Life Technologies Corporation announced results for its second quarter ended June 30, 2013. Revenue for the second quarter was $944 million, a decrease of 1 percent over the $950 million reported for the second quarter of 2012. Excluding the impact of currency, revenue growth for the quarter was 1 percent compared to the same period of the prior year.
"We are pleased to report results that reflect significant growth in Ion Torrent, strength in Applied Sciences and continued stable performance in Research Consumables," said Gregory T. Lucier, chairman and chief executive officer of Life Technologies. "During the quarter, we added to our innovation pipeline, launching novel tools for stem cell research, digital qPCR and Ion Torrent. We continued to expand into growth and emerging markets by acquiring our instrument distributor in South Korea, and by entering into strategic relationships that apply our technologies to therapeutic areas like oncology."
Lucier continued, "We are actively working with Thermo Fisher to consummate our previously announced transaction. We recently filed our definitive proxy and will be hosting our special meeting of stockholders on August 21, 2013. 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 June 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 Second Quarter 2013 Results
• Second quarter revenue decreased by 1 percent over the prior year, representing an increase of approximately 1 percent excluding the impact of currency. Revenue growth for the quarter was driven by a significant increase in sales from Ion Torrent, an increase in the Research Consumables business and higher royalties including licensing agreements, partially offset by lower CE for research, SOLiD and Bioproduction sales.
• Gross margin in the second quarter was 65.9 percent, an increase of approximately 50 basis points over the same period of the prior year that was driven by manufacturing productivity, revenue from licensing agreements and higher realized price, partially offset by product mix with the continued increase in Ion Torrent instrument sales.
• Operating margin was 27.4 percent in the second quarter, approximately 120 basis points lower than in the same period of the prior year. Operating margin was primarily impacted by increased expenses related to acquisitions and planned investments in Ion Torrent and molecular diagnostics.
• The Company's tax rate was 25.0 percent for the second quarter. The rate was lower than in the second quarter of last year due to the reinstatement of the US research tax credit, greater earnings in countries with lower tax rates and the settlement of income tax audits.
• Second quarter EPS increased 2 percent to $0.98.
• Diluted weighted shares outstanding were 175.6 million in the second quarter, a decrease of 5.7 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 second quarter was $219 million. Second quarter capital expenditures were $23 million, resulting in free cash flow of $196 million. The company ended the quarter with $290 million in cash and short-term investments.
Business Group and Regional Highlights
• Research Consumables revenue was $405 million in the second quarter, an increase of 1 percent compared to the prior year. Excluding the impact of currency, revenue for the business group increased 2 percent primarily due to strong sales from the Company's fluorescent imaging, stem cell and sample prep products.
• Genetic Analysis revenue was $341 million in the second quarter, a decrease of 4 percent over the same period last year. Excluding the impact of currency, revenue decreased 2 percent. Results for the quarter were primarily driven by an increase in Ion Torrent sales, offset by lower CE research sales, primarily due to large customer orders in the second quarter of the prior year and an expected decline in SOLiD.
• Applied Sciences revenue was $198 million in the second quarter, an increase of 2 percent over the prior year. Excluding the impact of currency, revenue increased 4 percent primarily as a result of licensing agreements, partially offset by a decline in the Company's Bioproduction business due to the timing of customer orders.
• Regional revenue growth rates excluding currency for the second quarter, compared to the same quarter of the prior year, were as follows: the Americas declined 1 percent, Europe was flat, Asia Pacific grew 4 percent, and Japan grew 6 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 June 30, 2013 rates, currency is expected to have a negative impact of approximately $75 million on revenue and $0.17 on non-GAAP EPS for the full year. This compares to a negative impact of $62 million on revenue and $0.15 on non-GAAP EPS for the full year at March 31, 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 a Life stockholder vote and customary closing conditions, including regulatory approvals.