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Biotech / Medical : Bio-Rad Labs: Things are changing -- Ignore unavailable to you. Want to Upgrade?

To: Dave Chanoux who wrote (7)	2/13/2000 10:32:00 PM
From: Dave Chanoux	Read Replies (1) \| Respond to of 18

Dave, For pain - take an aspirin. Put the Shakespeare back in your pocket. Instead of complaining, take a look at a different cut at the financials (below). Column 3 on the right is Bio-Rad's income statement as reported, Bio-Rad + PSD. Column 1 is the Bio-Rad without PSD, derived from the company's press release text. And Column 2 is the result of simple math. Some simple observations jump out: 1. PSD is a breakeven operation at best. Bio-Rad has some work to do to make this business profitable: keep the customers (revenue), get the margins up (better gross margins). 2. Is there potential for cross-selling: Bio-Rad products to PSD customers, PSD products to Bio-Rad customers? Cross-selling has the potential to increase revenue without corresponding increases in SG&A. Is the French Mad-Cow test kit an example of cross-selling? 3. Interest expense is funny as reported. PSD reportedly cost $210 M. Prior to PSD interest expense was negligible. If one were to assume $200 M in borrowing at 10%, the expense would be $5M per quarter. How can the company report $10.3M in interest expense? There must be some non-recurring expense in the reported expense number. Split the interest expense item into recurring $5M)and non-recurring ($5.3) items. If you don't like that split make your own. 4. Bio-Rad's business is healthy. PSD offers potential for improvement. The risk is in execution. If you think Bio-Rad can improve PSD's margins, make your own estimates, derive your own eps estimates and make your investment. Bio-Rad PSD Bio-Rad+PSD Revenue 134.2 60.2 194.4 Gross Margin 71.1 26.1 97.2 Gross Margin percent 52.98% 43.36% 50.00% SG&A 45.6 20.4 66.0 R&D-Continuing 13.4 5.4 18.8 R&D-Non-recurring 15.5 Operating Income 12.1 0.3 -3.1 Interest - recurring 0 0 5.0 Interest -non-recurring 0 0 5.3 Taxable Income 10.1 0.3 -15.7 Taxes (29%) 2.929 0.087 -4.553 Net Income 7.171 0.213 -11.147 EPS (12.125M shares) $0.59 $0.02 -$0.92 Stop complaining. Revenue and gross margin next quarter will be the key. Watch for them. Regards, Dave Chanoux