<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
--------------------
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________ to _____________
Commission file number 0-14991
-------
LIFE TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 34-0431300
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
8717 Grovemont Circle, Gaithersburg, MD 20877
(Address of principal executive offices) (Zip Code)
-----------------
Registrant's telephone number, including area code: (301) 840-8000
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes x No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at October 24, 1996
----- ----------------------------------
Common Stock, par value $.01 per share 22,940,980 shares
- --------------------------------------------------------------------------------
<PAGE>
PART I
------
FINANCIAL INFORMATION
---------------------
Item 1. Financial Statements
--------------------
CONSOLIDATED STATEMENT OF INCOME
(amounts in thousands, except per share data)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
--------------------------- -------------------------------
1996 1995 Change 1996 1995 Change
- ----------------------------------------------------------- -------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Net sales $77,064 $66,981 + 15% $231,124 $202,077 + 14%
Net royalties 425 67 - 559 67 -
------- ------- -------- --------
77,489 67,048 + 16% 231,683 202,144 + 15%
Operating expenses:
Cost of sales 37,298 33,012 + 13% 109,857 102,376 + 7%
Marketing and 24,764 22,199 + 12% 75,292 63,250 + 19%
administrative
Research and development 4,797 3,756 + 28% 14,103 11,814 + 19%
Gain on product line
disposal - - - (2,569) - -
------- ------- -------- --------
Total operating expenses 66,859 58,967 + 13% 196,683 177,440 + 11%
------- ------- -------- --------
Operating income 10,630 8,081 + 32% 35,000 24,704 + 42%
Other income (expense):
Investment income 166 149 + 11% 503 514 - 2%
Interest expense (5) (20) - 75% (89) (25) +256%
Other, net (9) 124 - (111) 367 -
------- ------- -------- --------
Total other income 152 253 - 40% 303 856 - 65%
------- ------- -------- --------
Income before income taxes 10,782 8,334 + 29% 35,303 25,560 + 38%
Income taxes 3,882 2,917 + 33% 12,709 8,946 + 42%
------- ------- -------- --------
Income before minority 6,900 5,417 + 27% 22,594 16,614 + 36%
interests
Minority interests (269) (50) - (986) (11) -
------- ------- -------- --------
Net income $ 6,631 $ 5,367 + 24% $ 21,608 $ 16,603 + 30%
======= ======= ======== ========
Average shares outstanding 23,574 23,012 + 2% 23,445 22,850 + 3%
======= ======= ======== ========
Net income per share $0.28 $0.23 + 22% $ 0.92 $ 0.73 + 26%
======= ======= ======== ========
Dividends per share $0.04 $0.0333 + 20% $ 0.1133 $ 0.10 + 13%
======= ======= ======== ========
</TABLE>
Prior period share and per share amounts have been adjusted for a 3 for 2 stock
split effected on August 28, 1996.
Amounts are unaudited.
2
<PAGE>
Part I - Financial Statements (continued)
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEET
(amounts in thousands, except per share data)
September 30, December 31,
1996 1995
- ---------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 22,282 $ 23,201
Accounts receivable, net 55,379 48,722
Inventories:
Materials and supplies 11,595 10,508
In process and finished 52,103 56,598
LIFO reserve (3,932) (6,261)
-------- --------
Total inventory 59,766 60,845
Prepaid expenses 3,419 3,697
Current deferred tax assets 5,142 5,557
-------- --------
Total current assets 145,988 142,022
Property, plant and equipment 118,019 89,691
Less accumulated depreciation (43,315) (37,830)
-------- --------
Total property, plant and equipment 74,704 51,861
Investments and other assets 9,291 8,671
Excess of cost over net assets of
businesses acquired, net 14,608 6,190
-------- --------
Total assets $244,591 $208,744
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt $ 1,177 $ 1,934
Accounts payable 17,449 15,102
Dividends payable 917 759
Income taxes 17,251 13,645
Accrued liabilities and expenses 22,638 13,821
-------- --------
Total current liabilities 59,432 45,261
Long-term debt 1,086 1,451
Deferred items 2,935 2,421
Deferred income taxes 2,221 2,352
Minority interests 5,138 3,334
-------- --------
Total liabilities 70,812 54,819
Stockholders' equity:
Common stock 229 152
Additional paid-in capital 48,001 45,995
Retained earnings 127,459 108,444
Currency exchange effects (1,910) (666)
-------- --------
Total stockholders' equity 173,779 153,925
-------- --------
Total liabilities and stockholders' equity $244,591 $208,744
======== ========
Equity per share $ 7.58 $ 6.76
</TABLE>
Prior period per share amounts have been adjusted for a 3 for 2 stock split
effected on August 28, 1996.
Amounts as of September 30, 1996 are unaudited.
3
<PAGE>
Part I - Financial Statements (continued)
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(amounts in thousands)
Nine months ended
September 30,
------------------
1996 1995
- -----------------------------------------------------------------------
<S> <C> <C>
CASH INFLOWS (OUTFLOWS)
Operations:
Net income $21,608 $16,603
Non-cash items:
Depreciation and amortization 7,562 5,745
Gain on product line disposal (2,569) -
Other 483 (621)
Changes in assets and liabilities 7,318 (4,511)
------- -------
34,402 17,216
Investments:
Capital expenditures (23,607) (7,752)
Proceeds from product line disposal 2,569 -
Acquisitions (11,104) (724)
Advance to affiliate (500) -
------- -------
(32,642) (8,476)
Financing:
Dividends paid (2,435) (2,250)
Proceeds from exercise of stock options 1,736 2,299
Loan repayments (920) -
------- -------
(1,619) 49
Effect of exchange rate changes on cash (1,060) (19)
------- -------
Increase in cash and cash equivalents (919) 8,770
Cash included from consolidation of a subsidiary
which became majority owned in 1995 - 2,134
Cash and cash equivalents at beginning of period 23,201 13,246
------- -------
Cash and cash equivalents at end of period $22,282 $24,150
======= =======
</TABLE>
Amounts are unaudited.
Notes To Financial Statements:
- -----------------------------
In the opinion of the Company's management, the unaudited financial statements
reflect all adjustments (which consist of normal recurring adjustments)
necessary to present a fair statement of the results for the interim periods.
The results for the three-month and nine-month periods ended September 30, 1996
are not necessarily indicative of the results for the entire year 1996.
Net income per share figures in the Consolidated Statement of Income are based
on the weighted average number of shares and common stock equivalents
outstanding as indicated for each period. Prior period share and per share
amounts have been adjusted for a 3 for 2 stock split effected on August 28,
1996.
4
<PAGE>
Part I - (continued)
The Company has reviewed the status of its contingencies and believes there are
no material changes from that disclosed in Form 10-K for the year ended
December 31, 1995. The financial data included herein have been reviewed by the
registrant's independent public accountants, Coopers & Lybrand L.L.P., and their
report is attached.
Item 2. Management's Discussion and Analysis of Financial
-------------------------------------------------
Condition and Results of Operations
-----------------------------------
Third Quarter Results
Revenues were $77.5 million for the third quarter of 1996, an increase of 16%
over the comparable quarter of 1995. Sales of products other than fetal bovine
serum ("FBS") increased by 18%, when comparing the third quarter of 1996 with
the comparable period in 1995 and excluding the effect of changes due to
different currency translation rates. Third quarter 1996 FBS sales were $0.4
million greater than in the third quarter of 1995. Higher unit sales for FBS
increased net sales by $1.9 million and lower FBS unit selling prices decreased
net sales by $1.5 million. FBS sales represented 14% of net sales in the third
quarter of 1996 and 15% in the third quarter of 1995. The effect of changes in
currency exchange rates decreased third quarter 1996 net sales by $0.8 million,
or 1%, when compared with the third quarter of 1995. Royalty income was $0.4
million in the third quarter of 1996 compared with almost $0.1 million in the
third quarter of 1995. Royalty income in both periods is primarily from
licensing fees.
Gross margins were 51.6% of net sales in the third quarter of 1996 compared with
50.7% in the third quarter of 1995. Gross margins improved in the 1996 period as
FBS gross margins increased and the Company realized higher gross margins in
Japan. FBS gross margins improved as FBS unit costs declined at a faster rate
than the decline in unit selling prices. Gross margins in Japan were higher
principally as result of the Company's consolidating the results of its Japanese
subsidiary upon the acquisition of a controlling interest in that subsidiary in
September 1995. The Company reduced its LIFO reserves in the amount of $0.9
million during the third quarter of 1996.
Marketing and administrative expenses were 32.1% of net sales in the third
quarter of 1996 and 33.1% in the third quarter of 1995. Research and development
expenses were $4.8 million for the quarter ended September 30, 1996,
representing a 28% increase when compared with the $3.8 million reported in the
third quarter of 1995.
Other income decreased 40% when comparing the third quarter of 1996 with the
third quarter of the previous year, principally because the 1995 period included
$0.2 million in equity income related to its then unconsolidated Japanese
subsidiary where no similar equity income was reported in 1996.
The Company's effective income tax rate of 36% in the third quarter of 1996
compared with 35% in the third quarter of the previous year.
Third quarter 1996 net income of $6.6 million increased 24% over the comparable
period a year earlier. Net income per share of $0.28 in the third quarter of
1996 were 22% greater than the $0.23 per share reported in the prior year's
third quarter.
5
<PAGE>
Part I - (continued)
Income attributed to minority interests is principally related to earnings from
the Company's serum collection joint venture and its Japanese subsidiary.
Nine Months Results
For the nine months of 1996, revenues were $231.7 million, an increase of $29.5
million, or 15%, over the comparable period of 1995. Sales of products other
than FBS increased by 18%, when comparing the first nine months of 1996 with the
comparable period in 1995 and excluding the effect of changes due to different
currency translation rates. FBS sales were $0.7 million higher than in the
comparable period of 1995. Higher unit sales for FBS increased net sales by $1.7
million and lower FBS unit selling prices decreased net sales by $1.0 million.
FBS sales represented 14% of net sales in the first nine months of 1996 and 16%
in the comparable period of 1995. The impact of consolidating the results of the
Company's Japanese subsidiary represented almost 5% of the 14% increase in net
sales. Changes in currency exchange rates used to translate sales to U.S.
dollars decreased net sales in the first nine months of 1996 by $1.7 million, or
1%, when compared with the first nine months of last year. Royalty income in the
first nine months of 1996 increased by $0.5 million to $0.6 million.
Gross margins for the first nine months of 1996 were 52.5% of net sales compared
with 49.3% in the first nine months of 1995. Gross margins improved in the 1996
period as FBS gross margins increased and the Company realized higher gross
margins in Japan. FBS gross margins improved as FBS unit costs decreased at a
faster rate than FBS unit selling prices when comparing the 1996 period with the
first nine months of 1995. Gross margins in Japan were higher principally as a
result of the Company's consolidating the results of its Japanese subsidiary
upon the acquisition of a controlling interest in that subsidiary. The Company
reduced its LIFO reserves in the amount of $2.3 million during the first nine
months of 1996.
Marketing and administrative expenses represented 32.6% of net sales in the
first nine months of 1996 and 31.3% of net sales in the comparable period of
1995. The increase as a percentage of sales was mostly the result of the
Company's consolidating the sales and expenses of its Japanese subsidiary.
Research and development expenses were $14.1 million in the first nine months of
1996, representing a 19% increase over the $11.8 million reported in the first
nine months of 1995.
Operating income of $35.0 million for the first nine months of 1996 increased
42% compared with operating income of $24.7 million for the first nine months of
1995. A gain on the product line disposal represented 10% of the 42% operating
income improvement. Other income decreased 65% when comparing the first nine
months of 1996 with the comparable period of the previous year, mostly because
equity income fell from $0.5 million in 1995 to zero in 1996.
The Company's effective income tax rate was 36% in the first nine months of 1996
and 35% in the first nine months of 1995.
Net income of $21.6 million for the first nine months of 1996 was 30% greater
than the $16.6 million for the comparable period in 1995. Net income per share
6
<PAGE>
Part I - (continued)
of $0.92 in the first nine months of 1996 represented a 26% increase over
earnings per share in the comparable period of 1995.
Income attributed to minority interests is principally related to earnings from
the Company's serum collection joint venture and its Japanese subsidiary.
Liquidity and Capital Resources
Operating activities provided $34.4 million in cash during the first nine months
of 1996. Net income after adjustments for depreciation and amortization was the
principal source of cash from operations in 1996. Working capital was a source
of cash during the first nine months of 1996. Apart from receivables, which
increased principally due to sales increases, all other major components of
working capital were a source of cash in the first nine months of 1996.
Inventory values fell due to effective inventory management and lower unit
costs. Amounts due for supplies, taxes and accrued expense increased largely due
to the timing of payments.
The Company paid $23.6 million for capital expenditures in the first nine months
of 1996. Approximately $12.8 million of the capital expenditures in 1996 related
to the Company's new corporate R&D center in Maryland and another $4.7 million
was for other facilities upgrades and improvements elsewhere around the world.
The Company also completed its acquisition of Custom Primers Inc., a custom
oligonucleotide producer, for $7.1 million. The purchase agreement provides for
possible earn-out contingencies based on sales of oligonucleotides over the next
five years. The Company paid $3.7 million for an additional 29% interest in its
Japanese subsidiary and $0.3 million in deferred payments related to a European
acquisition.
Cash used for financing activities included $2.4 million for dividend payments
paid in the first nine months of 1996. The Company paid $0.9 million to a joint
venture partner to reduce an outstanding loan. The exercise of stock options
provided $1.7 million in the first nine months of 1996.
Capital expenditures in 1996 are expected to range from $35-40 million. The
Company expects to spend approximately $20-25 million in 1996 for its new
corporate R&D center in Maryland and another $5-10 million for other facilities
upgrades and improvements elsewhere around the world. The balance of the
expected 1996 capital spending is anticipated to be for new and replacement
machinery, equipment and management information systems. The Company believes
it will be able to generate sufficient cash from its operations and its existing
credit lines to meet its anticipated working capital and capital expenditure
requirements in 1996.
The Company continues to evaluate 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.
7
<PAGE>
PART II - OTHER INFORMATION
------- -----------------
Item 1. Legal Proceedings - Not applicable.
-----------------
Item 2. Changes in Securities - Not applicable.
---------------------
Item 3. Defaults Upon Senior Securities - Not applicable.
-------------------------------
Item 4. Submission of Matters to a Vote of Security Holders - Not applicable.
---------------------------------------------------
Item 5. Other Information - Not applicable.
-----------------
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits:
11. Statement re computation of per share earnings.
15. Letter re unaudited interim financial statements.
27. Financial data schedule
(b) Reports on Form 8-K.
There were no reports on Form 8-K filed for the three months ended
September 30, 1996.
8
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereto duly authorized.
LIFE TECHNOLOGIES, INC.
Date: Oct. 28, 1996 By: /s/ Joseph C. Stokes, Jr.
---------------------------------
Joseph C. Stokes, Jr.
Senior Vice President
and Chief Financial Officer
(Principal Financial Officer
and Authorized Signatory)
By: /s/ C. Eric Winzer
----------------------------------
C. Eric Winzer
Controller
(Principal Accounting Officer)
9
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors
Life Technologies, Inc.
We have reviewed the accompanying consolidated balance sheet of Life
Technologies, Inc. and its subsidiaries as of September 30, 1996 and the related
consolidated statements of income for the three-month and nine-month periods
ended September 30, 1996 and 1995, and the related condensed consolidated
statements of cash flows for the nine-month periods then ended. These financial
statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying consolidated financial statements referred to above
for them to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet as of December 31, 1995 and the
related consolidated statements of income, stockholders' equity and cash flows
for the year then ended (not presented herein), and in our report dated January
22, 1996 we expressed an unqualified opinion on those consolidated financial
statements.
/s/ Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
Rockville, Maryland
October 9, 1996
10
<PAGE>
EXHIBIT INDEX
-------------
Page
----
Exhibit 11 Statement re computation of per share earnings 12-14
Exhibit 15 Letter re unaudited interim financial statements 15-16
Exhibit 27 Financial data schedule 17
11
<PAGE>
EXHIBIT 11
----------
STATEMENT RE COMPUTATION OF
---------------------------
PER SHARE EARNINGS
------------------
12
<PAGE>
Exhibit 11
----------
LIFE TECHNOLOGIES, INC.
STATEMENT RE COMPUTATION OF PRIMARY PER SHARE EARNINGS
------------------------------------------------------
for the three and nine months ended
September 30, 1996 and 1995
(amounts in thousands, except per share data)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
------------------- ------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income $ 6,631 $ 5,367 $21,608 $16,603
======= ======= ======= =======
Weighted average shares
outstanding 22,905 22,617 22,857 22,553
Weighted average effect of
common stock equivalents 669 395 588 297
------- ------- ------- -------
23,574 23,012 23,445 22,850
======= ======= ======= =======
Primary net income per share $ 0.28 $ 0.23 $ 0.92 $ 0.73
======= ======= ======= =======
</TABLE>
Prior period share and per share amounts have been adjusted for a 3 for 2 stock
split effected on August 28, 1996.
13
<PAGE>
Exhibit 11
----------
LIFE TECHNOLOGIES, INC.
STATEMENT RE COMPUTATION OF FULLY DILUTED PER SHARE EARNINGS
------------------------------------------------------------
for the three and nine months ended
September 30, 1996 and 1995
(amounts in thousands, except per share data)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
------------------- ------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income $ 6,631 $ 5,367 $21,608 $16,603
======= ======= ======= =======
Weighted average shares
outstanding 22,905 22,617 22,857 22,553
Weighted average effect of
common stock equivalents 729 480 750 502
------- ------- ------- -------
23,634 23,097 23,607 23,055
======= ======= ======= =======
Fully diluted net income
per share $ 0.28 $ 0.23 $ 0.92 $ 0.72
======= ======= ======= =======
Primary net income per share $ 0.28 $ 0.23 $ 0.92 $ 0.73
======= ======= ======= =======
</TABLE>
Prior period share and per share amounts have been adjusted for a 3 for 2 stock
split effected on August 28, 1996.
14
<PAGE>
EXHIBIT 15
----------
LETTER RE UNAUDITED INTERIM FINANCIAL STATEMENTS
------------------------------------------------
15
<PAGE>
Exhibit 15
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
We are aware that our report dated October 9, 1996 on our review of interim
financial information of Life Technologies, Inc. (the Company) for the three-
month and nine month periods ended September 30, 1996 and 1995, included in this
Form 10-Q is incorporated by reference in the Company's registration statements
on Form S-8, Registration No. 333-03773, Registration No. 33-59741, Registration
No. 33-21807 and Registration No. 33-956, and the Company's registration
statement on Form S-3, Registration No. 33-29536. Pursuant to Rule 436(c) under
the Securities Act of 1933, this report should not be considered a part of the
registration statements prepared or certified by us within the meaning of
Section 7 and 11 of that Act.
/s/ Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
Rockville, Maryland
October 9, 1996
16
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Balance Sheet, Income Statement and Exhibit 11 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 22,282
<SECURITIES> 0
<RECEIVABLES> 56,869
<ALLOWANCES> 1,490
<INVENTORY> 59,766
<CURRENT-ASSETS> 145,988
<PP&E> 118,019
<DEPRECIATION> 43,315
<TOTAL-ASSETS> 244,591
<CURRENT-LIABILITIES> 59,432
<BONDS> 1,086
0
0
<COMMON> 229
<OTHER-SE> 173,550
<TOTAL-LIABILITY-AND-EQUITY> 244,591
<SALES> 231,124
<TOTAL-REVENUES> 231,683
<CGS> 109,857
<TOTAL-COSTS> 109,857
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 89
<INCOME-PRETAX> 35,303
<INCOME-TAX> 12,709
<INCOME-CONTINUING> 21,608
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 21,608
<EPS-PRIMARY> 0.92
<EPS-DILUTED> 0.92
</TABLE>
