Life Technologies Corporation (NASDAQ: LIFE) today announced results for its third quarter ended September 30, 2013. Revenue for the third quarter was $936 million, an increase of 3 percent over the $911 million reported for the third quarter of 2012. Excluding the impact of currency, revenue growth for the quarter was 4 percent compared to the same period of the prior year.
"We are pleased with our mid-single digit revenue and double-digit non-GAAP EPS growth, which was driven by strength across our Research Consumables and Applied Sciences business groups, solid growth in Japan and emerging markets such as China, and continued stability in the U.S. and Europe," said Gregory T. Lucier, chairman and chief executive officer of Life Technologies. "During the quarter, we continued to execute against our strategy of expanding into growth markets by introducing new products in stem cells and next generation sequencing and by opening a state-of-the art forensics lab in India. In addition, we partnered with TriCore Reference Laboratories to establish our first next-generation sequencing Center of Excellence focused on clinical research."
Lucier continued, "On August 21, 2013, our stockholders voted to adopt the Life Technologies and Thermo Fisher merger agreement, representing a significant milestone and bringing us one step closer to the anticipated close of the acquisition in early 2014. Both companies remain excited about creating the unrivaled leader in life sciences that will continue to accelerate innovation and better meet the needs of our customers."
Life Technologies reported results compared to the quarter ended September 30, 2012. Results are non-GAAP unless indicated otherwise. A full reconciliation of non-GAAP to GAAP measures can be found in the tables of today's press release.
Analysis of Third Quarter 2013 Results
Third quarter revenue increased by 3 percent over the prior year, representing an increase of approximately 4 percent excluding the impact of currency. Revenue growth for the quarter was driven by increases in the company's Research Consumables and Bioproduction businesses, partially offset by declines in Genetic Analysis.
Gross margin in the third quarter was 65.7 percent, approximately 10 basis points higher than the same period of the prior year. Gross margin was driven by manufacturing productivity and higher realized price, partially offset by a decline in royalties.
Operating margin was 28.1 percent in the third quarter, approximately 10 basis points higher than in the same period of the prior year, primarily due to the increase in revenue and gross margin, partially offset by increases in expenses related to acquisitions and planned investments in Ion Torrent.
The Company's tax rate was 22.9 percent for the third quarter, which was lower than the third quarter of last year due to the reinstatement of the U.S. federal research tax credit and tax credits on foreign repatriation.
Third quarter EPS increased 10 percent to $1.02.
Diluted weighted shares outstanding were 175.9 million in the third quarter, a decrease of 1.4 million shares over the prior year. The decrease was a result of the share repurchase program, partially offset by shares issued for employee stock plans.
Cash flow from operating activities for the third quarter was $250 million. Third quarter capital expenditures were $25 million, resulting in free cash flow of $225 million. The company ended the quarter with $368 million in cash and short-term investments.
Business Group and Regional Highlights
Research Consumables revenue was $404 million in the third quarter, an increase of 5 percent compared to the prior year. Excluding the impact of currency, revenue for the business group increased 6 percent primarily due to strong sales from the Company's fluorescent imaging, stem cells, synthetic biology and cell culture products.
Genetic Analysis revenue was $338 million in the third quarter, a decrease of 4 percent over the same period last year. Excluding the impact of currency, revenue decreased 3 percent. Results for the quarter were primarily driven by an expected decline in qPCR royalties and SOLiD sales, offset by continued solid performance in the rest of the business.
Applied Sciences revenue was $194 million in the third quarter, an increase of 12 percent over the prior year. Excluding the impact of currency, revenue increased 13 percent primarily as a result of an increase in Bioproduction sales.
Regional revenue growth rates excluding currency for the third quarter, compared to the same quarter of the prior year, were as follows: the Americas were flat, Europe grew 2 percent, Asia Pacific grew 18 percent, and Japan grew 8 percent.
Given the announcement in April that Life Technologies and Thermo Fisher have entered into a definitive merger agreement under which Thermo Fisher will acquire all of the outstanding shares of Life Technologies for $76.00 per share in cash, the Company is no longer providing quarterly guidance. The Company will continue to provide commentary regarding the impact that fluctuations in currency rates could have on results.
Based on September 30, 2013 rates, currency is expected to have a negative impact of approximately $57 million on revenue and $0.13 on non-GAAP EPS for the full year. This compares to a negative impact of $75 million on revenue and $0.17 on non-GAAP EPS for the full year at June 30, 2013 rates.
In light of the announced transaction with Thermo Fisher, the Company will no longer hold conference calls for its quarterly and annual earnings. The transaction, which is expected to close early in 2014, is subject to customary closing conditions, including regulatory approvals.
Life Technologies Corporation