<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
------------ ------------
Commission file number 0-14991
---------
LIFE TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 34-0431300
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
8717 GROVEMONT CIRCLE, GAITHERSBURG, MD 20877
(Address of principal executive offices) (Zip Code)
--------------------------------
Registrant's telephone number, including area code: (301) 840-8000
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes x No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at Oct. 31, 1995
----- ----------------------------
Common Stock, par value $.01 per share 15,460,000 shares
- -------------------------------------------------------------------------------
<PAGE>
PART I
------
FINANCIAL INFORMATION
---------------------
Item 1. Financial Statements
--------------------
CONSOLIDATED BALANCE SHEET
(amounts in thousands)
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
- --------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 24,150 $ 13,246
Accounts receivable, net 51,969 36,163
Inventories:
Materials and supplies 10,869 8,811
In process and finished 54,919 49,894
LIFO reserve (6,676) (5,995)
-------- --------
59,112 52,710
Prepaid expenses 3,502 1,974
Current deferred tax assets 3,480 3,475
-------- --------
Total current assets 142,213 107,568
Property, plant and equipment 86,750 79,348
Less accumulated depreciation (36,438) (31,305)
-------- --------
50,312 48,043
Investments and other assets 7,332 9,796
Excess of cost over net assets of
businesses acquired, net 6,223 6,340
-------- --------
Total assets $206,080 $171,747
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt $ 995 $ -
Accounts payable 16,099 14,358
Dividends payable 756 749
Accrued income taxes 16,155 11,326
Accrued liabilities and expenses 15,838 11,593
-------- --------
Total current liabilities 49,843 38,026
Long-term debt 2,488 -
Deferred income taxes 1,869 1,871
Minority interests 2,035 541
Other 1,161 1,180
-------- --------
Total liabilities 57,396 41,618
Stockholders' equity:
Common stock 151 150
Additional paid-in capital 45,125 42,561
Retained earnings 103,530 89,184
Currency exchange effects (122) (1,766)
-------- --------
Total stockholders' equity 148,684 130,129
-------- --------
Total liabilities and stockholders' equity $206,080 $171,747
======== ========
</TABLE>
Amounts as of September 30, 1995 are unaudited.
2
<PAGE>
Part I -- Financial Statements (continued)
CONSOLIDATED STATEMENT OF INCOME
(amounts in thousands, except per share data)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30 September 30
------------------------------- -----------------------------
1995 1994 Change 1995 1994 Change
--------- --------- --------- --------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Net sales $66,981 $59,098 + 13% $202,077 $ 176,339 + 15%
Net royalties 67 - - 67 67 -
------- ------- -------- ---------
67,048 59,098 + 13% 202,144 176,406 + 15%
Operating expenses:
Cost of sales 33,012 31,538 + 5% 102,376 92,697 + 10%
Marketing and 22,199 17,531 + 27% 63,250 51,309 + 23%
administrative
Research and development 3,756 3,533 + 6% 11,814 11,460 + 3%
------- ------- -------- ---------
58,967 52,602 + 12% 177,440 155,466 + 14%
------- ------- -------- ---------
Operating income 8,081 6,496 + 24% 24,704 20,940 + 18%
Other income (expense):
Investment income 149 111 + 34% 514 411 + 25%
Interest expense (20) (1) - (25) (24 + 4%
Other, net 124 43 +188% 367 161 +128%
------- ------- -------- ---------
253 153 + 65% 856 548 + 56%
------- ------- -------- ---------
Income before income taxes 8,334 6,649 + 25% 25,560 21,488 + 19%
Income taxes 2,917 2,394 + 22% 8,946 7,736 + 16%
------- ------- -------- ---------
Income before minority 5,417 4,255 + 27% 16,614 13,752 + 21%
interests
Minority interests (50) 97 - (11) (83 - 87%
------- ------- -------- ---------
Net income $ 5,367 $ 4,352 + 23% $ 16,603 $ 13,669 + 21%
======= ======= ======== =========
Average shares outstanding 15,341 15,077 + 2% 15,233 15,065 + 1%
======= ======= ======== =========
Net income per share $0.35 $0.29 + 21% $1.09 $0.91 + 20%
======= ======= ======== =========
Dividends per share $0.05 $0.05 - $0.15 $0.15 -
======= ======= ======== =========
</TABLE>
Amounts are unaudited.
3
<PAGE>
Part I - Financial Statements (continued)
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(amounts in thousands)
<TABLE>
<CAPTION>
Nine months ended
September 30
-----------------
1995 1994
- -----------------------------------------------------------------------
<S> <C> <C>
CASH INFLOWS (OUTFLOWS)
Operations:
Net income $16,603 $ 13,669
Non-cash items:
Depreciation and amortization 5,745 4,887
Other (621) 1,026
Changes in assets and liabilities (4,511) (7,992)
------- --------
17,216 11,590
Investments:
Capital expenditures (7,752) (9,848)
Acquisitions/joint ventures (724) (1,191)
------- --------
(8,476) (11,039)
Financing:
Dividends paid (2,250) (2,245)
Proceeds from exercise of stock options 2,299 290
------- --------
49 (1,955)
Effect of exchange rate changes on cash (19) 317
------- --------
Increase in cash and cash equivalents 8,770 (1,087)
Cash included from consolidation of a subsidiary
which became majority owned in 1995 2,134 -
Cash and cash equivalents at beginning of period 13,246 7,927
------- --------
Cash and cash equivalents at end of period $24,150 $ 6,840
======= ========
</TABLE>
Amounts are unaudited.
Notes To Financial Statements:
- -----------------------------
Net income per share figures in the Consolidated Statement of Income are based
on the weighted average number of shares and common stock equivalents
outstanding as indicated for each period.
In the opinion of the Company's management, the unaudited financial statements
reflect all adjustments (which consist of normal recurring adjustments)
necessary to present a fair statement of the results for the interim periods.
The results for the nine-month period ended September 30, 1995 are not
necessarily indicative of the results for the entire year 1995.
The financial data included herein have been reviewed by the registrant's
independent public accountants, Coopers & Lybrand L.L.P., and their report is
attached.
4
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Part I - (continued)
Item 2. Management's Discussion and Analysis of Financial
-------------------------------------------------
Condition and Results of Operations
-----------------------------------
THIRD QUARTER RESULTS
Net sales were $67.0 million for the third quarter of 1995, an increase of 13%
over the comparable quarter of 1994. Sales of products other than fetal bovine
serum (FBS) increased by 14%, when comparing the third quarter of 1995 with the
comparable period in 1994 and excluding the effect of changes due to different
currency translation rates. Lower unit sales of FBS decreased net sales by $1.2
million while higher unit selling prices of FBS increased net sales by $0.5
million when comparing the third quarter of 1995 with the third quarter of 1994.
FBS sales represented 15% of net sales in the third quarter of 1995 and 18% in
the third quarter of 1994. The effect of changes in currency exchange rates
increased third quarter 1995 net sales by $1.5 million when compared with the
third quarter of 1994.
Gross margins were 50.7% of net sales in the third quarter of 1995 compared with
46.6% in the third quarter of 1994. FBS gross margins were higher in the third
quarter of 1995 than in the comparable quarter a year earlier as FBS unit
selling prices increased while unit costs decreased.
Marketing and administrative expenses were 33.1% of net sales in the third
quarter of 1995 and 29.7% in the third quarter of 1994. The effect of
consolidating the Company's Japanese subsidiary increased marketing and
administrative expenses by $0.9 million, or 1.3% of net sales. Expenses related
to the Company's new direct sales offices and custom oligonucleotide business
also contributed to the increase in marketing and administrative expenses in the
third quarter of 1995. Research and development expenses were $3.8 million in
the third quarter of 1995, representing a 6% increase over the $3.5 million
reported in the third quarter of 1994.
Operating income of $8.1 million for the quarter ended September 30, 1995
represented a 24% increase over the third quarter of 1994. Other income
increased 65% when comparing the third quarter of 1995 with the third quarter of
the previous year, principally due to higher equity income from the Company's
Japanese subsidiary reported prior to consolidation and higher investment income
in the 1995 period. The Company's effective income tax rate was 35% in the
third quarter of 1995 compared with 36% in the third quarter of the previous
year.
Third quarter 1995 net income of $5.4 million increased 23% over the comparable
period a year earlier. Earnings per share of $0.35 in the third quarter of 1995
were 21% greater than the $0.29 per share reported in the prior year's third
quarter.
5
<PAGE>
Part I - (continued)
NINE MONTHS RESULTS
For the first nine months of 1995, net sales were $202.1 million, an increase of
$25.7 million, or 15%, over the first nine months of 1994. Sales of products
other than FBS increased by 13% when comparing the first nine months of 1995
with the comparable period in 1994 and excluding the effect of changes due to
different currency translation rates. Lower unit sales of FBS reduced net sales
by $2.1 million, while higher FBS unit selling prices increased net sales by
$1.4 million in the first nine months of 1995. FBS sales represented 16% of net
sales in the first nine months of 1995 and 18% in the comparable period of 1994.
Changes in currency exchange rates used to translate sales to U.S. dollars
increased net sales in the first nine months of 1995 by $7.4 million when
compared with the first nine months of last year.
Gross margins for the first nine months of 1995 were 49.3% of net sales compared
with 47.4% in the first nine months of 1994. Gross margins on products other
than FBS improved in the 1995 period, mostly because the Company reported higher
gross margins in markets it served directly in the first nine months of 1995
where these markets were served by distributors for a substantial portion of the
comparable period of 1994. FBS gross margins were higher in the first nine
months of 1995 as FBS unit selling prices increased at a faster rate than the
increase in unit costs.
Marketing and administrative expenses represented 31.3% of net sales in the
first nine months of 1995 compared with 29.1% of net sales in the comparable
period of 1994. The increase as a percentage of sales is principally due to the
Company's new direct sales offices and new custom oligonucleotide business.
Research and development expenses were $11.8 million in the first nine months of
1995, an increase of 3% over the first nine months of 1994.
Operating income increased 18% to $24.7 million in the first nine months of 1995
compared with the first nine months of 1994. Other income increased 56% in the
first nine months of 1995 principally due to higher equity income from the
Company's Japanese subsidiary reported prior to consolidation and higher
investment income in the 1995 period. The Company's effective income tax rate
was 35% in the first nine months of 1995 compared with 36% in the first nine
months of 1994.
Net income of $16.6 million for the first nine months of 1995 was 21% greater
than the $13.7 million for the comparable period in 1994. Earnings per share of
$1.09 in the first nine months of 1995 represented a 20% increase over earnings
per share in the comparable period of 1994.
LIQUIDITY AND CAPITAL RESOURCES
Operating activities provided $17.2 million in cash during the first nine months
of 1995. Net income after adjustments for depreciation and amortization was the
principal source of cash from operations in 1995. Working capital increases,
largely related to higher sales or seasonal factors, were the principal use of
cash from operations.
The Company paid $7.8 million for capital expenditures in the first nine months
of 1995, including a significant investment in new management information
6
<PAGE>
systems. The Company acquired a controlling interest in its Japanese joint
venture for $0.2 million increasing its ownership from 50% to 51%. The Company
also made an additional equity investment of $0.3 million in a life sciences
company in North America and made deferred payments of $0.2 million related to
the 1994 purchase of its Swedish operations.
Cash used for financing activities included $2.3 million paid in the first nine
months of 1995 for the Company's quarterly dividend. Short and long term debt
was a result of acquiring an additional 1% interest in the Company's Japanese
joint venture and consolidating its results for the first time in the quarter
ended September 30, 1995. The Company received $2.3 million in cash related to
the exercise of options to acquire the Company's common stock in the first nine
months of 1995.
Capital expenditures in 1995 are expected to approach $12 million primarily for
new and replacement machinery, equipment and management information systems as
well as for facilities modernization, including the Company's new corporate R&D
center in Maryland. The Company believes it will be able to generate sufficient
cash from its operations and its existing credit line from The Dexter
Corporation, an affiliate of the Company, to meet its anticipated working
capital and capital expenditure requirements in the fourth quarter of 1995.
The Company is actively evaluating licensing possibilities, as well as
acquisition candidates which complement the Company's core cell and molecular
biology and cell culture product lines. The Company may fund these transactions
using cash from operations, debt, equity or other sources.
PART II - OTHER INFORMATION
------- -----------------
Item 1. Legal Proceedings - Not applicable.
-----------------
Item 2. Changes in Securities - Not applicable.
---------------------
Item 3. Defaults Upon Senior Securities - Not applicable.
-------------------------------
Item 4. Submission of Matters to a Vote of Security Holders - Not applicable.
---------------------------------------------------
Item 5. Other Information - Not applicable.
-----------------
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits:
11. Statement re computation of per share earnings.
15. Letter re unaudited interim financial statements.
27. Financial data schedule
(b) Reports on Form 8-K.
There were no reports on Form 8-K filed for the three months ended
September 30, 1995.
7
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereto duly authorized.
LIFE TECHNOLOGIES, INC.
Date: Nov. 3, 1995 By:/s/ Joseph C. Stokes, Jr.
------------------------------
Joseph C. Stokes, Jr.
Vice President-Finance,
Secretary and Treasurer
(Principal Financial Officer
and Authorized Signatory)
By:/s/ C. Eric Winzer
----------------------------
C. Eric Winzer
Controller
(Principal Accounting
Officer)
8
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors
Life Technologies, Inc.
We have reviewed the accompanying consolidated balance sheet of Life
Technologies, Inc. and its subsidiaries as of September 30, 1995 and the related
consolidated statements of income for the three-month and nine-month periods
ended September 30, 1995 and 1994, and the related condensed consolidated
statements of cash flows for the nine-month periods then ended. These financial
statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying consolidated financial statements referred to above
for them to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet as of December 31, 1994 and the
related consolidated statements of income, stockholders' equity and cash flows
for the year then ended (not presented herein), and in our report dated January
23, 1995 we expressed an unqualified opinion on those consolidated financial
statements.
/s/ Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
Washington, D.C.
October 9, 1995
9
<PAGE>
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Exhibit 11 Statement re computation of per share earnings 11-13
Exhibit 15 Letter re unaudited interim financial statements 14-15
Exhibit 27 Financial data schedule 16
</TABLE>
10
<PAGE>
EXHIBIT 11
----------
STATEMENT RE COMPUTATION OF
---------------------------
PER SHARE EARNINGS
------------------
11
<PAGE>
Exhibit 11
----------
LIFE TECHNOLOGIES, INC.
STATEMENT RE COMPUTATION OF PRIMARY PER SHARE EARNINGS
------------------------------------------------------
for the three and nine months ended
September 30, 1995 and 1994
(amounts in thousands, except per share data)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30 September 30
------------------- ------------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income $ 5,367 $ 4,352 $16,603 $13,669
======= ======= ======= =======
Weighted average shares outstanding 15,078 14,974 15,035 14,968
Weighted average effect of
common stock equivalents 263 103 198 97
------- ------- ------- -------
15,341 15,077 15,233 15,065
======= ======= ======= =======
Primary net income per share $ .35 $ .29 $ 1.09 $ .91
======= ======= ======= =======
</TABLE>
12
<PAGE>
Exhibit 11
----------
LIFE TECHNOLOGIES, INC.
STATEMENT RE COMPUTATION OF FULLY DILUTED PER SHARE EARNINGS
------------------------------------------------------------
for the three and nine months ended
September 30, 1995 and 1994
(amounts in thousands, except per share data)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30 September 30
------------------ -----------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income $ 5,367 $ 4,352 $16,603 $13,669
======= ======= ======= =======
Weighted average shares outstanding 15,078 14,974 15,035 14,968
Weighted average effect of
common stock equivalents 320 130 335 133
------- ------- ------- -------
15,398 15,104 15,370 15,101
======= ======= ======= =======
Fully diluted net income
per share $ .35 $ .29 $ 1.08 $ .91
======= ======= ======= =======
Primary net income per share $ .35 $ .29 $ 1.09 $ .91
======= ======= ======= =======
</TABLE>
13
<PAGE>
EXHIBIT 15
----------
LETTER RE UNAUDITED INTERIM FINANCIAL STATEMENTS
------------------------------------------------
14
<PAGE>
Exhibit 15
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
We are aware that our report dated October 9, 1995 on our review of interim
financial information of Life Technologies, Inc. (the Company) for the three-
month and nine month periods ended September 30, 1995 and 1994, included in this
Form 10-Q is incorporated by reference in the Company's registration statements
on Form S-8, Registration No. 33-59741, Registration No. 33-21807 and
Registration No. 33-956, and the Company's registration statement on Form S-3,
Registration No. 33-29536. Pursuant to Rule 436(c) under the Securities Act of
1933, this report should not be considered a part of the registration statements
prepared or certified by us within the meaning of Section 7 and 11 of that Act.
/s/ Cooper & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
Washington, D.C.
October 27, 1995
15
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the Balance
Sheet, Income Statement and Exhibit 11 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 24,150
<SECURITIES> 0
<RECEIVABLES> 52,650
<ALLOWANCES> 681
<INVENTORY> 59,112
<CURRENT-ASSETS> 142,213
<PP&E> 86,750
<DEPRECIATION> 36,438
<TOTAL-ASSETS> 206,080
<CURRENT-LIABILITIES> 49,843
<BONDS> 2,488
<COMMON> 151
0
0
<OTHER-SE> 148,533
<TOTAL-LIABILITY-AND-EQUITY> 206,080
<SALES> 202,077
<TOTAL-REVENUES> 202,144
<CGS> 102,376
<TOTAL-COSTS> 102,376
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 25
<INCOME-PRETAX> 25,560
<INCOME-TAX> 8,946
<INCOME-CONTINUING> 16,603
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,603
<EPS-PRIMARY> 1.09
<EPS-DILUTED> 1.08
</TABLE>
