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Rating Action:

Moody's upgrades Bio-Rad to Baa3 from Ba1; outlook stable

Global Credit Research - 17 Jul 2014

Approximately $425 million of debt affected

New York, July 17, 2014 -- Moody's Investors Service upgraded the senior unsecured notes of Bio-Rad Laboratories, Inc. ("Bio-Rad") to Baa3 from Ba1. Concurrently, Moody's changed the rating outlook to stable from positive. The upgrade reflects Bio-Rad's long track record of conservative financial policies including the maintenance of adjusted debt to EBITDA below 2.5x, and the absence of dividends and share repurchases.

Moody's upgraded the following rating:

$425 million Senior Unsecured notes due 2020 to Baa3 from Ba1

Concurrently, Moody's has withdrawn the following ratings, as these measures are applicable only for non investment grade companies:

Ba1 Corporate Family Rating

Ba1-PD Probability of Default Rating

SGL-1 Speculative Grade Liquidity Rating

All LGD Assessments

The outlook is stable.

RATINGS RATIONALE

Bio-Rad's Baa3 rating is supported by the company's conservative financial policy, which has led to a strong balance sheet, characterized by cash and short-term investments in excess of debt. Bio-Rad has good diversity by product, customer and geography and roughly 70% of revenue is recurring in nature. These factors have helped support a long history of growth and stable financial performance throughout economic cycles. Further, Moody's expects that Bio-Rad will maintain excellent liquidity over the next 12-18 months.

The ratings are constrained by the company's size, which is modest both on an absolute basis and relative to competitors. Further, Moody's expects that operating performance will continue to be constrained by significant investments in a major ongoing ERP implementation, and acquisitions of assets that have negative EBITDA. While these investments in new products and information technology will benefit Bio-Rad over the longer-term, they will constrain margins and free cash flow over the next 12-18 months. Lastly, Bio-Rad will continue to face headwinds due to its exposure to government funding, both in Europe in the diagnostics business and in the US in the life science business.

The stable outlook reflects Moody's expectation that Bio-Rad will continue to operate with conservative financial policies and generate modest growth in revenue and profit despite market headwinds and internal investments.

Moody's could upgrade the ratings if Bio-Rad expands its scale, either organically or through strategic acquisitions, while sustaining adjusted debt to EBITDA below 2.5 times. Improvement in profit margins and free cash flow as a result of strong returns on the current investments that Bio-Rad is making into the business could also support an upgrade.

If increased competition, adverse economic conditions or government funding trends negatively impact Bio-Rad's revenue and cash flow in a meaningful way, Moody's could downgrade the ratings. Further, a change in financial policies such as large, debt-funded acquisitions or a more aggressive stance toward shareholder returns could result in a downgrade. Specifically, if Moody's expects debt/EBITDA to be sustained above 3.0 times, the ratings could be downgraded.

The principal methodology used in this rating was the Global Medical Product and Device Industry published in October 2012. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

Bio-Rad, based in Hercules, California, operates in two industry segments: Life Science and Clinical Diagnostics. The Life Science segment includes the manufacture of equipment and related products for research, drug discovery and food pathogen testing, primarily in the laboratory setting. The Clinical Diagnostic segment includes the manufacture of equipment and tests used to detect, identify and quantify substances in blood or other body fluids and tissues, primarily used in hospital and reference laboratories. Bio-Rad reported revenues of $2.1 billion for the twelve months ended March 31, 2014.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this rating action, and whose ratings may change as a result of this rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Jessica Gladstone
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Peter H. Abdill, CFA
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's upgrades Bio-Rad to Baa3 from Ba1; outlook stable
No Related Data.

 

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