Life Technologies Announces Third Quarter 2012 Results

Revenue of $911 million

GAAP earnings per share (EPS) of $0.37, or $0.92 on a non-GAAP basis

Free Cash Flow of $177 million

Company repurchased $208 million of shares in the third quarter, total of $535 million year-to-date

02 Nov, 2012, 19:04 ET from Life Technologies Corporation

CARLSBAD, Calif., Nov. 1, 2012 /PRNewswire/ -- Life Technologies Corporation (NASDAQ: LIFE) today announced results for its third quarter ended September 30, 2012. Revenue for the third quarter was $911 million, a decrease of 1.9 percent over the $929 million reported for the third quarter of 2011. Excluding the impact of currency, revenue growth for the quarter was 1.4 percent compared to the same period of the prior year.

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

"Our third quarter performance came in stronger than our expectations driven by a significant increase in Ion Torrent platform sales, as well as increased sales in our research consumables and forensics businesses," said Gregory T. Lucier, chairman and chief executive officer of Life Technologies. "During the quarter, we made solid progress in expanding our operations and footprint in high growth and emerging markets, including entering into strategic partnerships for companion diagnostics, building the foundation for our Medical Sciences business and acquiring distributors in China and Chile. We achieved important milestones with several highly anticipated launches including the Ion Proton System, a platform whose speed, ease of use and affordability will democratize genome sequencing, and our Pervenio Lung RS test service, the first of its kind molecular test to identify early-stage lung cancer patients who are at high risk of reoccurrence following surgery."

"We continue to demonstrate our commitment to returning capital to shareholders by repurchasing an additional $208 million worth of shares in the third quarter, bringing our year-to-date total to $535 million. Based on our performance year-to-date and end market assumptions, we are tightening the full year guidance range by increasing the bottom end by $0.05 and are now expecting non-GAAP earnings per share of $3.95 to $4.00."

Life Technologies reported current quarter results compared to the quarter ended September 30, 2011. Results are non-GAAP unless indicated otherwise. A full reconciliation of the non-GAAP measures to GAAP can be found in the tables of today's press release.

Analysis of Third Quarter 2012 Results

  • Third quarter revenue decreased 1.9 percent over the prior year. Revenue growth without the impact from currency was 1.4 percent.
  • Gross margin in the third quarter was 65.6 percent, approximately 50 basis points lower than the same period of the prior year primarily driven by unfavorable currency rates.
  • Operating margin was 28.0 percent in the third quarter, approximately 140 basis points lower than the same period of the prior year. Operating margin contraction was primarily due to unfavorable currency rates and increased investments in Greater China and Medical Sciences.
  • Third quarter tax rate was 27.3 percent.
  • Third quarter EPS was $0.92.
  • Diluted weighted shares outstanding were 177.3 million in the third quarter, a decrease of 9.6 million shares over the prior year. The decrease was a result of the continuation of the company's share repurchase program, partially offset by shares issued for employee stock plans. The company repurchased $208 million or 4.4 million shares in the third quarter.
  • Cash flow from operating activities for the third quarter was $197 million. Third quarter capital expenditures were $20 million, resulting in free cash flow of $177 million. The company ended the quarter with $299 million in cash and short-term investments.

Business Group Highlights

  • Research Consumables revenue was $384 million, a decrease of 3 percent compared to the prior year. Excluding the impact from currency, revenue for the business group grew 1 percent, primarily as a result of growth in our cell culture products, sample prep products and benchtop instruments.
  • Genetic Analysis revenue was $353 million in the third quarter, a decrease of 1 percent over the same period last year. Excluding the impact from currency, revenue increased 2 percent primarily as a result of increased sales of the Ion Torrent platform, including the Ion Proton System and the Ion PGM benchtop instruments, offset by an expected decline in SOLiD® instrument sales and lower sales of CE instruments, primarily due to one-time orders in the prior year quarter and the timing of sales.
  • Applied Sciences revenue was $174 million in the third quarter, flat compared to the same period last year. Excluding the impact from currency, revenue increased 3 percent, primarily due to forensics and higher sales of qPCR applied sciences instruments, offset by lower sales of CE instruments due to one-time orders in the prior year quarter, and an expected decline in BioProduction sales, which tend to fluctuate quarter to quarter.
  • Regional revenue growth rates excluding currency for the quarter compared to the same quarter of the prior year were as follows: the Americas declined 1 percent, Europe grew 2 percent, Asia Pacific grew 10 percent and Japan grew 4 percent.

Fiscal Year 2012 Outlook

Subject to the risk factors detailed in the Safe Harbor Statement section of this release, the company is updating its guidance. The company's updated 2012 guidance is for organic revenue growth of approximately 2 percent over 2011 revenues of $3.7 billion. Additionally, the company is tightening the previously provided range by increasing the bottom by $0.05 and is now expecting non-GAAP earnings per share of $3.95 to $4.00. The company will provide further detail on its business outlook during the webcast today.

The Ion Proton System is for Research Use Only and not intended for use in diagnostic procedures.

Webcast Details

The company will discuss its financial and business results as well as its business outlook on its webcast at 4:30 PM ET today. This webcast will contain forward-looking information. The webcast will include a discussion of "non-GAAP financial measures" as that term is defined in Regulation G. For actual results, the most directly comparable GAAP financial measures and information reconciling these non-GAAP financial measures to the company's financial results determined in accordance with GAAP, as well as other material financial and statistical information to be discussed on the webcast will be posted at the company's investor relations website at https://ir.lifetechnologies.com. The webcast can be accessed through the investor relations page of the company's website at https://ir.lifetechnologies.com/events.cfm. A replay of the webcast will be available on the company's website through Thursday, November 22, 2012.

About Life Technologies

Life Technologies Corporation (NASDAQ: LIFE) is a global biotechnology company with customers in more than 160 countries using its innovative solutions to solve some of today's most difficult scientific challenges. Quality and innovation are accessible to every lab with its reliable and easy-to-use solutions spanning the biological spectrum with more than 50,000 products for agricultural biotechnology, translational research, molecular medicine and diagnostics, stem cell-based therapies, forensics, food safety and animal health. Its systems, reagents and consumables represent some of the most cited brands in scientific research including: Ion Torrent™, Applied Biosystems®, Invitrogen™, GIBCO®, Ambion®, Molecular Probes®, Novex®, and TaqMan®. Life Technologies employs approximately 10,400 people and upholds its ongoing commitment to innovation with more than 4,000 patents and exclusive licenses. LIFE had sales of $3.7 billion in 2011. 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. 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; and corporate strategy and performance. 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.

Non-GAAP Measurements

This press release 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 on the investor relations portion of the company's website at www.lifetechnologies.com.

Investor and Financial Contact Carol Cox 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, 2012

ended September 30, 2011

(unaudited)

Revenues

$          911,183

$             928,198

Cost of revenues

361,571

315,062

Purchased intangibles amortization

71,126

73,901

Gross profit

478,486

539,235

Gross margin

52.5%

58.1%

Operating expenses:

Selling, general and administrative

270,565

251,832

Research and development

84,811

103,856

Business consolidation costs

10,571

23,126

Total operating expenses

365,947

378,814

Operating income

112,539

160,421

Operating margin

12.4%

17.3%

Interest income

436

919

Interest expense

(29,291)

(37,992)

Other expense, net

(2,781)

(3,039)

Total other expense, net

(31,636)

(40,112)

Income from operations before provision for 

     income taxes

80,903

120,309

Income tax provision

(15,301)

(24,335)

Net income

65,602

95,974

Net loss attributable to non-controlling interests

255

297

Net income attributable to controlling interest

$          65,857

$             96,271

Effective tax rate 

18.9%

20.2%

Add back interest expense for subordinated

    debt, net of tax

-

650

Numerator for diluted earnings

  per share

$          65,857

$             96,921

Earnings per common share:

Basic earnings per share attributable to controlling interest

$              0.38

$                  0.54

Diluted earnings per share attributable to controlling interest

$              0.37

$                  0.52

Weighted average shares used in per share calculation:

Basic

174,044

179,859

Diluted

177,258

186,812

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, 2012

ended September 30, 2011

(unaudited)

GAAP net income 

$         65,602

$       95,974

Non-GAAP revenue adjustments

Purchase accounting related adjustments 

193

644

Charges on a discontinued product

-

(101)

Total Non-GAAP revenue adjustments

193

(1)

543

(1)

Non-GAAP cost of revenues and purchased intangible adjustments

Purchased intangibles amortization

71,126

73,901

Purchase accounting related adjustments 

-

(183)

Legal judgment

48,500

-

Total Non-GAAP cost of revenues and purchased intangible adjustments

119,626

(2)

73,718

(2)

Non-GAAP Operating Expense Adjustments:

Purchase accounting related adjustments 

1,019

15,367

Business consolidation costs

10,571

23,126

Legal settlement

11,400

-

Total Non-GAAP Operating Expense Adjustments

22,990

(3)

38,493

(3)

Non-GAAP Other Expense Adjustments:

Noncash interest expense charges 

-

6,572

Total Non-GAAP Other Expense Adjustments

-

6,572

(4)

Non-GAAP Income Tax Provision Adjustments:

Income tax adjustments

(45,740)

(40,612)

Total Non-GAAP Income Tax Provision Adjustments

(45,740)

(5)

(40,612)

(5)

Non-GAAP Net Income

$      162,671

$     174,688

Non-GAAP loss attributable to controlling interest

255

(6)

193

(6)

Non-GAAP Net Income Attributable to Controlling Interest

$      162,926

$     174,881

Add back of interest expense for subordinated debt, net of tax

-

32

Non-GAAP Numerator for diluted earnings per share

$      162,926

$     174,913

Non-GAAP Earnings per common share:

Basic earnings per share attributable to controlling interest

$             0.94

$            0.97

Diluted earnings per share attributable to controlling interest

$             0.92

$            0.94

Weighted average shares used in per share calculation:

Basic

174,044

179,859

Diluted

177,258

186,812

Summary of Reconciliation between GAAP and Non-GAAP Net Income

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.

For the three months ended September 30, 2011, Non-GAAP earnings resulted in total revenue of $928.7 million, gross profit of $613.5 million with gross margin of 66.1%, operating profit of $273.2 million with operating margin of 29.4%, and an income tax provision of $64.9 million with the Non-GAAP effective tax rate of 27.1%  with the above adjustments.

Notes

(1)

Add back purchased deferred revenue of $0.2 million and $0.6 million for the three months ended September 30, 2012 and 2011, respectively, and adjust revenue related to returns of a discontinued product of $0.1 million for the three months ended September 30, 2011.

(2)

Add back amortization of purchased intangibles of $71.1 million and $73.9 million for the three months ended September 30, 2012 and 2011, respectively. Add back the legal judgment of $48.5 million for the three months ended September 30, 2012, and adjust charges for a contingent consideration remeasurement of $0.2 million for the three months ended September 30, 2011.

(3)

Add back depreciation of purchase accounting property, plant, and equipment revaluation of $1.0 million and $1.7 million, and 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 $10.6 million and $23.1 million for the three months ended September 30, 2012 and 2011, respectively. Add back legal settlement of $11.4 million for the three months ended September 30, 2012, and add back purchase accounting contingent consideration fair value adjustment of $13.7 million for the three months ended September 30, 2011.

(4)

Add back charges related to non-cash interest expense for senior convertible debts of $5.1 million and imputed finance charge of $1.5 million associated with contingent consideration on business acquisitions for the three months ended September 30, 2011.

(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, adjusted for noncash charges for purchase accounting property, plant, and equipment revaluation, 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, 2012

ended September 30, 2011

(unaudited)

Revenues

$         2,799,606

$      2,765,227

Cost of revenues

1,003,611

955,840

Purchased intangibles amortization

219,192

226,527

Gross profit

1,576,803

1,582,860

Gross margin

56.3%

57.2%

Operating expenses:

Selling, general and administrative

790,012

759,438

Research and development

258,225

287,723

Business consolidation costs

34,266

56,468

Total operating expenses

1,082,503

1,103,629

Operating income

494,300

479,231

Operating margin

17.7%

17.3%

Interest income

1,715

2,960

Interest expense

(94,266)

(123,911)

Other expense, net

(11,097)

(7,980)

Total other expense, net

(103,648)

(128,931)

Income from operations before provision for 

     income taxes

390,652

350,300

Income tax provision

(70,108)

(65,534)

Net income

320,544

284,766

Net loss attributable to non-controlling interests

305

658

Net income attributable to controlling interest

$         320,849

$       285,424

Effective tax rate 

17.9%

18.7%

Add back interest expense for subordinated

    debt, net of tax

12

716

Numerator for diluted earnings

  per share

$         320,861

$       286,140

Earnings per common share:

Basic earnings per share attributable to controlling interest

$                1.81

$              1.59

Diluted earnings per share attributable to controlling interest

$                1.78

$              1.54

Weighted average shares used in per share calculation:

Basic

177,028

179,751

Diluted

180,559

185,946

LIFE TECHNOLOGIES CORPORATION

ITEMIZED RECONCILIATION BETWEEN

GAAP AND NON-GAAP NET INCOME

For the nine months

For the nine months

(in thousands, except per share data)

ended September 30, 2012

ended September 30, 2011

(unaudited)

GAAP net income 

$      320,544

$        284,766

Non-GAAP revenue adjustments

Purchase accounting related adjustments 

835

2,375

Charges on a discontinued product

(457)

2,736

Total Non-GAAP revenue adjustments

378

(1)

5,111

(1)

Non-GAAP cost of revenues and purchased intangible adjustments

Purchased intangibles amortization

219,192

226,527

Purchase accounting related adjustments 

-

(1,555)

Charges on a discontinued product

-

2,094

Legal judgement and settlement of historical portion of licensing dispute

48,331

-

Total Non-GAAP cost of revenues and purchased intangible adjustments

267,523

(2)

227,066

(2)

Non-GAAP Operating Expense Adjustments:

Purchase accounting related adjustments 

2,869

20,886

Business consolidation costs

34,266

56,468

Licensing and legal settlements

10,467

-

Total Non-GAAP Operating Expense Adjustments

47,602

(3)

77,354

(3)

Non-GAAP Other Expense Adjustments:

Noncash interest expense charges 

5,382

24,130

Other expense

5,302

-

Total Non-GAAP Other Expense Adjustments

10,684

(4)

24,130

(4)

Non-GAAP Income Tax Provision Adjustments:

Income tax adjustments

(128,868)

(122,610)

Total Non-GAAP Income Tax Provision Adjustments

(128,868)

(5)

(122,610)

(5)

Non-GAAP Net Income

$      517,863

$        495,817

Non-GAAP loss attributable to controlling interest

305

(6)

350

(6)

Non-GAAP Net Income Attributable to Controlling Interest

$      518,168

$        496,167

Add back interest expense for subordinated debt, net of tax

12

98

Non-GAAP Numerator for diluted earnings per share

$      518,180

$        496,265

Non-GAAP Earnings per common share:

Basic earnings per share attributable to controlling interest

$             2.93

$               2.76

Diluted earnings per share attributable to controlling interest

$             2.87

$               2.67

Weighted average shares used in per share calculation:

Basic

177,028

179,751

Diluted

180,559

185,946

Summary of Reconciliation between GAAP and Non-GAAP Net Income

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.

For the nine months ended September 30, 2011, Non-GAAP earnings resulted in total revenue of $2.8 billion, gross profit of $1.8 billion with gross margin of 65.5%, operating profit of $788.8 million with operating margin of 28.5%, and an income tax provision of $188.1 million with the Non-GAAP effective tax rate of 27.5%  with the above adjustments.

Notes

(1)

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.  Add back purchased deferred revenue of $2.4 million and revenue related to returns of a discontinued product of $2.7 million for the nine months ended September 30, 2011.

(2)

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.  Add back amortization of purchased intangibles of $226.5 million, charges for inventory reserves related to a discontinued product of $2.1 million, and purchase accounting related cost of revenue revaluation of $0.5 million which was offset by contingent consideration revaluation of $2.1 million for the nine months ended September 30, 2011. 

(3)

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 depreciation of purchase accounting property, plant, and equipment revaluation of $5.7 million, purchase accounting contingent consideration fair value adjustment of $13.7 million and accelerated compensation expense related to business acquisitions of $1.5 million for the nine months ended September 30, 2011. 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 $34.3 million and $56.5 million for the nine months ended September 30, 2012 and 2011, 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. Add back charges related to non-cash interest expense for senior convertible debts of $19.5 million and charges for imputed finance charge of $4.6 million associated with contingent consideration on business acquisitions for the nine months ended September 30, 2011.

(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, adjusted for noncash charges for purchase accounting property, plant, and equipment revaluation, 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 STATEMENTS OF CASH FLOWS

For the nine months

ended September 30,

(in thousands)(unaudited)

2012

2011

Net income

$            320,544

$         284,766

Add back amortization and 

    share-based compensation

292,918

289,912

Add back depreciation

93,617

90,988

Balance sheet changes

(42,539)

(153,355)

Other noncash adjustments

(107,755)

(19,104)

Net cash provided by operating activities

556,785

493,207

Capital expenditures

(68,385)

(65,779)

Free cash flow

488,400

427,428

Net cash used in investing activities

(72,057)

(48,645)

Net cash used in financing activities

(980,524)

(601,228)

Effect of exchange rate changes on cash

(420)

3,092

Net decrease in cash and cash equivalents

$           (564,601)

$       (219,353)

LIFE TECHNOLOGIES CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

September 30, 

December 31,

(in thousands)

2012

2011

ASSETS

 (unaudited) 

Current assets:

Cash and short-term investments

$               299,270

$             881,994

Trade accounts receivable, net of allowance for doubtful accounts

644,579

636,998

Inventories

400,680

377,866

Prepaid expenses and other current assets

251,160

196,759

     Total current assets

1,595,689

2,093,617

Long-term assets

6,962,346

7,094,346

     Total assets

$            8,558,035

$          9,187,963

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Current portion of long-term debt

$               253,200

$             450,839

Short-term borrowings

140,000

-

Accounts payable, accrued expenses and other current liabilities

728,468

1,045,467

     Total current liabilities

1,121,668

1,496,306

Long-term debt

2,061,280

2,297,653

Other long-term liabilities

760,586

794,778

Stockholders' equity

4,614,501

4,599,226

    Total liabilities and stockholders' equity

$            8,558,035

$          9,187,963

SOURCE Life Technologies Corporation



RELATED LINKS

http://www.lifetechnologies.com