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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1994
----------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to
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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)
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Registrant's telephone number, including area code: (301) 840-8000
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 Par Value
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(Title of each class)
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
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [x]
The aggregate market value of the voting stock held by non-affiliates of the
registrant as of February 21, 1995 was $126,565,364.
The number of shares of common stock, par value $.01 per share outstanding as of
February 21, 1995 was 15,005,814.
Documents Incorporated By Reference
Portions of the registrant's definitive Proxy Statement for its Annual Meeting
of Stockholders to be held on April 11, 1995 are incorporated by reference in
Part III of this Report.
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As used herein, the terms "LTI" and the "Company" shall mean Life Technologies,
Inc. and its subsidiaries unless the context otherwise indicates and the term
"Proxy Statement" shall mean the definitive Proxy Statement for the Company's
Annual Meeting of Stockholders to be held on April 11, 1995.
PART I
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ITEM 1. BUSINESS
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GENERAL
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LTI, originally incorporated in Ohio in 1915 and reincorporated in Delaware in
1986, develops, manufactures and supplies more than 3,000 products used in life
sciences research and commercial manufacture of genetically engineered products.
The Company's products include sera, other cell growth media, biochemicals and
enzymes and other biological products necessary for recombinant DNA procedures.
These and related products and services provided by the Company are used in
cellular biochemistry and molecular biology research and in the production of
genetically engineered pharmaceuticals such as interferons, interleukins, and t-
PA.
The Company's products are sold to more than 20,000 customers, including
research laboratories and pharmaceutical and biotechnology companies. The
Company sells its products principally through its own direct sales organization
which is supplemented by a network of distributors.
The Company's research and development activity is aimed at maintaining a
leadership position in providing research tools to the life sciences research
market and enhancing its market position as a supplier of products used to
manufacture genetically engineered pharmaceuticals and other materials.
The Company's activities have focused on the following areas:
o Products for Life Sciences Research
CELL CULTURE PRODUCTS - The Company is a leading supplier of sera and
other cell and tissue culture media used by life sciences researchers to
grow cells under laboratory conditions.
CELL AND MOLECULAR BIOLOGY PRODUCTS - The Company is a leading supplier of
enzymes, nucleic acids, reagent systems, biochemicals and other products
used by life sciences researchers to identify, isolate and manipulate the
metabolic processes and genetic material of living organisms.
o PRODUCTS FOR COMMERCIAL PROCESSES USING GENETICALLY ENGINEERED CELLS
The Company is a leading supplier of sera, cell culture media and reagents
used for the commercial production of pharmaceuticals and other materials
made by genetically engineered cells.
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MARKETS
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The Company serves two principal markets: life sciences research and commercial
manufacture of genetically engineered products.
The life sciences research market consists of laboratories generally associated
with universities, medical research centers, government institutions such as the
National Institutes of Health, and other research institutions as well as
biotechnology, pharmaceutical, energy, agricultural and chemical companies.
Life sciences researchers require special biochemical research tools capable of
performing precise functions in a given experimental procedure. The Company
serves two principal disciplines of the life sciences research market: cellular
biochemistry and molecular biology.
Cellular biochemistry involves the study of the genetic functioning and
biochemical composition of cells as well as their proliferation,
differentiation, growth and death. The understanding gained from such study has
broad application in the field of developmental biology and is important in the
study of carcinogenesis, virology, immunology, vaccine design and production and
agriculture. To grow the cells required for research, researchers use cell or
tissue culture media which simulate under laboratory conditions (in vitro) the
environment which surrounds such cells naturally (in vivo) and which facilitate
their growth.
Molecular biology involves the study of the genetic information systems of
living organisms. The genetic material of living organisms consists of long,
double- stranded molecules of DNA (deoxyribonucleic acid). DNA contains the
information required for the production of proteins by means of RNA (ribonucleic
acid), a single-stranded molecule similar in structure to DNA. Proteins have
many different functional properties and include antibodies, certain hormones
and enzymes. Many researchers study the various steps of gene expression from
DNA to RNA to protein products, and the impact of these proteins on cellular
function. Other researchers are interested in manipulating the DNA-RNA system
in order to modify its functioning. Through techniques that are commonly termed
"genetic engineering" or "gene-splicing," the researcher modifies an organism's
naturally occurring DNA to produce a desired protein not usually produced by the
organism, or to produce a naturally produced protein at an increased rate.
The Company also serves industries which apply genetic engineering to the
commercial production of otherwise rare or difficult to obtain substances with
potential for significant utility. For example, in the biotechnology industry,
these substances include interferons, interleukins, t-PA and monoclonal
antibodies. The manufacturers of these materials require larger quantities of
the same sera and other cell growth media that are also purchased in smaller
quantities as research tools. Some of these new substances are manufactured in
full scale production facilities, while others are being manufactured on a pre-
production basis. Other industries involved in the commercial production of
genetically engineered products include the pharmaceutical, food processing and
agricultural industries. The Company is increasingly expanding its activities
into related new markets for its products. These include genetic and identity
testing, cell therapy and tissue engineering involving cell culture media and
plant biotechnology applications.
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PRODUCTS
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The Company is a major supplier of cell culture products used to maintain living
cells for study in the laboratory. The Company's cell culture products consist
of bovine serum, liquid and dry-powdered culture media, balanced salt solutions,
other animal sera and plant tissue culture media. The Company also produces and
markets a line of products to assist the researcher in analyzing cellular
functions in mammals and other multicell organisms, including the growth and
differentiation of cells and their immunological response. Sales of fetal
bovine serum (FBS), a major product of the Company, accounted for 18% of the
Company's net sales in 1994 and 1993, and 20% of the Company's net sales in
1992.
The Company is a major supplier of products used as research tools by molecular
biologists, including restriction enzymes, DNA and RNA modifying enzymes,
specialty reagents, research apparatus, nucleic acids and molecular biology
systems.
GEOGRAPHIC INFORMATION
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Information regarding geographic operations and sales required by this item is
contained in the Financial Notes entitled "Geographic Data" on page F-18 of this
1994 Annual Report on Form 10-K.
SALES AND MARKETING
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At December 31, 1994, the Company had approximately 119 employees worldwide who
were employed in direct field sales. Most of the Company's products are sold
throughout the world by its own sales employees and the remaining products are
sold through agents or distributors.
RESEARCH AND DEVELOPMENT
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The Company believes that a strong research and product development effort is
important to its future growth. The Company's investment in research and
development was $15.0 million in 1994, $14.5 million in 1993 and $13.9 million
in 1992. An explanation of the changes in research and development expense for
the above periods is contained under the caption "Research and Development (R&D)
Expenses" in Management's Discussion and Analysis of Financial Condition and
Results of Operations provided under Part II, Item 7 on page 11 of this 1994
Annual Report on Form 10-K.
The Company conducts most of its research and development activities at its own
facilities using its own personnel. At December 31, 1994, the Company had
approximately 118 employees principally engaged in research and development. The
Company's scientific staff is augmented by advisory relationships with a number
of scientists.
The Company's research and development activities are aimed at providing new
products for its current product lines and developing new applications for its
products.
COMPETITION
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Only one company is known to compete with the Company in all its major product
lines but in each product line competition is offered by a number of companies,
including companies substantially larger and with greater financial resources
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than LTI. In the Company's view, competitive position in its markets is
determined by product quality, technical support, price, breadth of product
line, timely product development and speed of delivery.
PATENTS AND LICENSES
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The Company has a number of patents and has pending applications for additional
U.S. patents and corresponding foreign filings. The Company believes that
because of the rapid pace of technological change in the field of biotechnology,
the degree of protection which a patent provides is uncertain and of less
significance than factors such as the knowledge and experience of the Company's
management and personnel and their ability to define, enhance and market new
products. In addition, the Company obtains nondisclosure and confidentiality
agreements from all its employees believed to have access to proprietary
information.
The Company has obtained rights to products or technologies under a number of
license agreements with universities and others. In 1994, approximately 10% of
the Company's net sales were related to products which were licensed from others
or which incorporated technologies licensed from others. The Company intends to
continue its current strategy of seeking licenses to technologies and products
from sources around the world. The Company does not believe that any single
product or technology licensed from others is material to its business as a
whole.
CUSTOMERS
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LTI has no single customer for its products which it deems to be material to its
business as a whole. However, many of the Company's customers receive funding
for their research either directly or indirectly from the federal government in
the United States and from government agencies in various countries throughout
the world.
SUPPLIERS
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The Company buys materials for its products from many suppliers, including
certain affiliate joint ventures, and is generally not dependent on any one
supplier or group of suppliers. Raw materials, other than FBS, purchased from
others are generally readily available at competitive prices from a number of
suppliers. Although there is a well-established market for FBS, one of the
Company's major products, its price is unstable and its supply could be limited
since the availability of slaughtered cattle tends to be cyclical. The Company
acquires raw FBS products from various suppliers including an affiliate joint
venture. Some of these suppliers provide a major portion of the FBS available
from a specific geographic region although no single supplier provides a
majority of the total FBS available to the Company.
The Company believes it maintains a quantity of FBS inventory adequate to insure
reasonable customer service levels while guarding against normal volatility in
the supply of FBS available to the Company. FBS inventory quantities can
fluctuate significantly as the Company balances varying customer demand for FBS
against fluctuating supplies of FBS available to the Company. The Company
believes it will be able to continue to acquire FBS in quantities sufficient to
meet its customer's requirements.
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GOVERNMENT REGULATION
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Certain of the Company's cell culture products are subject to regulation under
the Federal Food, Drug and Cosmetic Act with respect to testing, safety,
efficacy, marketing, labeling and other matters. In addition, the Company's
manufacturing facilities for the production of cell culture products are subject
to periodic inspection primarily by the U.S. Food and Drug Administration (FDA)
and other product-oriented federal agencies and various state and local
authorities. Such facilities are believed to be in compliance with the
requirements of the FDA's current Good Manufacturing Practices and other
federal, state and local regulations.
The federal government oversees certain recombinant DNA research activities
through the National Institutes of Health Guidelines for research involving
recombinant DNA molecules (the NIH Guidelines). The NIH Guidelines prohibit or
restrict certain recombinant DNA experiments, set forth levels of biological and
physical containment of recombinant DNA molecules to be met for various types of
research and require that institutional biosafety committees approve certain
experiments before they are initiated. The NIH Guidelines now exempt most of
the experiments conducted by the Company. The Company, however, voluntarily
complies with the NIH Guidelines for its molecular and cell biology experiments.
Compliance with the NIH Guidelines has not had, and the Company does not believe
it will have in the future, a material effect on the capital expenditures,
earnings or competitive position of the Company.
The Company has an Institutional Biosafety Committee, which has been approved
and certified by the NIH Office of Recombinant DNA Activities, to oversee its
laboratory practices concerning biological agents. Through training, practices,
equipment and facilities, LTI follows the NIH Guidelines' hazard classification
system recommendations for handling bacterial and viral agents, with
capabilities through biosafety level three.
In addition to the foregoing, the Company is subject to other federal, state and
local laws and ordinances applicable to its business, including the Occupational
Safety and Health Act, the Clean Air Act, the Clean Water Act, the Toxic
Substances Control Act and various statutes and regulations applicable to the
use of radioactive materials.
EMPLOYEES
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At December 31, 1994, the Company had approximately 1,322 full-time and 58 part-
time employees, approximately 479 of whom were employed outside the United
States. Fewer than 10 employees are covered by a collective bargaining
agreement. Management believes that its relations with its employees are good.
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ITEM 2. PROPERTIES
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The Company owns or leases the following principal properties, each of which
contains manufacturing, storage, laboratory or office facilities:
<TABLE>
<CAPTION>
Approximate
Floor Area in Owned or
Location Square Feet Leased
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<S> <C> <C>
Gaithersburg, Maryland 145,000 Leased
Paisley, Scotland 90,000 Owned
25,000 Leased
Grand Island, New York 117,000 Owned
14,000 Leased
Frederick, Maryland 77,000 Leased
Auckland, New Zealand 60,000 Owned
7,000 Leased
Christchurch, New Zealand 17,000 Leased
4,000 Owned
Nelson, New Zealand 5,000 Owned
Burlington, Ontario 19,000 Leased
Roskilde, Denmark 18,000 Leased
Eggenstein, Germany 13,000 Leased
Ghent, Belgium 12,000 Leased
Cergy Pontoise, France 12,000 Leased
Basel, Switzerland 10,000 Leased
New Territories, Hong Kong 9,000 Leased
</TABLE>
The terms of the leases for properties to which the Company is a party range in
expiration dates from 1995 to 2011, and some are renewable.
Many of the Company's plants have been constructed, renovated, or expanded one
or more times during the past ten years. The Company is currently using
substantially all of its space and considers the facilities to be in a condition
suitable for their current uses. Because of expected growth in the business and
due to the increasing requirements of customers or regulatory agencies, the
Company may need to acquire additional space or upgrade and enhance existing
space during the next five years. The Company currently expects to consolidate
its Gaithersburg, Maryland research and development efforts at a new R&D center
to be constructed on a 20 acre site in Gaithersburg. The Company expects to
spend approximately $30-35 million in 1995 through 1997 for this facility.
Eventually, the Company expects to relocate its remaining Gaithersburg-based
sales and administrative functions, including its corporate headquarters, to
this site. Additional facilities will be constructed on the site as needed.
The Company estimates that it will spend between $15-18 million for capital
expenditures during the year ending December 31, 1995. Capital spending in 1995
is anticipated to be 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.
Additional information regarding the Company's properties is contained in the
Financial Notes entitled "Property, Plant and Equipment" and "Leases" on pages
F-8 and F-9 of this 1994 Annual Report on Form 10-K.
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Item 3. Legal Proceedings
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The Company is not involved in any pending or threatened legal proceedings
(other than ordinary routine litigation incidental to its business) which the
Company believes will have a material adverse effect on the Company's financial
condition or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
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None.
EXECUTIVE OFFICERS OF THE REGISTRANT
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The Board of Directors elects all executive officers of the Company. Each
executive officer holds his or her office until the earlier of his or her death,
resignation, removal from office or the election or appointment of his or her
successor. No family relationships exist among any of the Company's executive
officers, directors or persons nominated to serve as such. The positions held
and period during which the executive officers have served in those positions
are set forth below:
J. STARK THOMPSON, Ph.D. (age: 53; years of service: 6) was elected President
and Chief Executive Officer of the Company in August 1988 and became a director
of the Company in September 1988. Prior to joining the Company, he had been
with E.I. DuPont de Nemours & Company (DuPont) for 21 years. From June to
August 1988, he had been Director of Sales and Marketing, North America,
Diagnostics Division of DuPont. He was Director of the Diagnostics Systems
Division between 1985 and June 1988. Prior thereto, he had been Business
Director of the Diagnostic Systems Division from 1984 to 1985 with worldwide
sales and marketing responsibility for the Division. Prior thereto, he had been
Manager of DuPont's Instrument System Division and was responsible for general
management of that Division.
THOMAS M. COUTTS (age: 50; years of service: 25) was elected Senior Vice
President and General Manager, European Division, effective March 1, 1989.
Prior thereto, he had been Vice President of Life Technologies, Europe, since
prior to 1987.
JOHN V. COOPER, (age 43; years of service: 3) was elected Vice President and
General Manager, America's Research Products Division, effective April 13, 1993.
Prior to joining the Company, he had been Worldwide Business Manager for DuPont
since prior to 1987.
BRIAN D. GRAVES (age: 53; years of service: 13) was elected Vice President and
General Manager, U.S. Industrial Bioproducts Division, effective July 1, 1990.
Prior thereto, he had been Vice President of Sales and Marketing, U.S. Research
Products Division, for the Company since prior to 1987.
GEORGE E. LOWKE, Ph.D. (age: 55; years of service: 5) joined the Company on
September 11, 1989 as Vice President, Research and Development. He previously
had been Vice President, Research and Development - Diagnostics for IGEN Inc.
from December 1987 to September 1989. Prior thereto, he had been Vice
President, Product Development for Ortho Diagnostics, Inc., a subsidiary of
Johnson & Johnson, Inc., since prior to 1987.
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TIMOTHY E. PIERCE, Ph.D. (age: 53; years of service: 4) joined the Company in
August of 1990 as Vice President and General Manager, Asia Pacific Division.
Prior to joining the Company, he had been General Manager, Asia Pacific, for
Technicon Instruments Corporation since prior to 1987.
JOSEPH C. STOKES, Jr. (age: 47; years of service: 6) was elected Vice President,
Finance, Secretary and Treasurer, effective March 1, 1989. Prior thereto, he
had been Treasurer of The Dexter Corporation since prior to 1987.
ROSEMARY J. VERSTEEGEN, Ph.D., (age: 46; years of service: 13) was elected a
Vice President of the Company on April 16, 1991. Since 1982 she held several
managerial positions with the Company. Prior thereto, she worked for Litton
Industries as a staff scientist.
PART II
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Item 5. Market for the Registrant's Common Equity and Related Stockholder
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Matters
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The Company's common stock is traded on The Nasdaq Stock Market under the
symbol: LTEK. The high and low sales prices for the Company's Common Stock for
each quarter of 1993 and 1994 as reported by The Nasdaq Stock Market are
contained in the Financial Notes entitled "Quarterly Financial Information" on
page F-17 of this 1994 Annual Report on Form 10-K.
The number of holders of record of the Company's Common Stock at February 21,
1995 was 631. At February 21, 1995, The Dexter Corporation owned approximately
54.4% of the outstanding Common Stock of the Company.
The Company's Board of Directors has declared a $.05 per share dividend in each
quarter of the previous three years and expects to consider the declaration and
payment of quarterly dividends based on future operating results.
ITEM 6. SELECTED FINANCIAL DATA
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This information has been derived from, and should be read in conjunction with,
the related consolidated financial statements and Management's Discussion and
Analysis of Financial Condition and Results of Operations included elsewhere in
this 1994 Annual Report on Form 10-K.
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SELECTED FINANCIAL DATA
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(amounts in thousands, except per share data)
<TABLE>
<CAPTION>
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1994 1993 1992 1991 1990
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<S> <C> <C> <C> <C> <C>
FOR THE YEAR
Revenues $235,262 $205,616 $197,640 $171,339 $151,636
Research & development
expenses 15,000 14,463 13,892 12,974 12,514
Restructuring charges - 420 - 1,200 156
Operating income 27,506 25,638 24,540 18,855 19,026
Investment income, net of
interest expense 585 381 492 1,272 4,270
Net income 18,207 16,560 15,487 12,125 15,362
Capital expenditures $ 12,123 $ 7,230 $ 16,424 $ 9,406 $ 7,039
Return on average
stockholders' equity 15.2% 16.0% 16.6% 11.4% 13.7%
Average shares outstanding
including dilutive common
stock equivalents 15,071 15,091 15,079 14,838 13,787
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AT DECEMBER 31
Cash & cash
equivalents $ 13,246 $ 7,927 $ 7,652 $ 5,748 $ 56,068
Working capital 69,542 58,923 50,528 53,696 94,185
Total assets 171,747 145,790 130,049 116,381 151,700
Convertible subordinated
debentures - - - - 4,095
Stockholders' equity 130,129 110,000 96,680 90,409 123,168
Per share $ 8.69 $ 7.36 $ 6.48 $ 6.09 $ 9.00
Shares outstanding 14,981 14,951 14,925 14,857 13,688
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PER SHARE
Net income:
Primary $ 1.21 $ 1.10 $ 1.03 $ .82 $ 1.11
Fully diluted 1.20 1.10 1.03 .81 1.07
Cash dividends declared .20 .20 .20 3.65 -
Market price:
High 20 1/4 26 23 1/4 29 20 1/4
Low 15 15 3/4 15 3/4 13 3/4 12 5/8
Close 19 1/2 18 1/2 21 3/4 17 1/2 18 5/8
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</TABLE>
Dividends - Prior to 1991, the Company retained its earnings for use in the
business. On February 26, 1991, the Board of Directors of the Company declared
a special cash dividend of $3.50 per share payable in March 1991. The Board has
declared quarterly dividends of $0.05 per share in each quarter since the
special dividend.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
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RESULTS OF OPERATIONS
---------------------
This information should be read in conjunction with the related consolidated
financial statements and notes thereto contained elsewhere in this 1994 Annual
Report on Form 10-K.
MANAGEMENT'S DISCUSSION AND ANALYSIS
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GENERAL
The Company develops, manufactures, and sells cell and molecular biology
products and cell culture products under the GIBCO BRL brand name. Cell and
molecular biology products are used by scientists to identify, isolate, and
manipulate the metabolic processes and genetic material of living organisms.
Cell culture products include cell and tissue culture media, reagents, fetal
bovine serum (a major product of the Company), and other animal sera. These
products are used by scientists to grow cells under laboratory conditions and
are also used increasingly for the commercial manufacture of pharmaceuticals and
other life sciences products.
RESULTS OF OPERATIONS
REVENUES
The major product line components of net sales for 1994, 1993 and 1992 compare
as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------
(amounts in thousands) 1994 1993 1992
- ----------------------------------------------------------
<S> <C> <C> <C>
Cell and molecular biology $ 94,034 $ 79,302 $ 71,521
Cell culture 141,161 125,647 126,017
- ----------------------------------------------------------
Net sales $235,195 $204,949 $197,538
==========================================================
</TABLE>
Net sales for 1994 were $235.2 million, an increase of $30.2 million, or 15%,
over 1993. Sales of products other than FBS increased $23.4 million, or 14%,
over 1993 sales levels. FBS sales were $4.8 million higher in 1994 than in
1993. Higher unit sales of FBS increased 1994 net sales by $6.5 million while
lower unit selling prices reduced net sales by $1.7 million when compared with
1993. Currency exchange rate changes increased 1994 net sales by $2.0 million
when compared with 1993.
Net sales for 1993 were $204.9 million, an increase of $7.4 million, or 4%, over
1992. Sales of products other than FBS increased $16.5 million, or 11%, over
1992 sales levels. FBS sales were $1.3 million lower in 1993 when compared with
1992 due to lower unit selling prices and lower unit sales in 1993, principally
to industrial customers. Changes in currency exchange rates decreased 1993 net
sales by $7.8 million when compared with 1992
FBS represented 18% of net sales in 1994 and 1993 and 20% in 1992.
Royalty income was $0.1 million, $0.7 million and $0.1 million in 1994, 1993 and
1992, respectively. Royalty income represents licensing fees paid to the
Company for technologies developed from research efforts undertaken for the
Company's discontinued molecular diagnostics product line.
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COST OF SALES - GROSS MARGIN
Gross margins were 47.3% of net sales in 1994 compared with 50.3% in 1993.
Gross margins declined in the 1994 period principally due to lower FBS gross
margins and higher royalty expense in the 1994 period. FBS gross margins were
lower because of a decline in unit selling prices and an increase in unit costs.
Gross margins were 50.3% of net sales for both 1993 and 1992. In 1993, the
Company decreased the FBS LIFO reserve by $0.3 million due to falling FBS costs
and increased the LIFO reserve for other U.S. cell culture inventories by $0.3
million reflecting rising costs for these products. The Company increased the
LIFO reserve by $0.5 million in 1992 as costs for FBS and other U.S. cell
culture inventories were rising.
MARKETING AND ADMINISTRATIVE EXPENSES
Marketing and administrative expenses were 29.2% of net sales in 1994, 30.8% of
net sales in 1993 and 30.9% of net sales in 1992. The Company continues to
realize efficiencies in its marketing and administrative programs as its sales
increase.
RESEARCH AND DEVELOPMENT (R&D) EXPENSES
Research and development expenses were $15.0 million in 1994, $14.5 million in
1993 and $13.9 million in 1992. R&D expenses in 1994, 1993 and 1992 were
primarily directed toward developing new products and business solutions for the
Company's life sciences research and industrial bioprocessing customers.
Research and development expenses represented 6.4%, 7.1% and 7.0% of net sales
in 1994, 1993 and 1992, respectively.
RESTRUCTURING
In the fourth quarter of 1993, the Company restructured its European operations
to better align expenses with expected sales levels. Also in the fourth quarter
of 1993 the Company completed the restructuring of its North American FBS
collection operations with the disposition of an FBS collection subsidiary. The
restructuring charge of $0.4 million in the fourth quarter of 1993 includes
severance costs for ten employees who left the Company as a result of the
European restructuring, costs related to closing a distribution center in
eastern Germany and costs related to the FBS restructuring.
OPERATING INCOME
Operating income for 1994 was $27.5 million, an increase of $1.9 million, or 7%,
compared with 1993. Higher net sales in 1994 compared with 1993 were the
primary reason for the increase in operating income. The percentage increase in
operating income was less than the percentage increase in net sales as gross
margins were lower in 1994 compared with 1993. Changes in currency exchange
rates used to translate non-U.S. earnings to U.S. dollars increased operating
income in 1994 by $0.4 million when compared with 1993.
Operating income for 1993 was $25.6 million, an increase of $1.1 million, or 4%,
compared with 1992. Higher net sales and royalty income in 1993, offset by the
$0.4 million restructuring charge, were the main reasons for the increase in
operating income. Changes in currency exchange rates used to translate non-
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U.S. earning to U.S. dollars reduced operating income in 1993 by $2.0 million
when compared with 1992.
OTHER INCOME AND EXPENSES
Investment income was $0.6 million in 1994, $0.4 million in 1993 and $0.6
million in 1992. Investment income in 1994, 1993 and 1992 included $0.3
million, $0.2 million and $0.3 million, respectively, related to an interest
bearing note received upon the disposition of the Company's molecular
diagnostics product line in late 1990. The note is scheduled to mature in 1995-
1997. The Company is currently renegotiating the terms of this note. Other
income includes equity income from the Company's Japanese joint venture of $0.7
million in 1994, $0.5 million in 1993 and breakeven in 1992.
INCOME TAXES
Income taxes were 36% of pre-tax income in 1994 and 1993, compared with 36.5% in
1992. The Company adopted Financial Accounting Standard No. 109 (FAS 109),
Accounting for Income Taxes, in the first quarter of 1993. The impact of
adopting FAS 109 was not significant to the Company's net income or financial
position.
NET INCOME
Net income for 1994 was $18.2 million, an increase of 10% over net income for
1993 of $16.6 million. Earnings per share were $1.21 for 1994, up 10% compared
with earnings per share of $1.10 for 1993. Higher operating and other income
were the primary reasons that net income and earnings per share increased when
comparing 1994 with 1993.
Net income for 1993 was $16.6 million, an increase of 7% over the prior year's
net income of $15.5 million. Earnings per share were $1.10 for 1993, up 7%
compared with earnings per share of $1.03 for 1992. Higher operating income,
higher earnings from the Company's joint venture in Japan and the lower income
tax rate in 1993 were the principal reasons for the increase in earnings in 1993
when compared with 1992.
LOOKING AHEAD
The Company expects to continue to concentrate on its core cell and molecular
biology and cell culture product lines in 1995. Future trends in the markets
may be affected by government funding for life sciences research, the number of
new products developed and introduced by the Company's customers, and changes in
technology and scientific discoveries.
Changes in currency exchange rates, the supply and price of FBS, the global
economic situation and the availability of well-trained employees throughout the
world are factors that could have a significant effect on the Company in 1995.
Significant strengthening of the U.S. dollar against non-U.S. currencies,
especially European currencies, could have a negative impact on the Company's
results. Volatility in the FBS market will continue to have a significant
impact on the Company's results. The market volatility of FBS and the
increasing demand for alternative media provide strong incentive to develop
products and technologies which are not dependent on animal sera raw materials.
The Company will continue to actively seek out highly motivated and well-
educated individuals to become employees of the Company.
12
<PAGE>
Heightened worldwide safety and environmental concerns are likely to lead to
increased regulation in these areas. The Company is committed to safeguarding
the safety and health of its employees and the environment and will remain pro-
active in complying with all Federal, state and local regulations.
LIQUIDITY AND CAPITAL RESOURCES
1994 CASH FLOWS
The Company generated $21.4 million in cash from operations during 1994. Net
income after adjustments for depreciation and amortization was the principal
source of cash from operations in 1994. During 1994, the Company used $2.9
million in cash to increase its inventories, mostly due to increases in
inventory quantities. This increase was for normal working capital increases
related to higher sales and customer service levels in 1994. The Company used
$5.0 million in cash related to higher levels of accounts receivable. This
increase is principally related to higher sales levels.
The Company paid $12.5 million in cash for property, plant and equipment in
1994. Capital spending in 1994 was for new and replacement machinery and
equipment related to the Company's ongoing business operations and for
facilities expansion and modernization programs. The Company used $1.3 million
in 1994 to acquire new businesses.
The Company borrowed various amounts up to $3.1 million during 1994 at
prevailing market rates of interest under a revolving line of credit made
available by The Dexter Corporation (Dexter), an affiliate of the Company, to
meet short-term working capital needs. There were no borrowings outstanding at
December 31, 1994. The Company currently has an unused line of credit with a
bank totaling $20 million and a short-term revolving credit facility with Dexter
in the amount of $8 million.
LOOKING AHEAD
Capital expenditures in 1995 are expected to be between $15-18 million. Capital
spending in 1995 is anticipated to be 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 Dexter to meet its anticipated
working capital and capital expenditure requirements in 1995.
The Board of Directors intends to continue to consider the declaration and
payment of quarterly dividends in the future based on the operating performance
of the Company.
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.
13
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ------- -------------------------------------------
The Financial Statements and Supplementary Data appear on pages F-1 through F-18
of this 1994 Annual Report on Form 10-K.
ITEM 9. Changes in and disagreements with accountants on Accounting and
- ------- ---------------------------------------------------------------
Financial Disclosure
--------------------
None.
PART III
--------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- -------- --------------------------------------------------
Information regarding directors of the Company and compliance by the directors
and officers of the Company with certain reporting requirements pursuant to
Section 16(a) of the Securities Exchange Act of 1934 is contained under the
caption "Proposal No. 1 - Election of Directors" in the Company's Proxy
Statement, which is incorporated herein by reference. Information regarding
executive officers of the Company is included in Part I hereof, under the
caption "Executive Officers of the Registrant."
ITEM 11. EXECUTIVE COMPENSATION
- -------- ----------------------
The information required by this item is contained under the caption "Executive
Compensation" in the Company's Proxy Statement, which is incorporated herein by
reference (except for the "Report of the Compensation and Organization Committee
and Stock Option Committee on Executive Compensation" and the "Performance
Graph").
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- -------- --------------------------------------------------------------
The information required by this item is contained under the caption "Beneficial
Ownership of Common Stock" in the Company's Proxy Statement, which is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- -------- ----------------------------------------------
The information required by this item is contained under the caption "Proposal
No. 1 - Election of Directors" and under the headings "Certain Relationships and
Related Transactions", "Compensation Committee Interlocks and Insider
Participation" and "Compensation of Directors" of the Company's Proxy Statement,
which is incorporated herein by reference.
14
<PAGE>
PART IV
-------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
- -------- ----------------------------------------------------------------
(a) (1) Financial Statements:
a. Report of Independent Accountants
b. Consolidated Statement of Income for the
years ended December 31, 1994, 1993 and 1992
c. Consolidated Balance Sheet as of December 31,
1994 and 1993
d. Consolidated Statement of Cash Flows for the
years ended December 31, 1994, 1993 and 1992
e. Notes to Consolidated Financial Statements
(a) (2) Financial Statement Schedules:
None.
All schedules have been omitted because they are not required, not
applicable, or the information required to be set forth therein is
included in the Company's 1994 consolidated financial statements.
(a) (3) Exhibits:
Exhibit numbers 10(A),(B),(C),(D),(E),(F),(G),(H),(I),(J) and (K) are
management contracts, compensatory plans or arrangements.
3(A) Certificate of Incorporation of the Registrant including
Amendment to Certificate of Incorporation dated April 17, 1987,
previously filed as Exhibit 3(A) to the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1992, which
is incorporated herein by reference.
3(B) By-laws of the Registrant as amended and restated on April 16,
1991, previously filed as Exhibit 3(B) to the Registrant's
Annual Report on Form 10-K for the year ended December 31, 1991,
which is incorporated herein by reference.
4(A) Instruments defining the rights of security holders, including
indentures.
Registrant by this filing agrees, upon request, to file with the
Securities and Exchange Commission the instruments defining the
rights of holders of its long-term debt where the total amount
of securities authorized thereunder does not exceed 10% of the
total assets of registrant and its subsidiaries on a
consolidated basis.
15
<PAGE>
10(A) 1984 Stock Option Plan, previously filed as Exhibit 4.1 to the
Registrant's Registration Statement on Form S-8, No. 33-21807,
dated May 12, 1988, which is incorporated herein by reference.
10(B) Executive Supplemental Retirement Plan, previously filed as
Exhibit 10(B) to the Registrant's Annual Report on Form 10-K for
the year ended December 31, 1990, SEC file no. 0-14991, which is
incorporated herein by reference.
10(C) Executive Deferred Compensation Benefit Plan, previously filed
as Exhibit 10.8 to the Registrant's Registration Statement on
Form S-1, No. 33-7993, dated October 1, 1986, which is
incorporated herein by reference.
10(D) Employment Agreement dated June 23, 1989, between the Registrant
and Dr. J. Stark Thompson regarding certain severance benefits
in the event of termination of employment following a change of
control, as defined in the agreement, previously filed as
Exhibit 10(K) to the Registrant's Annual Report on Form 10-K for
the year ended December 31, 1989, SEC file no. 0-14991, which is
incorporated herein by reference.
10(E) Employment Agreement dated June 23, 1989, between the Registrant
and Joseph C. Stokes, Jr. regarding certain severance benefits
in the event of termination of employment following a change of
control, as defined in the agreement, previously filed as
Exhibit 10(E) to the Registrant's Annual Report on Form 10-K for
the year ended December 31, 1992, SEC file no. 0-14991, which is
incorporated herein by reference.
10(F) Employment Agreement dated June 23, 1989, between the Registrant
and Thomas M. Coutts regarding certain severance benefits in the
event of termination of employment following a change of
control, as defined in the agreement, previously filed as
Exhibit 10(F) to the Registrant's Annual Report on Form 10-K for
the year ended December 31, 1992, SEC file no. 0-14991, which is
incorporated herein by reference.
10(G) Employment Agreement dated September 11, 1989, between the
Registrant and George E. Lowke, Ph.D. regarding certain
severance benefits in the event of termination of employment
following a change of control, as defined in the agreement,
previously filed as Exhibit 10(G) to the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1992, SEC
file no. 0-14991, which is incorporated herein by reference.
10(H) Employment Agreement dated April 13, 1993, between the
Registrant and John V. Cooper regarding certain severance
benefits in the event of termination of employment following a
change of control, as defined in the agreement, previously filed
as Exhibit 10(H) to the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1993, SEC file no. 0-14991,
which is incorporated herein by reference.
16
<PAGE>
10(I) Executive Deferred Compensation Benefit Plan, previously filed
as Exhibit 10(H) to the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1991, SEC file no. 0-14991,
which is incorporated herein by reference.
10(J) Employment agreement dated July 1, 1990, between the Registrant
and Brian D. Graves regarding certain severance benefits in the
event of termination of employment following a change of
control, as defined in the agreement, previously filed as
Exhibit 10(J) to the Registrant's Annual Report on Form 10-K for
the year ended December 31, 1992, SEC file no. 0-14991, which is
incorporated herein by reference.
10(K) 1991 Stock Option Plan, previously filed as Exhibit 4 to the
Registrant's Registration Statement on Form S-8 No. 33-956,
dated May 9, 1991, which is incorporated herein by reference.
11 Statement re: computation of per share earnings.
21 Subsidiaries of the Registrant.
23 Consent of Independent Accountants.
27 Financial Data Schedule.
Exhibits other than those incorporated herein by reference have been
included in copies of this Form 10-K filed with the Securities and
Exchange Commission. The Registrant agrees that it will furnish,
without charge, a copy of any such exhibits to each stockholder of the
Registrant upon the written request therefor to the Registrant.
(b) Reports on Form 8-K.
None.
(c) Exhibits
See (a) 1 (3) above.
(d) Financial Statement Schedules
See (a) 1 (2) above.
17
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Dated February 24, 1995 LIFE TECHNOLOGIES, INC.
(Registrant)
By /s/ Joseph C. Stokes, Jr.
------------------------------------
Joseph C. Stokes, Jr.
Vice President, Finance,
Secretary and Treasurer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities indicated.
/s/ Thomas H. Adams, Ph.D. /s/ Jerry E. Robertson, Ph.D.
- --------------------------------------------------------------------------
Thomas H. Adams, Ph.D. Jerry E. Robertson, Ph.D.
Director Director
/s/ Frederick R. Adler /s/ Donald C. Sutherland
- --------------------------------------------------------------------------
Frederick R. Adler Donald C. Sutherland
Director Director
/s/ J. Stark Thompson, Ph.D.
- --------------------------------------------------------------------------
Richard Axel, M.D., Ph.D. J. Stark Thompson, Ph.D.
Director Director and
President and Chief Executive Officer
(Principal Executive Officer)
/s/ Betsy Z. Cohen /s/ K. Grahame Walker
- --------------------------------------------------------------------------
Betsy Z. Cohen Chairman of the Board of Directors
Director
/s/ Paul A. Marks, M.D. /s/ Joseph C. Stokes, Jr.
- --------------------------------------------------------------------------
Paul A. Marks, M.D. Joseph C. Stokes, Jr.
Director Vice President, Finance
Secretary and Treasurer
(Principal Financial Officer)
/s/ Robert E. McGill, III /s/ C. Eric Winzer
- --------------------------------------------------------------------------
Robert E. McGill, III C. Eric Winzer
Director Controller
(Principal Accounting Officer)
18
<PAGE>
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
<TABLE>
<CAPTION>
Financial Statements: Page
<S> <C>
Index to Financial Statements and Schedules F-1
Report of Independent Accountants F-2
Consolidated Statement of Income for the
years ended December 31, 1994, 1993 and 1992 F-3
Consolidated Balance Sheet as of December 31,
1994 and 1993 F-4
Consolidated Statement of Cash Flows for the
years ended December 31, 1994, 1993 and 1992 F-5
Notes to Consolidated Financial Statements F-6
</TABLE>
Financial Statement Schedules:
None.
All schedules have been omitted because they are not required, not applicable,
or the information required to be set forth therein is included in the Company's
1994 consolidated financial statements.
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors of
Life Technologies, Inc.
We have audited the consolidated financial statements of Life Technologies, Inc.
and its subsidiaries listed in Item 14(a) of this Form 10-K. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Life Technologies,
Inc. and its subsidiaries as of December 31, 1994 and 1993, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1994 in conformity with generally accepted
accounting principles.
Coopers & Lybrand L.L.P.
Washington, D.C.
January 23, 1995
F-2
<PAGE>
Consolidated Statement of Income
(amounts in thousands, except per share data)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------
For the years ended December 31, 1994 1993 1992
- ------------------------------------------------------------------
<S> <C> <C> <C>
Revenues:
Net sales $235,195 $204,949 $197,538
Net royalties 67 667 102
- ------------------------------------------------------------------
Total revenues 235,262 205,616 197,640
- ------------------------------------------------------------------
Expenses:
Cost of sales 123,988 101,874 98,253
Marketing and administrative 68,768 63,221 60,955
Research and development 15,000 14,463 13,892
Restructuring - 420 -
- ------------------------------------------------------------------
Total expenses 207,756 179,978 173,100
- ------------------------------------------------------------------
Operating income 27,506 25,638 24,540
- ------------------------------------------------------------------
Other income (expense):
Investment income 615 425 556
Interest expense (30) (44) (64)
Other, net 534 (144) (642)
- ------------------------------------------------------------------
Total other income (expense) 1,119 237 (150)
- ------------------------------------------------------------------
Income before income taxes 28,625 25,875 24,390
Income taxes 10,305 9,315 8,903
- ------------------------------------------------------------------
Income before minority interests 18,320 16,560 15,487
Minority interests (113) - -
- ------------------------------------------------------------------
Net income $ 18,207 $ 16,560 $ 15,487
- ------------------------------------------------------------------
Average shares outstanding 15,071 15,091 15,079
- ------------------------------------------------------------------
Primary net income per share $1.21 $1.10 $1.03
- ------------------------------------------------------------------
Dividends declared per share $.20 $.20 $.20
- ------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-3
<PAGE>
Consolidated Balance Sheet
(amounts in thousands, except share data)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
December 31, 1994 1993
- ----------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 13,246 $ 7,927
Accounts receivable, net 36,163 29,901
Inventories:
FIFO 58,705 52,771
LIFO reserve (5,995) (5,094)
- ----------------------------------------------------------------------
Total inventory 52,710 47,677
Prepaid expenses 1,974 2,352
Current deferred tax assets 3,475 3,776
- ----------------------------------------------------------------------
Total current assets 107,568 91,633
Property, plant and equipment, net 48,043 40,394
Investments and other assets 9,796 8,475
Excess of cost over net assets of businesses
acquired, net 6,340 5,288
- ----------------------------------------------------------------------
Total assets $171,747 $145,790
- ----------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 14,358 $ 13,217
Dividends payable 749 748
Accrued income taxes 11,326 9,460
Accrued liabilities and expenses 11,593 9,285
- ----------------------------------------------------------------------
Total current liabilities 38,026 32,710
Deferred income taxes 1,871 1,898
Minority interests 541 -
Other 1,180 1,182
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value, one million
shares authorized, none issued
Common stock, $.01 par value, 50 million
shares authorized, issued and outstanding
14,980,799 in 1994 and
14,951,383 in 1993 150 150
Additional paid-in capital 42,561 42,184
Retained earnings 89,184 73,972
Currency exchange effects (1,766) (6,306)
- ----------------------------------------------------------------------
Total stockholders' equity 130,129 110,000
- ----------------------------------------------------------------------
Total liabilities and stockholders' equity $171,747 $145,790
- ----------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-4
<PAGE>
Consolidated Statement of Cash Flows
(amounts in thousands)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
For the years ended December 31, 1994 1993 1992
- --------------------------------------------------------------------------
<S> <C> <C> <C>
CASH INFLOWS (OUTFLOWS)
Operations:
Net income $ 18,207 $16,560 $ 15,487
Non-cash items:
Depreciation 5,996 5,336 4,284
Amortization 512 487 447
Deferred income taxes 229 (86) 82
Other 516 (451) 90
Changes in assets and liabilities net of
divestitures/acquisitions:
Accounts receivable (4,994) (504) (3,725)
Inventories (2,939) (7,684) (3,028)
Prepaid expenses 471 (446) -
Accounts payable and accrued expenses 1,580 (1,474) 5,279
Accrued income taxes 1,775 586 2,707
- --------------------------------------------------------------------------
Cash provided by operations 21,353 12,324 21,623
- --------------------------------------------------------------------------
Investments:
Capital expenditures (12,533) (8,085) (15,367)
Business acquisitions (1,287) - (1,259)
Issuance of long-term note receivable - (911) -
Other 17 (123) 444
- --------------------------------------------------------------------------
Cash used in investing activities (13,803) (9,119) (16,182)
- --------------------------------------------------------------------------
Financing:
Dividends paid (2,993) (2,987) (2,977)
Proceeds from exercise of stock options 308 374 817
- --------------------------------------------------------------------------
Cash used in financing activities (2,685) (2,613) (2,160)
- --------------------------------------------------------------------------
Effect of exchange rate changes on cash 454 (317) (1,377)
- --------------------------------------------------------------------------
Increase in cash and cash equivalents 5,319 275 1,904
Cash and cash equivalents at beginning
of year 7,927 7,652 5,748
- --------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 13,246 $ 7,927 $ 7,652
- --------------------------------------------------------------------------
Supplemental cash flow information:
Income tax payments, net of refunds $ 8,057 $ 8,515 $ 5,999
- --------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-5
<PAGE>
FINANCIAL NOTES
- --------------------------------------------------------------------------------
BASIS OF CONSOLIDATION AND PRESENTATION:
The consolidated financial statements include the accounts of Life Technologies,
Inc. (the Company or Life Technologies) and its majority owned subsidiaries.
Intercompany accounts, transactions, and profits have been eliminated in the
consolidated financial statements. Investments in affiliated companies (20% to
50% Life Technologies' ownership) are recorded in the consolidated financial
statements using the equity method of accounting except in cases where the
Company can effectively exercise control. In these cases, the accounts of the
affiliate are included in the Company's consolidated financial statements.
BUSINESS SEGMENTS:
The Company is engaged in one line of business. The Company produces and sells
products used principally in life sciences research and commercial manufacture
of genetically engineered products.
Sales of fetal bovine serum accounted for 18% of net sales in 1994 and 1993 and
20% of net sales in 1992.
BUSINESS ACQUISITIONS:
In August 1994, the Company acquired certain assets of a distributor of life
sciences research products serving Sweden, for $1.7 million. One million dollars
of the purchase price was deferred and will be paid over three years, ending in
1997. The acquisition was accounted for as a purchase.
In October 1992, the Company acquired certain assets of Telios Pharmaceuticals,
Inc. used in the manufacture and sale of extracellular matrix research reagents.
The assets were purchased for $1.3 million. The acquisition was accounted for
as a purchase.
TECHNOLOGY AGREEMENTS:
The Company has obtained rights to products or technologies under a number of
licensing agreements or patents. The cost of technologies acquired from outside
sources is capitalized and amortized over the legal or expected useful life
where the technologies are currently commercially applicable. Where
considerable development effort is required to have acquired technologies become
part of the Company's product lines, the cost of the technologies are reported
as research and development expense. Internal efforts to develop or patent
technologies are expensed when incurred.
The Company also licenses technology it has developed to others. The Company
recognizes revenue on these licenses when payment is reasonably certain.
Revenues are reduced by related transaction expenses.
NET INCOME PER SHARE:
Primary net income per common share has been computed by dividing net income by
the weighted average number of shares of common stock outstanding plus dilutive
common stock equivalents.
F-6
<PAGE>
RELATED PARTY - DEXTER:
At December 31, 1994, The Dexter Corporation (Dexter) owned approximately 54.5%
of the outstanding shares of the Company's common stock. Most transactions with
Dexter are administrative in nature (e.g., insurance) and the Company has no
significant product sales to Dexter or its affiliates. Two executives of Dexter
served as directors of the Company and Dexter in 1994.
The Company borrowed various amounts up to $3.1 million and $4.5 million from
Dexter in 1994 and 1993, respectively, under an $8.0 million revolving line of
credit to finance short-term working capital needs. Borrowings under the line
of credit were at prevailing market interest rates. There were no amounts
outstanding under this line of credit at year end 1994 or 1993.
CASH AND CASH EQUIVALENTS:
Cash equivalents are highly liquid short-term investments readily convertible
into cash. Cash equivalents consist primarily of time deposits and certificates
of deposit with various financial institutions throughout the world. These
investments are carried at cost, which approximates market, mature within 90
days and are therefore subject to minimal risk.
ACCOUNTS RECEIVABLE:
Accounts receivable are reduced by allowances of $446,000 and $424,000 at
December 31, 1994 and 1993, respectively.
INVENTORIES:
Inventories are valued at the lower of cost or market. The LIFO (last-in,
first-out) method is used for determining costs of approximately one half of
U.S. inventories, while the remaining U.S. and all international inventories are
valued on the FIFO (first-in, first-out) method. Inventories valued at cost
using LIFO were approximately 35% and 34% of total inventories at December 31,
1994 and 1993, respectively. Inventories were as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------
(amounts in thousands) 1994 1993
- -------------------------------------------------------------
<S> <C> <C>
Materials and supplies $ 8,811 $11,562
Work in process 6,088 4,754
Finished goods 43,806 36,455
- -------------------------------------------------------------
Total FIFO value 58,705 52,771
LIFO reserve (5,995) (5,094)
- -------------------------------------------------------------
Total inventory $52,710 $47,677
- -------------------------------------------------------------
</TABLE>
F-7
<PAGE>
PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment are carried at cost. Depreciation is provided by
the straight-line method for financial reporting purposes based upon the
estimated useful lives of the assets which range from 3 to 50 years. The cost
of assets sold or retired and the related amounts of accumulated depreciation
are eliminated from the accounts and the resulting gain or loss is included in
income. Renewals and betterments are capitalized. Repairs and maintenance are
charged to expense when incurred and were $2.5 million in 1994, $2.7 million in
1993 and $2.4 million in 1992.
The cost and accumulated depreciation of property, plant and equipment were as
follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
(amounts in thousands) 1994 1993
- -------------------------------------------------------------------------
<S> <C> <C>
Land and land improvements $ 3,163 $ 3,070
Buildings and leasehold improvements 23,991 20,812
Machinery and equipment 45,717 39,156
Construction-in-process 6,477 2,426
- -------------------------------------------------------------------------
Total cost 79,348 65,464
Accumulated depreciation (31,305) (25,070)
- -------------------------------------------------------------------------
Property, plant and equipment, net $ 48,043 $ 40,394
- -------------------------------------------------------------------------
</TABLE>
INVESTMENTS AND OTHER ASSETS:
Significant components of investments and other assets were as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
(amounts in thousands) 1994 1993
- -------------------------------------------------------------------------
<S> <C> <C>
Pension and retirement related $3,180 $3,244
Investment in, and advances to, affiliated companies 4,043 2,760
Deferred tax assets 1,595 1,169
Patents and licenses, net of amortization 422 613
Other 556 689
- -------------------------------------------------------------------------
Total investments and other assets $9,796 $8,475
- -------------------------------------------------------------------------
</TABLE>
The significant affiliated company included above is Life Technologies Oriental,
Inc. (LTOKK), the Company's 50% owned joint venture in Japan. The Company
accounts for LTOKK using the equity method and reported $0.7 million and $0.5
million of equity income in 1994 and 1993, respectively. LTOKK had net sales of
$24.5 million in 1994 and $21.2 million in 1993. The Company has made advances
in the form of loans to LTOKK to meet its working capital and financing needs.
The Company had loans to LTOKK of $2.5 million ((Yen) 250 million) and $2.3
million ((Yen) 250 million) at December 31, 1994 and 1993, respectively. LTOKK
has received loans from the other joint venture partner for a like amount.
LTOKK may borrow up to an additional (Yen) 100 million from each joint venture
partner under the current loan provisions.
EXCESS ACQUISITION COSTS:
The excess of costs over the net asset values of businesses acquired is
amortized on a straight-line basis principally over 30 years. The Company
F-8
<PAGE>
assesses the recoverability of net cost in excess of net assets of acquired
companies by determining whether the amortization of this intangible asset over
its remaining life can be recovered through future operating earnings.
Accumulated amortization at December 31, 1994 and 1993, amounted to $3.0 million
and $2.7 million, respectively.
ACCRUED LIABILITIES AND EXPENSES:
Accrued liabilities and expenses were as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------
(amounts in thousands) 1994 1993
- ----------------------------------------------------------------------------
<S> <C> <C>
Salaries, wages and benefits $ 2,933 $2,242
Compensated absences 1,822 1,674
Retirement plans 2,230 2,187
Royalties 1,196 502
Deferred taxes 424 -
Restructuring and discontinued
operations accruals 359 451
Other 2,629 2,229
- ----------------------------------------------------------------------------
Total accrued liabilities and expenses $11,593 $9,285
- ----------------------------------------------------------------------------
</TABLE>
LEASES:
The Company leases buildings, automobiles and equipment under operating lease
arrangements. These leases contain various renewal options, purchase options
and escalation clauses. The total rental expense of all leases was $5.8 million
in 1994, $5.9 million in 1993 and $5.8 million in 1992.
The future minimum rental payments required under noncancellable operating
leases as of December 31, 1994 were as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------
For the years ending December 31: (amounts in thousands)
- ----------------------------------------------------------------------------
<S> <C>
1995 $ 4,851
1996 3,990
1997 2,484
1998 1,058
1999 966
2000 and thereafter 1,922
- ----------------------------------------------------------------------------
Total minimum lease payments $15,271
- ----------------------------------------------------------------------------
</TABLE>
CONTINGENCIES:
At December 31, 1994, there were a number of actions by individuals pending
against numerous defendants, including Dexter, alleging injuries resulting from
the use of diethylsibestrol (DES). Dexter's involvement with DES products arose
from the acquisition in 1970 by the Company of a pharmaceutical supplier which
allegedly sold these products. Upon the Company's sale of this pharmaceutical
supplier in 1985, Life Technologies agreed to indemnify Dexter for all costs,
liabilities and expenses incurred in connection with product liability suits
relating to DES. Over the past several years, DES claims against Dexter have
been settled for nominal amounts, withdrawn, or resulted in defense verdicts.
F-9
<PAGE>
Litigation is subject to many uncertainties and it is reasonably possible that
some of the legal actions or proceedings referred to above could be decided
unfavorably to the Company. Although the amount of liability at December 31,
1994 with respect to these matters could not be ascertained with certainty, the
Company believes that any resulting liability should not materially affect the
Company's consolidated financial statements.
RETIREMENT BENEFITS:
The Company has a qualified pension plan (defined benefit) and deferred profit
sharing plan (defined contribution) for substantially all United States (U.S.)
employees. The Company also sponsors an unfunded, nonqualified supplementary
retirement plan for certain senior management. The Company has purchased life
insurance on the lives of participants designed to provide sufficient funds to
recover all costs of the plan. In addition to the above plans, the Company
sponsors an unfunded, nonqualified executive supplemental plan that provides for
a target benefit based upon compensation in the five years before retirement,
which benefit is then offset by other benefits payable to the participant. With
respect to its qualified U.S. pension plan, the Company's policy is to deposit
with an independent trustee amounts as are necessary on an actuarial basis to
provide for benefits in accordance with the requirements of the Employee
Retirement Income Security Act and any other applicable Federal laws and
regulations. The U.S. pension plan provides benefits that are generally based
upon the employee's highest average compensation in any consecutive five year
period in the ten years before retirement.
The retirement benefits for most employees of non-U.S. operations are generally
provided by government sponsored or insured programs and, in certain countries,
by defined benefit plans. The only significant non-U.S. defined benefit plan is
for United Kingdom (U.K.) employees. The Company's policy with respect to its
U.K. pension plan is to fund amounts as are necessary on an actuarial basis to
provide for benefits under the plan in accordance with local laws and income tax
regulations. The U.K. pension plan provides benefits based upon the employees'
highest average base compensation over three consecutive years.
The components of net periodic pension cost and other pension costs for the
pension plans during the years 1994, 1993 and 1992 are provided in the following
table.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
(amounts in thousands) 1994 1993 1992
- -----------------------------------------------------------------------------
Pension Plans:
<S> <C> <C> <C>
Service cost $1,705 $ 1,132 $ 978
Interest cost 1,352 1,065 894
Actual return on assets (318) (1,138) (541)
Net amortization and deferrals (272) 502 (148)
- -----------------------------------------------------------------------------
Net periodic pension costs 2,467 1,561 1,183
Deferred profit sharing plan 461 350 553
Defined contribution plans and other 239 293 467
- -----------------------------------------------------------------------------
Total pension costs $3,167 $ 2,204 $2,203
- -----------------------------------------------------------------------------
</TABLE>
F-10
<PAGE>
The assumptions used in accounting for pensions in 1994, 1993 and 1992 were as
follows:
<TABLE>
<CAPTION>
1994 1993 1992
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Pension plan assumptions:
Discount rate
Beginning of year:
U.S. 6.75% 7.50% 7.50%
U.K. 6.75% 9.75% 10.50%
End of year:
U.S. 8.50% 6.75% 7.50%
U.K. 9.75% 6.75% 9.75%
Average wage increase
U.S. 6.00% 6.00% 6.00%
U.K. 6.00% 6.00% 7.00%
Expected long-term rate of
return on plan assets
U.S. 9.00% 9.00% 10.0%
U.K. 8.00% 8.00% 9.0%
- -----------------------------------------------------------------------------
</TABLE>
The discount rate is the estimated rate at which the obligation for pension
benefits could effectively be settled. The average wage increase assumption
reflects the Company's best estimate of the future compensation levels of the
individual employees covered by the plans. The expected long-term rate of
return on plan assets reflects the average rate of earnings that the Company
estimates will be generated on the assets of the plans.
The funded status of the Company's pension plans and amounts recognized at
December 31, 1994 and 1993 were as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
Plans Where Plans Where
Assets Exceed Accumulated Benefits
Accumulated Benefits Exceed Assets
- ------------------------------------------------------------------------------
(amounts in thousands) 1994 1993 1994 1993
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Actuarial present value of
benefit obligation:
Vested $ 8,886 $10,512 $ 1,147 $ 1,300
Accumulated 9,461 11,366 1,195 1,342
Projected 15,549 18,303 1,249 1,380
Plan assets at fair market
value 13,944 11,806 - -
- ------------------------------------------------------------------------------
Projected benefit
obligation
in excess of plan assets (1,605) (6,497) (1,249) (1,380)
Unrecognized net
(gain)/loss (1,523) 5,100 25 185
Unrecognized prior service
cost 2,950 1,703 8 10
Unrecognized net asset (358) (360) - -
Adjustment required to
recognize
minimum liability - - (12) (157)
- ------------------------------------------------------------------------------
Accrued pension liability $ (536) $ (54) $(1,228) $(1,342)
- ------------------------------------------------------------------------------
</TABLE>
F-11
<PAGE>
Stockholders' Equity:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
Additional Currency Total
Common Paid-In Retained Exchange Stockholders'
(amounts in thousands) Stock Capital Earnings Effects Equity
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balances at
December 31, 1991 $149 $40,790 $47,894 $ 1,576 $ 90,409
Net income 15,487 15,487
Dividends - $.20 per share (2,981) (2,981)
Shares issued under
stock option plans 987 987
Currency effects (7,222) (7,222)
- -----------------------------------------------------------------------------------
Balances at
December 31, 1992 149 41,777 60,400 (5,646) 96,680
Net income 16,560 16,560
Dividends - $.20 per share (2,988) (2,988)
Shares issued under
stock option plans 1 407 408
Currency effects (660) (660)
- -----------------------------------------------------------------------------------
Balances at
December 31, 1993 150 42,184 73,972 (6,306) 110,000
Net income 18,207 18,207
Dividends - $.20 per share (2,995) (2,995)
Shares issued under
stock options plans 377 377
Currently effects 4,540 4,540
- -----------------------------------------------------------------------------------
Balances at
December 31, 1994 $150 $42,561 $89,184 $(1,766) $130,129
- -----------------------------------------------------------------------------------
</TABLE>
CURRENCY EFFECTS:
The financial statements of the Company's non-U.S. operations are translated to
U.S. dollars for consolidation and the translation adjustment resulting from the
fluctuation in the exchange rates is carried directly to stockholders' equity.
The adjustments will affect net income only upon sale or liquidation of the
underlying non-U.S. investment. Currency exchange gains and losses realized on
business transactions were not significant in 1994, 1993 or 1992.
The Company utilizes forward exchange contracts to hedge nonlocal currency
transactions and commitments. Gains and losses on forward exchange contracts
that hedge specific currency commitments are deferred and recognized in income
in the same period as the hedged transaction. Gains and losses on forward
contracts that do not hedge an identifiable currency commitment are included in
income as the gain or loss arises. Forward exchange contracts outstanding at
year-end 1994 were short-term in nature and related to nonlocal currency
transactions of the Company's European operations. The market risk associated
with forward exchange contracts is caused by fluctuations in exchange rates
subsequent to entering into the forward exchange contracts. The equivalent U.S.
dollar amounts of these contracts were approximately $2.1 million at December
31, 1994 and December 31, 1993, and $5.8 million at December 31, 1992. Deferred
unrealized gains and losses at December 31, 1994, 1993 and 1992 were not
significant.
F-12
<PAGE>
At December 31, 1994, the Company's net asset position exposed to currency
changes, expressed in local currencies and U.S. dollar equivalents, was as
follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Local U.S.
(amounts in thousands) Currency Dollars
- --------------------------------------------------------------------------------
<S> <C> <C>
Pound sterling 20,799 $32,551
New Zealand dollar 17,881 11,444
Japanese yen 468,156 4,700
Deutsche mark 6,376 4,112
French franc 20,807 3,891
Belgian franc 121,465 3,814
Canadian dollar 3,116 2,222
Danish krona 8,157 1,338
Swedish krona 8,934 1,206
Italian lira 1,848,882 1,139
Swiss franc 901 688
Austrian shilling 4,103 377
Dutch guilder 544 313
Australian dollar 233 180
- --------------------------------------------------------------------------------
$67,975
- --------------------------------------------------------------------------------
</TABLE>
STOCK OPTIONS:
The 1991 Stock Option Plan provides for the granting of incentive and non-
qualified stock options to purchase up to 750,000 shares of common stock. The
option price may not be less than 100% of the fair market value for incentive
stock options and not less than 50% of the fair market value for non-qualified
stock options.
The 1984 Plan, as amended in 1988, permitted the granting of incentive and non-
qualified stock options to purchase up to 1,250,000 shares of common stock. The
option price could not be less than 100% of the fair market value for incentive
stock options and not less than 50% of the fair market value for non-qualified
stock options. Prior to the 1988 amendment, grants could include SARs which had
to be exercised in tandem with the related stock option. No further grants
under the 1984 Plan can be made.
The 1983 Plan authorized the granting of stock options to purchase up to 300,000
shares of common stock at a price not less than fair market value.
F-13
<PAGE>
The transactions under the plans were as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1991 1984 1983
Plan Plan Plan
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
December 31, 1991 152,500 431,442 23,333
Granted 192,000
Expired or canceled (1,700) (12,454)
Exercised at average price
of $12.03 per share (3,668) (54,262) (10,000)
- --------------------------------------------------------------------------------
December 31, 1992 339,132 364,726 13,333
Granted 196,350
Expired or canceled (17,597) (1,050)
Exercised at average price
of $13.98 per share (5,571) (21,235)
- --------------------------------------------------------------------------------
December 31, 1993 512,314 342,441 13,333
Granted 206,250
Expired or canceled (12,663) (4,237)
Exercised at average price
of $10.47 per share (10,369) (5,714) (13,333)
- --------------------------------------------------------------------------------
December 31, 1994 695,532 332,490 0
- --------------------------------------------------------------------------------
Price range $14.25-$20.88 $7.25-$26.00 -
Weighted average price $18.31 $13.79 -
- --------------------------------------------------------------------------------
Exercisable 306,692 332,490 0
- --------------------------------------------------------------------------------
</TABLE>
Most options become exercisable on a cumulative basis over a period of service
not exceeding five years from the date of grant. The remainder of shares of
common stock available for future grant under the 1991 plan is 34,860 shares.
The Company makes no charge against income with respect to options granted at
fair market value.
In March 1991, the Company arranged for a bank to lend certain optionees the
funds necessary to exercise options prior to the special dividend. Where the
Company has guaranteed the loans, the shares issued upon exercise of these
options are held in safekeeping by the Company. The amount outstanding at
December 31, 1994 relating to these loans guaranteed by the Company was
$308,000.
F-14
<PAGE>
INCOME TAXES:
The effective income tax rate was 36.0% in 1994 and 1993, and 36.5% in 1992.
The differences between the U.S. federal statutory tax rate and the Company's
effective tax rate are as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1994 1993 1992
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Statutory U.S. federal income tax rate 35.0% 35.0% 34.0%
State income taxes 1.1% 1.8% .9%
Non-U.S. tax rate differences (3.2%) 3.8% 3.3%
U.S. tax credits (2.2%) (6.6%) (3.8%)
Other 5.3% 2.0% 2.1%
- --------------------------------------------------------------------------------
Effective income tax rate 36.0% 36.0% 36.5%
- --------------------------------------------------------------------------------
</TABLE>
On January 1, 1993, the Company adopted Financial Accounting Standard No. 109
(FAS 109), Accounting for Income Taxes, which requires the use of an asset and
liability method in accounting for income taxes. As permitted under the new
rule, prior years' financial statements have not been restated. The cumulative
effect of adopting this statement as of January 1, 1993 was immaterial to net
earnings.
The provision (benefit) for taxes on income before income taxes for 1994, 1993
and 1992 is summarized below:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Liability Liability Deferred
Method Method Method
(amounts in thousands) 1994 1993 1992
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Current
United States $ 3,599 $1,685 $1,386
International 5,967 7,014 7,148
State 510 702 287
- --------------------------------------------------------------------------------
Total current 10,076 9,401 8,821
- --------------------------------------------------------------------------------
Deferred
United States 301 218 (20)
International (114) (14) 69
State 42 (290) 33
- --------------------------------------------------------------------------------
Total deferred 229 (86) 82
- --------------------------------------------------------------------------------
Total provision for income taxes $10,305 $9,315 $8,903
- --------------------------------------------------------------------------------
</TABLE>
F-15
<PAGE>
The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities at December 31, 1994 and
1993 are presented below:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
(amounts in thousands) 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets
Inventory reserves and intercompany profit $1,680 $2,150
Reserves for vacation pay 508 467
Expenses deductible when paid 1,371 1,151
Reserves for insurance 400 110
Restructuring activities 126 235
Reserves for bad debts and product returns 160 101
Other 825 731
- --------------------------------------------------------------------------------
Gross deferred tax assets $5,070 $4,945
- --------------------------------------------------------------------------------
Deferred tax liabilities:
Fixed assets, principally depreciation $1,236 $1,479
Deferred investment tax credit 9 9
Inventory capitalization 327 -
Other 723 410
- --------------------------------------------------------------------------------
Gross deferred tax liabilities $2,295 1,898
- --------------------------------------------------------------------------------
Net deferred tax asset $2,775 $3,047
- --------------------------------------------------------------------------------
</TABLE>
Management has determined, based on the Company's history of prior operating
earnings and its expectations for the future, that operating income of the
Company will more likely than not be sufficient to recognize fully these net
deferred tax assets.
For the year ended December 31, 1992, deferred income tax costs of $82,000
resulted from timing differences in the recognition of income and expense for
income tax and financial reporting purposes. The sources and tax effects of
those timing differences are presented below:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
(amounts in thousands) 1992
- --------------------------------------------------------------------------------
<S> <C>
Tax attributed to:
Expenses deductible when paid $ 117
Depreciation 97
Inventory adjustments (187)
Investment tax credits (33)
Other 88
- --------------------------------------------------------------------------------
Total deferred taxes $ 82
- --------------------------------------------------------------------------------
</TABLE>
Tax credits for research and development and foreign income taxes paid on
foreign source income reduce income tax expense in the year realized.
U.S. and international withholding taxes have not been provided on approximately
$60.4 million of undistributed earnings of foreign subsidiaries, which are
considered to be permanently reinvested in the operations of such subsidiaries.
The distribution of these earnings would have resulted in approximately $3.6
million of foreign withholding taxes and additional U.S. income taxes to the
extent not offset by U.S. foreign tax credits. It is impractical to estimate
the total tax liability, if any, until such a distribution is made. Pretax
income from international operations amounted to $19.3 million in 1994, $17.2
million in 1993 and $18.8 million in 1992.
F-16
<PAGE>
QUARTERLY FINANCIAL INFORMATION (unaudited):
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
(amounts in thousands, except per share data)
- ---------------------------------------------
Quarter First Second Third Fourth Year
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1994:
Net sales $58,069 $59,172 $59,098 $58,856 $235,195
Net royalties 67 - - - 67
Cost of sales 30,282 30,877 31,538 31,291 123,988
Operating income 7,369 7,075 6,496 6,566 27,506
Net income 4,679 4,638 4,352 4,538 18,207
Primary earnings
per share .31 .31 .29 .30 1.21
Market price per share:
High 19-1/2 18-3/4 19-1/2 20-1/4 20-1/4
Low 15-3/4 15 17 16-1/2 15
- --------------------------------------------------------------------------------
1993:
Net sales $51,307 $51,669 $51,030 $50,943 $204,949
Net royalties - - - 667 667
Cost of sales 25,061 25,338 25,712 25,763 101,874
Restructuring charge - - - 420 420
Operating income 6,680 6,804 6,187 5,967 25,638
Net income 4,362 4,372 3,939 3,887 16,560
Primary earnings
per share .29 .29 .26 .26 1.10
Market price per share:
High 26 21 21-1/2 20-1/4 26
Low 19 17 16-3/4 15-3/4 15-3/4
- --------------------------------------------------------------------------------
</TABLE>
F-17
<PAGE>
GEOGRAPHIC DATA:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
(amounts in thousands) 1994 1993 1992
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Sales:
North America $160,514 $135,697 $125,861
Intercompany (20,555) (13,006) (11,375)
- --------------------------------------------------------------------------------
Trade sales 139,959 122,691 114,486
- --------------------------------------------------------------------------------
Europe 86,650 75,504 75,681
Intercompany (3,181) (2,629) (985)
- --------------------------------------------------------------------------------
Trade sales 83,469 72,875 74,696
- --------------------------------------------------------------------------------
Pacific area 11,767 9,383 8,356
- --------------------------------------------------------------------------------
Net sales $235,195 $204,949 $197,538
- --------------------------------------------------------------------------------
Operating Income:
North America $ 16,394 $ 15,234 $ 12,773
Europe 19,551 18,298 19,706
Pacific area 817 1,359 897
General corporate expense (9,256) (9,253) (8,836)
- --------------------------------------------------------------------------------
Operating income $ 27,506 $ 25,638 $ 24,540
- --------------------------------------------------------------------------------
Assets:
North America $ 87,341 $ 81,234 $ 65,977
Europe 67,939 54,081 54,356
Pacific area 16,467 10,475 9,716
- --------------------------------------------------------------------------------
Total assets 171,747 145,790 130,049
Liabilities: 41,618 35,790 33,369
- --------------------------------------------------------------------------------
Net Assets: $130,129 $110,000 $ 96,680
- --------------------------------------------------------------------------------
</TABLE>
Intercompany sales between areas are based on estimated market prices or on
amounts computed to provide reasonable profit to each unit. Operating income
represents net sales less expenses of operations. Sales to the Company's
unconsolidated Japanese joint venture, Life Technologies Oriental, Inc., and the
related income are included in the geographic areas from which the export sales
are made.
F-18
<PAGE>
INDEX TO EXHIBITS Page#
----------------- -----
3(A) Certificate of Incorporation of the Registrant including
Amendment to Certificate of Incorporation dated April 17,
1987, previously filed as Exhibit 3(A) to the Registrant's
Annual Report on Form 10-K for the year ended December
31, 1992, which is incorporated herein by reference.
3(B) By-laws of the Registrant as amended and restated on April
16, 1991, previously filed as Exhibit 3(B) to the Registrant's
Annual Report on Form 10-K for the year ended December 31,
1991, which is incorporated herein by reference.
4(A) Instruments defining the rights of security holders, including
indentures.
Registrant by this filing agrees, upon request, to file
with the Securities and Exchange Commission the instruments
defining the rights of holders of its long-term debt where
the total amount of securities authorized thereunder does not
exceed 10% of the total assets of registrant and its
subsidiaries on a consolidated basis.
10(A) 1984 Stock Option Plan, previously filed as Exhibit 4.1 to the
Registrant's Registration Statement on Form S-8, No. 33-21807,
dated May 12, 1988, SEC file no. 0-14991, which is incorporated
herein by reference.
10(B) Executive Supplemental Retirement Plan, previously filed as
Exhibit 10(B) to the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1990, SEC file no. 0-14991,
which is incorporated herein by reference.
10(C) Executive Deferred Compensation Benefit Plan, previously filed
as Exhibit 10.8 to the Registrant's Registration Statement on
Form S-1, No. 33-7993, dated October 1, 1986, which is
incorporated herein by reference.
10(D) Employment Agreement dated June 23, 1989, between the
Registrant and Dr. J. Stark Thompson regarding certain
severance benefits in the event of termination of employment
following a change of control, as defined in the agreement,
previously filed as Exhibit 10(K) to the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1989,
SEC file no. 0-14991, which is incorporated herein by reference.
10(E) Employment Agreement dated June 23, 1989, between the
Registrant and Joseph C. Stokes, Jr. regarding certain
severance benefits in the event of termination of employment
following a change of control, as defined in the agreement,
previously filed as Exhibit 10(E) to the Registrant's Annual
Report on Form 10-K for the year
<PAGE>
Page#
-----
ended December 31, 1992, SEC file no. 0-14991, which is
incorporated herein by reference.
10(F) Employment Agreement dated June 23, 1989, between the
Registrant and Thomas M. Coutts regarding certain severance
benefits in the event of termination of employment following
a change of control, as defined in the agreement, previously
filed as Exhibit 10(F) to the Registrant's Annual Report
on Form 10-K for the year ended December 31, 1992, SEC file
no. 0-14991, which is incorporated herein by reference.
10(G) Employment Agreement dated September 11, 1989, between
the Registrant and George E. Lowke, Ph.D. regarding certain
severance benefits in the event of termination of employment
following a change of control, as defined in the agreement,
previously filed as Exhibit 10(G) to the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1992,
SEC file no. 0-14991, which is incorporated herein by reference.
10(H) Employment Agreement dated April 13, 1993, between the
Registrant and John V. Cooper regarding certain severance
benefits in the event of termination of employment following
a change of control, as defined in the agreement, previously
filed as Exhibit 10(H) to the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1993, SEC file
no. 0-14991, which is incorporated herein by reference.
10(I) Executive Deferred Compensation Benefit Plan, previously filed
as Exhibit 10(H) to the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1991, SEC file no. 0-14991,
which is incorporated herein by reference.
10(J) Employment Agreement dated July 1, 1990, between the
Registrant and Brian D. Graves regarding certain severance
benefits in the event of termination of employment following
a change of control, as defined in the agreement, previously
filed as Exhibit 10(J) to the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1992, SEC file
no. 0-14991, which is incorporated herein by reference.
10(K) 1991 Stock Option Plan, previously filed as Exhibit 4 to the
Registrant's Registration Statement on Form S-8 No. 33-956,
dated May 9, 1991, which is incorporated herein by reference.
11 Statement re: computation of per share earnings. E-1
21 Subsidiaries of the Registrant. E-6
23 Consent of Independent Accountants. E-8
27 Financial Data Schedule. (electronic filing only) E-10
<PAGE>
Exhibit 11
----------
E-1
<PAGE>
Exhibit 11
INDEX
-----
Calculation of earnings per share for the quarters and for the years ended
December 31:
PAGE
----
o 1994 E-3
o 1993 E-4
o 1992 E-5
E-2
<PAGE>
Exhibit 11
LIFE TECHNOLOGIES
CALCULATION OF EARNINGS PER SHARE
for the year ended December 31, 1994
(amounts in thousands, except per share data)
<TABLE>
<CAPTION>
Quarters (unaudited)
-----------------------------------
PRIMARY First Second Third Fourth Year
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net income $ 4,679 $ 4,638 $ 4,352 $ 4,538 $18,207
-----------------------------------------------
Weighted average shares
outstanding 14,959 14,970 14,974 14,980 14,971
Weighted average effect of
common stock equivalents 102 87 103 105 100
-----------------------------------------------
15,061 15,057 15,077 15,085 15,071
-----------------------------------------------
Primary net income per share $.31 $.31 $.29 $.30 $1.21
-----------------------------------------------
FULLY DILUTED
- -------------
Net income $ 4,679 $ 4,638 $ 4,352 $ 4,538 $18,207
-----------------------------------------------
Weighted average shares
outstanding 14,959 14,970 14,974 14,980 14,971
Weighted average effect of
common stock equivalents 102 110 130 165 159
-----------------------------------------------
15,061 15,080 15,104 15,145 $15,130
-----------------------------------------------
Fully diluted net income
per share $ .31 $ .31 $ .29 $ .30 $ 1.20
-----------------------------------------------
</TABLE>
E-3
<PAGE>
Exhibit 11
LIFE TECHNOLOGIES
CALCULATION OF EARNINGS PER SHARE
for the year ended December 31, 1993
(amounts in thousands, except per share data)
<TABLE>
<CAPTION>
Quarters (unaudited)
------------------------------------
PRIMARY First Second Third Fourth Year
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net income $ 4,362 $ 4,372 $ 3,939 $ 3,887 $16,560
---------------------------------------------
Weighted average shares
outstanding 14,933 14,934 14,945 14,951 14,942
Weighted average effect of
common stock equivalents 211 143 135 105 149
---------------------------------------------
15,144 15,077 15,080 15,056 15,091
---------------------------------------------
Primary net income per share $.29 $.29 $.26 $.26 $1.10
---------------------------------------------
FULLY DILUTED
- -------------
Net income $ 4,362 $ 4,372 $ 3,939 $ 3,887 $16,560
---------------------------------------------
Weighted average shares
outstanding 14,933 14,934 14,945 14,951 14,942
Weighted average effect of
common stock equivalents 211 143 158 115 148
---------------------------------------------
15,144 15,077 15,103 15,066 $15,090
---------------------------------------------
Fully diluted net income
per share $ .29 $ .29 $ .26 $ .26 $ 1.10
---------------------------------------------
</TABLE>
E-4
<PAGE>
Exhibit 11
LIFE TECHNOLOGIES
CALCULATION OF EARNINGS PER SHARE
for the year ended December 31, 1992
(amounts in thousands, except per share data)
<TABLE>
<CAPTION>
Quarters (unaudited)
-----------------------------------
PRIMARY First Second Third Fourth Year
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net income $ 3,796 $ 3,901 $ 3,780 $ 4,010 $15,487
---------------------------------------------
Weighted average shares
outstanding 14,868 14,887 14,901 14,919 14,894
Weighted average effect of
common stock equivalents 168 202 185 181 185
---------------------------------------------
15,036 15,089 15,086 15,100 15,079
---------------------------------------------
Primary net income per share $.25 $.26 $.25 $.27 $1.03
---------------------------------------------
FULLY DILUTED
- -------------
Net income $ 3,796 $ 3,901 $ 3,780 $ 4,010 $15,487
---------------------------------------------
Weighted average shares
outstanding 14,868 14,887 14,901 14,919 14,894
Weighted average effect of
common stock equivalents 198 202 185 195 203
---------------------------------------------
15,066 15,089 15,086 15,114 $15,097
---------------------------------------------
Fully diluted net income
per share $ .25 $ .26 $ .25 $ .27 $ 1.03
---------------------------------------------
</TABLE>
E-5
<PAGE>
Exhibit 21
----------
E-6
<PAGE>
Exhibit 21
SUBSIDIARIES OF THE REGISTRANT
------------------------------
The following table sets forth subsidiaries of Life Technologies, Inc. which
are included in the consolidated financial statements.
<TABLE>
<CAPTION>
Percentage Jurisdiction in
of Which Incorporated
Name Ownership or Organized
- --------------------------------------------------------------------------------
<S> <C> <C>
Bethesda Research Labs
(U.K.) Ltd. 100% (B) (G) England
Biomed Benelux B.V. 100% (E) (G) Netherlands
Canadian Life Technologies, Inc. 100% Ontario
GIBCO/Bio-Cult
Diagnostics, Ltd. 100% (F) (G) Scotland
GIBCO Leasing Ltd. 100% (B) (G) Scotland
GIBCO New Zealand (1989)
Ltd. 100% (D) (G) New Zealand
Laboratory Services Ltd. 100% New Zealand
Labserum Distributors
(1980) Ltd. 100% (D) (G) New Zealand
Life Technologies A.G. 100% (C) Switzerland
Life Technologies A.S. 100% Denmark
Life Technologies B.V. 100% (C) Netherlands
Life Technologies (Europe)
Ltd. 100% (B) (G) Scotland
Life Technologies Foreign
Sales Corp. 100% U.S.Virgin Islands
Life Technologies
Holdings, Unlimited 100% Scotland
Life Technologies GmbH 100% (C) Germany
Life Technologies
Investment Holdings,Inc. 100% Delaware
Life Technologies Italia S.r.l. 100% Italy
Life Technologies Ltd. 100% (B) Scotland
Life Technologies Ltd. 100% New Zealand
Life Technologies Overseas
Ltd. 100% (B) Scotland
Life Technologies (Pacific) Ltd. 100% Hong Kong
Life Technologies Pty. Ltd. 100% Australia
Life Technologies S.A.R.L. 100% (C) France
Life Technologies Asia Pacific Inc. 100% Delaware
N.V. Life Technologies S.A. 100% (C) Belgium
Phoenix Chemicals Ltd. 100% (D) (G) New Zealand
Prespak Plastics (1988)
Ltd. 100% (A) (G) New Zealand
Serum Technologies Holdings, Inc. 100% Delaware
Life Technologies Sweden AB 100% Sweden
Life Technologies GIBCO
BRL Co., Ltd. 51% Republic of
China,(Taiwan)
(A) Owned by Laboratory Services Ltd.
(B) Owned by Life Technologies
Holdings, Unlimited
(C) Owned by Life Technologies
Overseas Ltd.
(D) Owned by Life Technologies Ltd.
(New Zealand)
(E) Owned by Life Technologies B.V.
(F) Owned by Life Technologies Ltd.
(Scotland)
(G) Inactive
</TABLE>
The following unconsolidated company is accounted for by the equity method.
Financial statements of this company have been omitted because the company does
not constitute a significant subsidiary.
<TABLE>
<CAPTION>
Percentage Jurisdiction in
of Which Incorporated
Name Ownership or Organized
- --------------------------------------------------------------------------------
<S> <C> <C>
Life Technologies Oriental K.K. 50% Japan
</TABLE>
E-7
<PAGE>
Exhibit 23
----------
E-8
<PAGE>
Exhibit 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements of
Life Technologies, Inc. and subsidiaries on Form S-8, Registration No. 33-21807
and Registration No. 33-956, and the Company's registration statement on Form
S-3, Registration No. 33-29536, of our report dated January 23, 1995, on our
audits of the consolidated financial statements of Life Technologies, Inc. and
subsidiaries as of December 31, 1994 and 1993, and for the years ended December
31, 1994, 1993 and 1992, which report is included in this Annual Report on Form
10-K.
Coopers & Lybrand L.L.P.
Washington, D.C.
February 23, 1995
E-9
<TABLE> <S> <C>
<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> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 13246
<SECURITIES> 0
<RECEIVABLES> 36163
<ALLOWANCES> 446
<INVENTORY> 52710
<CURRENT-ASSETS> 107568
<PP&E> 79348
<DEPRECIATION> 31305
<TOTAL-ASSETS> 171747
<CURRENT-LIABILITIES> 38026
<BONDS> 0
<COMMON> 150
0
0
<OTHER-SE> 129979
<TOTAL-LIABILITY-AND-EQUITY> 171747
<SALES> 235195
<TOTAL-REVENUES> 235262
<CGS> 123988
<TOTAL-COSTS> 123988
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 30
<INCOME-PRETAX> 28625
<INCOME-TAX> 10305
<INCOME-CONTINUING> 18207
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 18207
<EPS-PRIMARY> 1.21
<EPS-DILUTED> 1.20
</TABLE>
