SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2004
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: 0-25317
INVITROGEN CORPORATION
(Exact name of registrant as specified in its charter)
| Delaware | 33-0373077 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) | |
| 1600 Faraday Avenue, Carlsbad, CA | 92008 | |
| (Address of principal executive offices) | (Zip Code) | |
Registrant’s telephone number, including area code: (760) 603-7200
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 by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes x or No ¨
As of May 3, 2004, there were 52,302,943 shares of the registrant’s Common Stock, par value $.01 per share, outstanding.
PART I. FINANCIAL INFORMATION
| Item 1. | Financial Statements |
INVITROGEN CORPORATION
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except par value data)
| March 31, 2004 |
December 31, 2003 |
|||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current Assets: |
||||||||
| Cash and cash equivalents |
$ | 433,911 | $ | 588,678 | ||||
| Short-term investments |
439,504 | 403,427 | ||||||
| Restricted cash and investments |
17,911 | 6,632 | ||||||
| Trade accounts receivable, net of allowance for doubtful accounts of $5,164 and $4,129, respectively |
166,388 | 117,095 | ||||||
| Inventories |
115,285 | 126,707 | ||||||
| Deferred income tax assets |
20,277 | 19,310 | ||||||
| Prepaid expenses and other current assets |
28,132 | 25,495 | ||||||
| Total current assets |
1,221,408 | 1,287,344 | ||||||
| Long-term investments |
145,183 | 177,070 | ||||||
| Property and equipment, net |
239,479 | 186,231 | ||||||
| Goodwill |
1,390,037 | 983,407 | ||||||
| Intangible assets, net |
482,267 | 464,659 | ||||||
| Deferred income tax assets |
1,284 | 904 | ||||||
| Other assets |
72,434 | 66,074 | ||||||
| Total assets |
$ | 3,552,092 | $ | 3,165,689 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current Liabilities: |
||||||||
| Current portion of long-term obligations |
$ | 2,551 | $ | 1,784 | ||||
| Accounts payable |
59,799 | 55,745 | ||||||
| Accrued expenses and other current liabilities |
84,596 | 65,406 | ||||||
| Income taxes |
5,595 | 2,758 | ||||||
| Total current liabilities |
152,541 | 125,693 | ||||||
| Long-term obligations, deferred credits and reserves |
52,799 | 32,069 | ||||||
| Pension liabilities |
17,330 | 17,249 | ||||||
| Deferred income tax liabilities |
175,289 | 161,331 | ||||||
| 1½% Convertible Senior Notes due 2024 |
450,000 | — | ||||||
| 2% Convertible Senior Notes due 2023 |
350,000 | 350,000 | ||||||
| 2¼% Convertible Subordinated Notes due 2006 |
500,000 | 500,000 | ||||||
| 5½% Convertible Subordinated Notes due 2007 |
— | 172,500 | ||||||
| Total liabilities |
1,697,959 | 1,358,842 | ||||||
| Commitments and contingencies |
||||||||
| Stockholders’ Equity: |
||||||||
| Preferred stock; $0.01 par value, 6,405,884 shares authorized; no shares issued or outstanding |
— | — | ||||||
| Common stock; $0.01 par value, 125,000,000 shares authorized; 55,276,820 and 54,595,766 shares issued, respectively |
552 | 546 | ||||||
| Additional paid-in-capital |
1,975,698 | 1,942,756 | ||||||
| Deferred compensation |
(11,282 | ) | (11,265 | ) | ||||
| Accumulated other comprehensive income |
60,004 | 56,158 | ||||||
| Accumulated deficit |
(73,985 | ) | (84,494 | ) | ||||
| Less cost of treasury stock; 3,201,451 shares |
(96,854 | ) | (96,854 | ) | ||||
| Total stockholders’ equity |
1,854,133 | 1,806,847 | ||||||
| Total liabilities and stockholders’ equity |
$ | 3,552,092 | $ | 3,165,689 | ||||
The accompanying notes are an integral part of these consolidated financial statements.
2
INVITROGEN CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands, except per share data)
| For the Three Months Ended March 31, |
||||||||
| 2004 |
2003 |
|||||||
| (Unaudited) | ||||||||
| Revenues |
$ | 251,324 | $ | 180,642 | ||||
| Cost of revenues |
109,339 | 71,453 | ||||||
| Gross margin |
141,985 | 109,189 | ||||||
| Operating Expenses: |
||||||||
| Sales and marketing |
45,454 | 35,819 | ||||||
| General and administrative |
27,023 | 19,844 | ||||||
| Research and development |
15,748 | 10,625 | ||||||
| Purchased intangibles amortization |
28,228 | 16,676 | ||||||
| Business integration costs |
— | 320 | ||||||
| Total operating expenses |
116,453 | 83,284 | ||||||
| Income from operations |
25,532 | 25,905 | ||||||
| Other income (expense): |
||||||||
| Interest income |
5,854 | 6,174 | ||||||
| Interest expense |
(9,481 | ) | (6,489 | ) | ||||
| Loss on early retirement of debt |
(6,775 | ) | — | |||||
| Other income (expense), net |
32 | (277 | ) | |||||
| Total other income and expense, net |
(10,370 | ) | (592 | ) | ||||
| Income before provision for income taxes and minority interest |
15,162 | 25,313 | ||||||
| Provision for income taxes |
(4,653 | ) | (8,277 | ) | ||||
| Minority interest |
— | (124 | ) | |||||
| Net income |
$ | 10,509 | $ | 16,912 | ||||
| Earnings per common share: |
||||||||
| Basic |
$ | 0.20 | $ | 0.34 | ||||
| Diluted |
$ | 0.20 | $ | 0.34 | ||||
| Weighted average shares used in per share calculation: |
||||||||
| Basic |
51,697 | 49,998 | ||||||
| Diluted |
53,858 | 50,243 | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
3
INVITROGEN CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
| For the Three Months Ended March 31, |
||||||||
| 2004 |
2003 |
|||||||
| (Unaudited) | ||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||
| Net income |
$ | 10,509 | $ | 16,912 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities, net of effects of businesses acquired: |
||||||||
| Depreciation |
8,866 | 5,950 | ||||||
| Amortization of intangible assets |
28,907 | 17,474 | ||||||
| Amortization of deferred debt issue costs |
922 | 818 | ||||||
| Amortization of premiums on investments, net of accretion of discounts |
2,269 | 2,644 | ||||||
| Amortization of deferred compensation |
897 | — | ||||||
| Deferred income taxes |
(9,137 | ) | (8,629 | ) | ||||
| Other non-cash adjustments |
3,654 | 825 | ||||||
| Changes in operating assets and liabilities: |
||||||||
| Trade accounts receivable |
(24,453 | ) | (16,792 | ) | ||||
| Inventories |
14,679 | (3,203 | ) | |||||
| Prepaid expenses and other current assets |
(419 | ) | (774 | ) | ||||
| Other assets |
(670 | ) | 104 | |||||
| Accounts payable |
(10,116 | ) | (861 | ) | ||||
| Accrued expenses and other current liabilities |
408 | (66 | ) | |||||
| Income taxes |
4,084 | 11,141 | ||||||
| Net cash provided by operating activities |
30,400 | 25,543 | ||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||||
| Maturities of available-for-sale securities |
337,399 | — | ||||||
| Purchases of available-for-sale securities |
(344,700 | ) | — | |||||
| Maturities of held-to-maturity securities |
— | 100,953 | ||||||
| Purchases of held-to-maturity securities |
— | (58,700 | ) | |||||
| Cash paid for business combinations, net of cash acquired |
(466,232 | ) | (101,439 | ) | ||||
| Purchases of property and equipment |
(6,608 | ) | (5,945 | ) | ||||
| Proceeds from sale of property, plant and equipment |
— | 2,694 | ||||||
| Payments for intangible assets |
(542 | ) | (50 | ) | ||||
| Net cash used in investing activities |
(480,683 | ) | (62,487 | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: |
||||||||
| Proceeds from long-term obligations |
440,650 | — | ||||||
| Principal payments on long-term obligations |
(172,654 | ) | (2,293 | ) | ||||
| Proceeds from sale of common stock |
24,495 | 905 | ||||||
| Purchase of treasury stock |
— | (5,354 | ) | |||||
| Net cash provided by (used in) financing activities |
292,491 | (6,742 | ) | |||||
| Effect of exchange rate changes on cash |
3,025 | 201 | ||||||
| Net decrease in cash and cash equivalents |
(154,767 | ) | (43,485 | ) | ||||
| Cash and cash equivalents, beginning of period |
588,678 | 537,817 | ||||||
| Cash and cash equivalents, end of period |
$ | 433,911 | $ | 494,332 | ||||
The accompanying notes are an integral part of these consolidated financial statements.
4
INVITROGEN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
| 1. | Basis of Presentation |
Financial Statement Preparation
The consolidated financial statements are unaudited and include the accounts of Invitrogen Corporation (Invitrogen) and its wholly-owned subsidiaries, collectively referred to as Invitrogen. All significant intercompany accounts and transactions have been eliminated in consolidation. The interim financial statements have been prepared, without audit, according to the rules and regulations of the Securities and Exchange Commission (SEC). Certain information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to the SEC’s rules and regulations. In the opinion of management, the accompanying unaudited financial statements contain all adjustments, which include only normal recurring adjustments, necessary to state fairly the financial position, results of operations and cash flows as of and for the periods indicated.
These financial statements should be read in conjunction with the audited financial statements and the notes thereto included in our Annual Report on Form 10-K, filed with the Securities and Exchange Commission on March 3, 2004.
Inventories
Inventories include material, labor and overhead costs in addition to purchase accounting adjustments to write-up acquired inventory to estimated selling prices less costs to complete, costs of disposal and a reasonable profit allowance. Inventories consist of the following:
| (in thousands) | March 31, 2004 |
December 31, 2003 | ||||
| (Unaudited) | ||||||
| Raw materials and components |
$ | 17,224 | $ | 15,800 | ||
| Work in process (materials, labor and overhead) |
13,427 | 11,920 | ||||
| Adjustment to write up acquired work in process inventory to fair value |
7,309 | 16,442 | ||||
| Total work in process |
20,736 | 28,362 | ||||
| Finished goods (materials, labor and overhead) |
77,325 | 81,340 | ||||
| Adjustment to write up acquired finished goods inventory to fair value |
— | 1,205 | ||||
| Total finished goods |
77,325 | |||||