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Bio-Rad Ratings Affirmed by Fitch

NEW YORK (GenomeWeb News) – Fitch Ratings today affirmed Bio-Rad's ratings, noting the firm's stability and strong cash position but warning against continued macroeconomic headwinds.

Included in the ratings is a BBB- for Issuer Default Rating; BBB- for senior secured bank facility; BBB- for senior unsecured notes; and BB+ for senior subordinated notes.

The rating outlook for the Hercules, Calif.-based company is stable, Fitch said.

In a statement, the ratings agency noted Bio-Rad's stable operating profile and cash flows, saying that about 70 percent of total revenues derive from the sales of consumables. Much of those sales are contracted through the placement of the firm's capital equipment, ensuring "relatively stable sales volumes and reliable cash generation," Fitch said.

It added that it expects Bio-Rad's consumables business to grow in the mid-single digits over the intermediate term. "Potentially favorable volume impacts of healthcare reform legislation in the US is also likely to support sales in 2014," Fitch said.

It also took note of Bio-Rad's "strong liquidity" and extended debt maturities. Bio-Rad's cash and short-term investments as of Sept. 30 totaled $854 million, and it has a $200 million credit agreement due in June 2014, along with expected free cash flow of between $120 million and $150 million this year and next.

Meanwhile, the company has no meaningful debt maturities until subordinated notes are due in 2016.

"Large cash and short-term investments balances, combined with Bio-Rad's history of financial conservatism and an extended debt maturity profile, afford the company considerable flexibility at the current BBB- ratings," Fitch said.

However, Fitch noted macroeconomic challenges, especially in Europe, where Bio-Rad has significant exposure. Government cuts have led to strained research budgets and more careful spending by scientists, especially for capital equipment. A weaker euro has also adversely affected Bio-Rad, which Fitch said, derives its largest share of sales from the Eurozone.

Throughout the year, Bio-Rad's Eurozone market has experienced depressed demand and Fitch expects that to continue in 2013. For 2013, Fitch expects Bio-Rad revenues to grow in the low-single digits.