Life Technologies Announces Third Quarter 2013 Results

Revenue increased 4 percent, excluding the impact of currency
GAAP earnings per share (EPS) were $0.67, or $1.02 on a Non-GAAP basis
Free cash flow of $225 million

PR Newswire

CARLSBAD, Calif., Nov. 5, 2013 /PRNewswire/ -- Life Technologies Corporation (LIFE) today announced results for its third quarter ended September 30, 2013.  Revenue for the third quarter was $936 million, an increase of 3 percent over the $911 million reported for the third quarter of 2012.  Excluding the impact of currency, revenue growth for the quarter was 4 percent compared to the same period of the prior year.  

"We are pleased with our mid-single digit revenue and double-digit non-GAAP EPS growth, which was driven by strength across our Research Consumables and Applied Sciences business groups, solid growth in Japan and emerging markets such as China, and continued stability in the U.S. and Europe," said Gregory T. Lucier, chairman and chief executive officer of Life Technologies.  "During the quarter, we continued to execute against our strategy of expanding into growth markets by introducing new products in stem cells and next generation sequencing and by opening a state-of-the art forensics lab in India.  In addition, we partnered with TriCore Reference Laboratories to establish our first next-generation sequencing Center of Excellence focused on clinical research."

Lucier continued, "On August 21, 2013, our stockholders voted to adopt the Life Technologies and Thermo Fisher merger agreement, representing a significant milestone and bringing us one step closer to the anticipated close of the acquisition in early 2014. Both companies remain excited about creating the unrivaled leader in life sciences that will continue to accelerate innovation and better meet the needs of our customers."

Life Technologies reported results compared to the quarter ended September 30, 2012.  Results are non-GAAP unless indicated otherwise.  A full reconciliation of non-GAAP to GAAP measures can be found in the tables of today's press release.

Analysis of Third Quarter 2013 Results

  • Third quarter revenue increased by 3 percent over the prior year, representing an increase of approximately 4 percent excluding the impact of currency.  Revenue growth for the quarter was driven by increases in the company's Research Consumables and Bioproduction businesses, partially offset by declines in Genetic Analysis.
  • Gross margin in the third quarter was 65.7 percent, approximately 10 basis points higher than the same period of the prior year.  Gross margin was driven by manufacturing productivity and higher realized price, partially offset by a decline in royalties.
  • Operating margin was 28.1 percent in the third quarter, approximately 10 basis points higher than in the same period of the prior year, primarily due to the increase in revenue and gross margin, partially offset by increases in expenses related to acquisitions and planned investments in Ion Torrent.
  • The Company's tax rate was 22.9 percent for the third quarter, which was lower than the third quarter of last year due to the reinstatement of the U.S. federal research tax credit and tax credits on foreign repatriation.
  • Third quarter EPS increased 10 percent to $1.02.   
  • Diluted weighted shares outstanding were 175.9 million in the third quarter, a decrease of 1.4 million shares over the prior year.  The decrease was a result of the share repurchase program, partially offset by shares issued for employee stock plans.    
  • Cash flow from operating activities for the third quarter was $250 million.  Third quarter capital expenditures were $25 million, resulting in free cash flow of $225 million.  The company ended the quarter with $368 million in cash and short-term investments.

Business Group and Regional Highlights

  • Research Consumables revenue was $404 million in the third quarter, an increase of 5 percent compared to the prior year.  Excluding the impact of currency, revenue for the business group increased 6 percent primarily due to strong sales from the Company's fluorescent imaging, stem cells, synthetic biology and cell culture products.
  • Genetic Analysis revenue was $338 million in the third quarter, a decrease of 4 percent over the same period last year.  Excluding the impact of currency, revenue decreased 3 percent.  Results for the quarter were primarily driven by an expected decline in qPCR royalties and SOLiD sales, offset by continued solid performance in the rest of the business.
  • Applied Sciences revenue was $194 million in the third quarter, an increase of 12 percent over the prior year.  Excluding the impact of currency, revenue increased 13 percent primarily as a result of an increase in Bioproduction sales.
  • Regional revenue growth rates excluding currency for the third quarter, compared to the same quarter of the prior year, were as follows: the Americas were flat, Europe grew 2 percent, Asia Pacific grew 18 percent, and Japan grew 8 percent.  

Outlook
Given the announcement in April that Life Technologies and Thermo Fisher have entered into a definitive merger agreement under which Thermo Fisher will acquire all of the outstanding shares of Life Technologies for $76.00 per share in cash, the Company is no longer providing quarterly guidance.  The Company will continue to provide commentary regarding the impact that fluctuations in currency rates could have on results. 

Based on September 30, 2013 rates, currency is expected to have a negative impact of approximately $57 million on revenue and $0.13 on non-GAAP EPS for the full year.  This compares to a negative impact of $75 million on revenue and $0.17 on non-GAAP EPS for the full year at June 30, 2013 rates.

Conference Calls
In light of the announced transaction with Thermo Fisher, the Company will no longer hold conference calls for its quarterly and annual earnings.  The transaction, which is expected to close early in 2014, is subject to customary closing conditions, including regulatory approvals.

About Life Technologies
Life Technologies Corporation (NASDAQ: LIFE) is a global biotechnology company that is committed to providing the most innovative products and services to leading customers in the fields of scientific research, genetic analysis and applied sciences. With a presence in more than 180 countries, the company's portfolio of 50,000 end-to-end solutions are secured by more than 5,000 patents and licenses that span the entire biological spectrum -- scientific exploration, molecular diagnostics, 21st century forensics, regenerative medicine and agricultural research. Life Technologies has approximately 10,000 employees and had sales of $3.8 billion in 2012. Visit us at our website: http://www.lifetechnologies.com.

Safe Harbor Statement
Certain statements contained in this press release are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, and Life Technologies intends that such forward-looking statements be subject to the safe harbor created thereby. Forward-looking statements may be identified by words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates," "will," or words of similar meaning and include, but are not limited to, statements about the expected future business and financial performance of the company and statements regarding the proposed acquisition of Life Technologies by Thermo Fisher. Such forward-looking statements include, but are not limited to, statements relating to financial projections, including revenue and pro forma EPS projections; success of acquired businesses, including cost and revenue synergies; development and increased flow of new products; leveraging technology and personnel; advanced opportunities and efficiencies; opportunities for growth; expectations of prospective new standards, new delivery platforms, and new selling specialization and effectiveness; plans and prospects for the company; corporate strategy and performance; and the expected timetable for completing the transaction with Thermo Fisher. A number of the matters discussed in this press release and presentation that are not historical or current facts deal with potential future circumstances and developments, including future research and development plans. The discussion of such matters is qualified by the inherent risks and uncertainties surrounding future expectations generally and other factors that could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. Such risks and uncertainties include, but are not limited to:  volatility of the financial markets; and the risks that are described from time to time in Life Technologies' reports filed with the SEC. This press release and presentation speaks only as of its date, and the company disclaims any duty to update the information herein.

All products referenced are for Research Use Only and not intended for use in diagnostic procedures, unless otherwise noted.

Non-GAAP Measurements
This discussion includes certain financial information which constitutes "non-GAAP financial measures" as defined by the SEC.  The GAAP measures which are most directly comparable to these measures, as well as a reconciliation of these measures with the most directly comparable GAAP measures, can be found at the Investor Relations portion of the company's website at www.lifetechnologies.com.

(Logo: http://photos.prnewswire.com/prnh/20110216/MM49339LOGO)

Investor and Financial Contact:

Carol Cox
Agnes Lee
Investor Relations
(760) 603-7208
ir@lifetech.com

 

LIFE TECHNOLOGIES CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS












For the three months


For the three months

(in thousands, except per share data)

ended September 30, 2013


ended September 30, 2012

(unaudited)












Revenues



$                        935,090


$                          911,183

Cost of revenues

319,546


361,571

Purchased intangibles amortization

70,641


71,126




Gross profit

544,903


478,486

Gross margin


58.3%


52.5%

Operating expenses:





Selling, general and administrative

268,839


270,565


Research and development

82,978


84,811


Business consolidation costs

26,922


10,571



Total operating expenses

378,739


365,947




Operating income

166,164


112,539

Operating margin

17.8%


12.4%


Interest income

400


436


Interest expense

(27,092)


(29,291)


Other expense, net

(5,182)


(2,781)



Total other expense, net

(31,874)


(31,636)

Income from operations before provision for 




     income taxes


134,290


80,903

Income tax provision

(16,310)


(15,301)




Net income

117,980


65,602




Net loss attributable to non-controlling interests

266


255




Net income attributable to controlling interest

$                        118,246


$                           65,857








Effective tax rate 

12.1%


18.9%

Numerator for diluted earnings




  per share


$                        118,246


$                           65,857








Earnings per common share:





Basic earnings per share attributable to controlling interest

$                              0.68


$                               0.38









Diluted earnings per share attributable to controlling interest

$                              0.67


$                               0.37








Weighted average shares used in per share calculation:





Basic


172,892


174,044


Diluted


175,901


177,258

 


LIFE TECHNOLOGIES CORPORATION

ITEMIZED RECONCILIATION BETWEEN

GAAP AND NON-GAAP NET INCOME













For the three months


For the three months


(in thousands, except per share data)

ended September 30, 2013


ended September 30, 2012


(unaudited)














GAAP net income 

$                         117,980


$                           65,602











Non-GAAP revenue adjustments








Purchase accounting related adjustments 

516


193



Total Non-GAAP revenue adjustments

516

(1)

193

(1)










Non-GAAP cost of revenues and purchased intangible adjustments








Purchased intangibles amortization

70,641


71,126





Purchase accounting related adjustments

(1,103)


-





Legal settlement

-


48,500



Total Non-GAAP cost of revenues and purchased intangible adjustments

69,538

(2)

119,626

(2)










Non-GAAP operating expense adjustments








Purchase accounting related adjustments 

194


1,019





Business consolidation costs

26,922


10,571





Legal settlement

-


11,400



Total Non-GAAP operating expense adjustments

27,116

(3)

22,990

(3)










Non-GAAP income tax provision adjustments








Income tax adjustments

(36,682)


(45,740)



Total Non-GAAP income tax provision adjustments

(36,682)

(4)

(45,740)

(4)









Non-GAAP Net Income

$                         178,468


$                         162,671



Non-GAAP loss attributable to non-controlling interest

266

(5)

255

(5)

Non-GAAP Net Income Attributable to Controlling Interest

$                         178,734


$                         162,926


















Non-GAAP Numerator for diluted earnings per share

$                         178,734


$                         162,926










Non-GAAP Earnings per common share:






Basic earnings per share attributable to controlling interest

$                               1.03


$                               0.94











Diluted earnings per share attributable to controlling interest

$                               1.02


$                               0.92










Weighted average shares used in per share calculation:






Basic


172,892


174,044



Diluted


175,901


177,258


















Summary of Reconciliation between GAAP and Non-GAAP Net Income


For the three months ended September 30, 2013, Non-GAAP earnings resulted in total revenue of $935.6 million, gross profit of $615.0 million with gross margin of 65.7%, operating profit of $263.3 million with operating margin of 28.1%, and an income tax provision of $53.0 million with the Non-GAAP effective tax rate of 22.9% with the above adjustments.




For the three months ended September 30, 2012, Non-GAAP earnings resulted in total revenue of $911.4 million, gross profit of $598.3 million with gross margin of 65.6%, operating profit of $255.3 million with operating margin of 28.0%, and an income tax provision of $61.0 million with the Non-GAAP effective tax rate of 27.3% with the above adjustments.

Notes


(1)

Add back purchased deferred revenue of $0.5 million and $0.2 million for the three months ended September 30, 2013 and 2012, respectively. 



(2)

Add back amortization of purchased intangibles of $70.6 million, offset by contingent consideration revaluation of $1.1 million for the three months ended September 30, 2013. Add back amortization of purchased intangibles of $71.1 million for the three months ended September 30, 2012. Add back the legal judgment of $48.5 million for the three months ended September 30, 2012. 



(3)

Add back depreciation of purchase accounting property, plant, and equipment revaluation of $0.2 million and $1.0 million for the three months ended September 30, 2013 and 2012, respectively.  Add back business consolidation costs including restructuring and integrating acquired entities, aligning acquired and existing operations through business transformation activities and costs associated with divesting entities of $26.9 millionand $10.6 million for the three months ended September 30, 2013 and 2012, respectively. Add back legal settlement of $11.4 million for the three months ended September 30, 2012.



(4)

Non-GAAP tax adjustment due to the exclusion of the aforementioned business combination related charges, non cash charges, and one-time costs which are not indicative of the profitability or cash flows of the Company's ongoing or future operations. These deductions produce a GAAP only tax benefit which is added back for Non-GAAP presentation.



(5)

Non-GAAP net loss attributable to non-controlling interest, net of tax benefit.







The Company reports Non-GAAP results which excludes costs that are not indicative of the profitability or cash flows of the Company's ongoing or future operations.  Such costs are restructuring cost, business transformation expenses, amortization and depreciation of deferred revenue, intangibles assets, and fixed assets, and revaluation charges for inventories, contingent consideration liabilities, asset impairments, and in process research and development expenses, incurred as a result of business combinations as well as the impact from the divestiture and discontinuance of product lines.  The Company also excludes noncash interest expense associated with convertible debt bifurcation and noncash charges associated with non-controlling interests. In addition, the Company excludes one-time costs including the early repayment of debt and the associated impacts, and the impact of certain settlements in order to provide a supplemental comparison of the results of operations. 

 

LIFE TECHNOLOGIES CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS












For the nine months


For the nine months

(in thousands, except per share data)


ended September 30, 2013


ended September 30, 2012

(unaudited)














Revenues




$                             2,843,410


$                             2,799,606

Cost of revenues



964,185


1,003,611

Purchased intangibles amortization


213,886


219,192




Gross profit

1,665,339


1,576,803

Gross margin



58.6%


56.3%

Operating expenses:







Selling, general and administrative

816,455


790,012


Research and development

255,083


258,225


Business consolidation costs

81,921


34,266



Total operating expenses

1,153,459


1,082,503




Operating income

511,880


494,300

Operating margin



18.0%


17.7%


Interest income


1,617


1,715


Interest expense


(84,106)


(94,266)


Other expense, net


(9,570)


(11,097)



Total other expense, net

(92,059)


(103,648)

Income from operations before provision for 




     income taxes



419,821


390,652

Income tax provision



(54,316)


(70,108)




Net income

365,505


320,544




Net loss attributable to non-controlling interests

577


305




Net income attributable to controlling interest

$                              366,082


$                              320,849








Effective tax rate 



12.9%


17.9%

Add back interest expense for subordinated




    debt, net of tax



-


12

Numerator for diluted earnings





  per share




$                              366,082


$                              320,861








Earnings per common share:






Basic earnings per share attributable to controlling interest

$                                     2.13


$                                     1.81









Diluted earnings per share attributable to controlling interest

$                                     2.09


$                                     1.78








Weighted average shares used in per share calculation:





Basic



172,072


177,028


Diluted



175,314


180,559

 

LIFE TECHNOLOGIES CORPORATION

ITEMIZED RECONCILIAITON BETWEEN

GAAP AND NON-GAAP NET INCOME













For the nine months


For the nine months


(in thousands, except per share data)

ended September 30, 2013


ended September 30, 2012


(unaudited)














GAAP net income 

$              365,505


$              320,544











Non-GAAP revenue adjustments







Purchase accounting related adjustments 

1,373


835




Charges on a discontinued product

-


(457)




Historical portion of licensing settlement

(2,774)


-



Total Non-GAAP revenue adjustments

(1,401)

(1)

378

(1)










Non-GAAP cost of revenues and purchased intangible adjustments







Purchased intangibles amortization

213,886


219,192




Purchase accounting related adjustments 

(3,118)


-




Legal judgement and settlement of historical portion of licensing dispute

-


48,331



Total Non-GAAP cost of revenues and purchased intangible adjustments

210,768

(2)

267,523

(2)










Non-GAAP operating expense adjustments:








Purchase accounting related adjustments 

2,021


2,869





Business consolidation costs

81,921


34,266





Licensng and legal settlements

-


10,467



Total Non-GAAP operating expense adjustments

83,942

(3)

47,602

(3)










Non-GAAP other expense adjustments:








Noncash interest expense charges 

-


5,382





Other expense

-


5,302



Total Non-GAAP other expense adjustments

-


10,684

(4)










Non-GAAP income tax provision adjustments:








Income tax adjustments

(121,880)

(5)

(128,868)

(5)


Total Non-GAAP income tax provision adjustments

(121,880)


(128,868)










Non-GAAP Net Income

$              536,934


$              517,863



Non-GAAP loss attributable to controlling interest

577

(6)

305

(6)

Non-GAAP Net Income Attributable to Controlling Interest

$              537,511


$              518,168










Add back interest expense for subordinated debt, net of tax

-


12










Non-GAAP Numerator for diluted earnings per share

$              537,511


$              518,180










Non-GAAP Earnings per common share:






Basic earnings per share attributable to controlling interest

$                     3.12


$                     2.93











Diluted earnings per share attributable to controlling interest

$                     3.07


$                     2.87










Weighted average shares used in per share calculation:






Basic


172,072


177,028



Diluted


175,314


180,559



Summary of Reconciliation between GAAP and Non-GAAP Net Income


For the nine months ended September 30, 2013, Non-GAAP earnings resulted in total revenue of $2.8 billion, gross profit of $1.9 billion with gross margin of 66.0%, operating profit of $805.2 million with operating margin of 28.3%, and an income tax provision of $176.2 million with the Non-GAAP effective tax rate of 24.7% with the above adjustments.




For the nine months ended September 30, 2012, Non-GAAP earnings resulted in total revenue of $2.8 billion, gross profit of $1.8 billion with gross margin of 65.9%, operating profit of $809.8 million with operating margin of 28.9%, and an income tax provision of $199.0 million with the Non-GAAP effective tax rate of 27.8% with the above adjustments.


Notes

(1)

Adjust for historical portion of royalty licensing settlement of $2.8 million, and add back purchased deferred revenue of $1.4 million for the nine months ended September 30, 2013.  Add back purchased deferred revenue of $0.8 million and adjust for revenue related to a discontinued product of $0.5 million for the nine months ended September 30, 2012.



(2)

Add back amortization of purchased intangibles of $213.9 million and amortization of a fair value inventory write-up of $1.5 million, offset by contingent consideration revaluation of $4.6 million for the nine months ended September 30, 2013.  Add back amortization of purchased intangibles of $219.2 million and a legal judgment of $48.5 million partially offset by $0.2 million related to the historical portion of the settlement of licensing disputes for the nine months ended September 30, 2012. 



(3)

Add back contingent consideration revaluation of $1.0 million and depreciation of purchase accounting property, plant, and equipment revaluation of $1.0 million for the nine months ended September 30, 2013. Add back depreciation of purchase accounting property, plant, and equipment revaluation of $2.9 million, and add back legal settlement of $11.4 million and adjust for compensation cost of $0.9 million related to the historical portion of the settlement of a licensing dispute for the nine months ended September 30, 2012. Add back business consolidation costs including restructuring and integrating acquired entities, aligning acquired and existing operations through business transformation activities and costs associated with divesting entities of $81.9 million and $34.3 million for the nine months ended September 30, 2013 and 2012, respectively.  



(4)

Add back charges associated with a divestiture activity of $5.3 million, charges related to non-cash interest expense for senior convertible debts of $1.7 million and the extinguishment of a line of credit facility of $3.7 million for the nine months ended September 30, 2012. 



(5)

Non-GAAP tax adjustment due to the exclusion of the aforementioned business combination related charges, non cash charges, and one-time costs which are not indicative of the profitability or cash flows of the Company's ongoing or future operations. These deductions produce a GAAP only tax benefit which is added back for Non-GAAP presentation.



(6)

Non-GAAP net loss attributable to non-controlling interest, net of tax benefit.








The Company reports Non-GAAP results which excludes costs that are not indicative of the profitability or cash flows of the Company's ongoing or future operations. Such costs are restructuring cost, business transformation expenses, amortization and depreciation of deferred revenue, intangibles assets, and fixed assets, and revaluation charges for inventories, contingent consideration liabilities, asset impairments, and in process research and development expenses, incurred as a result of business combinations as well as the impact from the divestiture and discontinuance of product lines. The Company also excludes noncash interest expense associated with convertible debt bifurcation and noncash charges associated with non-controlling interests. In addition, the Company excludes one-time costs including the early repayment of debt and the associated impacts, and the impact of certain settlements in order to provide a supplemental comparison of the results of operations.

 

LIFE TECHNOLOGIES CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS


















September 30,


December 31,

(in thousands)

2013


2012

ASSETS

 (unaudited) 



Current assets:





Cash and short-term investments

$         368,252


$        276,369


Trade accounts receivable, net of allowance for doubtful accounts

653,525


697,228


Inventories

431,089


403,488


Prepaid expenses and other current assets

293,250


248,154


     Total current assets

1,746,116


1,625,239






Long-term assets

6,742,120


7,012,826


     Total assets

$      8,488,236


$     8,638,065






LIABILITIES AND STOCKHOLDERS' EQUITY




Current liabilities:





Current portion of long-term debt

$             4,157


$        253,214


Short-term borrowings

-


100,000


Accounts payable, accrued expenses and other current liabilities

797,147


839,137


     Total current liabilities

801,304


1,192,351











Long-term debt

2,067,587


2,060,855

Other long-term liabilities

642,569


731,396

Stockholders' equity

4,976,776


4,653,463


    Total liabilities and stockholders' equity

$      8,488,236


$     8,638,065

 

LIFE TECHNOLOGIES CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


















For the nine months



ended September 30,

(in thousands)(unaudited)

2013


2012

Net income

$ 365,505


$  320,544


Add back amortization and 





    share-based compensation

280,867


292,918


Add back depreciation

91,976


93,617


Balance sheet changes

(32,962)


(42,539)


Other noncash adjustments

(100,965)


(107,755)

Net cash provided by operating activities

604,421


556,785


Capital expenditures

(71,179)


(68,385)


Proceeds from sale of assets 

36,729


-

Free cash flow

569,971


488,400

Net cash used in investing activities

(78,949)


(72,057)

Net cash used in financing activities

(406,067)


(980,524)

Effect of exchange rate changes on cash

(4,113)


(420)

Net (decrease) increase in cash and cash equivalents

$   80,842


$ (564,601)

Rates

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