings per share takes account effect dilutive instruments stock options restricted stock uses average share price period determining number potential common shares added weighted average number shares outstanding potential common shares excluded diluted earnings per share calculation effect would antidilutive weighted average number common shares outstanding used calculate basic diluted earnings per share antidilutive shares follows thousands fair value financial instruments certain financial instruments including cash equivalents shortterm investments accounts receivable marketable securities notes payable accounts payable foreign exchange contracts carrying amounts approximate fair value estimated fair value financial instruments based exchange price would received asset paid transfer liability exit price using available market information appropriate valuation methodologies principal advantageous market asset liability orderly transaction market participants estimates necessarily indicative amounts could realized current market exchange considerable judgment required interpreting market data used develop estimates fair value use different market assumptions estimation techniques could material effect estimated fair value see note 3 recent accounting standards updates february 2016 financial accounting standards board “fasb” issued accounting standards update “asu” 201602 leases require among items lessees recognize leases assets liabilities balance sheet qualitative quantitative disclosures enhanced better understand amount timing uncertainty cash flows arising leases asu 201602 effective fiscal years beginning december 15 2018 interim periods within fiscal years early adoption permitted asu 201602 adopted modified retrospective basis elective reliefs requires application asu 201602 periods presented currently evaluating effect asu 201602 consolidated financial statements january 2016 fasb issued asu 201601 recognition measurement financial assets financial liabilities amendments asu 201601 among items require equity investments unconsolidated entities accounted using equity method accounting generally measured fair value earnings longer availableforsale classification changes fair value reported comprehensive income equity securities readily determinable fair values equity investments without readily determinable fair values cost method also eliminated however entities able elect record equity investments without readily determinable fair values cost less impairment plus minus subsequent adjustments observable price changes basis equity investments reported current earnings asu 201601 effective fiscal years beginning december 15 2017 interim periods within fiscal years currently evaluating effect asu 201601 consolidated financial statements november 2015 fasb issued asu 201517 “balance sheet classification deferred taxes” requires entities present deferred tax assets deferred tax liabilities noncurrent taxpaying jurisdiction balance sheet previous disclosures required entities separate deferred tax assets liabilities current amount noncurrent amount taxpaying jurisdiction asu 201517 effective annual periods beginning december 15 2016 interim periods within years asu 201517 early adopted period issued prospective retrospective basis early adopted asu 201517 fourth quarter 2015 prospective basis change accounting policy therefore prior periods retrospectively adjusted july 2015 fasb issued asu 201511 “simplifying measurement inventory” current guidance entity subsequently measures inventory lower cost market defined replacement cost net realizable value nrv less normal profit margin entity uses current replacement cost provided nrv ie ceiling nrv less “approximately normal profit margin” ie floor asu 201511 eliminates analysis requires entities measure inventory “at lower cost nrv” asu 201511 effective prospectively annual periods beginning december 15 2016 interim periods therein early adoption permitted currently evaluating effect asu 201511 consolidated financial statements april 2015 fasb issued asu 201503 simplifying presentation debt issuance costs asu 201503 issued simplify presentation debt issuance costs requiring debt issuance costs presented deduction corresponding debt liability make presentation debt issuance costs consistent presentation debt discounts premiums current us gaap debt issuance costs reported balance sheet assets amortized interest expense asu 201503 debt issuance costs continue amortized interest expense using effective interest method august 2015 fasb issued asu 201515 presentation subsequent measurement debt issuance costs associated lineofcredit arrangements clarify sec staff’s position would object entity deferring presenting debt issuance costs asset subsequently amortizing deferred debt issuance costs ratably term lineofcredit arrangement current practice asu 201503 effective financial statements issued fiscal years beginning december 15 2015 interim periods within fiscal years early adoption permitted early adopt debt issuance costs material december 31 2015 may 2014 fasb issued asu 201409 “revenue contracts customers” requires entity recognize amount revenue expects entitled transfer promised goods services customers asu 201409 replace existing revenue recognition guidance gaap becomes effective august 2015 fasb issued asu 201514 defer effective date annual reporting periods beginning december 15 2017 including interim periods within reporting period early adoption permitted original effective date asu 201409 annual reporting periods beginning december 15 2016 however plan early adopt new standard applied retrospectively permits use either retrospective cumulative effect transition method currently evaluating effect asu 201409 consolidated financial statements related disclosures yet selected transition method 2 acquisitions gnubio inc april 2014 acquired 1000 issued outstanding stock gnubio inc gnubio acquisition accounted business combination gnubio represents integrated set activities assets capable conducted managed purpose providing return therefore constitutes business accordance gaap amount acquisitionrelated costs minimal biorad primarily represented acquisition process business acquisition included clinical diagnostics segments results operations acquisition date believe gnubios innovative dna workflow wellsuited clinical diagnostics sequencing market leverage leadership role area droplet digital pcr final fair values net assets acquired gnubio acquisition date determined 464 million indefinitelived intangible assets specifically inprocess research development iprd 135 million goodwill 95 million net tangible liabilities goodwill recorded deductible income tax purposes fair value consideration acquisition date 504 million included 397 million paid cash closing date 107 million contingent consideration potentially payable gnubios shareholders contingent consideration based probabilityweighted income approach could reach 700 million upon achievement developmentregulatory sales milestones contingent consideration developmentregulatory milestones valued 107 million based assumptions regarding probability achieving milestones amounts discounted present value contingent consideration sales milestones determined negligible using riskneutral probability money based blackscholes framework sales required purchase agreement low probability obtaining thresholds see note 3 discussion 3 fair value measurements determine fair value asset liability based assumptions market participants would use pricing asset liability orderly transaction market participants measurement date identification market participant assumptions provides basis determining inputs used pricing asset liability fair value hierarchy established gives precedence fair value measurements calculated using observable inputs using unobservable inputs hierarchy prioritizes inputs three broad levels follows • level 1 quoted prices active markets identical instruments • level 2 significant observable inputs including quoted prices active markets similar instruments • level 3 significant unobservable inputs including assumptions determining fair value certain investments financial assets liabilities carried fair value measured recurring basis december 31 2015 classified hierarchy follows millions financial assets liabilities carried fair value measured recurring basis december 31 2014 classified hierarchy follows millions cash equivalents included cash equivalents consolidated balance sheets b availableforsale investments included following accounts consolidated balance sheets millions c forward foreign exchange contracts asset position included current assets consolidated balance sheets forward foreign exchange contracts liability position included current liabilities consolidated balance sheets e contingent consideration liabilities included following accounts consolidated balance sheets millions third quarter 2012 recognized contingent consideration liability 446 million upon acquisition new cell sorting system propel labs inc fair value contingent consideration based probabilityweighted income approach related achievement certain development sales milestones development milestone achieved paid 2013 first sales milestone reached resulting payments 24 million 30 million fourth quarter 2014 first quarter 2015 respectively 2015 contingent consideration revalued decrease 56 million estimated fair value 91 million december 31 2015 second quarter 2014 recognized contingent consideration liability upon acquisition gnubio acquisition date contingent consideration based probabilityweighted income approach could reach 700 million upon achievement developmentregulatory sales milestones contingent consideration developmentregulatory milestones valued 107 million acquisition date based assumptions regarding probability achieving milestones amounts discounted present value contingent consideration related developmentregulatory milestones revalued fair value 100 million december 31 2015 2014 contingent consideration sales milestones acquisition date december 31 2015 determined negligible using riskneutral probability money based blackscholes framework sales required purchase agreement low probability obtaining thresholds following table provides reconciliation level 3 contingent consideration liabilities measured estimated fair value based original valuations updated quarterly year ended december 31 2015 millions following table provides quantitative information level 3 inputs fair value measurement contingent consideration liabilities december 31 2015 significant increases decreases inputs isolation could result significantly lower higher fair value measurement estimate fair value level 2 debt securities december 31 2015 2014 primary pricing provider uses sp capital iq primary pricing source pricing process allows us select hierarchy pricing sources securities held chosen pricing hierarchy level 2 securities certificates deposit commercial paper sp capital iq primary pricing source custodian secondary pricing source sp capital iq price level 2 security hold pricing provider utilize custodian supplied pricing commercial paper december 31 2015 2014 pricing determined straightline calculation starting purchase price date purchase increasing par maturity interest bearing certificates deposit commercial paper priced par addition primary pricing provider performed daily reasonableness testing sp capital iq prices custodian reported prices outside tolerable variance approximately 1 investigated resolved availableforsale investments consist following millions unrealized gains longterm marketable equity securities primarily due investment sartorius ag preferred shares following summary investments gross unrealized losses associated fair value millions unrealized losses securities due number factors including changes interest rates changes economic conditions changes market outlook various industries among others biorad ability intent hold investments unrealized losses recovery fair value reasonable period time sufficient forecasted recovery fair value may maturity consider investments otherthantemporarily impaired december 31 2015 december 31 2014 part distributing products regularly enter intercompany transactions enter forward foreign exchange contracts manage foreign exchange risk future movements foreign exchange rates affect foreign currency denominated intercompany receivables payables use derivative financial instruments speculative trading purposes seek hedge accounting treatment contracts result contracts generally maturity dates 90 days less denominated primarily currencies industrial countries recorded fair value balance sheet date notional principal amounts provide one measure transaction volume outstanding december 31 2015 represent amount biorads exposure loss estimated fair value contracts derived using spot rates reuters last business day quarter points provided counterparties resulting gains losses offset exchange gains losses related receivables payables included foreign exchange losses net consolidated statements income following summary forward foreign currency exchange contracts millions following summary amortized cost estimated fair value debt securities december 31 2015 contractual maturity date millions estimated fair value financial instruments recognized fair value consolidated balance sheets included investments presented table fair value determined using significant observable inputs including quoted prices active markets similar instruments estimates necessarily indicative amounts could realized current market exchange considerable judgment required interpreting market data used develop estimates fair value use different market assumptions estimation techniques could material effect estimated fair value investments include financial instruments majority fair value based similar actively traded stock adjusted various discounts including discount marketability longterm debt excluding leases current maturities estimated fair value based quoted market prices similar issues estimated fair value financial instruments discussed level fair value hierarchy within fair value measurement categorized follows millions shares ordinary voting stock sartorius ag sartorius goettingen germany process technology supplier biotechnology pharmaceutical chemical food beverage industries 35 outstanding voting shares excluding treasury shares sartorius december 31 2015 sartorius family trust sartorius family members hold controlling interest outstanding voting shares representative designee sartorius’ board directors ability exercise significant influence operating financial policies sartorius account investment using cost method carrying value investment included investments consolidated balance sheets stock thinly traded conjunction valuation method discussed classified estimated fair value level 2 level 2 classification appropriate given valuation method employed incorporates observable input fair value sartorius’ actively traded preferred stock 4 goodwill purchased intangible assets changes goodwill segment follows millions conjunction acquisition 100 outstanding stock gnubio inc clinical diagnostics segment april 2014 recorded 135 million goodwill 464 million inprocess research development indefinitelived intangible asset information regarding identifiable purchased intangible assets definite indefinite lives follows millions material impairment losses related purchased intangible assets recorded 2015 2014 impaired licenses discontinued product line amount 64 million impairment charge included 58 million cost goods sold 06 million research development expense accompanying consolidated statements income amortization expense related purchased intangible assets years ended december 31 2015 2014 2013 365 million 478 million 450 million respectively estimated future amortization expense based existing purchased intangible assets including iprd years ending december 31 2016 2017 2018 2019 2020 thereafter 333 million 250 million 221 million 193 million 173 million 539 million respectively 5notes payable longterm debt domestic international lines credit standby letters credit guarantee arrangements 2012 million available borrowing usage december 31 2015 reduced 26 million utilized standby letters credit guarantee arrangements issued banks support obligations principal components longterm debt follows millions senior notes due 2020 december 2010 biorad sold 4250 million principal amount senior notes due 2020 4875 notes sale yielded net cash proceeds 4226 million effective rate 4946 4875 notes pay fixed rate interest 4875 per year option redeem 4875 notes time redemption price 100 principal amount plus specified makewhole premium defined indenture governing 4875 notes accrued unpaid interest thereon redemption date obligations 4875 notes secured rank equal right payment existing future unsubordinated indebtedness certain covenants apply year end 4875 notes including limitations following liens sale leaseback transactions mergers consolidations sales assets covenants compliance covenants december 31 2015 restrictive covenants relating total indebtedness interest coverage stock repurchases recapitalizations dividends distributions shareholders current ratios credit agreement june 2014 biorad entered 2000 million unsecured credit agreement replacing amended restated credit agreement june 2010 expired june 21 2014 borrowings credit agreement revolving basis used make permitted acquisitions working capital general corporate purposes outstanding borrowings credit agreement december 31 2015 2014 however 08 million utilized domestic standby letters credit reduced borrowing availability credit agreement matures june 2019 borrowed credit agreement borrowing rate would 186 december 31 2015 credit agreement requires biorad comply certain financial ratios covenants among things ratios covenants include leverage ratio test interest coverage test well restrictions ability declare pay dividends incur debt guarantee debt enter transactions affiliates merge consolidate sell assets make investments create liens compliance ratios covenants december 31 2015 maturities longterm debt december 31 2015 follows 2016 03 million 2017 03 million 2018 03 million 2019 02 million 2020 4253 million thereafter 109 million 6 income taxes us international components income taxes follows millions provision income taxes consists following millions reconciliation effective tax rate income taxes statutory tax rate follows effective income tax rate 22 32 31 2015 2014 2013 respectively effective tax rate 2015 included significant tax benefit expected utilization foreign tax credits us effective tax rate 2014 included nondeductible penalties losses nonrecurring effective tax rate 2013 included significant tax benefit related reinstated 2012 us federal research credit partially offset increase tax liabilities unrecognized tax benefits audit settlements foreign jurisdictions foreign taxes result primarily income earned france switzerland many jurisdictions operate including switzerland russia uk singapore statutory tax rates significantly lower us statutory tax rate 35 effective tax rate may impacted future either favorably unfavorably many factors including limited changes statutory tax rates changes tax laws regulations tax audits settlements generation tax credits deferred tax assets liabilities reflect tax effects losses credits temporary differences carrying amounts assets liabilities financial reporting purposes amounts used income tax purposes significant components deferred tax assets liabilities follows millions december 31 2015 biorad’s international subsidiaries combined net operating loss carryforwards 1162 million loss carryforwards 1157 million expiration date believe likely benefit net operating loss carryforwards realized provided valuation allowance 265 million relating net operating loss carryforwards december 31 2015 biorad us federal net operating loss carryforwards approximately 55 million result acquisitions carryforwards subject limitation utilization expire 2018 2034 december 31 2015 biorad us federal foreign tax credit carryforwards 131 million us federal research tax credit carryforwards 82 million 19 million subject limitations utilization december 31 2015 biorad approximately 53 million california net operating loss carryforwards related acquisition quantalife believe likely benefit net operating loss carryforwards realized recorded full valuation allowance losses december 31 2015 biorad deferred tax asset 228 million relating california research tax credit carryforwards including 20 million acquisition quantalife may carried forward indefinitely based judgment consistent prior years recorded full valuation allowance deferred tax asset believe likely certain deferred tax assets described realized foreseeable future recognized tax benefits relating reversal valuation allowance deferred tax assets december 31 2015 recognized reduction income tax expense income tax returns audited us federal state foreign tax authorities currently examination many tax authorities tax years open examination include years 2012 forward us years 2008 forward certain foreign jurisdictions including france switzerland germany differing interpretations tax laws regulations result significant disputes may arise tax authorities involving issues timing amount deductions allocations income among various tax jurisdictions evaluate exposures associated tax filing positions quarterly basis record liabilities unrecognized tax benefits related uncertain tax positions believe currently pending uncertain tax positions material adverse effect consolidated financial statements although adverse resolution one uncertain tax positions period may material impact results operations period following tabular reconciliation total amounts unrecognized tax benefits millions biorad recognizes accrued interest penalties related unrecognized tax benefits income tax expense related unrecognized tax benefits noted biorad accrued interest 30 million 38 million 34 million december 31 2015 2014 2013 respectively december 31 2015 based expected outcome certain examinations result expiration statutes limitation certain jurisdictions believe within next twelve months reasonably possible previously unrecognized tax benefits could decrease approximately 40 million substantially amounts impact effective income tax rate recognized general practice intention reinvest earnings nonus subsidiaries operations december 31 2015 biorad made provision us additional foreign withholding taxes approximately 392 million excess amount financial reporting tax basis investments foreign subsidiaries essentially permanent duration generally amounts become subject us taxation upon remittance dividends certain circumstances earnings repatriated us deferred tax liability associated temporary differences would approximately 82 million 7 stockholders equity biorad’s issued outstanding stock consists class common stock class b common stock class b share class b participates equally earnings biorad identical respects except follows class limited voting rights share class entitled one tenth vote matters share class b entitled one vote additionally class stockholders entitled elect 25 board directors class b stockholders entitled elect 75 directors cash dividends may paid class shares without paying cash dividend class b shares cash dividend may paid class b shares unless least equal cash dividend paid class shares class b shares convertible time class shares oneforone basis option stockholder founders biorad schwartz family collectively hold majority biorad’s voting stock result schwartz family able exercise significant influence biorad changes biorads issued common stock shares follows thousands treasury shares board directors authorized repurchase 180 million biorads common stock 33 million yet repurchased open market december 31 2015 amended restated credit agreement credit agreement limits ability repurchase stock accordance terms awards 2007 incentive award plan june 2012 withheld 122 shares class common stock 917 shares class b common stock satisfy minimum statutory tax obligations due upon vesting restricted stock certain employees considered repurchase stock restricted stock vested december 31 2013 therefore anticipate repurchasing shares purpose repurchases stock 2015 2014 8 accumulated comprehensive income accumulated comprehensive income included consolidated balance sheets consolidated statements changes stockholders equity consists following components millions increase 2015 net unrealized holding gains availableforsale investments primarily ownership preferred shares sartorius amounts reclassified accumulated comprehensive income consolidated statements income presentation location follows reclassification adjustments calculated using specific identification method 9 sharebased compensationstock option purchase plans description sharebased compensation plans stock option award plans three stock option plans officers certain employees 1994 stock option plan 1994 plan 2003 stock option plan 2003 plan 2007 incentive award plan 2007 plan 1994 plan 2003 plan authorized grant incentive stock options nonqualified stock options employees 2007 plan authorizes grant stock options restricted stock restricted stock units stock appreciation rights types equity awards employees longer grant stock option grants 1994 plan 2003 plan since 2007 sharebased compensation grants 2007 plan total 2250360 shares reserved issuance equity awards 2007 plan may either class b common stock specified within plan december 31 2015 770094 shares available granted future plans class b options granted prices less fair market value underlying common stock date grant generally options granted term 10 years vest increments 20 per year fiveyear period yearly anniversary date grant stock awards issued 2007 plan generally vest increments 20 per year fiveyear period yearly anniversary date grant employee stock purchase plans 2011 employee stock purchase plan 2011 espp provides eligible employees may contribute 10 compensation 25000 annually toward quarterly purchase class common stock employees’ purchase price 85 lesser fair market value stock first business day last business day calendar quarter 2011 espp includes two components code section 423 component intend qualify “employee stock purchase plan” section 423 us internal revenue code 1986 amended “code” non423 component authorizes grant purchase rights qualify “employee stock purchase plan” section 423 code authorized sale 600000 shares class common stock 2011 espp sharebased compensation expense included sharebased compensation expense cost related stock option grants espp stock purchases restricted stock restricted stock unit awards sharebased compensation expense allocated cost goods sold research development expense selling general administrative expense consolidated statements income 2015 2014 2013 recognized sharebased compensation expense 170 million 149 million 137 million respectively capitalize sharebased compensation expense inventory options awards amortize fair value straightline basis stock compensation awards amortized requisite service periods awards generally vesting periods stock options following table summarizes stock option activity intrinsic value stock options defined difference current market value exercise price total intrinsic value date exercise stock options exercised 2015 2014 2013 approximately 13 million 5 million 11 million respectively total grant date fair value options vested 2015 2014 2013 22 million 21 million 22 million respectively cash received stock options exercised 2015 2014 2013 29 million 58 million 41 million respectively actual tax benefit realized tax deductions stock options exercised totaled 93 million 53 million 66 million 2015 2014 2013 respectively december 31 2015 55 million total unrecognized compensation cost stock options amount expected recognized future weightedaverage period approximately 3 years weightedaverage fair value stock options granted estimated using blackscholes optionpricing model following weightedaverage assumptions volatility based historical volatilities common stock period equal stock option’s expected life riskfree interest rate based us treasury yield curve effect time grant expected life represents number years estimate based primarily historical experience options outstanding prior exercise anticipate paying cash dividends future therefore use expected dividend yield zero restricted stock restricted stock units 2007 plan restricted stock last granted 2008 restricted stock units rights receive shares company stock granted 2007 2015 2007 plan fair value restricted stock share restricted stock unit market value determined closing price stock day grant following table summarizes restricted stock restricted stock unit activity total grant date fair value restricted stock restricted stock units 2015 2014 2013 122 million 106 million 96 million respectively december 31 2015 approximately 401 million total unrecognized compensation cost related restricted stock units amount expected recognized remaining weightedaverage period approximately 4 years employee stock purchase plans fair value employees’ purchase rights 2011 espp 1988 espp estimated using blackscholes model following weightedaverage assumptions major assumptions primarily based historical data volatility based historical volatilities common stock period equal expected life purchase rights riskfree interest rate based us treasury yield curve effect time grant anticipate paying cash dividends future therefore use expected dividend yield zero sold 96634 shares 108 million 102222 shares 102 million 103669 shares 100 million 2011 espp employees 2015 2014 2013 respectively december 31 2015 189726 shares remain authorized available issuance 2011 espp currently issue new shares satisfy stock option exercises restricted stock issuances espp stock purchases 10 income expense net income expense net includes following components millions otherthantemporary impairment losses investments recorded 2015 2014 2013 certain availableforsale investments certain equity investment light continuing declines market prices time 11 supplemental cash flow information reconciliation net income including noncontrolling interests net cash provided operating activities follows millions 12 commitments contingent liabilities rents leases rental expense operating leases 450 million 469 million 455 million 2015 2014 2013 respectively leases principally facilities automobiles sublease income annual future minimum lease payments december 31 2015 operating leases follows 2016 412 million 2017 339 million 2018 252 million 2019 187 million 2020 beyond 433 million deferred profit sharing retirement plan profit sharing plan covering substantially us employees contributions made discretion board directors biorad liability current year’s contribution expense 147 million 137 million 135 million 2015 2014 2013 respectively postemployment benefits several foreign locations statutorily required provide lump sum severance termination indemnity employees plans vested benefit obligation december 31 2015 2014 686 million 461 million respectively included accrued payroll employee benefits longterm liabilities consolidated balance sheets plans required funded trust device used accumulate assets settle obligations however plans require funding based local laws trust device used accumulate assets assist settling obligations purchase obligations december 31 2015 obligations recognized balance sheet 1108 million include agreements purchase goods services enforceable legally binding biorad specify significant terms exclude agreements cancelable without penalty annual future fixed determinable portion purchase obligations recognized balance sheet december 31 2015 follows 2016 238 million 2017 109 million 2018 32 million 2019 21 million 2020 17 million 2020 691 million december 31 2015 purchase obligations recognized balance sheet 357 million include agreements purchase goods services enforceable legally binding biorad specify significant terms exclude agreements cancelable without penalty annual future fixed determinable portion purchase obligations recognized balance sheet december 31 2015 follows 2016 178 million 2017 51 million 2018 36 million 2019 36 million 2020 56 million 2020 0 million letters credit ordinary course business times required post letters credit letters credit issued banks guarantee obligations various parties contingently liable 13 million standby letters credit banks december 31 2015 contingent consideration second quarter 2014 recognized contingent consideration liability upon acquisition gnubio acquisition date contingent consideration based probabilityweighted income approach could reach 700 million upon achievement developmentregulatory sales milestones contingent consideration developmentregulatory milestones valued 107 million acquisition date based assumptions regarding probability achieving milestones amounts discounted present value contingent consideration related developmentregulatory milestones revalued fair value 100 million december 31 2015 2014 contingent consideration sales milestones acquisition date december 31 2015 determined negligible using riskneutral probability money based blackscholes framework sales required purchase agreement low probability obtaining thresholds third quarter 2012 recognized contingent consideration liability 446 million upon acquisition new cell sorting system propel labs inc fair value contingent consideration based probabilityweighted income approach related achievement certain development sales milestones development milestone achieved paid 2013 first sales milestone reached resulting payments 24 million 30 million fourth quarter 2014 first quarter 2015 respectively 2015 contingent consideration revalued decrease 56 million estimated fair value 91 million december 31 2015 concentrations labor subject collective bargaining agreements december 31 2015 approximately eight percent biorads approximately 3100 us employees covered collective bargaining agreement expire november 8 2016 many biorads nonus fulltime employees especially france covered collective bargaining agreements 13 legal proceedings january 23 2015 city riviera beach general employees’ retirement system filed shareholder derivative lawsuit superior court california contra costa county three current directors one former director also named nominal defendant complaint plaintiff alleges directors breached fiduciary duty loyalty failing ensure sufficient internal controls systems compliance foreign corrupt practices act fcpa failed provide adequate training fcpa based actions directors unjustly enriched purportedly seeking relief behalf plaintiff seeks award restitution unspecified damages costs expenses including attorneys’ fees april 23 2015 individual defendants filed demurrer requesting dismissal complaint case demurrer heard august 6 2015 court granted demurrer failure make demand board directors august 17 2015 provided leave amend september 4 2015 plaintiff filed amended complaint simultaneously served litigation demand letter board directors via counsel action letter demands investigate bring appropriate legal action certain individuals including defendants city riviera beach case six current former employees plaintiff also moved temporary stay proceedings purportedly enable board respond demand board formed demand review committee respond demand february 24 2016 demand review committee reported board concluded investigation unanimously determined best interests company stockholders pursue litigation individuals named city riviera beach’s litigation demand letter october 6 2015 individual defendants filed second demurrer seeking dismiss case failure make timely presuit demand case stayed pending mediation caption city riviera beach general employees’ retirement system v schwartz et al case c1500140 august 13 2015 august 18 2015 respectively international brotherhood electrical workers local 38 pension fund wayne county employees’ retirement system filed stockholder derivative complaint delaware court chancery four current directors one former director named nominal defendant complaints allege defendants failed cause us develop internal controls sufficient ensure compliance fcpa plaintiffs assert claims breach fiduciary duty unjust enrichment request award damages sustained result alleged violations among relief two lawsuits consolidated august 27 2015 case stayed pending mediation caption consolidated case biorad laboratories inc stockholder litigation consol ca 11387vcn del ch may 27 2015 former general counsel sanford wadler filed lawsuit us district court northern district california us four current directors one former director plaintiff’s suit alleges whistleblower retaliation violation sarbanesoxley act doddfrank act raising fcparelated concerns mr wadler also alleges wrongful termination violation public policy nonpayment wages waiting time penalties violation california labor code plaintiff seeks back pay compensatory damages lost wages earnings retirement benefits employee benefits compensation mental pain anguish emotional distress waiting time penalties punitive damages litigation costs including attorneys’ fees reinstatement employment believe lawsuit without merit july 28 2015 filed motion dismiss plaintiffs complaint specifically requested dismissal claims alleged us doddfrank act california labor code 11025 claims directors sarbanesoxley act doddfrank act october 23 2015 district court granted motion respect alleged violations sarbanesoxley act director defendants except norman schwartz prejudice court denied motion dismiss claims doddfrank act us director defendants discovery started mediation scheduled april 19 2016 trial scheduled january 9 2017 vigorously defending claims cannot time reasonably estimate range exposure potential liability addition party various claims legal actions complaints arising ordinary course business believe time ultimate liability resulting matters material adverse effect results operations financial position liquidity however cannot give assurance regarding ultimate outcome matters resolution could material operating results particular period depending level income period 14 segment information biorad multinational manufacturer worldwide distributor life science research products clinical diagnostics products two reportable segments life science clinical diagnostics reportable segments strategic business lines offer 8000 different products services require different marketing strategies disclose quantitative information different products services impractical based primarily numerous products services sell global markets serve life science segment develops manufactures sells services reagents apparatus instruments used biological research products sold university medical school laboratories pharmaceutical biotechnology companies food testing laboratories government industrial research facilities clinical diagnostics segment develops manufactures sells services automated test systems informatics systems test kits specialized quality controls healthcare market products sold reference laboratories hospital laboratories state newborn screening facilities physicians’ office laboratories transfusion laboratories insurance forensic testing laboratories operations include remainder former analytical instruments segment results presented manner present operations internally make operating decisions assess performance accounting policies segments described significant accounting policies see note 1 segment profit loss includes allocation corporate expense based upon sales allocation interest expense based upon accounts receivable inventories difference total segment allocated interest expense depreciation amortization capital expenditures corresponding consolidated amounts attributable corporate headquarters segments expected manage assets completely control accordingly segment assets include primarily accounts receivable inventories gross machinery equipment goodwill balances included corporate segment reporting purposes information regarding industry segments december 31 2015 2014 2013 years ended follows millions net corporate operating expense consists receipts expenditures primary responsibility segment operating management therefore allocated segments performance assessment chief operating decision maker 2014 2013 included accrual 201 million 350 million respectively associated us securities exchange commission department justice investigations relating us foreign corrupt practices act final settlement reached fourth quarter 2014 2013 also included 156 million expense redemption 80 senior subordinated notes following reconciles total segment profit consolidated income taxes millions following reconciles total segment assets consolidated total assets millions following presents net sales external customers geographic region based primarily location use product service millions following presents property plant equipment net investments assets excluding deferred income taxes geographic region based upon location asset millions 15 quarterly financial data unaudited summarized quarterly financial data 2015 2014 follows millions except per share data 16 subsequent event january 2016 acquired high performance analytical flow cytometer platform propel labs propel enable advanced novice users perform basic multiparameter cytometry wide range applications chemistries biorad expects launch instrument later year aggregate consideration instrument consisted cash payment january 2016 100 million payments 200 million due upon completion certain technical milestones following completion milestones semiannual performance payments propel required based percentage sales 2020 presently unable report purchase price allocation evaluation transaction time needed complete information transfer seller include information valuation individual assets liabilities including contingent consideration item 9item 8 financial statements supplementary data report independent registered public accounting firm board directors stockholders biorad laboratories inc audited accompanying consolidated balance sheets biorad laboratories inc subsidiaries company december 31 2016 2015 related consolidated statements income comprehensive income stockholders’ equity cash flows years threeyear period ended december 31 2016 connection audits consolidated financial statements also audited financial statement schedule consolidated financial statements financial statement schedule responsibility company’s management responsibility express opinion consolidated financial statements financial statement schedule based audits conducted audits accordance standards public company accounting oversight board united states standards require plan perform audit obtain reasonable assurance whether financial statements free material misstatement audit includes examining test basis evidence supporting amounts disclosures financial statements audit also includes assessing accounting principles used significant estimates made management well evaluating overall financial statement presentation believe audits provide reasonable basis opinion consolidated financial statements referred present fairly material respects financial position biorad laboratories inc subsidiaries december 31 2016 2015 results operations cash flows years threeyear period ended december 31 2016 conformity us generally accepted accounting principles also opinion related financial statement schedule considered relation basic consolidated financial statements taken whole present fairly material respects information set forth therein also audited accordance standards public company accounting oversight board united states biorad laboratories inc’s internal control financial reporting december 31 2016 based criteria established internal control integrated framework 2013 issued committee sponsoring organizations treadway commission coso report dated february 28 2017 expressed unqualified opinion effectiveness company’s internal control financial reporting report independent registered public accounting firm board directors stockholders biorad laboratories inc audited biorad laboratories inc’s company internal control financial reporting december 31 2016 based criteria established internal control integrated framework 2013 issued committee sponsoring organizations treadway commission coso biorad laboratories inc’s management responsible maintaining effective internal control financial reporting assessment effectiveness internal control financial reporting included accompanying management’s report internal control financial reporting item 9ab responsibility express opinion company’s internal control financial reporting based audit conducted audit accordance standards public company accounting oversight board united states standards require plan perform audit obtain reasonable assurance whether effective internal control financial reporting maintained material respects audit included obtaining understanding internal control financial reporting assessing risk material weakness exists testing evaluating design operating effectiveness internal control based assessed risk audit also included performing procedures considered necessary circumstances believe audit provides reasonable basis opinion company’s internal control financial reporting process designed provide reasonable assurance regarding reliability financial reporting preparation financial statements external purposes accordance generally accepted accounting principles company’s internal control financial reporting includes policies procedures 1 pertain maintenance records reasonable detail accurately fairly reflect transactions dispositions assets company 2 provide reasonable assurance transactions recorded necessary permit preparation financial statements accordance generally accepted accounting principles receipts expenditures company made accordance authorizations management directors company 3 provide reasonable assurance regarding prevention timely detection unauthorized acquisition use disposition company’s assets could material effect financial statements inherent limitations internal control financial reporting may prevent detect misstatements also projections evaluation effectiveness future periods subject risk controls may become inadequate changes conditions degree compliance policies procedures may deteriorate opinion biorad laboratories inc maintained material respects effective internal control financial reporting december 31 2016 based criteria established internal control integrated framework 2013 issued committee sponsoring organizations treadway commission coso also audited accordance standards public company accounting oversight board united states consolidated balance sheets biorad laboratories inc subsidiaries december 31 2016 2015 related consolidated statements operations comprehensive income stockholders’ equity cash flows years threeyear period ended december 31 2016 report dated february 28 2017 expressed unqualified opinion consolidated financial statements financial statement schedule accompanying notes integral part consolidated financial statements accompanying notes integral part consolidated financial statements biorad laboratories inc consolidated statements income thousands except per share data accompanying notes integral part consolidated financial statements biorad laboratories inc consolidated statements comprehensive income thousands reclassification adjustments calculated using specific identification method accompanying notes integral part consolidated financial statements biorad laboratories inc consolidated statements cash flows thousands accompanying notes integral part consolidated financial statements accompanying notes integral part consolidated financial statements biorad laboratories inc notes consolidated financial statements 1significant accounting policies basis presentation consolidated financial statements include accounts biorad laboratories inc wholly majority owned subsidiaries referred report “biorad” “we” “us” “our” elimination intercompany balances transactions preparation financial statements conformity us generally accepted accounting principles requires management make estimates assumptions affect amounts reported financial statements accompanying notes actual results could differ estimates evaluate subsequent events evidence provide conditions existing date balance sheet well conditions arose balance sheet date financial statements issued effects conditions existed balance sheet date recognized financial statements events conditions arising balance sheet date financial statements issued evaluated determine disclosure required keep financial statements misleading extent events conditions exist disclosures made regarding nature events estimated financial effects events conditions cash equivalents cash equivalents consist cash highly liquid investments original maturities three months less readily convertible cash equivalents stated cost approximates fair value shortterm restricted investments shortterm restricted investments 456 million 421 million december 31 2016 2015 respectively represent money market fund collateral secures workers compensation general liability insurance investment income accrues biorad recorded cash equivalents consolidated balance sheets availableforsale investments availableforsale investments consist corporate obligations municipal securities asset backed securities us government sponsored agencies marketable equity securities management classifies investments time purchase reevaluates classification balance sheet date investments maturities beyond one year may classified shortterm based liquid nature marketable securities represent investment cash available current operations availableforsale investments reported fair value based quoted market prices observable market data unrealized gains losses reported component comprehensive income net related tax effect unrealized losses charged income decline fair value individual security determined otherthantemporary review availableforsale investments otherthantemporary losses quarterly basis realized gains losses otherthantemporary impairments investments included income expense net see note 10 concentration credit risk financial instruments potentially subject us concentration credit risk consist primarily cash equivalents investments foreign exchange contracts trade accounts receivable cash equivalents investments placed various highly rated major financial institutions located different geographic regions biorad sustained significant losses instruments held financial institutions forward contracts used managing foreign currency exposures element risk counterparties may unable meet terms agreements attempt minimize risk limiting counterparties diverse group highlyrated domestic international financial institutions event nonperformance counterparties carrying values financial instruments represent maximum amount loss would incurred fiscal yearend however expect record losses result counterparty default perform credit evaluation procedures related trade receivables exception certain developing countries generally require collateral result increased risk certain developing countries biorad sales subject collateral letters credit customers credit risk trade accounts receivable generally limited due large number customers dispersion across many geographic areas however significant amount trade receivables national healthcare systems countries within european union accounts receivable maintain allowance doubtful accounts estimated losses resulting inability customers make required payments amount allowance determined analyzing known uncollectible accounts aged receivables economic conditions customers’ country industry historical losses customers’ creditworthiness amounts later determined specifically identified uncollectible charged written allowance inventory inventories valued lower actual cost market net realizable value include material labor overhead costs firstin firstout method used relieve inventory products sold property plant equipment property plant equipment carried cost less accumulated depreciation amortization included property plant equipment buildings equipment acquired capital lease arrangements reagent rental equipment capitalized software including costs software developed obtained internal use property plant equipment assessed impairment quarterly whenever events changes circumstances indicate carrying amount may recoverable depreciation computed straightline basis estimated useful lives assets buildings leasehold improvements amortized 1530 years term leases life improvements whichever shorter exception reagent rental equipment amortized 15 year period equipment capitalized software depreciated 312 years goodwill represents excess cost fair value net tangible identifiable intangible assets acquired businesses goodwill assessed impairment applying fair value based tests annually fourth quarter whenever events changes circumstances indicate carrying amount may recoverable perform impairment tests goodwill reporting unit level one level operating segments reporting units identified components discrete financial information available regularly reviewed management goodwill amounts assigned reporting units time acquisition goodwill impairment test consists twostep process first step goodwill impairment test used identify potential impairment compares fair value reporting unit carrying value including goodwill use projected discounted cash flow model determine fair value reporting unit fair value reporting unit exceeds carrying amount goodwill reporting unit considered impaired second step impairment test required second step required compares implied fair value reporting unit goodwill carrying amount goodwill fair value reporting unit allocated assets liabilities unit including unrecognized intangible assets reporting unit acquired business combination fair value reporting unit price paid acquire reporting unit carrying amount reporting unit’s goodwill exceeds implied fair value impairment charge recognized amount equal excess longlived assets purposes recognition measurement impairment loss longlived asset assets grouped assets liabilities lowest level identifiable cash flows largely independent cash flows assets liabilities assess impairment longlived assets including identifiable intangible assets quarterly whenever events changes circumstances indicate carrying value may recoverable factors consider important could trigger impairment review include • significant underperformance relative expected historical projected future operating results • significant changes manner use longlived assets intangible assets strategy overall business • current expectation likely longlived asset sold otherwise disposed loss end previously estimated useful life • significant negative industry legal regulatory economic trends management determines carrying value longlived assets may recoverable based upon existence one indicators impairment test impairment based projected undiscounted cash flow method projected future operating results cash flows asset group used establish fair value used evaluating carrying value longlived intangible assets estimate future cash flows longlived assets using current longterm financial forecasts carrying amount longlived asset recoverable exceeds sum undiscounted cash flows expected result use eventual disposition asset case impairment loss would recognized impairment loss recognized amount carrying amount exceeds fair value income taxes account income taxes asset liability method requires recognition deferred tax assets liabilities expected future tax consequences events included financial statements method deferred tax assets liabilities reflect tax effects losses credits temporary differences carrying amounts assets liabilities financial reporting purposes amounts used income tax purposes determined using enacted tax rates effect year differences expected reverse effect change tax rates deferred tax assets liabilities recognized income period includes enactment date record deferred tax assets extent believe assets likely realized making determination consider available positive negative evidence including scheduled reversals deferred tax liabilities projected future taxable income tax planning strategies recent financial operations extent determine able realize deferred income tax assets future excess net recorded amount make adjustment valuation allowance may reduce provision income taxes establish reduce valuation allowance deferred tax assets provision income taxes increase decrease respectively period determination change valuation allowance made recognize tax benefit uncertain tax position likely tax position sustained examination taxing authorities based technical merits position tax benefits recognized financial statements particular tax position measured based largest benefit greater 50 likelihood realized upon settlement amount unrecognized tax benefits adjusted appropriate changes facts circumstances significant amendments existing tax law new regulations interpretations taxing authorities new information obtained tax examination resolution examination recognize accrued interest penalties appropriate related unrecognized tax benefits provision income taxes revenue recognition revenue recognized pervasive evidence arrangement exists price buyer fixed determinable collectability reasonably assured title passed customer product delivered absent specific contractual specifications revenue associated equipment requires factory installation recorded installation complete customer acceptance required contractually occurred time revenue recognized provision recognized estimated product returns service revenues extended warranty contracts recognized ratably life service agreement services performed contract net sales actual selling price products customers taxes billed customer sales tax value added tax etc shall credited tax liability accounts excluded net sales reagent agreements diagnostic industry sales method provides use instrument consumables reagents customer per test basis evaluate reagent agreements account contracts guidance pertaining accounting revenue arrangements multiple deliverables reagent agreements represent one unit accounting instrument consumables interdependent producing diagnostic result neither standalone value respect agreements revenues earn reagent agreements recognized pursuant terms agreement based entirely contingent upon either consumables conduct fixed number tests delivered ii reported customer per test basis shipping handling classify freight costs billed customers net sales related freight costs included cost goods sold warranty warrant certain equipment defects design materials workmanship mostly period one year upon delivery equipment establish part cost goods sold provision expected costs warranty based historical experience specific warranty terms customer feedback review performed quarterly basis assess adequacy warranty accrual changes warranty accrual included current liabilities longterm liabilities follows millions research development internal research development costs expensed incurred thirdparty research development costs expensed contracted work performed foreign currency balance sheet accounts international subsidiaries translated current exchange rates end accounting period income statement items translated average exchange rates period resulting translation adjustments recorded separate component stockholders’ equity foreign currency transaction gains losses included foreign exchange losses net consolidated statements income transaction gains losses result primarily fluctuations exchange rates intercompany receivables payables denominated currencies functional currency subsidiary recorded transaction forward foreign exchange contracts part distributing products regularly enter intercompany transactions enter forward foreign exchange contracts manage foreign exchange risk future movements exchange rates affect foreign currency denominated intercompany receivables payables use derivative financial instruments speculative trading purposes seek hedge accounting treatment contracts result contracts generally maturity dates 90 days less denominated primarily currencies industrial countries recorded asset liability measured fair value balance sheet date resulting gains losses offset exchange gains losses related receivables payables recorded foreign exchange losses net consolidated statements income sharebased compensation plans stockbased compensation expense sharebased payment awards granted determined based grantdate fair value recognize compensation costs net estimated forfeitures requisite service period award generally vesting term sharebased payment awards estimated forfeiture rate based historical experience plans described fully note 9 earnings per share basic earnings per share computed dividing net income attributable biorad weighted average number common shares outstanding period diluted earnings per share takes account effect dilutive instruments stock options restricted stock uses average share price period determining number potential common shares added weighted average number shares outstanding potential common shares excluded diluted earnings per share calculation effect would antidilutive weighted average number common shares outstanding used calculate basic diluted earnings per share antidilutive shares follows thousands fair value financial instruments certain financial instruments including cash equivalents shortterm investments accounts receivable marketable securities notes payable accounts payable foreign exchange contracts carrying amounts approximate fair value estimated fair value financial instruments based exchange price would received asset paid transfer liability exit price using available market information appropriate valuation methodologies principal advantageous market asset liability orderly transaction market participants estimates necessarily indicative amounts could realized current market exchange considerable judgment required interpreting market data used develop estimates fair value use different market assumptions estimation techniques could material effect estimated fair value see note 3 recent accounting standards updates january 2017 financial accounting standards board “fasb” issued accounting standards update “asu” 201704 simplifying test goodwill impairment asu 201704 removes step 2 goodwill impairment test requires hypothetical purchase price allocation goodwill impairment amount reporting unit’s carrying value exceeds fair value exceed carrying amount goodwill asu 201704 effective prospectively annual interim periods beginning december 15 2019 early adoption permitted impairment tests performed january 1 2017 asu 201704 provide streamlined approach evaluating future goodwill impairment early adopted january 1 2017 assessed impact asu 201704 consolidated financial statements goodwill impairment occurred january 1 2017 january 2017 fasb issued asu 201701 clarifying definition business asu 201701 changes definition business assist entities evaluating set transferred assets activities business substantially fair value concentrated single asset group similar assets acquired set business met entity evaluates whether set meets requirement business include minimum input substantive process together significantly contribute ability create outputs determining whether set constitutes business critical accounting business combination differs significantly asset acquisition asu 201701 effective fiscal years beginning december 15 2017 interim periods within years asu 201701 applied prospectively transactions occurring within period adoption early adoption permitted including interim annual periods financial statements issued made available issuance early adopted asu 201701 january 1 2017 acquisition raindance technologies inc asu 201701 affect conclusion business combination see note 17 consolidated financial statements november 2016 fasb issued asu 201618 restricted cash asu 201618 requires entities show changes total cash equivalents restricted cash restricted cash equivalents statement cash flows result entities longer present transfers cash equivalents restricted cash restricted cash equivalents statement cash flows asu 201618 applied retrospectively effective fiscal years beginning december 15 2017 interim periods within years early adoption permitted limited amount restricted cash 20 million 14 million december 31 2016 2015 respectively reclassified cash either prepaid expenses current assets consolidated balance sheets time adoption cannot assure whether restricted cash amounts held restricted cash may historically reported amounts similar october 2016 fasb issued asu 201616 intraentity transfers assets inventory asu 201616 requires immediate recognition income tax consequences intercompany asset transfers asu 201616 effective fiscal years beginning december 15 2017 interim periods within fiscal years early adoption permitted beginning annual reporting period finan inventory transfers existing gaap prohibits recognition income tax consequences intercompany asset transfers whereby seller defers net tax effect buyer prohibited recognizing deferred tax asset difference newly created tax basis asset tax jurisdiction financial statement carrying amount reported consolidated financial statements asu 201616 specifically excludes scope intercompany inventory transfers whereby recognition tax consequences take place inventory sold third parties cial statements issued made available issuance plan early adopt asu 201616 currently evaluating effect asu 201616 consolidated financial statements august 2016 fasb issued asu 201615 classification certain cash receipts cash payments asu 201615 intended reduce diversity practice certain transactions classified statement cash flows asu 201615 effective fiscal years beginning december 15 2017 interim periods within fiscal years early adoption permitted currently evaluating effect asu 201615 consolidated statements cash flows june 2016 fasb issued asu 201613 measurement credit losses financial instruments asu 201613 replace current incurred loss approach expected loss model trade receivables instruments measured amortized cost require entities record allowances availableforsale debt securities rather reduce carrying amount current otherthantemporary impairment model asu 201613 effective fiscal years beginning december 15 2019 interim periods within fiscal years early adoption permitted entities annual periods beginning december 15 2018 interim periods therein currently evaluating effect asu 201613 consolidated financial statements march 2016 fasb issued asu 201609 improvements employee sharebased payment accounting asu 201609 require income tax effects awards recognized income statement awards vest settled also allow employer repurchase employee’s shares today tax withholding purposes without triggering liability accounting make policy election account forfeitures occur asu 201609 effective fiscal years beginning december 15 2016 interim periods within fiscal years adopted asu 201609 january 1 2017 made policy election account forfeitures occur expect asu 201609 material impact consolidated financial statements march 2016 fasb issued asu 201607 simplifying transition equity method accounting eliminates requirement retrospectively apply equity method previous periods investor initially obtains significant influence investee current guidance investor consolidate investment initially accounts method equity method required retrospectively apply equity method prior periods held investment subsequently obtained significant influence asu 201607 applied prospective basis effective entities fiscal years beginning december 15 2016 interim periods within years adopted asu 201607 january 1 2017 expect materially affect consolidated financial statements unless situation changes regarding ability influence investee future result cost method investment sartorius ag see note 3 consolidated financial statements february 2016 fasb issued asu 201602 leases require among items lease accounting recognize leases assets liabilities balance sheet qualitative quantitative disclosures enhanced better understand amount timing uncertainty cash flows arising leases asu 201602 effective fiscal years beginning december 15 2018 interim periods within fiscal years early adoption permitted plan early adopt asu 201602 adopted modified retrospective basis elective reliefs requires application asu 201602 periods presented currently gathering documenting analyzing lease agreements related asu anticipate material additions balance sheet rightofuse assets offset associated liabilities january 2016 fasb issued asu 201601 recognition measurement financial assets financial liabilities amendments asu 201601 among items require equity investments unconsolidated entities accounted using equity method accounting generally measured fair value earnings longer availableforsale classification changes fair value reported comprehensive income equity securities readily determinable fair values equity investments without readily determinable fair values cost method also eliminated however entities able elect record equity investments without readily determinable fair values cost less impairment plus minus subsequent adjustments observable price changes basis equity investments reported current earnings asu 201601 effective fiscal years beginning december 15 2017 interim periods within fiscal years equity securities would affected asu 201601 see availableforsale investments table note 3 consolidated financial statements time adoption cannot assure whether equity securities held equity securities may historically reported changes similar september 2015 fasb issued asu 201516 simplifying accounting measurementperiod adjustments eliminates requirement acquirer business combination account measurementperiod adjustments retrospectively asu 201516 acquirers must recognize measurementperiod adjustments period determine amounts including effect earnings amounts would recorded previous periods accounting completed acquisition date measurement period cannot exceed one year date acquisition asu 201516 effective january 1 2016 adopted time change accounting policy impact consolidated financial statements july 2015 fasb issued asu 201511 “simplifying measurement inventory” current guidance entity subsequently measures inventory lower cost market defined replacement cost net realizable value nrv less normal profit margin entity uses current replacement cost provided nrv ie ceiling nrv less “approximately normal profit margin” ie floor asu 201511 eliminates analysis requires entities measure inventory “at lower cost nrv” asu 201511 effective prospectively annual periods beginning december 15 2016 interim periods therein adopted asu 201511 january 1 2017 expect material impact consolidated financial statements april 2015 fasb issued asu 201503 simplifying presentation debt issuance costs asu 201503 issued simplify presentation debt issuance costs requiring debt issuance costs presented deduction corresponding debt liability makes presentation debt issuance costs consistent presentation debt discounts premiums prior us gaap debt issuance costs reported balance sheet assets amortized interest expense asu 201503 debt issuance costs continue amortized interest expense using effective interest method august 2015 fasb issued asu 201515 presentation subsequent measurement debt issuance costs associated lineofcredit arrangements clarify sec staff’s position would object entity deferring presenting debt issuance costs asset subsequently amortizing deferred debt issuance costs ratably term lineofcredit arrangement current practice adopted asu 201503 january 1 2016 retrospective basis change accounting policy condensed consolidated balance sheet december 31 2015 retrospectively adjusted decreasing assets longterm debt net current maturities 18 million respectively may 2014 fasb issued asu 201409 “revenue contracts customers” requires entity recognize amount revenue expects entitled transfer promised goods services customers asu 201409 replace existing revenue recognition guidance gaap becomes effective august 2015 fasb issued asu 201514 defer effective date annual reporting periods beginning december 15 2017 including interim periods within reporting period early adoption permitted original effective date asu 201409 annual reporting periods beginning december 15 2016 however early adopt december 2016 fasb issued asu 201620 technical corrections improvements topic 606 revenue contracts customers affect narrow aspects guidance issued asu 201409 may 2016 fasb issued asu 201612 narrowscope improvements practical expedients amends clarifies certain aspects asu 201409 include collectiblity presentation sales taxes collected customers noncash consideration contract modifications completed contracts transition april 2016 fasb issued asu 201610 identifying performance obligations licensing amends guidance asu 201409 accounting licenses intellectual property identifying performance obligations march 2016 fasb issued asu 201608 principal versus agent considerations reporting revenue gross versus net amends principal versus agent guidance asu 201409 standards applied retrospectively permit use either retrospective cumulative effect transition method use cumulative effect transition method adopt asus 201409 201620 201612 201610 201608 january 1 2018 completed revenue recognition diagnostic surveys across regions decentralized sales contracting process based local country commercial regulations practices begun assessing individual contracts identify performance obligations asu’s compared deliverables separate units accounting previously identified current us gaap determine effect asu’s consolidated financial statements related disclosures 2 acquisitions propel labs inc january 2016 acquired high performance analytical flow cytometer platform propel labs propel enable advanced novice users perform basic multiparameter cytometry wide range applications chemistries asset acquisition accounted business combination new analytical flow cytometer platform represented integrated set activities assets capable conducted managed purpose providing return therefore constitutes business accordance gaap amount acquisitionrelated cost minimal biorad primarily represented acquisition process business acquisition included life science segment’s results operations acquisition date fair value consideration acquisition date 328 million included 95 million paid cash closing date 233 million contingent consideration potentially payable propel effects calculation revision reflected fourth quarter 2016 revision reduced goodwillintangibles contingent consideration amount significant impact consolidated income statement contingent consideration based probabilityweighted income approach related achievement certain sales milestones recognized estimated fair value 254 million december 31 2016 see note 3 fair value measurements fair values net assets acquired propel acquisition date determined 327 million definitelived intangible assets 01 million goodwill expect goodwill recorded deductible income tax purposes acquired analytical flow cytometer platform fits well biorad’s existing life science segment product offerings may offer researchers greater access technology addition biorad contracted propel provide development services concurrent included purchase agreement biorad receiving future manufacturing engineering marketing support propel payments made upon successful completion contracted services result services included total purchase consideration majority expensed future periods 3 fair value measurements determine fair value asset liability based assumptions market participants would use pricing asset liability orderly transaction market participants measurement date identification market participant assumptions provides basis determining inputs used pricing asset liability fair value hierarchy established gives precedence fair value measurements calculated using observable inputs using unobservable inputs hierarchy prioritizes inputs three broad levels follows • level 1 quoted prices active markets identical instruments • level 2 significant observable inputs including quoted prices active markets similar instruments • level 3 significant unobservable inputs including assumptions determining fair value certain investments financial assets liabilities carried fair value measured recurring basis december 31 2016 classified hierarchy follows millions financial assets liabilities carried fair value measured recurring basis december 31 2015 classified hierarchy follows millions cash equivalents included cash equivalents consolidated balance sheets b availableforsale investments included following accounts consolidated balance sheets millions c forward foreign exchange contracts asset position included current assets consolidated balance sheets forward foreign exchange contracts liability position included current liabilities consolidated balance sheets e contingent consideration liabilities included following accounts consolidated balance sheets millions 2012 recognized contingent consideration liability certain milestones 446 million upon acquisition new cell sorting system propel since 2012 paid 289 million upon reaching milestones reduced valuation milestones 126 million estimated fair value 31 million december 31 2016 remaining liability paid february 2017 first quarter 2016 recognized contingent consideration liability upon acquisition new high performance analytical flow cytometer platform propel acquisition date contingent consideration based probabilityweighted income approach related achievement sales milestones ranging 39 20 calendar years 2017 2020 sales milestones could potentially range 0 unlimited amount december 31 2020 fair value contingent consideration acquisition date 233 million effects calculation revision reflected fourth quarter 2016 contingent consideration recognized estimated fair value 254 million december 31 2016 following table provides reconciliation level 3 cell sorting system analytical flow cytometer platform contingent consideration liabilities measured estimated fair value based original valuations updated quarterly year ended december 31 2016 millions following table provides quantitative information level 3 inputs fair value measurement analytical flow cytometer platform contingent consideration liability december 31 2016 significant increases decreases inputs isolation could result significantly lower higher fair value measurement 2014 recognized contingent consideration liability upon acquisition gnubio inc contingent consideration milestones valued 107 million acquisition date based assumptions regarding probability achieving milestones amounts discounted present value level 3 contingent consideration revalued fair value 100 million december 31 2016 2015 estimate fair value level 2 debt securities december 31 2016 2015 primary pricing provider uses sp capital iq primary pricing source pricing process allows us select hierarchy pricing sources securities held chosen pricing hierarchy level 2 securities certificates deposit commercial paper sp capital iq primary pricing source custodian secondary pricing source sp capital iq price level 2 security hold pricing provider utilize custodian supplied pricing commercial paper december 31 2016 2015 pricing determined straightline calculation starting purchase price date purchase increasing par maturity interest bearing certificates deposit commercial paper priced par primary pricing provider performs daily reasonableness testing sp capital iq prices price changes 5 greater investigated resolved addition perform quarterly testing sp capital iq prices custodian reported prices outside tolerable variance approximately 1 investigated resolved availableforsale investments consist following millions unrealized gains longterm marketable equity securities primarily due investment sartorius ag preferred shares following summary investments gross unrealized losses associated fair value millions unrealized losses securities due number factors including changes interest rates changes economic conditions changes market outlook various industries among others biorad ability intent hold investments unrealized losses recovery fair value reasonable period time sufficient forecasted recovery fair value may maturity consider investments otherthantemporarily impaired december 31 2016 december 31 2015 part distributing products regularly enter intercompany transactions enter forward foreign exchange contracts manage foreign exchange risk future movements foreign exchange rates affect foreign currency denominated intercompany receivables payables use derivative financial instruments speculative trading purposes seek hedge accounting treatment contracts result contracts generally maturity dates 90 days less denominated primarily currencies industrial countries recorded fair value balance sheet date notional principal amounts provide one measure transaction volume outstanding december 31 2016 represent amount biorads exposure loss estimated fair value contracts derived using spot rates reuters last business day quarter points provided counterparties resulting gains losses offset exchange gains losses related receivables payables included foreign exchange losses net consolidated statements income following summary forward foreign currency exchange contracts millions following summary amortized cost estimated fair value debt securities december 31 2016 contractual maturity date millions estimated fair value financial instruments recognized fair value consolidated balance sheets included investments presented table fair value determined using significant observable inputs including quoted prices active markets similar instruments estimates necessarily indicative amounts could realized current market exchange considerable judgment required interpreting market data used develop estimates fair value use different market assumptions estimation techniques could material effect estimated fair value investments include financial instruments majority fair value based similar actively traded stock adjusted various discounts including discount marketability longterm debt excluding leases current maturities estimated fair value based quoted market prices similar issues estimated fair value financial instruments discussed level fair value hierarchy within fair value measurement categorized follows millions shares ordinary voting stock sartorius ag sartorius goettingen germany process technology supplier biotechnology pharmaceutical chemical food beverage industries 35 outstanding voting shares excluding treasury shares sartorius december 31 2016 sartorius family trust sartorius family members hold controlling interest outstanding voting shares representative designee sartorius’ board directors ability exercise significant influence operating financial policies sartorius account investment using cost method carrying value investment included investments consolidated balance sheets stock thinly traded conjunction valuation method discussed classified estimated fair value level 2 level 2 classification appropriate given valuation method employed incorporates observable input fair value sartorius’ actively traded preferred stock 4 goodwill purchased intangible assets changes goodwill segment follows millions conjunction purchase certain assets propel january 2016 see note 2 acquisitions recorded 01 million goodwill 327 million definitelived intangible assets 297 million developed product technology 30 million covenants compete effects calculation revision reflected fourth quarter 2016 information regarding identifiable purchased intangible assets definite indefinite lives follows millions 2016 fully impaired goodwill inprocess research development amounts 135 million 464 million respectively associated 2014 acquisition gnubio inc impairments based upon revision level 3 valuation inputs ie expected future cash flows impairment losses recorded 2015 amortization expense related purchased intangible assets years ended december 31 2016 2015 2014 352 million 365 million 478 million respectively estimated future amortization expense based existing purchased intangible assets years ending december 31 2017 2018 2019 2020 2021 thereafter 272 million 242 million 214 million 194 million 184 million 510 million respectively 5notes payable longterm debt domestic international lines credit standby letters credit guarantee arrangements 2057 million available borrowing usage december 31 2016 reduced 54 million utilized standby letters credit guarantee arrangements issued banks support obligations principal components longterm debt follows millions senior notes due 2020 december 2010 biorad sold 4250 million principal amount senior notes due 2020 4875 notes sale yielded net cash proceeds 4226 million effective rate 4946 4875 notes pay fixed rate interest 4875 per year option redeem 4875 notes time redemption price 100 principal amount plus specified makewhole premium defined indenture governing 4875 notes accrued unpaid interest thereon redemption date obligations 4875 notes secured rank equal right payment existing future unsubordinated indebtedness certain covenants apply year end 4875 notes including limitations following liens sale leaseback transactions mergers consolidations sales assets covenants compliance covenants december 31 2016 restrictive covenants relating total indebtedness interest coverage stock repurchases recapitalizations dividends distributions shareholders current ratios credit agreement june 2014 biorad entered 2000 million unsecured credit agreement borrowings credit agreement revolving basis used make permitted acquisitions working capital general corporate purposes outstanding borrowings credit agreement december 31 2016 2015 however 08 million utilized domestic standby letters credit reduced borrowing availability credit agreement matures june 2019 borrowed credit agreement borrowing rate would 225 december 31 2016 credit agreement requires biorad comply certain financial ratios covenants among things ratios covenants include leverage ratio test interest coverage test well restrictions ability declare pay dividends incur debt guarantee debt enter transactions affiliates merge consolidate sell assets make investments create liens compliance ratios covenants december 31 2016 maturities longterm debt december 31 2016 follows 2017 03 million 2018 03 million 2019 02 million 2020 4253 million 2021 03 million thereafter 106 million 6 income taxes us international components income taxes follows millions provision income taxes consists following millions reconciliation effective tax rate income taxes statutory tax rate follows effective income tax rate 32 22 32 2016 2015 2014 respectively effective tax rates 2016 2015 included tax benefits repatriation foreign earnings effective tax rate 2016 included additional tax liabilities unrecognized tax benefits related nondeductibility interest expense foreign jurisdictions effective tax rate 2014 included nondeductible penalties losses nonrecurring foreign taxes result primarily income earned france switzerland many jurisdictions operate including switzerland russia uk singapore statutory tax rates significantly lower us statutory tax rate 35 effective tax rate may impacted future either favorably unfavorably many factors including limited changes statutory tax rates changes tax laws regulations tax audits settlements generation tax credits deferred tax assets liabilities reflect tax effects losses credits temporary differences carrying amounts assets liabilities financial reporting purposes amounts used income tax purposes significant components deferred tax assets liabilities follows millions december 31 2016 biorad’s international subsidiaries combined net operating loss carryforwards 1413 million loss carryforwards 1408 million expiration date believe likely benefit net operating loss carryforwards realized provided valuation allowance 296 million relating net operating loss carryforwards december 31 2016 biorad us federal net operating loss carryforwards approximately 19 million result acquisitions carryforwards subject limitation utilization expire 2028 2033 december 31 2016 biorad us federal foreign tax credit carryforwards 276 million us federal research tax credit carryforwards 36 million 04 million subject limitations utilization december 31 2016 biorad approximately 53 million california net operating loss carryforwards related acquisition quantalife believe likely benefit net operating loss carryforwards realized recorded full valuation allowance losses december 31 2016 biorad deferred tax asset 259 million relating california research tax credit carryforwards including 20 million acquisition quantalife may carried forward indefinitely based judgment consistent prior years recorded full valuation allowance deferred tax asset believe likely certain deferred tax assets described realized foreseeable future recognized tax benefits relating reversal valuation allowance deferred tax assets december 31 2016 recognized reduction income tax expense income tax returns audited us federal state foreign tax authorities currently examination many tax authorities tax years open examination include years 2013 forward us years 2010 forward certain foreign jurisdictions including france switzerland germany differing interpretations tax laws regulations result significant disputes may arise tax authorities involving issues timing amount deductions allocations income among various tax jurisdictions evaluate exposures associated tax filing positions quarterly basis record liabilities unrecognized tax benefits related uncertain tax positions believe currently pending uncertain tax positions material adverse effect consolidated financial statements although adverse resolution one uncertain tax positions period may material impact results operations period following tabular reconciliation total amounts unrecognized tax benefits millions biorad recognizes accrued interest penalties related unrecognized tax benefits income tax expense related unrecognized tax benefits noted biorad accrued interest penalties 115 million 30 million 38 million december 31 2016 2015 2014 respectively total unrecognized tax benefits interest penalties 276 million 2016 partially offset prepaid taxes 127 million net amount 149 million december 31 2016 based expected outcome certain examinations result expiration statutes limitation certain jurisdictions believe within next twelve months reasonably possible previously unrecognized tax benefits could decrease approximately 35 million substantially amounts impact effective income tax rate recognized general practice intention reinvest earnings nonus subsidiaries operations december 31 2016 biorad made provision us additional foreign withholding taxes approximately 447 million excess amount financial reporting tax basis investments foreign subsidiaries essentially permanent duration generally amounts become subject us taxation upon remittance dividends certain circumstances earnings repatriated us deferred tax liability associated temporary differences would approximately 47 million 7 stockholders equity biorad’s issued outstanding stock consists class common stock class b common stock class b share class b participates equally earnings biorad identical respects except follows class limited voting rights share class entitled one tenth vote matters share class b entitled one vote additionally class stockholders entitled elect 25 board directors class b stockholders entitled elect 75 directors cash dividends may paid class shares without paying cash dividend class b shares cash dividend may paid class b shares unless least equal cash dividend paid class shares class b shares convertible time class shares oneforone basis option stockholder founders biorad schwartz family collectively hold majority biorad’s voting stock result schwartz family able exercise significant influence biorad changes biorads issued common stock shares follows thousands treasury shares board directors authorized repurchase 180 million biorads common stock 33 million yet repurchased open market december 31 2016 amended restated credit agreement credit agreement limits ability repurchase stock accordance terms awards 2007 incentive award plan june 2012 withheld 122 shares class common stock 917 shares class b common stock satisfy minimum statutory tax obligations due upon vesting restricted stock certain employees considered repurchase stock restricted stock vested december 31 2013 therefore anticipate repurchasing shares purpose repurchases stock 2016 2015 8 accumulated comprehensive income accumulated comprehensive income included consolidated balance sheets consolidated statements changes stockholders equity consists following components millions increases 2016 2015 net unrealized holding gains availableforsale investments primarily ownership preferred shares sartorius amounts reclassified accumulated comprehensive income consolidated statements income presentation location follows reclassification adjustments calculated using specific identification method 9 sharebased compensationstock option purchase plans description sharebased compensation plans believe sharebased compensation plans align interests employees shareholders stock option award plans two stock option plans officers certain employees 2003 stock option plan 2003 plan 2007 incentive award plan 2007 plan 2003 plan authorized grant incentive stock options nonqualified stock options employees 2007 plan authorizes grant stock options restricted stock restricted stock units stock appreciation rights types equity awards employees longer grant stock option grants 2003 plan since 2007 sharebased compensation grants 2007 plan total 2250360 shares reserved issuance equity awards 2007 plan may either class b common stock specified within plan december 31 2016 587509 shares available granted future plans class b options granted prices less fair market value underlying common stock date grant generally options granted term 10 years vest increments 20 per year fiveyear period yearly anniversary date grant stock awards issued 2007 plan generally vest increments 20 per year fiveyear period yearly anniversary date grant employee stock purchase plans 2011 employee stock purchase plan 2011 espp provides eligible employees may contribute 10 compensation 25000 annually toward quarterly purchase class common stock employees’ purchase price 85 lesser fair market value stock first business day last business day calendar quarter 2011 espp includes two components code section 423 component intend qualify “employee stock purchase plan” section 423 us internal revenue code 1986 amended “code” non423 component authorizes grant purchase rights qualify “employee stock purchase plan” section 423 code authorized sale 600000 shares class common stock 2011 espp sharebased compensation expense included sharebased compensation expense cost related stock option grants espp stock purchases restricted stock unit awards sharebased compensation expense allocated cost goods sold research development expense selling general administrative expense consolidated statements income 2016 2015 2014 recognized sharebased compensation expense 197 million 170 million 149 million respectively capitalize sharebased compensation expense inventory options awards amortize fair value straightline basis stock compensation awards amortized requisite service periods awards generally vesting periods stock options following table summarizes stock option activity intrinsic value stock options defined difference current market value exercise price total intrinsic value date exercise stock options exercised 2016 2015 2014 approximately 1 million 13 million 5 million respectively total grant date fair value options vested 2016 2015 2014 21 million 22 million 21 million respectively cash received stock options exercised 2016 2015 2014 12 million 29 million 58 million respectively actual tax benefit realized tax deductions stock options exercised totaled 60 million 93 million 53 million 2016 2015 2014 respectively december 31 2016 49 million total unrecognized compensation cost stock options amount expected recognized future weightedaverage period approximately 3 years weightedaverage fair value stock options granted estimated using blackscholes optionpricing model following weightedaverage assumptions volatility based historical volatilities common stock period equal stock option’s expected life riskfree interest rate based us treasury yield curve effect time grant expected life represents number years estimate based primarily historical experience options outstanding prior exercise anticipate paying cash dividends future therefore use expected dividend yield zero restricted stock units restricted stock units rights receive shares company stock granted 2009 2016 2007 plan fair value restricted stock unit market value determined closing price stock day grant following table summarizes restricted stock unit activity total grant date fair value restricted stock units vested 2016 2015 2014 140 million 122 million 106 million respectively december 31 2016 approximately 468 million total unrecognized compensation cost related restricted stock units amount expected recognized remaining weightedaverage period approximately 4 years employee stock purchase plans fair value employees’ purchase rights 2011 espp estimated using blackscholes model following weightedaverage assumptions major assumptions primarily based historical data volatility based historical volatilities common stock period equal expected life purchase rights riskfree interest rate based us treasury yield curve effect time grant anticipate paying cash dividends future therefore use expected dividend yield zero sold 93605 shares 115 million 96634 shares 108 million 102222 shares 102 million 2011 espp employees 2016 2015 2014 respectively december 31 2016 96121 shares remain authorized available issuance 2011 espp currently issue new shares satisfy stock option exercises restricted stock issuances espp stock purchases 10 income expense net income expense net includes following components millions otherthantemporary impairment losses investments recorded 2016 2015 2014 certain availableforsale investments certain equity investment light continuing declines market prices time 11 supplemental cash flow information reconciliation net income net cash provided operating activities follows millions 12 commitments contingent liabilities rents leases rental expense operating leases 444 million 450 million 469 million 2016 2015 2014 respectively leases principally facilities automobiles sublease income annual future minimum lease payments december 31 2016 operating leases follows 2017 421 million 2018 321 million 2019 247 million 2020 204 million 2021 beyond 388 million deferred profit sharing retirement plan profit sharing plan covering substantially us employees contributions made discretion board directors biorad liability current year’s contribution expense 151 million 147 million 137 million 2016 2015 2014 respectively postemployment benefits several foreign locations statutorily required provide lump sum severance termination indemnity employees plans vested benefit obligation december 31 2016 2015 680 million 686 million respectively included accrued payroll employee benefits longterm liabilities consolidated balance sheets plans required funded trust device used accumulate assets settle obligations however plans require funding based local laws trust device used accumulate assets assist settling obligations purchase obligations december 31 2016 obligations recognized balance sheet 1429 million include purchases goods services enforceable legally binding biorad specify significant terms exclude agreements cancelable without penalty obligations also include postemployment benefits foreign locations indicated annual future fixed determinable portion purchase obligations recognized balance sheet december 31 2016 follows 2017 343 million 2018 73 million 2019 31 million 2020 25 million 2021 16 million 2021 941 million december 31 2016 purchase obligations recognized balance sheet 350 million include agreements purchase goods services enforceable legally binding biorad specify significant terms exclude agreements cancelable without penalty annual future fixed determinable portion purchase obligations recognized balance sheet december 31 2016 follows 2017 175 million 2018 50 million 2019 35 million 2020 35 million 2021 55 million 2021 0 million letters creditguarantees ordinary course business times required post letters creditguarantees letters creditguarantees issued financial institutions guarantee obligations various parties contingently liable 54 million standby letters creditguarantees financial institutions december 31 2016 contingent consideration first quarter 2016 recognized contingent consideration liability upon acquisition new high performance analytical flow cytometer platform propel acquisition date contingent consideration based probabilityweighted income approach related achievement sales milestones ranging 39 20 calendar years 2017 2020 sales milestones could potentially range 0 unlimited amount december 31 2020 fair value contingent consideration acquisition date 233 million effects calculation revision reflected fourth quarter 2016 contingent consideration recognized estimated fair value 254 million december 31 2016 2014 recognized contingent consideration liability upon acquisition gnubio inc contingent consideration milestones valued 107 million acquisition date based assumptions regarding probability achieving milestones amounts discounted present value level 3 contingent consideration revalued fair value 100 million december 31 2016 2015 2012 recognized contingent consideration liability certain milestones 446 million upon acquisition new cell sorting system propel since 2012 paid 289 million upon reaching milestones reduced valuation milestones 126 million estimated fair value 31 million december 31 2016 remaining liability paid february 2017 concentrations labor subject collective bargaining agreements december 31 2016 approximately seven percent biorads approximately 3300 us employees covered collective bargaining agreement expire november 7 2019 many biorads nonus fulltime employees especially france covered collective bargaining agreements 13 legal proceedings january 23 2015 city riviera beach general employees’ retirement system filed shareholder derivative lawsuit superior court california contra costa county three current directors one former director also named nominal defendant complaint plaintiff alleges directors breached fiduciary duty loyalty failing ensure sufficient internal controls systems compliance foreign corrupt practices act fcpa failed provide adequate training fcpa based actions directors unjustly enriched purportedly seeking relief behalf plaintiff seeks award restitution unspecified damages costs expenses including attorneys’ fees april 23 2015 individual defendants filed demurrer requesting dismissal complaint case demurrer heard august 6 2015 court granted demurrer failure make demand board directors august 17 2015 provided leave amend september 4 2015 plaintiff filed amended complaint simultaneously served litigation demand letter board directors board via counsel action letter demanded investigate bring appropriate legal action certain individuals including defendants city riviera beach case six current former employees plaintiff also moved temporary stay proceedings purportedly enable board respond demand board formed demand review committee respond demand february 24 2016 demand review committee reported board concluded investigation unanimously determined best interests company stockholders pursue litigation individuals named city riviera beach’s litigation demand letter october 6 2015 individual defendants filed second demurrer seeking dismiss case failure make timely presuit demand case stayed pending mediation caption city riviera beach general employees’ retirement system v schwartz et al case c1500140 lawsuit demand letter referred collectively “california action” august 13 2015 august 18 2015 respectively international brotherhood electrical workers local 38 pension fund wayne county employees’ retirement system filed stockholder derivative complaint delaware court chancery four current directors one former director named nominal defendant complaints allege defendants failed cause us develop internal controls sufficient ensure compliance fcpa plaintiffs assert claims breach fiduciary duty unjust enrichment request award damages sustained result alleged violations among relief two lawsuits consolidated august 27 2015 case stayed pending mediation caption consolidated case biorad laboratories inc stockholder litigation consol ca 11387vcn del ch cases filed delaware court chancery together california action referred collectively “derivative actions” parties filed stipulation dated november 4 2016 superior court california contra costa county sets forth terms proposed settlement derivative actions proposed settlement includes dismissal prejudice claims asserted derivative actions agreedupon set revised corporate procedures monetary payment award attorneys’ fees costs plaintiffs’ counsel defendants admit liability fault connection proposed settlement december 22 2016 superior court california contra costa county issued order granting preliminary approval proposed settlement pursuant order court hold hearing final approval settlement march 2 2017 objections settlement required filed writing court february 15 2017 may 27 2015 former general counsel sanford wadler filed lawsuit us district court northern district california us four current directors one former director plaintiff’s suit alleged whistleblower retaliation violation sarbanesoxley act doddfrank act raising fcparelated concerns mr wadler also alleged wrongful termination violation public policy nonpayment wages waiting time penalties violation california labor code plaintiff sought back pay compensatory damages lost wages earnings retirement benefits employee benefits compensation mental pain anguish emotional distress waiting time penalties punitive damages litigation costs including attorneys’ fees reinstatement employment july 28 2015 filed motion dismiss plaintiffs complaint specifically requested dismissal claims alleged us doddfrank act california labor code 11025 claims directors sarbanesoxley act doddfrank act october 23 2015 district court granted motion respect alleged violations sarbanesoxley act director defendants except norman schwartz prejudice court denied motion dismiss claims doddfrank act us director defendants parties engaged mediation case april 19 2016 september 14 2016 mediations result settlement trial commenced january 17 2017 concluded february 6 2017 mr wadler awarded 1092 million plus prejudgment interest 141608 postjudgment interest mr wadler’s litigation costs expert witness fees reasonable attorneys’ fees approved court provided judgment interest mr wadlers litigation costs considering appeal judgment biorad received three notices violations bay area air quality management district “district” district alleges operated three 3 power generation units without appropriate monitoring recordkeeping exceeded permissible levels emissions operations cooperating district investigating allegations formal proceeding initiated district also party various claims legal actions complaints arising ordinary course business cannot time reasonably estimate range exposure potential liability respect matters believe time ultimate liability resulting matters material adverse effect results operations financial position liquidity cannot give assurance regarding ultimate outcome matters resolution could material operating results particular period depending level income period 14 segment information biorad multinational manufacturer worldwide distributor life science research products clinical diagnostics products two reportable segments life science clinical diagnostics reportable segments strategic business lines offer 8000 different products services require different marketing strategies disclose quantitative information different products services impractical based primarily numerous products services sell global markets serve life science segment develops manufactures sells services reagents apparatus instruments used biological research products sold university medical school laboratories pharmaceutical biotechnology companies food testing laboratories government industrial research facilities clinical diagnostics segment develops manufactures sells services automated test systems informatics systems test kits specialized quality controls healthcare market products sold reference laboratories hospital laboratories state newborn screening facilities physicians’ office laboratories transfusion laboratories insurance forensic testing laboratories operations include remainder analytical instruments segment results presented manner present operations internally make operating decisions assess performance accounting policies segments described significant accounting policies see note 1 segment profit loss includes allocation corporate expense based upon sales allocation interest expense based upon accounts receivable inventories difference total segment allocated interest expense depreciation amortization capital expenditures corresponding consolidated amounts attributable corporate headquarters segments expected manage assets completely control accordingly segment assets include primarily accounts receivable inventories gross machinery equipment goodwill balances included corporate segment reporting purposes information regarding industry segments december 31 2016 2015 2014 years ended follows millions net corporate operating expense consists receipts expenditures primary responsibility segment operating management therefore allocated segments performance assessment chief operating decision maker 2014 included accrual 201 million associated us securities exchange commission department justice investigations relating us foreign corrupt practices act final settlement reached fourth quarter 2014 following reconciles total segment profit consolidated income taxes millions following reconciles total segment assets consolidated total assets millions following presents net sales external customers geographic region based primarily location use product service millions following presents property plant equipment net investments assets excluding deferred income taxes geographic region based upon location asset millions 15 restructuring costs year ended december 31 2016 recorded 125 million related restructuring actions include elimination relocation various positions actions generally intended streamline focus efforts properly align cost structure projected future revenue streams following table summarizes activity restructuring reserves severance millions may 2016 management announced take certain actions europe geographic region designed better align expenses revenue gross margin profile position us improved operating performance actions aligned creation evolution organization structure coordinated implementation global single instance erp platform expected incurred 2019 result recorded approximately 125 million restructuring charges related severance employee benefits year ended december 31 2016 90 million anticipated paid 2019 liability 90 million december 31 2016 encompassed shortterm liability 64 million longterm liability 26 million amounts recorded reflected cost goods sold 21 million selling general administrative expense 104 million consolidated statements income year ended december 31 2016 amounts adjusted primarily additional positions identified elimination partially offset employees finding positions within biorad leaving prematurely 16 quarterly financial data unaudited summarized quarterly financial data 2016 2015 follows millions except per share data note result net loss three months ended december 31 2016 potentially issuable common shares excluded diluted shares used computation earnings per share effect antidilutive 17 subsequent event february 15 2017 acquired issued outstanding stock raindance technologies inc raindance approximately 87 million including certain assumed net liabilities cash payments closing 829 million acquisition included life science segment’s results operations acquisition date accounted business combination amount acquisitionrelated costs minimal biorad primarily represented acquisition process goodwill recorded deductible income tax purposes presently unable report purchase price allocation evaluation transaction time needed complete information transfer seller include information valuation individual assets liabilities raindances foundational intellectual property portfolio product lines encompass wide range biological reactions droplets potential applications life science research clinical research genomic tools provide ultrasensitive detection genetic variations cancer well inherited infectious diseases enabling research areas noninvasive liquid biopsy believe raindances dropletbased solutions extend reach nextgeneration sequencing applications strengthen position area droplet digital™ pcr offering customers solutions wide range nucleic acid detection applications item 9item 8 financial statements supplementary data report independent registered public accounting firm stockholders board directors biorad laboratories inc opinion consolidated financial statements audited accompanying consolidated balance sheets biorad laboratories inc subsidiaries company december 31 2020 2019 related consolidated statements income comprehensive income changes stockholders’ equity cash flows years threeyear period ended december 31 2020 related notes collectively consolidated financial statements opinion consolidated financial statements present fairly material respects financial position company december 31 2020 2019 results operations cash flows years threeyear period ended december 31 2020 conformity us generally accepted accounting principles also audited accordance standards public company accounting oversight board united states pcaob companys internal control financial reporting december 31 2020 based criteria established internal control integrated framework 2013 issued committee sponsoring organizations treadway commission report dated february 12 2021 expressed unqualified opinion effectiveness companys internal control financial reporting changes accounting principle discussed note 1 consolidated financial statements company changed method accounting leases effective january 1 2019 due adoption accounting standard update asu 201602 leases related accounting standard updates basis opinion consolidated financial statements responsibility company’s management responsibility express opinion consolidated financial statements based audits public accounting firm registered pcaob required independent respect company accordance us federal securities laws applicable rules regulations securities exchange commission pcaob conducted audits accordance standards pcaob standards require plan perform audit obtain reasonable assurance whether consolidated financial statements free material misstatement whether due error fraud audits included performing procedures assess risks material misstatement consolidated financial statements whether due error fraud performing procedures respond risks procedures included examining test basis evidence regarding amounts disclosures consolidated financial statements audits also included evaluating accounting principles used significant estimates made management well evaluating overall presentation consolidated financial statements believe audits provide reasonable basis opinion critical audit matter critical audit matter communicated matter arising current period audit consolidated financial statements communicated required communicated audit committee 1 relate accounts disclosures material consolidated financial statements 2 involved especially challenging subjective complex judgments communication critical audit matter alter way opinion consolidated financial statements taken whole communicating critical audit matter providing separate opinions critical audit matter accounts disclosures relate assessment lease term reagent rental arrangements discussed note 1 consolidated financial statements company earns revenue reagent rental agreements customers agreement generally includes lease elements subject lease accounting standards nonlease elements subject revenue accounting standards classification lease component operating salestype lease impact timing revenue recognition cost attributable underlying lease elements reagent rental arrangements contain option lessee extend option lessee cancel period contract enforceable generally short lease term determined generally noncancelable period revenue allocated reagent rental lease elements approximately 3 total revenue year ended december 31 2020 included part net sales consolidated statement income identified assessment lease term reagent rental agreements including impact associated contractual termination penalties critical audit matter company’s determination lease classification operating salestype lease primarily dependent initial determination lease term company’s process based manual examination high volume agreements negotiated individually across world diverse terms testing determination lease term including consideration contractual termination penalties required high degree auditor judgment design execute audit procedures following primary procedures performed address critical audit matter evaluated design tested operating effectiveness certain internal controls related company’s lease classification process included controls related company’s process determining lease term including consideration contractual termination penalties assessed company’s policy determining lease term reagent rental arrangements accordance us generally accepted accounting principles additionally selection reagent rental agreements read underlying contract compared relevant terms within contract company’s determination lease term analysis evaluated management’s judgment determination length lease term evaluated sufficiency evidence obtained assessing results procedures performed including appropriateness nature extent evidence report independent registered public accounting firm stockholders board directors biorad laboratories inc opinion internal control financial reporting audited biorad laboratories inc subsidiaries company internal control financial reporting december 31 2020 based criteria established internal control integrated framework 2013 issued committee sponsoring organizations treadway commission opinion company maintained material respects effective internal control financial reporting december 31 2020 based criteria established internal control integrated framework 2013 issued committee sponsoring organizations treadway commission also audited accordance standards public company accounting oversight board united states pcaob consolidated balance sheets company december 31 2020 2019 related consolidated statements income comprehensive income changes stockholders equity cash flows years threeyear period ended december 31 2020 collectively consolidated financial statements report dated february 12 2021 expressed unqualified opinion consolidated financial statements basis opinion company’s management responsible maintaining effective internal control financial reporting assessment effectiveness internal control financial reporting included accompanying management’s report internal control financial reporting responsibility express opinion company’s internal control financial reporting based audit public accounting firm registered pcaob required independent respect company accordance us federal securities laws applicable rules regulations securities exchange commission pcaob conducted audit accordance standards pcaob standards require plan perform audit obtain reasonable assurance whether effective internal control financial reporting maintained material respects audit internal control financial reporting included obtaining understanding internal control financial reporting assessing risk material weakness exists testing evaluating design operating effectiveness internal control based assessed risk audit also included performing procedures considered necessary circumstances believe audit provides reasonable basis opinion definition limitations internal control financial reporting companys internal control financial reporting process designed provide reasonable assurance regarding reliability financial reporting preparation financial statements external purposes accordance generally accepted accounting principles companys internal control financial reporting includes policies procedures 1 pertain maintenance records reasonable detail accurately fairly reflect transactions dispositions assets company2 provide reasonable assurance transactions recorded necessary permit preparation financial statements accordance generally accepted accounting principles receipts expenditures company made accordance authorizations management directors company 3 provide reasonable assurance regarding prevention timely detection unauthorized acquisition use disposition companys assets could material effect financial statements inherent limitations internal control financial reporting may prevent detect misstatements also projections evaluation effectiveness future periods subject risk controls may become inadequate changes conditions degree compliance policies procedures may deteriorate biorad laboratories inc consolidated balance sheets thousands except share data accompanying notes integral part consolidated financial statements biorad laboratories inc consolidated balance sheets continued thousands except share data accompanying notes integral part consolidated financial statements biorad laboratories inc consolidated statements income thousands except per share data accompanying notes integral part consolidated financial statements biorad laboratories inc consolidated statements comprehensive income thousands accompanying notes integral part consolidated financial statements biorad laboratories inc consolidated statements cash flows thousands following table provides reconciliation cash equivalents restricted cash reported within consolidated balance sheets agrees amounts shown consolidated statements cash flows thousands restricted cash items primarily related performance guarantees restricted deposits accompanying notes integral part consolidated financial statements biorad laboratories inc consolidated statements changes stockholders’ equity thousands asu 201601 recognition measurement financial assets financial liabilities asu 201803 technical corrections improvements financial instruments recognition measurement financial assets financial liabilities disclosed december 31 2018 form 10k asu 201616 intraentity transfers assets inventory disclosed december 31 2018 form 10k see note 1 significant accounting policies revenue recognition accompanying notes integral part consolidated financial statements biorad laboratories inc notes consolidated financial statements 1significant accounting policies basis presentation consolidated financial statements include accounts biorad laboratories inc wholly majority owned subsidiaries referred report “biorad” “we” “us” “our” elimination intercompany balances transactions preparation financial statements conformity us generally accepted accounting principles requires management make estimates assumptions affect amounts reported financial statements accompanying notes actual results could differ estimates cash equivalents cash equivalents consist cash highly liquid investments original maturities three months less readily convertible cash equivalents stated cost approximates fair value shortterm restricted investments shortterm restricted investments 56 million december 31 2020 2019 represent money market fund provided collateral secure workers compensation general liability insurance availableforsale investments availableforsale investments consist corporate obligations municipal securities asset backed securities us government sponsored agencies management classifies investments time purchase reevaluates classification balance sheet date investments maturities beyond one year may classified shortterm based liquid nature marketable securities represent investment cash available current operations availableforsale investments reported fair value based quoted market prices observable market data unrealized gains losses reported component comprehensive income net related tax effect january 1 2020 adopted accounting standards update asu 201613 described recent accounting pronouncements adopted accordance adopted guidance replaced incurred loss approach expected loss model instruments measured amortized cost record allowances availableforsale debt securities rather reduce carrying amount otherthantemporary impairment followed otherthantemporary impairment model prior january 1 2020 realized gains losses otherthantemporary impairments investments included income expense net see note 10 concentration credit risk financial instruments potentially subject us concentration credit risk consist primarily cash equivalents investments foreign exchange contracts trade accounts receivable cash equivalents investments placed various highly rated major financial institutions located different geographic regions forward contracts used managing foreign currency exposures element risk counterparties may unable meet terms agreements attempt minimize risk limiting counterparties diverse group highlyrated domestic international financial institutions event nonperformance counterparties carrying values financial instruments represent maximum amount loss would incurred fiscal yearend credit risk trade accounts receivable generally limited due large number customers dispersion across many geographic areas manage accounts receivable credit risk ongoing credit evaluation customers financial conditions generally require collateral customers accounts receivable allowance doubtful accounts record trade accounts receivable net invoice value receivables noninterest bearing consider receivables past due based contractual payment terms january 1 2020 adopted asu 201613 measurement credit losses financial instruments described review exposure accounts receivable reserve amounts collectability longer reasonably assured based assessment various factors including historical loss rates expectations forwardlooking loss estimates prior january 1 2020 allowance doubtful accounts determined analyzing known uncollectible accounts aged receivables economic conditions customers country industry historical losses customers creditworthiness amounts later determined specifically identified uncollectible charged written allowance adjustments made historical loss experience reflect current differences assetspecific risk characteristics including example accounts receivable customer type public government entity versus private entity geographic location customer changes allowance doubtful accounts follows millions inventory inventories valued lower cost net realizable value include material labor overhead costs cost determined using standard costs approximate actual costs relieved inventory firstin firstout average cost basis classify inventories based historical anticipated levels sales inventory excess normal operating cycle 1 3 years depending product line classified longterm consolidated balance sheets longterm inventory immaterial december 31 2020 2019 property plant equipment property plant equipment stated cost less accumulated depreciation amortization additions improvements capitalized maintenance repairs expensed incurred included property plant equipment buildings equipment acquired capital lease arrangements reagent rental equipment capitalized software including costs software developed obtained internal use depreciation computed straightline basis estimated useful lives assets estimated useful lives property plant equipment generally follows buildings 1050 years leasehold improvements life improvements term lease whichever shorter reagent rental equipment 15 years equipment 312 years property equipment retired otherwise disposed cost accumulated depreciation relieved accounts net gain loss included operating expenses leases determine arrangement lease inception operating leases included operating lease rightofuse “rou” assets current operating lease liabilities operating lease liabilities consolidated balance sheets finance leases included property plant equipment current maturities longterm debt longterm debt net current maturities consolidated balance sheets rou assets represent right use underlying asset lease term lease liabilities represent obligation make lease payments arising lease operating lease rou assets liabilities recognized commencement date based present value lease payments lease term leases provide implicit rate use incremental borrowing rate based information available commencement date determining present value lease payments operating lease rou asset also includes lease payments made excludes lease incentives lease terms may include options extend terminate lease purposes determining lease term used measurement operating lease rou assets operating lease liabilities include noncancellable period lease together periods covered option extend lease reasonably certain exercise option periods covered option terminate lease reasonably certain exercise option periods covered option extend terminate lease exercise option controlled lessor lease expense lease payments recognized straightline basis lease term act lessee elected separate lease nonlease components act lessor reagent rental arrangements allocate consideration contract separate lease components nonlease components allocation amount variable payments allocated lease components recognized income lease accounting standard asc 842 amount variable payments allocated nonlease components recognized income accordance asc 606 reagent rental arrangements fully described caption reagent rental agreements intangible assets intangible assets principally include goodwill acquired technology know license tradenames customer relationships intangible assets finite lives include acquired technology know tradenames licenses customer relationships carried cost amortized using straightline method useful lives ranging 3 20 years intangible assets indefinite lives include goodwill recorded cost evaluated least annually impairment longlived assets review longlived assets property plant equipment finitelived intangible assets impairment whenever events indicate carrying amounts might recoverable recoverability property plant equipment finitelived intangible asset measured comparing projected undiscounted net cash flows associated assets carrying values asset considered impaired written fair value determined based assets projected discounted cash flows appraised value depending nature asset purposes recognition impairment assets held use group assets liabilities lowest level cash flows separately identifiable year ended december 31 2018 impaired finitelived intangible assets amount 105 million included life science segments results operations impairments finitelived intangible assets years ended december 31 2020 2019 impairment goodwill represents excess purchase price fair value net tangible identifiable intangible assets acquired business combination conduct goodwill impairment analysis annually fourth quarter frequently indicators impairment exist decision made sell exit business significant judgments involved determining indicator impairment occurred indicators may include deterioration general economic conditions negative developments equity credit markets adverse changes markets entity operates increases input costs negative effect earnings cash flows trend negative declining cash flows multiple periods among others fair value could realized actual transaction may differ used evaluate impairment goodwill reviewing goodwill impairment option first assess qualitative factors determine whether existence events circumstances leads determination likely greater 50 estimated fair value reporting unit less carrying amount year ended december 31 2020 elected perform qualitative assessment determined impairment likely analysis required also may elect perform qualitative assessment instead proceed directly quantitative impairment test ultimate outcome goodwill impairment review reporting unit whether choose perform qualitative assessment proceed directly quantitative impairment test year ended december 31 2018 impaired goodwill amount 2820 million included clinical diagnostics life science segments results operations amounts 2761 million 59 million respectively impairment goodwill years ended december 31 2020 2019 income taxes account income taxes asset liability method requires recognition deferred tax assets liabilities expected future tax consequences events included financial statements method deferred tax assets liabilities reflect tax effects net operating losses tax credits temporary differences carrying amounts assets liabilities financial reporting purposes amounts used income tax purposes determined using enacted tax rates effect year temporary differences expected reverse effect change tax rates deferred tax assets liabilities recognized income period includes enactment date record deferred tax assets extent believe assets likely realized making determination consider available positive negative evidence including scheduled reversals deferred tax liabilities projected future taxable income tax planning strategies recent financial operations establish reduce valuation allowance deferred tax assets provision income taxes increase decrease respectively period determination change valuation allowance made recognize tax benefit uncertain tax position likely tax position sustained examination taxing authorities based technical merits position tax benefits recognized financial statements particular tax position measured based largest benefit greater 50 likelihood realized upon settlement amount unrecognized tax benefits adjusted appropriate changes facts circumstances significant amendments existing tax law new regulations interpretations taxing authorities new information obtained tax examination resolution examination recognize accrued interest penalties appropriate related unrecognized tax benefits provision income taxes december 22 2017 us enacted comprehensive tax legislation “tax act” tax act made broad complex changes us tax code including imposition onetime mandatory deemed repatriation tax “transition tax” certain earnings accumulated offshore since 1986 reduction corporate tax rate 35 21 us taxable income resulting onetime remeasurement us federal deferred tax assets liabilities 2017 recorded income tax benefit 70 million related transition tax remeasurement us federal deferred tax assets liabilities completed accounting tax act staff accounting bulletin 118 income tax accounting implications tax cuts jobs act “sab 118” 2018 resulted additional income tax benefit 49 million revenue recognition recognize revenue operations sale products services license intellectual property rental instruments revenue contracts customers recognized upon transfer control promised products services customers amount reflects consideration expect receive exchange products services enter contracts include various combinations products services generally accounted distinct performance obligations revenue recognized net taxes collected customers sales tax value added tax etc subsequently remitted government authorities contracts customers often include promises transfer multiple products services customer determining whether products services considered distinct performance obligations accounted separately versus together may require significant judgment may impact timing revenue recognition revenue associated equipment requires factory installation recognized installation complete customer acceptance required occurred certain equipment requires installation due fact instruments operated clinicallaboratory environment installation services could result modification equipment order ensure instruments working according customer specifications subject validation tests upon completion installation arrangements require factory installation delivery equipment installation separate performance obligations recognize transaction price allocated equipment upon customer acceptance transfer control relation equipment occurred point customer ability direct use obtain substantially remaining benefits asset transaction price allocated installation services also recognized upon customer acceptance without completion installation services related customer acceptance customer cannot receive benefits service time revenue recognized provision recorded estimated product returns right considered variable consideration accordingly product revenues recognized transaction price reduced estimated amount product returns service revenues extended warranty contracts recognized ratably life service agreement standready performance obligation arrangements include combination products services transaction price allocated performance obligation based standalone selling prices method used determine standalone selling prices product service revenues based observable prices product services sold separately primary purpose invoicing terms provide customers simple predictable methods purchasing products services either provide receive financing customers record contract liabilities cash payments received due advance performance disclose value unsatisfied performance obligations contracts original expected length one year less payment terms vary type location customer products services offered term invoicing payment due significant fourth quarter fiscal year 2020 received 353 million court awarded damages related intellectual property litigation sales products infringing patents 2015 2018 total amount recognized 323 million revenue upon receipt damages based estimated standalone royalty rate associated infringed patents reagent rental agreements reagent rental agreements diagnostic industry sales method provides use instrument consumables reagents customer per test basis agreements may also include maintenance instruments placed customer locations well initial training initially determine reagent rental arrangement contains lease commencement determined arrangement contains lease next must ascertain lease classification purposes applying appropriate accounting treatment operating salestype direct financing lease purposes determining lease term used performing lease classification test include noncancellable period lease together periods covered option extend lease customer reasonably certain exercise option periods covered option terminate lease customer reasonably certain exercise option periods covered option extend terminate lease exercise option controlled company reagent rental arrangements contain either option lessee extend andor cancel period contract enforceable short period therefore lease term limited noncancellable period generally arrangements contain option lessee purchase underlying asset concluded use instrument referred “lease elements” within guidance asc 606 rather asc 842 accordingly first allocate transaction price lease elements nonlease elements based relative standalone selling prices determination transaction price requires judgment consideration fixedminimum payments well estimates variable consideration allocation amount variable payments allocated lease components recognized income asc 842 amount variable payments allocated nonlease components recognized income accordance asc 606 upon adoption asc 842 2019 maintenance services along reagents allocated nonlease elements recognized income accordance asc 606 change accordance requirements asc 842 resulted decrease amount rental income corresponding increase amount maintenance service revenue included net sales consolidated statements income generally terms arrangements result transfer control reagents upon either consumables delivered ii consumables consumed customer reagent rental arrangements predominantly comprised variable lease payments fluctuate depending volume reagents purchased arrangements contain fixedminimum lease payments reagent rental arrangements predominantly classified operating leases salestype leases represent aggregate immaterial amount lease income reported lease income primarily variable nature recognized upon delivery reagents consumed customer revenue allocated lease elements reagent rental arrangements represented approximately 3 total revenue december 31 2020 2019 respectively 5 december 31 2018 included part net sales consolidated statements income contract costs practical expedient expense incurred costs obtain contracts amortization period would one year less costs include internal sales force certain partner sales incentive programs recorded within selling general administrative expense consolidated statements income disaggregation revenue disaggregation revenue geographic region based primarily location use product service industry segment sources disaggregation revenues industry segment sources presented segment information footnote see note 14 deferred revenues primarily represent unrecognized fees billed collected extended service arrangements deferred revenue balance december 31 2020 december 31 2019 600 million 458 million respectively shortterm deferred revenue balance december 31 2020 december 31 2019 425 million 337 million respectively warrant certain equipment defects design materials workmanship generally period one year estimate cost warranties time related revenue recognized based historical experience specific warranty terms customer feedback costs recorded within cost goods sold consolidated statements income warranty liabilities included current liabilities longterm liabilities consolidated balance sheets change warranty liability follows millions shipping handling classify freight costs billed customers net sales related freight costs recognized upon transfer control promised products customers fulfillment cost included cost goods sold research development research development costs expensed incurred types expense incurred research development include materials supplies employee compensation consulting thirdparty services depreciation facility costs information technology foreign currency balance sheet accounts international subsidiaries translated current exchange rates end accounting period income statement items translated average exchange rates period resulting translation adjustments recorded separate component stockholders’ equity foreign currency transaction gains losses included foreign exchange losses net consolidated statements income transaction gains losses result primarily fluctuations exchange rates intercompany receivables payables denominated currencies functional currency subsidiary recorded transaction forward foreign exchange contracts part distributing products regularly enter intercompany transactions enter forward foreign exchange contracts manage foreign exchange risk future movements exchange rates affect foreign currency denominated intercompany receivables payables use derivative financial instruments speculative trading purposes seek hedge accounting treatment contracts result contracts generally maturity dates 90 days less denominated primarily currencies industrial countries recorded asset liability measured fair value balance sheet date resulting gains losses offset exchange gains losses related receivables payables recorded foreign exchange losses net consolidated statements income sharebased compensation plans sharebased compensation expense sharebased payment awards granted determined based grantdate fair value recognize compensation costs requisite service period award generally vesting term sharebased payment awards forfeitures recognized occur plans described fully note 9 earnings per share basic earnings per share computed dividing net income attributable biorad weighted average number common shares outstanding period diluted earnings per share takes account effect dilutive instruments stock options restricted stock uses average share price period determining number potential common shares added weighted average number shares outstanding potential common shares excluded diluted earnings per share calculation effect including securities would antidilutive weighted average number common shares outstanding used calculate basic diluted earnings per share antidilutive shares excluded diluted earnings per share calculation follows thousands fair value financial instruments certain financial instruments including cash equivalents shortterm investments accounts receivable marketable securities notes payable accounts payable foreign exchange contracts carrying amounts approximate fair value estimated fair value financial instruments based exchange price would received asset paid transfer liability exit price using available market information appropriate valuation methodologies principal advantageous market asset liability orderly transaction market participants estimates necessarily indicative amounts could realized current market exchange considerable judgment required interpreting market data used develop estimates fair value use different market assumptions estimation techniques could material effect estimated fair value see note 3 equity investments publicly traded companies ability exercise significant influence reported fair value unrealized gains losses reported component change fair market value equity securities consolidated statements income companies controlling financial interest significant influence accounted using equity method share aftertax earnings equity method investees included income net consolidated statements income investments privately held companies ability exercise significant influence accounted using cost method adjustments observable changes price impairments see note 3 recent accounting pronouncements adopted march 2020 fasb issued asu 202004 facilitation effects reference rate reform financial reporting topic 848 asu provides optional expedients exceptions applying gaap transactions affected reference rate eg libor reform certain criteria met limited period time ease potential burden accounting recognizing effects reference rate reform financial reporting asu effective march 12 2020 december 31 2022 evaluate transactions contract modifications occurring result reference rate reform determine whether apply optional guidance ongoing basis asu currently expected material impact consolidated financial statements august 2018 fasb issued asu 201813 fair value measurement topic 820 disclosure framework changes disclosure requirements fair value measurements aims improve overall usefulness disclosures financial statement users reduce unnecessary costs companies preparing fair value measurement disclosures adopted standard effective january 1 2020 material impact consolidated financial statements august 2018 fasb issued asu 201814 disclosure framework changes disclosure requirements defined benefit plans asu 201814 eliminates adds certain disclosures defined benefit plans asu 201814 effective fiscal years ending december 15 2020 adopted standard using retrospective approach material impact disclosures defined benefit plans june 2016 fasb issued asu 201613 measurement credit losses financial instruments asu 201613 replaces incurred loss approach expected loss model instruments measured amortized cost requires entities record allowances availableforsale debt securities rather reduce carrying amount done former otherthantemporary impairment model adopted asu 201613 january 1 2020 using cumulative effect transition method evaluated impacted instruments credit quality indicators determined cumulative effect transition adjustment retained earnings adoption date asu 201613 insignificant impact consolidated financial statements 2020 see also note 3 fair value measurements section caption “accounts receivable allowance doubtful accounts” february 2016 fasb issued asu 201602 leases related accounting standard updates requires among items lease accounting recognize leases assets liabilities balance sheet qualitative quantitative disclosures enhanced better understand amount timing uncertainty cash flows arising leases adopted asu 201602 modified retrospective basis effective january 1 2019 practical expedients restate comparative prior periods practical expedients elected transition included among items leases existed prior january 1 2019 reassessing whether contracts contain embedded leases reassessing classification existing leases reassessing whether previously capitalized initial direct costs qualify capitalization act lessee adoption standard resulted material additions balance sheet rightofuse assets associated liabilities see note 16 leases act lessee also elected separate lease nonlease components act lessor reagent rental arrangements insignificant impact consolidated financial statements fully described caption reagent rental agreements recent accounting pronouncements adopted january 2020 fasb issued asu 202001 clarifying interactions topic 321 investmentsequity securities topic 323 investmentsequity method joint ventures topic 815 derivatives hedging asu 202001 clarifies company consider observable transactions require company either apply discontinue equity method accounting topic 323 purposes applying measurement alternative accordance topic 321 immediately applying upon discontinuing equity method asu 202001 also clarifies determining accounting certain forward contracts purchased options company consider whether upon settlement exercise underlying securities would accounted equity method fair value option asu 202001 effective fiscal years beginning december 15 2020 expect asu 202001 material impact consolidated financial statements december 2019 fasb issued asu 201912 simplifying accounting income taxes eliminates certain exceptions within asc 740 income taxes clarifies aspects current guidance promote consistency among reporting entities asu 201912 effective fiscal years beginning december 15 2020 adjustments reflected january 1 2021 adoption asu 201912 expected material impact consolidated financial statements 2 acquisitions divestitures acquisitions celsee acquisition april 1 2020 acquisition date acquired equity interests celsee inc celsee total consideration 993 million described table including estimated fair value contingent consideration contingent consideration 600 million payable cash upon achievement certain net revenues period beginning january 1 2021 ending december 31 2022 celsee manufacturer instruments consumables isolation detection analysis single cells believe acquisition complement life science product offerings acquisition included life science segments results operations acquisition date amount acquisitionrelated costs minimal biorad primarily represented acquisition process celsee met definition business therefore accounted business combination fair value consideration transferred celsee acquisition consists following millions following table summarizes final fair values assets acquired liabilities assumed acquisition date millions goodwill related acquisition primarily attributable opportunities economies scale combining operations technologies biorad celsee deductible tax purposes following table summarizes final fair values estimated useful lives components identifiable intangible assets acquired acquisition date millions intangible assets acquired result celsee acquisition amortized estimated useful lives using straightline method amortization materially approximates distribution economic value identified intangible assets amortization acquired developed technology 28 million year ended december 31 2020 included cost goods sold consolidated statements income amortization acquired customer relationships 07 million covenants compete 04 million year ended december 31 2020 included selling general administrative expense consolidated statements income inprocess research development iprd accounted indefinitelived asset project completed carrying value iprd amortized estimated useful life asset iprd assessed impairment annual basis project completed believe values acquired intangible assets reported represent fair values approximate amounts market participant would pay intangible assets acquisition date included celsees fair value assets acquired liabilities assumed consolidated balance sheets beginning acquisition date results operations celsee subsequent acquisition date included immaterial consolidated statements income year ended pro forma results operations celsee acquisition presented material condensed consolidated statements income distributor acquisition october 2019 acquired issued outstanding shares foreign distributor approximately 42 million included cash payments closing net closing cash 36 million 06 million contingent consideration potentially payable sellers addition recorded net gain 04 million settlement preexisting conditions concurrent acquisition recorded selling general administrative expense acquisition included clinical diagnostics segments results operations acquisition date accounted business combination amount acquisitionrelated costs minimal biorad primarily represented acquisition process proforma financial statements provided acquisition immaterial biorad taken whole periods presented final allocation payments 34 million customer relationships definitelived intangible 02 million deferred tax asset 08 million deferred tax liability related purchased intangible 14 million acquired net assets final allocation payments unchanged preliminary allocation period ended december 31 2019 exact diagnostics llc acquisition august 2019 acquired issued outstanding membership interests exact diagnostics llc approximately 600 million cash payments closing net closing cash 597 million acquisition included clinical diagnostics segments results operations acquisition date accounted business combination amount acquisitionrelated costs minimal biorad primarily represented acquisition process goodwill related acquisition deductible income tax purposes proforma financial statements provided acquisition immaterial biorad taken whole periods presented final allocation payments 268 million purchased intangibles consisting primarily customer relationships developed product technology tradenames 42 million acquired net assets 287 million goodwill believe acquisition accelerate market penetration areas quality controls assay verification panels clinical diagnostics operations us private company acquisition march 2019 completed acquisition issued outstanding stock small us private company approximately 200 million cash payments net closing cash consisted 40 million paid november 2018 remaining 160 million paid march 2019 acquisition included life science segments results operations acquisition date accounted business combination amount acquisitionrelated costs minimal biorad primarily represented acquisition process goodwill related acquisition deductible income tax purposes pro forma financial statements provided acquisition immaterial biorad taken whole periods presented final allocation payments 156 million goodwill included workforce timetomarket advantage 55 million definitelived intangibles 02 million inprocess research development indefinitelived intangible asset deferred tax liability 13 million related purchased intangibles year ended december 31 2020 goodwill decreased 20 million due release escrow account setup acquisition classified prepaid asset opening balance sheet acquisition date believe acquisition expand reagents suite offerings life science operations divestiture informatics divestiture april 2020 received 122 million sale informatics division focused providing developing comprehensive highquality spectral databases associated software division part operations segment connection sale recorded 117 million gain income net consolidated statements income year ended december 31 2020 3 fair value measurements investments determine fair value asset liability based assumptions market participants would use pricing asset liability orderly transaction market participants measurement date identification market participant assumptions provides basis determining inputs used pricing asset liability fair value hierarchy established gives precedence fair value measurements calculated using observable inputs using unobservable inputs hierarchy prioritizes inputs three broad levels follows •level 1 quoted prices active markets identical instruments •level 2 significant observable inputs including quoted prices active markets similar instruments •level 3 significant unobservable inputs including assumptions determining fair value certain investments financial assets liabilities carried fair value measured recurring basis december 31 2020 classified hierarchy follows millions financial assets liabilities carried fair value measured recurring basis december 31 2019 classified hierarchy follows millions cash equivalents included cash equivalents consolidated balance sheets b restricted investments included following accounts consolidated balance sheets millions c equity securities included following accounts consolidated balance sheets millions change fair market value equity securities year ended december 31 2020 44958 million gain primarily due investment sartorius ag recorded consolidated statements income december 31 2020 12987900 ordinary voting shares 9588908 preference shares sartorius ag sartorius goettingen germany process technology supplier biotechnology pharmaceutical chemical food beverage industries purchase incremental shares years ended december 31 2020 2019 approximately 37 ordinary outstanding voting shares excluding treasury shares 28 preference shares sartorius december 31 2020 sartorius family trust sartorius family members hold controlling interest outstanding voting shares representative designee sartorius board directors ability exercise significant influence operating financial policies sartorius availableforsale investments included following accounts consolidated balance sheets millions e forward foreign exchange contracts asset position included current assets consolidated balance sheets f forward foreign exchange contracts liability position included current liabilities consolidated balance sheets g contingent consideration liabilities included following accounts consolidated balance sheets millions first quarter 2016 recognized contingent consideration liability upon acquisition high performance analytical flow cytometer platform propel labs acquisition date amount contingent consideration determined based probabilityweighted income approach related achievement sales milestones ranging 39 20 calendar years 2017 2020 sales milestones could potentially range 0 unlimited amount paid 33 million sales milestone payments per purchase agreement 2020 sales milestones fulfilled contingent consideration liability accrued estimated fair value 0 december 31 2020 fourth quarter 2019 recognized contingent consideration liability earnout targets related acquisition foreign distributor first earnout payment 07 million paid acquisition date remaining payment currently due anticipated paid first half 2021 maximum earnout payment due 14 million contingent consideration accrued estimated fair value 06 million december 31 2020 second quarter 2020 recognized contingent consideration liability upon acquisition celsee inc represents future potential earnout payments 600 million payable cash upon achievement certain net revenues period beginning january 1 2021 ending december 31 2022 fair value earnout acquisition date approximately 01 million determined using blackscholesmerton optionpricing valuation model includes significant assumptions unobservable inputs projected revenues celsee earnout period probability earnout threshold met fair value contingent consideration remeasured reporting period based assumptions inputs date remeasurement fair value earnout approximately 01 million december 31 2020 following table provides reconciliation level 3 contingent consideration liabilities measured estimated fair value millions estimate fair value level 2 debt securities december 31 2020 2019 primary pricing provider used reuters primary pricing source pricing process allows us select hierarchy pricing sources securities held reuters price level 2 security hold pricing provider utilize custodian supplied pricing secondary pricing source availableforsale investments consist following millions following summary amortized cost estimated fair value debt securities december 31 2020 contractual maturity date millions availableforsale investments consist following millions following summary investments gross unrealized losses associated fair value millions significant unrealized losses december 31 2020 either less greater 12 month categories gross unrealized losses associated fair value millions december 31 2019 outlined note 1 adopted asu 201613 january 1 2020 asu 201613 replaced incurred loss approach expected loss model instruments measured amortized cost requires entities record allowances availableforsale debt securities rather reduce carrying amount done former otherthantemporary impairment model factors considered evaluation included extent fair value less amortized cost basis adverse conditions specifically related debt security industry geographic area changes rating security rating agency credit loss impairments limited amount fair value instrument less amortized cost basis december 31 2020 concluded payments related availableforsale investments expected made full time par value diminution value intervening period due market conditions illiquidity interest rate movements due significant inherent credit concerns surrounding issuer result allowances credit losses availableforsale investments portfolio december 31 2020 included current assets 14 million 20 million interest receivable december 31 2020 december 31 2019 respectively primarily associated securities availableforsale investments portfolio associated interest securities typically payable semiannually due shortterm nature interest receivable asset made accounting policy election measure allowance credit losses accrued interest receivable consider uncollected interest receivable overdue greater one year impaired purposes writeoff year ended december 31 2020 writtenoff uncollected interest receivable part distributing products regularly enter intercompany transactions enter forward foreign exchange contracts manage foreign exchange risk future movements foreign exchange rates affect foreign currency denominated intercompany receivables payables use derivative financial instruments speculative trading purposes seek hedge accounting treatment contracts result contracts generally maturity dates 90 days less denominated primarily currencies industrial countries recorded fair value balance sheet date notional principal amounts provide one measure transaction volume outstanding december 31 2020 represent amount biorads exposure loss estimated fair value contracts derived using spot rates reuters last business day quarter points provided counterparties resulting gains losses offset exchange gains losses related receivables payables included foreign exchange losses net consolidated statements income following summary forward foreign currency exchange contracts millions december 2020 4875 senior notes matured paid full see note 5 estimated fair value current maturities longterm debt excluding leases december 31 2019 recognized fair value consolidated balance sheets estimated fair value based quoted market prices similar issues estimated fair value longterm debt level fair value hierarchy within fair value measurement categorized follows millions included investments consolidated balance sheet investments without readily determinable fair value measured cost adjustments observable price changes impairments carrying value investments 05 million 03 million december 31 2020 december 31 2019 respectively also included investments consolidated balance sheet equity method investments share equity method investees earnings included income net consolidated statements income carrying value investments 384 million 243 million december 31 2020 december 31 2019 respectively 4 goodwill purchased intangible assets changes goodwill segment follows millions information regarding identifiable purchased intangible assets definite indefinite lives follows millions impairment losses related goodwill purchased intangibles recorded 2020 2019 amortization expense related purchased intangible assets years ended december 31 2020 2019 2018 275 million 235 million 283 million respectively estimated future amortization expense based existing purchased intangible assets years ending december 31 2021 2022 2023 2024 2025 thereafter 283 million 251 million 238 million 207 million 187 million 781 million respectively 5notes payable longterm debt domestic international lines credit standby letters credit guarantee arrangements 2072 million available borrowing usage december 31 2020 reduced 49 million utilized standby letters credit guarantee arrangements issued banks support obligations principal components longterm debt follows millions 4875 senior notes december 2010 biorad sold 4250 million principal amount senior notes due december 2020 4875 notes sale yielded net cash proceeds 4226 million effective rate 4946 4875 notes paid fixed rate interest 4875 per year option redeem 4875 notes time redemption price 100 principal amount plus specified makewhole premium defined indenture governing 4875 notes accrued unpaid interest thereon redemption date obligations 4875 notes secured ranked equal right payment existing future unsubordinated indebtedness certain covenants applied year end 4875 notes including limitations following liens sale leaseback transactions mergers consolidations sales assets covenants restrictive covenants relating total indebtedness interest coverage stock repurchases recapitalizations dividends distributions shareholders current ratios compliance required debt covenants december 31 2019 december 2020 4875 notes paid full including accrued interest credit agreement april 2019 biorad entered 2000 million unsecured revolving credit facility credit agreement borrowings credit agreement revolving basis used make permitted acquisitions working capital general corporate purposes outstanding borrowings credit agreement december 31 2020 however 02 million utilized domestic standby letters credit reduced borrowing availability december 31 2020 credit agreement matures april 2024 borrowed credit agreement borrowing rate would 1375 december 31 2020 based 3month libor credit agreement requires biorad comply certain financial ratios covenants among things ratios covenants include leverage ratio test interest coverage test well restrictions ability declare pay dividends incur debt guarantee debt enter transactions affiliates merge consolidate sell assets make investments create liens compliance ratios covenants december 31 2020 2019 maturities finance leases debt december 31 2020 follows 2021 18 million 2022 18 million 2023 04 million 2024 04 million 2025 04 million 2026 thereafter 93 million 6 income taxes us international components income taxes follows millions provision income taxes consists following millions reconciliation effective tax rate income taxes statutory tax rate follows december 22 2017 us enacted comprehensive tax legislation “tax act” tax act made broad complex changes us tax code including imposition onetime mandatory deemed repatriation tax “transition tax” certain earnings accumulated offshore since 1986 reduction corporate tax rate 35 21 us taxable income resulting onetime remeasurement us federal deferred tax assets liabilities 2017 recorded income tax benefit 70 million related transition tax remeasurement us federal deferred tax assets liabilities completed accounting tax act staff accounting bulletin 118 income tax accounting implications tax cuts jobs act “sab 118” 2018 resulted additional income tax benefit 49 million effective income tax rates 224 222 287 years ended december 31 2020 2019 2018 respectively effective tax rates years ended december 31 2020 2019 driven unrealized gain equity securities taxed approximately 22 well geographic mix earnings taxation foreign earnings effective tax rate year ended december 31 2018 driven detriments due nondeductible impairment charges taxation foreign operations partially offset 49 million benefit recorded result completion accounting tax act sab 118 many jurisdictions operate statutory tax rates differ us statutory tax rate 21 effective tax rate impacted either favorably unfavorably many factors including limited jurisdictional mix income tax changes statutory tax rates changes tax laws regulations tax audits settlements generation tax credits deferred tax assets liabilities reflect tax effects losses credits temporary differences carrying amounts assets liabilities financial reporting purposes amounts used income tax purposes significant components deferred tax assets liabilities follows millions realization deferred tax assets dependent upon generation sufficient taxable income appropriate character future periods regularly assess ability realize deferred tax assets establish valuation allowance likely portion deferred tax assets realized assessing realizability deferred tax assets weigh available positive negative evidence due weight objectively verifiable negative evidence believe likely california certain foreign deferred tax assets realized december 31 2020 maintained valuation allowance deferred tax assets valuation allowance deferred tax assets california certain foreign jurisdictions decreased 226 million year ended december 31 2020 valuation allowance deferred tax assets follows millions december 31 2020 federal state foreign net operating loss carryforwards approximately 263 million 645 million 2550 million respectively foreign net operating losses 1178 million may carried forward indefinitely majority remaining foreign net operating losses utilized begin expire 2025 federal state net operating loss carryforwards utilized begin expire 2028 december 31 2020 federal state tax credit carryforwards approximately 23 million 372 million respectively federal tax credits utilized begin expire 2029 state tax credits generally may carried forward indefinitely federal state tax laws impose restrictions utilization net operating loss certain tax credit carryforwards event change ownership defined internal revenue code sections 382 383 section 382 383 internal revenue code substantial changes ownership acquired companies may limit amount net operating loss research development credit carryforwards available offset taxable income annual limitation would automatically result loss net operating loss research development credit carryforwards may limit amount available given future period income tax returns audited us federal state foreign tax authorities currently examination many tax authorities tax years open examination include years 2012 forward us certain foreign jurisdictions including france germany india switzerland differing interpretations tax laws regulations result significant disputes may arise tax authorities involving issues timing amount deductions allocations income among various tax jurisdictions evaluate exposures associated tax filing positions quarterly basis record liabilities unrecognized tax benefits related uncertain tax positions believe currently pending uncertain tax positions material adverse effect consolidated financial statements although adverse resolution one uncertain tax positions period may material impact results operations period following tabular reconciliation total amounts unrecognized tax benefits millions biorad recognizes accrued interest penalties related unrecognized tax benefits income tax expense related unrecognized tax benefits noted cumulative amount accrued interest penalties december 31 2020 2019 2018 143 million 112 million 95 million respectively biorad accrued interest penalties 28 million 17 million 14 million years ended december 31 2020 2019 2018 respectively total unrecognized tax benefits interest penalties 701 million december 31 2020 partially offset deferred tax assets 15 million prepaid taxes 58 million net amount 628 million december 31 2020 based expected outcome certain examinations result expiration statutes limitation certain jurisdictions believe within next twelve months reasonably possible previously unrecognized tax benefits could decrease approximately 172 million substantially amounts impact effective income tax rate recognized generally intention repatriate certain foreign earnings extent repatriations restricted local laws accounting rules substantial incremental costs determination amount unrecognized deferred tax liability foreign earnings indefinitely reinvested practicable estimate 7 stockholders equity biorad’s issued outstanding stock consists class common stock class b common stock class b share class b participates equally earnings biorad identical respects except follows class limited voting rights share class entitled one tenth vote matters share class b entitled one vote additionally class stockholders entitled elect 25 directors class b stockholders electing remaining directors cash dividends may paid class shares without paying cash dividend class b shares cash dividend may paid class b shares unless least equal cash dividend paid class shares class b shares convertible time class shares oneforone basis option stockholder founders biorad schwartz family collectively hold majority biorad’s voting stock result schwartz family able exercise significant influence biorad changes biorads issued common stock shares follows thousands treasury shares november 2017 board directors authorized share repurchase program granting biorad authority repurchase discretionary basis 2500 million outstanding shares common stock july 2020 board directors authorized increasing share repurchase program allow company repurchase additional 2000 million stock repurchases may made managements discretion time open market privately negotiated transactions share repurchase activity share repurchase program open market transactions years ended december 31 2020 2019 2018 summarized follows years ended december 31 2020 2019 used 117423 118910 respectively repurchased shares connection vesting restricted stock units 2019 used 19755 shares connection espp stock purchases december 31 2020 2731 million remained share repurchase program 8 accumulated comprehensive income loss accumulated comprehensive income loss included consolidated balance sheets consolidated statements changes stockholders equity consists following components millions amounts reclassified accumulated comprehensive income reclassified income net consolidated statements income reclassification adjustments calculated using specific identification method 9 sharebased compensationequity award purchase plans equity award plan 2017 incentive award plan 2017 plan officers certain employees 2017 plan authorizes grant stock options restricted stock restricted stock units types equity awards employees stock options granted exercise prices less fair market value underlying common stock date grant maximum term 10 years may issue stock options either class b common stock prior september 2020 grants equity awards granted vest increments 20 per year yearly anniversary date grant starting september 2020 equity awards granted vest increments 25 per year yearly anniversary date grant total 2108050 shares reserved issuance equity awards 2017 plan may either class b common stock december 31 2020 1451617 shares available granted employee stock purchase plans 2011 employee stock purchase plan 2011 espp provides eligible employees may contribute greater 10 compensation 25000 annually towards quarterly purchase class common stock employees’ purchase price 85 lesser fair market value stock first business day last business day calendar quarter authorized sale 1300000 shares class common stock 2011 espp sharebased compensation included sharebased compensation expense cost related stock option grants espp stock purchases restricted stock unit awards sharebased compensation expense allocated cost goods sold selling general administrative expense research development expense consolidated statements income year ended december 31 2020 recognized sharebased compensation expense 416 million 34 million allocated cost goods sold 318 million allocated selling general administrative expense 64 million allocated research development expense year ended december 31 2019 recognized sharebased compensation expense 356 million 29 million allocated cost goods sold 279 million allocated selling general administrative expense 48 million allocated research development expense year ended december 31 2018 recognized sharebased compensation expense 278 million 23 million allocated cost goods sold 220 million allocated selling general administrative expense 35 million allocated research development expense income tax benefit related sharebased compensation expense 60 million 56 million 44 million years ended december 31 2020 2019 2018 respectively capitalize sharebased compensation expense inventory immaterial tax benefit equity awards vested exercised years ended december 31 2020 2019 2018 112 million 54 million 54 million respectively equity awards amortize fair value straightline basis equity awards amortized requisite service periods awards generally vesting periods recognize forfeitures occur stock options weightedaverage fair value stock options granted estimated using blackscholes optionpricing model following weightedaverage assumptions expected volatility based historical volatilities common stock period equal stock option’s expected life riskfree interest rate based us treasury yield curve effect time grant expected life represents number years estimate based primarily historical experience options outstanding prior exercise anticipate paying cash dividends future therefore use expected dividend yield zero following table summarizes stock option activity intrinsic value stock options defined difference current market value exercise price total intrinsic value date exercise stock options exercised years ended december 31 2020 2019 2018 approximately 24 million 12 million 8 million respectively cash received stock options exercised years ended december 31 2020 2019 2018 38 million 26 million 05 million respectively december 31 2020 70 million total unrecognized compensation cost stock options amount expected recognized future remaining weightedaverage period approximately three years restricted stock units restricted stock units rights receive shares company stock fair value restricted stock unit market value determined closing price stock day grant following table summarizes restricted stock unit activity total fair value restricted stock units vested years ended december 31 2020 2019 2018 650 million 448 million 40 million respectively december 31 2020 approximately 1256 million total unrecognized compensation cost related restricted stock units amount expected recognized remaining weightedaverage period approximately three years employee stock purchase plans fair value employees’ purchase rights 2011 espp estimated using blackscholes model following weightedaverage assumptions major assumptions primarily based historical data volatility based historical volatilities common stock period equal expected life purchase rights riskfree interest rate based us treasury yield curve effect time grant anticipate paying cash dividends future therefore use expected dividend yield zero sold 47548 shares total employee contributions 164 million 58717 shares total employee contributions 143 million 63464 shares total employee contributions 136 million 2011 espp employees years ended december 31 2020 2019 2018 respectively december 31 2020 551983 shares remain authorized available issuance 2011 espp 10 income expense net income expense net includes following components millions otherthantemporary impairment losses equity method investments recorded light investees financial condition 11 supplemental cash flow information reconciliation net income net cash provided operating activities follows millions 12 commitments contingent liabilities deferred profit sharing retirement plan profit sharing plan covering substantially us employees contributions made discretion management biorad liability current year’s contribution expense 106 million 161 million 159 million years ended december 31 2020 2019 2018 respectively purchase obligations december 31 2020 purchase obligations recognized balance sheet 166 million include agreements purchase goods services enforceable legally binding biorad specify significant terms exclude agreements cancelable without penalty recognition purchase obligations occurs products services delivered biorad annual future fixed determinable portion purchase obligations recognized balance sheet december 31 2020 follows 2021 141 million 2022 21 million 2023 01 million 2024 01 million 2025 01 million 2025 01 million longterm liabilities december 31 2020 obligations recognized balance sheet 1340 million primarily represent recognized longterm obligations postemployment benefits indicated mostly due 5 years longterm deferred revenue excluded tax liabilities uncertain tax positions contingencies able reasonably estimate timing future cash flows tax liabilities therefore income tax obligations excluded annual future fixed determinable portion obligations recognized balance sheet december 31 2020 follows 2021 27 million 2022 120 million 2023 73 million 2024 56 million 2025 38 million 2025 1026 million letters creditguarantees ordinary course business times required post letters creditguarantees letters creditguarantees issued financial institutions guarantee obligations various parties contingently liable 49 million standby letters creditguarantees financial institutions december 31 2020 postemployment benefits several foreign locations statutorily required provide retirement benefits lump sum termination indemnity employees upon termination virtually reason plans accounted defined benefit plans associated net benefit obligation december 31 2020 2019 961 million 815 million respectively included accrued payroll employee benefits longterm liabilities consolidated balance sheets plans required funded trust device used accumulate assets settle obligations however plans require funding based local laws trust device administered external plan manager used accumulate assets assist settling obligations following disclosures include plans located france switzerland germany korea india thailand italy dubai japan obligations funded status following table sets forth change benefit obligations fair value plan assets amounts recognized consolidated balance sheets plans millions components net periodic benefit cost following sets forth net periodic benefit cost income periods indicated millions assumptions actuarial net losses primarily based financial demographic experience assumptions weightedaverage assumptions used computing benefit obligations follows weightedaverage assumptions used computing net periodic benefit costs follows accumulated benefit obligation abo estimate based assumption plans terminated immediately december 31 2020 2019 1595 million 1386 million respectively abo fair value plan assets plans abo excess plan assets 781 million 663 million december 31 2020 2019 respectively foreign locations service award plans paid based upon number years employment plans liability december 31 2020 2019 41 million 35 million respectively included accrued payroll employee benefits longterm liabilities consolidated balance sheets concentrations labor subject collective bargaining agreements december 31 2020 approximately seven percent biorads approximately 3180 us employees covered collective bargaining agreement expire november 14 2023 many biorads nonus fulltime employees especially france covered collective bargaining agreements 13 legal proceedings party various claims legal actions complaints arising ordinary course business cannot time reasonably estimate range exposure potential liability respect matters believe time ultimate liability resulting matters material adverse effect results operations financial position liquidity cannot give assurance regarding ultimate outcome matters resolution could material operating results particular period depending level income period 14 segment information biorad multinational manufacturer worldwide distributor life science research products clinical diagnostics products two reportable segments life science clinical diagnostics reportable segments strategic business lines offer 9000 different products services require different marketing strategies disclose quantitative information different products services impractical based primarily numerous products services sell global markets serve life science segment develops manufactures sells services reagents apparatus instruments used biological research products sold university medical school laboratories pharmaceutical biotechnology companies food testing laboratories government industrial research facilities clinical diagnostics segment develops manufactures sells services automated test systems informatics systems test kits specialized quality controls healthcare market products sold reference laboratories hospital laboratories state newborn screening facilities physicians’ office laboratories transfusion laboratories insurance forensic testing laboratories operations include analytical instruments segment small miscellaneous operation included prior acquisition segment results presented manner present operations internally make operating decisions assess performance accounting policies segments described significant accounting policies see note 1 segment profit loss includes allocation corporate expense based upon sales allocation interest expense based upon accounts receivable inventories difference total segment allocated interest expense depreciation amortization capital expenditures corresponding consolidated amounts attributable corporate headquarters segments expected manage assets completely control accordingly segment assets include primarily accounts receivable inventories gross machinery equipment goodwill balances included corporate segment reporting purposes information regarding industry segments december 31 2020 2019 2018 years ended follows millions net corporate operating expense consists receipts expenditures primary responsibility segment operating management therefore allocated segments performance assessment chief operating decision maker following reconciles total segment profit consolidated income taxes millions following reconciles total segment assets consolidated total assets millions following presents net sales external customers geographic region based primarily location use product service millions following presents property plant equipment net operating lease rightofuse assets excluding deferred income taxes geographic region based upon location asset millions 15 restructuring costs december 2018 announced closure small manufacturing facility france restructuring charges facility closure included clinical diagnostics segments results operations restructuring plan expected substantially complete first half 2021 recorded restructuring charges adjustments related severance employee benefits 01 million 01 million 39 million exit costs 01 million zero 02 million years ended december 31 2020 2019 2018 respectively amounts recorded reflected cost goods sold consolidated statements income liability 16 million december 31 2020 consisted 15 million recorded accrued payroll employee benefits 01 million recorded current liabilities consolidated balance sheets december 2018 december 31 2020 total expenses 40 million following table summarizes activity facility closure restructuring reserves severance exit costs millions november 2019 announced strategydriven restructuring plan expect significant portion net savings resulting restructuring plan repurposed alignment portfolio strategy restructuring plan includes workforce reduction europe united states canada expected substantially complete first half 2022 recorded 48 million 253 million expenses adjustments restructuring charges related severance employee benefits years ended december 31 2020 2019 respectively liability 28 million december 31 2020 recorded accrued payroll employee benefits consolidated balance sheets amounts recorded reflected cost goods sold 19 million 48 million selling general administrative expense 17 million 144 million research development expense 12 million 61 million consolidated statements income years ended december 31 2020 2019 respectively november 2019 december 31 2020 total expenses 205 million following table summarizes activity european north american reorganization restructuring reserves severance millions june 2020 announced restructuring plan consolidate certain finance administrative activities europe united states restructuring plan expected substantially complete first half 2022 liability 27 million december 31 2020 recorded accrued payroll employee benefits consolidated balance sheet amount reflected selling general administrative expense 39 million year ended december 31 2020 following table summarizes restructuring activities related finance administrative reorganization millions 16 leases accounting policies leases including leases act lessor reagent rental agreements see note 1 operating leases lesser extent finance leases buildings vehicles equipment leases remaining lease terms 1 year 18 years includes determination exercise renewal options components lease expense follows millions sublease building term ends 2025 options extend renew operating lease cost includes original reduction carrying amount rightofuse assets impact remeasurements modifications impairments abandonments shortterm leases expensed incurred reflecting leases lease term one year less significant years ended december 31 2020 2019 operating lease variable cost primarily comprised reimbursed actual common area maintenance property taxes insurance immaterial years ended december 31 2020 2019 supplemental cash flow information related leases follows millions supplemental balance sheet information related leases follows millions finance leases included property plant equipment current maturities longterm debt longterm debt net current maturities lease liabilities follows millions value operating lease portfolio principally facilities longer durations lesser value vehicles equipment shorter terms higherturn december 31 2020 operating leases commenced material operating leases asc 840 leases rents leases rental expense operating leases 474 million 2018 leases principally facilities automobiles 17 quarterly financial data unaudited see accompanying accountants report summarized quarterly financial data years ended december 31 2020 2019 follows millions except per share data 18 subsequent event february 3 2021 initiated strategydriven restructuring plan furtherance ongoing program improve operating performance restructuring plan primarily impacts operations europe includes elimination certain positions consolidation certain functions relocation certain manufacturing operations europe asia restructuring plan expected eliminate total approximately 530 positions subsequent creation total approximately 325 new positions anticipate restructuring plan implemented phases expected substantially completed end fiscal year 2022 estimate result restructuring plan incur approximately 125 million 130 million total cost anticipate consist approximately 86 million cash expenditures form onetime termination benefits affected employees including cash severance payments healthcare benefits related transition assistance ii approximately 19 million capital expenditures associated restructuring plan iii approximately 20 million 25 million onetime transition costs including employee transition costs supply chain costs regulatory costs anticipate record approximately 80 million 90 million charges related restructuring plan first quarter fiscal year 2021 amounts preliminary estimates based information currently available management possible additional charges future cash payments could occur relation restructuring actions item 9 nannannannannannanitem 15 exhibits financial statement schedules reports form 8k 1 index financial statements following consolidated financial statements included exhibit 131 incorporated herein reference pursuant item 8 page exhibit 131 consolidated balance sheets december 31 2002 2001 23 consolidated statements income three years period ended december 31 2002 4 consolidated statements cash flows three years period ended december 31 2002 5 consolidated statements changes stockholders equity three years period ended december 31 2002 6 notes consolidated financial statements 729 independent auditors report 3031 report independent public accountants 32 2 index financial statement schedule page form 10k schedule ii valuation qualifying accounts 11 independent auditors report supplemental schedule 12 report independent public accountants schedule ii 13 financial statement schedules omitted required information included consolidated financial statements notes thereto 3 index exhibits listed accompanying index exhibits pages 13 15 report filed incorporated reference part report b reports form 8k biorad filed current report form 8k sec december 23 2002 announcing executive management transition plans independent auditors report supplemental schedule board directors shareholders biorad laboratories inc audited consolidated financial statements biorad laboratories inc subsidiaries company december 31 2002 year ended issued report thereon dated february 5 2003 report expresses unqualified opinion includes explanatory paragraph concerning application procedures relating certain disclosures consolidated financial statement amounts related 2001 2000 consolidated financial statements audited auditors ceased operations consolidated financial statements report included companys 2002 annual report shareholders incorporated herein reference audit also included 2002 consolidated financial statement schedule company listed item 15 consolidated financial statement schedule responsibility companys management responsibility express opinion based audit opinion consolidated 2002 financial statement schedule considered relation 2002 basic consolidated financial statements taken whole presents fairly material respects information set forth therein financial statement schedules years ended december 31 2001 2000 audited auditors ceased operations auditors expressed opinion report dated february 4 2002 february 6 2002 subsequent event 2001 2000 financial statement schedules considered relation 2001 2000 basic financial statements taken whole prior disclosures referred presented fairly material respects information set forth therein deloitte touche llp san francisco california february 5 2003 report copy previously issued report covering 2001 2000 1999 predecessor auditors reissued report independent public accountants schedule ii biorad laboratories inc audited accordance auditing standards generally accepted united states consolidated financial statements included biorad laboratories incs annual report stockholders incorporated reference form 10k issued report thereon dated february 4 2002 audits made purpose forming opinion statements taken whole schedule listed index item 14a2 responsibility companys management presented purposes complying securities exchange commissions rules part basic financial statements schedule subjected auditing procedures applied audits basic financial statements opinion fairly states material respects financial data required set forth therein relation basic financial statements taken whole arthur andersen llp san francisco california february 4 2002 signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized biorad laboratories inc sanford wadler sanford wadler secretary date march 26 2003 pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities dates indicated principal executive officer norman schwartz president director march 26 2003 norman schwartz principal financial officer vice president christine tsingos chief financial officer march 26 2003 christine tsingos principal accounting officer james r stark corporate controller march 26 2003 james r stark directors james j bennett director march 26 2003 james j bennett albert j hillman director march 26 2003 albert j hillman ruediger naumann director march 26 2003 ruediger naumann philip l padou director march 26 2003 philip l padou alice n schwartz director march 26 2003 alice n schwartz david schwartz director march 26 2003 david schwartz certifications norman schwartz certify 1 reviewed annual report form 10k biorad laboratories inc 2 based knowledge annual report contain untrue statement material fact omit state material fact necessary make statements made light circumstances statements made misleading respect period covered annual report 3 based knowledge financial statements financial information included annual report fairly present material respects financial condition results operations cash flows registrant periods presented annual report 4 registrants certifying officer responsible establishing maintaining disclosure controls procedures defined exchange act rules 13a14 15d14 registrant designed disclosure controls procedures ensure material information relating registrant including consolidated subsidiaries made known us others within entities particularly period annual report prepared b evaluated effectiveness registrants disclosure controls procedures date within 90 days prior filing date annual report evaluation date c presented annual report conclusions effectiveness disclosure controls procedures based evaluation date 5 registrants certifying officer disclosed based recent evaluation registrants auditors audit committee registrants board directors persons performing equivalent functions significant deficiencies design operation internal controls could adversely affect registrants ability record process summarize report financial data identified registrants auditors material weakness internal controls b fraud whether material involves management employees significant role registrants internal controls 6 registrants certifying officer indicated annual report whether significant changes internal controls factors could significantly affect internal controls subsequent date recent evaluation including corrective actions regard significant deficiencies material weaknesses date march 26 2003 norman schwartz norman schwartz chief executive officer certifications christine tsingos certify 1 reviewed annual report form 10k biorad laboratories inc 2 based knowledge annual report contain untrue statement material fact omit state material fact necessary make statements made light circumstances statements made misleading respect period covered annual report 3 based knowledge financial statements financial information included annual report fairly present material respects financial condition results operations cash flows registrant periods presented annual report 4 registrants certifying officer responsible establishing maintaining disclosure controls procedures defined exchange act rules 13a14 15d14 registrant designed disclosure controls procedures ensure material information relating registrant including consolidated subsidiaries made known us others within entities particularly period annual report prepared b evaluated effectiveness registrants disclosure controls procedures date within 90 days prior filing date annual report evaluation date c presented annual report conclusions effectiveness disclosure controls procedures based evaluation date 5 registrants certifying officer disclosed based recent evaluation registrants auditors audit committee registrants board directors persons performing equivalent functions significant deficiencies design operation internal controls could adversely affect registrants ability record process summarize report financial data identified registrants auditors material weakness internal controls b fraud whether material involves management employees significant role registrants internal controls 6 registrants certifying officer indicated annual report whether significant changes internal controls factors could significantly affect internal controls subsequent date recent evaluation including corrective actions regard significant deficiencies material weaknesses date march 26 2003 christine tsingos christine tsingos vice president chief financial officer biorad laboratories inc index exhibits item 14a3 following documents filed part report exhibit 31 restated certificate incorporation february 8 2002 1 32 bylaws registrant amended february 19 1980 2 41 credit agreement dated september 30 1999 among biorad laboratories inc lenders named therein bank one na administrative agent abn amro bank nv syndication agent union bank california na documentation agent 3 411 amendment dated january 31 2000 credit agreement dated september 30 1999 among biorad laboratories inc lenders named therein bank one na agent 4 412 amendment dated june 21 2000 credit agreement dated september 30 1999 among biorad laboratories inc lenders named therein banc one na administrative agent abn amro bank nv syndication agent union bank california na documentation agent 6 413 amendment dated august 9 2003 credit agreement dated september 30 1999 among biorad laboratories inc lenders named therein bank one na agent 5 414 amendment dated february 12 2003 credit agreement dated september 30 1999 among biorad laboratories inc lenders names therein bank one na agent 42 senior subordinated credit agreement dated september 30 1999 among biorad laboratories inc lenders named therein bank one capital markets inc agent 3 44 senior subordinated credit agreement dated january 31 2000 among biorad laboratories inc lenders named therein ubs ag stamford branch agent 4 45 indenture dated february 17 2000 11625 senior subordinated notes due 2007 among biorad laboratories inc issuer norwest bank minnesota na trustee 4 46 registration rights agreement dated february 17 2000 among biorad laboratories inc warburg dillon reed llc abn amro incorporated 4 104 1994 stock option plan 7 1041 amendment biorad laboratories inc 1994 stock option plan dated april 28 1998 8 1042 second amendment biorad laboratories inc 1994 stock option plan dated december 6 1999 8 1043 third amendment biorad laboratories inc 1994 stock option plan dated september 19 2000 8 105 amended restated 1988 employee stock purchase plan 9 106 employees deferred profit sharing retirement plan amended restated effective january 1 1997 11 1010 noncompetition employment continuation agreement james j bennett 11 1012 split dollar life insurance agreement dated september 17 1999 schwartz irrevocable descendants trust biorad laboratories inc 4 131 excerpt annual report stockholders fiscal year ended december 31 2002 deemed filed extent required instructions exhibits reports form 10k 211 listing subsidiaries 231 consent independent public accountants 991 certification chief executive officer 992 certification chief financial officer 1 incorporated reference exhibits companys form 10k filing fiscal year ended december 31 2001 dated march 28 2002 2 incorporated reference exhibits companys registration statement form s7 registration 266797 became effective april 22 1980 3 incorporated reference exhibits companys form 8k dated october 1 1999 4 incorporated reference exhibits companys form 10k filing fiscal year ended december 31 1999 dated march 28 2000 5 incorporated reference exhibits companys september 30 2002 form 10q filing dated november 13 2002 6 incorporated reference exhibits companys june 30 2000 form 10q filing dated august 14 2000 7 incorporated reference exhibits companys form s8 filing dated april 28 1994 8 incorporated reference exhibits companys form 10k filing fiscal year ended december 31 2000 dated march 28 2001 9 incorporated reference exhibits companys september 30 1998 form 10q filing dated november 10 1998 10 incorporated reference exhibits companys september 30 1997 form 10q filing dated november 13 1997 11 incorporated reference exhibits companys form 10k filing fiscal year ended december 31 1996 dated march 26 1997item 15 exhibits financial statement schedules reports form 8k 1 index financial statements following consolidated financial statements included exhibit 131 incorporated herein reference pursuant item 8 page exhibit 131 consolidated balance sheets december 31 2003 2002 23 consolidated statements income three years period ended december 31 2003 4 consolidated statements cash flows three years period ended december 31 2003 5 consolidated statements changes stockholders equity three years period ended december 31 2003 6 notes consolidated financial statements 730 independent auditors report 3132 report independent public accountants 33 2 index financial statement schedule page form 10k schedule ii valuation qualifying accounts 12 independent auditors report supplemental schedule 13 report independent public accountants schedule ii 14 financial statement schedules omitted required information included consolidated financial statements notes thereto 3 index exhibits listed accompanying index exhibits pages 16 18 report filed incorporated reference part report b reports form 8k none biorad laboratories inc schedule ii valuation qualifying accounts years ended december 31 2003 2002 2001 thousands reserve doubtful accounts receivable additions balance charged balance beginning costs end year expenses deductions year 2003 12122 4687 3831 12978 2002 11509 2857 2244 12122 2001 10255 5200 3946 11509 valuation allowance deferred tax asset deductions balance charged balance beginning costs end year additions expenses othera year 2003 12867 1965 432 14400 2002 17302 1241 2342 3334 12867 2001 20620 4959 2793 5484 17302 valuation arising acquisition psd independent auditors report supplemental schedule board directors shareholders biorad laboratories inc audited consolidated financial statements biorad laboratories inc subsidiaries company december 31 2003 2002 years ended issued report thereon dated march 10 2004 report expresses unqualified opinion includes explanatory paragraphs concerning companys change method accounting goodwill intangible assets application procedures relating certain disclosures reclassifications consolidated financial statement amounts related 2001 consolidated financial statements audited auditors ceased operations consolidated financial statements report included companys 2003 annual report shareholders incorporated herein reference audit also included 2003 2002 consolidated financial statement schedule company listed item 15a2 consolidated financial statement schedule responsibility companys management responsibility express opinion based audits opinion consolidated 2003 2002 financial statement schedules considered relation 2003 2002 basic consolidated financial statements taken whole present fairly material respects information set forth therein financial statement schedules year ended december 31 2001 audited auditors ceased operations auditors expressed opinion report dated february 4 2002 february 6 2002 subsequent event 2001 financial statement schedules considered relation 2001 basic financial statements taken whole prior disclosures reclassifications referred presented fairly material respects information set forth therein deloitte touche llp san francisco california march 10 2004 report copy previously issued report covering 2001 2000 1999 predecessor auditors reissued report independent public accountants schedule ii biorad laboratories inc audited accordance auditing standards generally accepted united states consolidated financial statements included biorad laboratories incs annual report stockholders incorporated reference form 10k issued report thereon dated february 4 2002 audits made purpose forming opinion statements taken whole schedule listed index item 14a2 responsibility companys management presented purposes complying securities exchange commissions rules part basic financial statements schedule subjected auditing procedures applied audits basic financial statements opinion fairly states material respects financial data required set forth therein relation basic financial statements taken whole arthur andersen llp san francisco california february 4 2002 signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized biorad laboratories inc bys sanford wadler sanford wadler secretary date march 12 2004 pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities dates indicated principal executive officer norman schwartz president director march 12 2004 norman schwartz principal financial officer vice president christine tsingos chief financial officer march 12 2004 christine tsingos principal accounting officer james r stark corporate controller march 12 2004 james r stark directors james j bennett director march 12 2004 james j bennett albert j hillman director march 12 2004 albert j hillman ruediger naumannetienne director march 12 2004 ruediger naumannetienne philip l padou director march 12 2004 philip l padou alice n schwartz director march 12 2004 alice n schwartz david schwartz director march 12 2004 david schwartz biorad laboratories inc index exhibits item 14a3 exhibits 321 322 furnished herewith deemed filed securities exchange act 1934 exhibit 31 restated certificate incorporation february 8 2002 1 32 bylaws registrant amended february 19 1980 2 41 credit agreement dated september 9 2003 among biorad laboratories inc lenders bank one na administrative agent wells fargo bank na union bank california na syndication agents abn amro bank nv bnp paribas documentation agents 3 42 pledge amendment dated september 9 2003 among biorad laboratories inc bank one na contractual representative 3 43 security agreement dated september 9 2003 among bio rad laboratories inc grantor bank one na administrative agent 3 44 indenture dated august 11 2003 750 senior subordinated notes due 2013 among biorad laboratories inc issuer wells fargo bank na trustee 3 45 exchange registration rights agreement dated august 11 2003 750 senior subordinated notes due 2013 3 104 1994 stock option plan 7 1041 amendment biorad laboratories inc 1994 stock option plan dated april 28 1998 8 1042 second amendment biorad laboratories inc 1994 stock option plan dated december 6 1999 8 1043 third amendment biorad laboratories inc 1994 stock option plan dated september 19 2000 8 1044 fourth amendment biorad laboratories inc 1994 stock option plan dated april 25 2001 105 amended restated 1988 employee stock purchase plan9 1051 amendment amended 1988 employee stock purchase plan 106 employees deferred profit sharing retirement plan amended restated effective january 1 1997 11 107 2003 stock option plan 12 1010 noncompetition employment continuation agreement james j bennett 11 1012 split dollar life insurance agreement dated september 17 1999 schwartz irrevocable descendants trust biorad laboratories inc 4 131 excerpt annual report stockholders fiscal year ended december 31 2003 deemed filed extent required instructions exhibits reports form 10k 211 listing subsidiaries 231 consent independent public accountants 311 certification chief executive officer required rule 13a14a 17 cfr 24013a14a 312 certification chief financial officer required rule 13a14a 17 cfr 24013a14a 321 certification chief executive officer pursuant 18 usc section 1350 adopted pursuant section 906 sarbanes oxley act 2002 322 certification chief financial officer pursuant 18 usc section 1350 adopted pursuant section 906 sarbanesoxley act 2002 1 incorporated reference exhibits companys form 10k filing fiscal year ended december 31 2001 dated march 28 2002 2 incorporated reference exhibits companys registration statement form s7 registration 266797 became effective april 22 1980 3 incorporated reference exhibits companys form s4 dated september 19 2003 4 incorporated reference exhibits companys form 10k filing fiscal year ended december 31 1999 dated march 28 2000 5 incorporated reference exhibits companys september 30 2002 form 10q filing dated november 13 2002 6 incorporated reference exhibits companys june 30 2000 form 10q filing dated august 14 2000 7 incorporated reference exhibits companys form s8 filing dated april 28 1994 8 incorporated reference exhibits companys form 10k filing fiscal year ended december 31 2000 dated march 28 2001 9 incorporated reference exhibits companys september 30 1998 form 10q filing dated november 10 1998 10 incorporated reference exhibits companys september 30 1997 form 10q filing dated november 13 1997 11 incorporated reference exhibits companys form 10k filing fiscal year ended december 31 1996 dated march 26 1997 12 incorporated reference exhibits companys march 31 2003 form 10q filing dated may 13 2003nannannannannanitem 15 exhibits financial statement schedules 1 index financial statements see item 8 “financial statements supplementary data”on page 29 list financial statements 2 schedule ii valuation qualifying accounts financial statement schedules omitted required information included consolidated financial statements notes thereto 3 index exhibits listed accompanying index exhibits pages 72 76 report filed incorporated reference part report biorad laboratories inc schedule ii valuation qualifying accounts years ended december 31 2009 2008 2007 thousands allowance doubtful accounts receivable due acquisitions valuation allowance current longterm deferred tax assets b due acquisitions signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities dates indicated principal executive officer norman schwartz president director february 26 2010 norman schwartz principal financial officer christine tsingos vice president christine tsingos chief financial officer february 26 2010 principal accounting officer james r stark corporate controller february 26 2010 james r stark directors james j bennett director february 26 2010 james j bennett louis drapeau director february 26 2010 louis drapeau albert j hillman director february 26 2010 albert j hillman alice n schwartz director february 26 2010 alice n schwartz david schwartz director february 26 2010 david schwartz 103 amended restated pledge agreement dated june 21 2005 biorad laboratories inc jpmorgan chase bank na successor merger bank one na main office chicago administrative agent 7 104 1994 stock option plan 9 1041 amendment biorad laboratories inc 1994 stock option plan dated april 28 1998 10 1042 second amendment biorad laboratories inc 1994 stock option plan dated december 6 1999 10 1043 third amendment biorad laboratories inc 1994 stock option plan dated september 19 2000 10 1044 fourth amendment biorad laboratories inc 1994 stock option plan dated april 25 2001 11 1045 amendment 1994 stock option plan biorad laboratories inc dated february 18 2009 22 105 amended restated 1988 employee stock purchase plan 12 1051 amendment amended 1988 employee stock purchase plan 11 1052 amendment biorad laboratories inc amended restated 1988 employee stock purchase plan 106 employees’ deferred profit sharing retirement plan amended restated effective january 1 1997 13 107 2003 stock option plan 14 1071 amendment 2003 stock option plan biorad laboratories inc 19 108 2007 incentive award plan 21 1081 restricted stock unit award grant notice restricted stock unit award agreement 2007 incentive award plan 23 1010 noncompetition employment continuation agreement james j bennett 15 1013 stock purchase agreement dated august 16 2004 biorad mj geneworks incorporated michael j finney john finney excluding exhibits schedules pursuant regulation sk item 601b2 exhibits schedules agreement filed agree furnish supplementally copy omitted exhibits schedules sec upon request requested confidential treatment certain portions agreement 16 1014 connecticut settlement agreement dated february 9 2006 biorad laboratories inc mj research inc applera corporation applied biosystems group 16 1015 realtime settlement agreement dated february 9 2006 biorad laboratories inc mj research inc applera corporation applied biosystems group 16 10151 amendment 1 realtime settlement agreement dated may 4 2007 biorad laboratories inc mj research inc applera corporation applied biosystems group 20 1016 amended restated thermal cycler supplier agreement dated february 9 2006 biorad laboratories inc mj research inc applera corporation applied biosystems group 16 1017 realtime instrument patent license agreement dated february 9 2006 biorad laboratories inc mj research inc applera corporation applied biosystems group 16 10171 amendment 1 realtime patent license agreement dated may 4 2007 biorad laboratories inc mj research inc applera corporation applied biosystems group 20 1018 credit agreement dated september 9 2003 among biorad laboratories inc lenders bank one na administrative agent wells fargo bank na union bank california na syndication agents abn amro bank nv bnp paribas documentation agents 4 10181 amendment 1 credit agreement dated december 8 2004 among biorad laboratories inc lenders referred herein jpmorgan chase bank na successor merger bank one na illinois lender administrative agent wells fargo bank na union bank california na syndication agents abn amro bank nv bnp paribas documentation agents 5 10182 amendment 2 amended restated credit agreement dated september 27 2007 among biorad laboratories inc lenders referred herein jpmorgan chase bank na successor merger bank one na main office chicago lender contractual representative 18 10183 amendment 3 amended restated credit agreement dated may 18 2009 among biorad laboratories inc lenders referred herein jpmorgan chase bank na successor merger bank one na main office chicago lender contractual representative 25 1019 pledge amendment dated september 9 2003 among biorad laboratories inc bank one na contractual representative 4 1020 security agreement dated september 9 2003 among biorad laboratories inc grantor bank one na administrative agent 4 211 listing subsidiaries 231 consent ernst young llp independent registered public accounting firm 232 consent deloitte touche llp independent registered public accounting firm 311 certification chief executive officer required rule 13a14a 17cfr 24013a14a 312 certification chief financial officer required rule 13a14a 17cfr 24013a14a 321 certification chief executive officer pursuant 18 usc section 1350 adopted pursuant section 906 sarbanesoxley act 2002 322 certification chief financial officer pursuant 18 usc section 1350 adopted pursuant section 906 sarbanesoxley act 2002 1 incorporated reference exhibits biorad’s form 10k filing fiscal year ended december 31 2001 dated march 28 2002 2 incorporated reference exhibits biorad’s form 10k filing fiscal year ended december 31 2004 dated march 3 2005 3 incorporated reference exhibits biorad’s registration statement form s7 registration 266797 became effective april 22 1980 4 incorporated reference exhibits biorad’s form s4 filing dated september 19 2003 5 incorporated reference exhibits biorad’s form 8k filing dated december 14 2004 6 incorporated reference exhibits biorad’s form 8k filing dated december 22 2004 7 incorporated reference exhibits biorad’s form 8k filing dated june 24 2005 8 incorporated reference exhibits biorad’s september 30 2005 10q filing dated november 8 2005 9 incorporated reference exhibits biorad’s form s8 filing dated april 29 1994 10 incorporated reference exhibits biorad’s form 10k filing fiscal year ended december 31 2000 dated march 28 2001 11 incorporated reference exhibits biorad’s form 10k filing fiscal year ended december 31 2003 dated march 15 2004 12 incorporated reference exhibits biorad’s september 30 1998 form 10q filing dated november 12 1998 13 incorporated reference exhibits biorad’s september 30 1997 form 10q filing dated november 13 1997 14 incorporated reference exhibits biorad’s march 31 2003 form 10q filing dated may 13 2003 15 incorporated reference exhibits biorad’s december 31 1996 form 10k filing dated march 27 1997 16 incorporated reference exhibits biorad’s march 31 2006 form 10q filing dated may 9 2006 17 incorporated reference exhibits biorad’s june 30 2007 form 10q filing dated august 8 2007 18 incorporated reference exhibits biorad’s form 8k filing dated october 3 2007 19 incorporated reference exhibits biorad’s march 31 2007 form 10q filing dated may 4 2007 20 incorporated reference exhibits biorad’s june 30 2007 form 10q filing dated august 8 2007 21 incorporated reference exhibits biorad’s s8 filing dated july 30 2007 22 incorporated reference exhibits biorad’s june 30 2009 form 10q filing dated august 5 2009 23 incorporated reference exhibits biorad’s september 30 2009 form 10q filing dated november 4 2009 24 incorporated reference exhibits biorad’s form 8k filing dated may 26 2009 25 incorporated reference exhibits biorad’s form 8k filing dated may 18 2009 26 incorporated reference biorad’s form s4 dated april 20 2005item 15 exhibits financial statement schedules 1 index financial statements see item 8 “financial statements supplementary data”on page 30 list financial statements 2 schedule ii valuation qualifying accounts financial statement schedules omitted required information included consolidated financial statements notes thereto 3 index exhibits listed accompanying index exhibits pages 76 79 report filed incorporated reference part report biorad laboratories inc schedule ii valuation qualifying accounts years ended december 31 2010 2009 2008 thousands allowance doubtful accounts receivable due acquisitions valuation allowance current longterm deferred tax assets b due acquisitions signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities dates indicated principal executive officer norman schwartz president director february 28 2011 norman schwartz principal financial officer christine tsingos vice president christine tsingos chief financial officer february 28 2011 principal accounting officer james r stark corporate controller february 28 2011 james r stark directors james j bennett director february 28 2011 james j bennett louis drapeau director february 28 2011 louis drapeau albert j hillman director february 28 2011 albert j hillman dr ted w love director february 28 2011 dr ted w love alice n schwartz director february 28 2011 alice n schwartz david schwartz director february 28 2011 david schwartz 104 1994 stock option plan 6 1041 amendment biorad laboratories inc 1994 stock option plan dated april 28 1998 7 1042 second amendment biorad laboratories inc 1994 stock option plan dated december 6 1999 7 1043 third amendment biorad laboratories inc 1994 stock option plan dated september 19 2000 7 1044 fourth amendment biorad laboratories inc 1994 stock option plan dated april 25 2001 7 1045 amendment 1994 stock option plan biorad laboratories inc dated february 18 2009 8 105 amended restated 1988 employee stock purchase plan 9 1051 amendment amended 1988 employee stock purchase plan 10 1052 amendment biorad laboratories inc amended restated 1988 employee stock purchase plan 11 106 employees’ deferred profit sharing retirement plan amended restated effective january 1 1997 12 107 2003 stock option plan 13 1071 amendment 2003 stock option plan biorad laboratories inc 14 108 2007 incentive award plan 15 1081 restricted stock unit award grant notice restricted stock unit award agreement 2007 incentive award plan 16 211 listing subsidiaries 231 consent ernst young llp independent registered public accounting firm 232 consent deloitte touche llp independent registered public accounting firm 311 certification chief executive officer required rule 13a14a 17cfr 24013a14a 312 certification chief financial officer required rule 13a14a 17cfr 24013a14a 321 certification chief executive officer pursuant 18 usc section 1350 adopted pursuant section 906 sarbanesoxley act 2002 322 certification chief financial officer pursuant 18 usc section 1350 adopted pursuant section 906 sarbanesoxley act 2002 1 incorporated reference exhibit 21 biorad’s june 30 2007 form 10q filing dated august 8 2007 2 incorporated reference exhibits biorad’s form s4 filing dated september 19 2003 3 incorporated reference exhibits biorad’s form 8k filing dated may 28 2009 4 incorporated reference exhibit 41 biorad’s form 8k filing dated december 9 2010 5 incorporated reference exhibits biorad’s 8k filing dated december 22 2004 6 incorporated reference exhibit 41 biorad’s form s8 filing dated april 29 1994 7 incorporated reference exhibits biorad’s form 10k filing fiscal year ended december 31 2000 dated march 28 2001 file 0017928 film 1582270 8 incorporated reference exhibit 1045 biorad’s june 30 2009 form 10q filing dated august 5 2009 9 incorporated reference exhibit 105 biorad’s september 30 1998 form 10q filing dated november 12 1998 file 0017928 film 98743709 10 incorporated reference exhibit 1051 biorad’s form 10k filing fiscal year ended december 31 2003 dated march 15 2004 file 0017928 film 04669434 11 incorporated reference exhibit 1052 biorad’s form 10k filing fiscal year ended december 31 2009 dated february 26 2010 12 incorporated reference exhibit 106 biorad’s september 30 1997 form 10q filing dated november 13 1997 file 0017928 film 9771652 13 incorporated reference exhibit 107 biorad’s march 31 2003 form 10q filing dated may 13 2003 file 0017928 film 03696450 14 incorporated reference exhibit 1071 biorad’s march 31 2007 form 10q filing dated may 4 2007 file 0017928 film 07819469 15 incorporated reference exhibit 41 biorad’s form s8 filing dated july 30 2007 16 incorporated reference exhibit 1081 biorad’s september 30 2009 form 10q filing dated november 4 2009item 15 exhibits financial statement schedules a1 index financial statements see item 8 “financial statements supplementary data page 30 list financial statements schedule ii valuation qualifying accounts financial statement schedules omitted required information included consolidated financial statements notes thereto index exhibits listed accompanying index exhibits pages 73 76 report filed incorporated reference part report biorad laboratories inc schedule ii valuation qualifying accounts years ended december 31 2011 2010 2009 thousands allowance doubtful accounts receivable valuation allowance current longterm deferred tax assets due acquisitions signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities dates indicateditem 15 exhibits financial statement schedules a1 index financial statements see item 8 part ii report “financial statements supplementary data page 35 list financial statements schedule ii valuation qualifying accounts financial statement schedules omitted required information included consolidated financial statements notes thereto index exhibits listed accompanying index exhibits pages 84 87 report filed incorporated reference part report biorad laboratories inc schedule ii valuation qualifying accounts years ended december 31 2012 2011 2010 thousands allowance doubtful accounts receivable valuation allowance current longterm deferred tax assets due acquisitions signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized biorad laboratories inc christine tsingos christine tsingos executive vice president chief financial officer date march 18 2013 pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities dates indicateditem 15 exhibits financial statement schedules a1 index financial statements see item 8 part ii report “financial statements supplementary data page 37 list financial statements schedule ii valuation qualifying accounts financial statement schedules omitted required information included consolidated financial statements notes thereto index exhibits listed accompanying index exhibits pages 92 95 report filed incorporated reference part report biorad laboratories inc schedule ii valuation qualifying accounts years ended december 31 2013 2012 2011 thousands allowance doubtful accounts receivable valuation allowance current longterm deferred tax assets due acquisitions signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized biorad laboratories inc christine tsingos christine tsingos executive vice president chief financial officer date march 17 2014 pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities dates indicateditem 15 exhibits financial statement schedules a1 index financial statements see item 8 part ii report “financial statements supplementary data page 38 list financial statements schedule ii valuation qualifying accounts financial statement schedules omitted required information included consolidated financial statements notes thereto index exhibits listed accompanying index exhibits pages 87 89 report filed incorporated reference part report biorad laboratories inc schedule ii valuation qualifying accounts years ended december 31 2014 2013 2012 thousands allowance doubtful accounts receivable valuation allowance current longterm deferred tax assets due acquisitions signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized biorad laboratories inc christine tsingos christine tsingos executive vice president chief financial officer date march 2 2015 pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities dates indicateditem 15 exhibits financial statement schedules a1 index financial statements see item 8 part ii report “financial statements supplementary data page 44 list financial statements schedule ii valuation qualifying accounts financial statement schedules omitted required information included consolidated financial statements notes thereto biorad laboratories inc schedule ii valuation qualifying accounts years ended december 31 2017 2016 2015 thousands allowance doubtful accounts receivable valuation allowance longterm deferred tax assets 3 index exhibits listed accompanying index exhibits filed incorporated reference part report item 16 form 10k summary applicable signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized biorad laboratories inc christine tsingos christine tsingos executive vice president chief financial officer date april 13 2018 pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities dates indicateditem 15 exhibits financial statement schedules a1 index financial statements see item 8 part ii report “financial statements supplementary data page 40 list financial statements schedule ii valuation qualifying accounts financial statement schedules omitted required information included consolidated financial statements notes thereto biorad laboratories inc schedule ii valuation qualifying accounts years ended december 31 2019 2018 2017 thousands allowance doubtful accounts receivable valuation allowance longterm deferred tax assets 3 index exhibits listed accompanying index exhibits filed incorporated reference part report item 16 form 10k summary applicable signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities dates indicatednanitem 15 exhibits financial statement schedules a1 index financial statements see item 8 part ii report “financial statements supplementary data page 41 list financial statements schedule ii valuation qualifying accounts financial statement schedules omitted required information included consolidated financial statements notes thereto biorad laboratories inc schedule ii valuation qualifying accounts years ended december 31 2018 2017 2016 thousands allowance doubtful accounts receivable valuation allowance longterm deferred tax assets 3 index exhibits listed accompanying index exhibits filed incorporated reference part report item 16 form 10k summary applicable signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized biorad laboratories inc christine tsingos christine tsingos executive vice president chief financial officer date march 29 2019 pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities dates indicatednanitem 15 exhibits financial statement schedules a1 index financial statements see item 8 part ii report “financial statements supplementary data page 38 list financial statements schedule ii valuation qualifying accounts financial statement schedules omitted required information included consolidated financial statements notes thereto index exhibits listed accompanying index exhibits pages 85 87 report filed incorporated reference part report biorad laboratories inc schedule ii valuation qualifying accounts years ended december 31 2015 2014 2013 thousands allowance doubtful accounts receivable valuation allowance current longterm deferred tax assets signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized biorad laboratories inc christine tsingos christine tsingos executive vice president chief financial officer date february 29 2016 pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities dates indicated exhibit noitem 15 exhibits financial statement schedules a1 index financial statements see item 8 part ii report “financial statements supplementary data page 40 list financial statements schedule ii valuation qualifying accounts financial statement schedules omitted required information included consolidated financial statements notes thereto index exhibits listed accompanying index exhibits pages 90 92 report filed incorporated reference part report biorad laboratories inc schedule ii valuation qualifying accounts years ended december 31 2016 2015 2014 thousands allowance doubtful accounts receivable valuation allowance current longterm deferred tax assets 2014 year presented current longterm valuation allowances deferred tax assets due adoption asu 201517 2015 prospective basis therefore years 2016 2015 valuation allowance longterm deferred tax assets signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized biorad laboratories inc christine tsingos christine tsingos executive vice president chief financial officer date february 28 2017 pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities dates indicateditem 15 exhibits financial statement schedules a1index financial statements see item 8 part ii report “financial statements supplementary data page 39 list financial statements 2schedule ii valuation qualifying accounts financial statement schedules omitted required information included consolidated financial statements notes thereto 3index exhibits listed accompanying index exhibits filed incorporated reference part report item 16 form 10k summary applicable signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities dates indicated