Following the announcement of the proposed acquisition deal
Life Technologies Corporation
) reported its first-quarter 2013 earnings per share (EPS) of 69
cents, down 4.25 year over year. However, after taking into
account certain one-time items adjusted EPS came in at $1.07, up
8.1% from the year-ago quarter's adjusted EPS and 2 cents ahead
of the Zacks Consensus Estimate.
Revenues were up 2.5% year over year (up 4.4% at constant
exchange rates or CER) on a reported basis to $963 million,
surpassing the Zacks Consensus Estimate of $961 million. After a
sluggish fourth quarter, the reported quarter witnessed improved
sales on the back of strong sales in Ion
Torrent, Bioproduction and Forensics businesses. However,
this was partially offset by declines in SOLiD sales and lower
Research Consumables and capital equipment sales primarily due to
the anticipated slowdown in the U.S. as the threat of
sequestration influenced customer's buying patterns.
On a regional basis, during the quarter, Europe witnessed
revenue growth of 3%, Asia-Pacific witnessed revenue growth of
10% and Japan witnessed revenue growth of 1%, while revenues from
the Americas grew 5% year over year.
The three divisions of Life Technologies, viz. Research
Consumables, Genetic Analysis and Applied Sciences recorded
revenues of $409 million (down 3% year over year and 1% at CER),
$365 million (up 3%year over year and 5% at CER) and $189 million
(up 17% year over year and 19% at CER), respectively, during the
Revenues from Research Consumables declined due to limited
spending in the U.S. and Europe and tough comparison in Japan, as
the year-ago quarter had benefited from stimulus
spending. Genetic Analysis experienced growth in the
Ion Torrent franchise and royalties including licensing
agreements, partially offset by lower CE instrument sales and an
expected decline in SOLiD instrument sales. At Applied Sciences,
there were strong sales of BioProduction and Forensics
On a reported basis, adjusted gross margin, during the
reported quarter, contracted 47 basis points (bps) to 66.1%. A
higher mix of Ion Torrent instrument sales, Bioproduction sales
and unfavorable exchange rate, partially offset by manufacturing
productivity and royalties including licensing agreements,
primarily drove this downside.
The company recorded operating expenses of $354.8 million, up
3.7% year over year with a 7.0% rise in selling, general and
administrative expenses, partially offset by a 5.7% decline in
research and development expenses. Life Technologies, during the
quarter, recorded a 91 bps contraction in adjusted operating
margin to 29.3%.
Life Technologies exited the quarter with $292.6 million in
the form of cash and short-term investments, lower than $276.4
million at the end of fiscal 2012.
Free cash flow for the quarter was $147.8 million ($78.9
million at the end of the prior quarter), while cash flow from
operating activities were $134.7 million and capital expenditure
was $23.6 million.
Life Technologies provided its second-quarter 2013 outlook.
The company's adjusted EPS is in the range of 94-97 cents on
revenues of $950−$955 million. The Zacks Consensus Estimate for
earnings of $1.08 per share remains way above the guidance range.
In addition, the Zacks Consensus Estimate for revenues of $982
million exceeds the expected range.
As per LIFE's fiscal 2013 guidance, revenue growth is expected
in the range of 3%-5% over 2012 revenues of $3.8 billion with an
expected increase in the Ion Torrent franchise sales for the
third consecutive year and expansion in applied and emerging
markets. However, based on Mar 31, 2013 rates, currency is
expected to have a negative impact of $62 million on fiscal 2013
revenues and 15 cents on the yearly-adjusted EPS.
Life Technologies Acquisition
Earlier in April, Thermo Fisher disclosed that it will acquire
for roughly $13.6 billion (or $76 per share), plus the assumption
of Life Technologies' net debt ($2.2 billion as of year-end
2012). The acquisition is expected to close in early 2014.
Life Technologies preferred Thermo Fisher as a potential buyer
against the consortium of private equity firms. Given Life
Technologies' expansive line of consumables for genomic, and
molecular and cell biology, the buyout will complement Thermo
Fisher's market-leading portfolio of analytical technologies and
specialty diagnostic. The takeover should leverage Life
Technologies' attractive revenue profile. It also looks forward
to being able to gain a competitive edge over other players in
the market. The company now carries a Zacks Rank #3 (Hold).
However, other medical device stocks worth a look are
). All these stocks carry a Zacks Rank #1 (Strong Buy).
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LIFE TECHNOLOGS (LIFE): Free Stock Analysis
NUVASIVE INC (NUVA): Free Stock Analysis
THERMO FISHER (TMO): Free Stock Analysis
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