Life Technologies reports third quarter 2009 results; non-GAAP and organic revenues increase by 3% and 5%

Life Technologies Corporation (NASDAQ:LIFE) today announced results for its third quarter ended September 30, 2009. Non-GAAP revenue for the third quarter was $805 million, an increase of 3 percent over third quarter revenue of $784 million in 2008, as if Invitrogen and Applied Biosystems had been combined. Excluding the impact of currency and the divested LIMS business unit, organic revenue grew 5 percent over the same period in the previous year.

“I am very pleased that we’ve again delivered such strong results,” said Greg Lucier, Chairman and Chief Executive Officer of Life Technologies. “We saw good demand for our products and services around the globe, and began to receive the initial purchases emanating from the American Recovery and Reinvestment Act. The company also achieved its integration goals for the quarter, the most notable accomplishment being the completion of the portfolio review which resulted in the sale of our mass spectrometry joint venture to Danaher Corporation.”

Third quarter GAAP diluted earnings per share was $0.22, which includes $0.29 per share of acquisition related intangible amortization expense, $0.04 per share of non-cash interest expense associated with the adoption of FSP APB14-1, and $0.15 per share of business integration costs and other items. In addition, GAAP earnings per share includes $0.03 per share of accelerated amortization of debt issuance cost resulting from the early payment of debt incurred as a result of the Applied Biosystems merger. On a non-GAAP basis, which excludes these items, diluted earning per share was $0.73.

Analysis of Third Quarter 2009 Results

• Third quarter non-GAAP 2009 revenue increased 3 percent over the previous year. Revenue growth without the impact from currency and the divested LIMS business was 5 percent, which was a result of strong growth in Europe, Asia Pacific, Japan and the majority of product areas. Revenue from foreign currency exchange had a negative 2 point effect on reported revenue growth.
• Gross margin in the third quarter on a non-GAAP basis was 67.0 percent, an improvement of 20 basis points over the prior year quarter. Positive price realization across the portfolio, lower royalty expense and reduced costs as a result of merger synergies all contributed to the gross margin improvements offset partially by the negative impact of currency and lower royalty revenues.
• Non-GAAP operating margin was 27.3 percent in the third quarter, representing an increase of approximately 290 basis points over the same period in 2008. The increase in operating margin was a result of improved gross margins, as well as lower operating expenses due to synergy realization and other targeted cost reductions.
• Third quarter non-GAAP tax rate was 29.1 percent.
• Diluted weighted shares outstanding were 183.4 million in the third quarter.
• Cash flow from operating activities for the third quarter was $200 million. Third quarter capital expenditures were $36 million and resulting free cash flow was $164 million. The company ended the quarter with $580 million in cash & short-term investments, including $52 million held as restricted cash.

Business Highlights:

• Molecular Biology Systems division revenue was $394 million in the third quarter, an increase of approximately 5 percent over the same period last year. Excluding the impact from currency, organic revenue growth was 8 percent. This growth was a result of broad demand across the portfolio, including continued strong orders for the company’s Influenza A (H1N1) related products.
• Genetic Systems division revenue was $216 million in the third quarter, an increase of 5 percent over the same period last year. Excluding the impact from currency and the divested LIMS business, organic revenue growth was 7 percent. This increase was a result of double-digit growth for consumable kits and capillary electrophoresis instruments sold into applied markets like forensics, continued growth of next generation sequencing systems, as well as low single-digit growth in capillary electrophoresis sold into the life science research market.
• Cell Systems division revenue was $189 million in the third quarter, a decrease of 3 percent over the same period last year. Excluding the impact from currency, organic revenue was flat year over year. Expected declines in media sold to pharmaceutical and biotechnology customers were offset by significant growth in other product areas such as stem cell related products and cellular analysis solutions.
• The Mass Spectrometry division, the company’s joint venture with MDS Analytical Technologies, contributed $6 million in other income. This income was a result of $111 million in revenue, an increase of 2 percent over prior year. Excluding the impact from currency, organic growth was 3 percent. As announced on September 2^nd, a definitive agreement has been signed to sell the company’s ownership stake in the division to Danaher Corporation. The transaction is expected to close in the fourth quarter and is subject to customary closing conditions
• Regional organic growth rates, excluding the impact from the company’s mass spectrometry joint venture, were as follows compared to the same quarter of the prior year: the America’s increased 1 percent, Europe increased 8 percent, Asia Pacific increased 21 percent, and Japan increased 7 percent.
• Third quarter company and technology highlights include:
  • Continued expansion of the leading line of TaqMan® assays with the introduction of a new line of real-time PCR assays that enable researchers to rapidly detect and quantify proteins in human cell samples.
  • The launch of a new genomic analysis tool, the MeltDoctor^TM High-Resolution Melt (HRM) Reagents, which will help researchers in studies that associate genetic variation with specific diseases, and adds another industry leading technology to Life Technologies’ advanced genomics portfolio of products.
  • Launch of a new biomarker tool for use in pre-clinical research, which is indicative of the company’s increasing focus on advancements in the diagnostics market. The PlexMark™ 3 Renal Biomarker Panel Assay is a non-invasive and cost-effective research tool for performing kidney function post-transplantation studies rapidly and easily.
  • Furthering the company’s goal to advance education in science, the Life Technologies Foundation awarded $1.7 million in new grants for projects that include the creation of an online biology textbook, and building a museum exhibit about the human cell.

Fiscal Year 2009 Outlook

Subject to the risk factors detailed in the Safe Harbor Statement section of this release, the company increased its expectations for fiscal year 2009 financial performance. Organic revenue in the fourth quarter of 2009 is expected to increase in the high single digits, including a modest impact from ARRA stimulus funds. The revised full year non-GAAP earnings per share are now expected to be in the range of $2.90 to $2.95. The company will provide further detail on its business outlook during the conference call today.

Use of Pro-forma statements for comparison purposes

Posted on the Company’s investor relations Web site is a quarterly pro-forma 2008 Income Statement, down to operating income, for the combined companies of Invitrogen and Applied Biosystems. Also provided is quarterly revenue detail for each of Life Technologies’ technology divisions. These pro-forma income statements are meant for reference only and represent what the company profitability would have been if Invitrogen and Applied Biosystems had been combined during those years. Interested parties may access this document at www.lifetechnologies.com / corporate/investor relations/financial reports/GAAP Reconciliations. In addition, incorporated in this press release is a table comparing the current quarter results to the same quarter from the previous year using the pro-forma data provided in the table titled Life Technologies Corporate Condensed Non-GAAP and Reconciliation of Non-GAAP Adjustments. All comparisons of financial results from revenue to operating income will use the provided pro-forma statements.

Conference Call and Webcast Details

The company will discuss its financial and business results as well as its business outlook on its conference call at 8:30 a.m. EDT today. This conference call will contain forward-looking information. The conference call will include a discussion of “non-GAAP financial measures” as that term is defined in Regulation G. For actual results, the most directly comparable GAAP financial measures and information reconciling these non-GAAP financial measures to the company’s financial results determined in accordance with GAAP, as well as other material financial and statistical information to be discussed on the conference call will be posted at the company’s Investor Relations Web site at www.lifetechnologies.com. The Webcast can be accessed through the investor relations page of the Life Technologies’ Web site at www.lifetechnologies.com. Alternatively, callers may listen to the live conference call by dialing 866.543.6408 (domestic) or 617.213.8899 (international) and use passcode 86799224. A replay of the Webcast will be available on the Company's Web site through Tuesday, November 17, 2009.

The company will also hold a post-earnings Q&A call for analysts and investors on the same day at 11:00 a.m. EDT. The Webcast can be accessed through the investor relations page of the Life Technologies’ Web site at www.lifetechnologies.com. Alternatively, callers may listen to the live conference call by dialing 866.825.1709 (domestic) or 617.213.8060 (international) and use passcode 10585706. A replay of the Webcast will be available on the Company's Web site through Tuesday, November 17, 2009.