SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 0-25317

 

LIFE TECHNOLOGIES CORPORATION

(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)		33-0373077 (I.R.S. Employer Identification No.)
5791 Van Allen Way, Carlsbad, CA (Address of principal executive offices)		92008 (Zip Code)

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 þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ		Accelerated filer o		Non-accelerated filer o		Smaller reporting company o
				(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o or No þ

As of August 2, 2011, 180,461,180 shares of the Registrant’s common stock were outstanding.

 

 

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements			3
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			28
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk			39
ITEM 4. Controls and Procedures			41
PART II. OTHER INFORMATION			41
ITEM 1. Legal Proceedings			41
ITEM 1A. Risk Factors			42
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds			42
ITEM 3. Defaults Upon Senior Securities			42
ITEM 4. Removed and Reserved			42
ITEM 5. Other Information			42
ITEM 6. Exhibits			42
SIGNATURES			43
INDEX TO EXHIBITS			44
EX-31.1
EX-31.2
EX-32.1
EX-32.2
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements

LIFE TECHNOLOGIES CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands, except par value and share data)

		June 30,				December 31,
		2011				2010
		(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents		$	520,128			$	813,569
Short-term investments			27,576				23,079
Restricted cash and investments			17,395				18,153
Trade accounts receivable, net of allowance for doubtful accounts of $11,231 and $10,389, respectively			663,176				587,456
Inventories, net			367,721				323,318
Deferred income tax assets			22,757				90,947
Prepaid expenses and other current assets			192,985				190,003
Total current assets			1,811,738				2,046,525
Long-term investments			26,650				22,448
Property and equipment, net			840,181				847,984
Goodwill			4,408,410				4,372,073
Intangible assets, net			1,890,469				2,040,175
Deferred income tax assets			25,733				26,752
Other assets			121,442				130,242
Total assets		$	9,124,623			$	9,486,199
LIABILITIES AND EQUITY
Current liabilities:
Current portion of long-term debt		$	440,706			$	347,749
Accounts payable			205,936				174,449
Deferred compensation and related benefits			165,751				202,229
Deferred revenues and reserves			107,482				109,981
Contingent considerations			266,460				—
Accrued expenses and other current liabilities			243,872				257,987
Accrued income taxes			48,905				53,990
Total current liabilities			1,479,112				1,146,385
Long-term debt			2,298,473				2,727,624
Pension liabilities			141,962				145,298
Deferred income tax liabilities			450,792				557,982
Income taxes payable			102,195				114,726
Other long-term obligations			98,819				356,155
Total liabilities			4,571,353				5,048,170
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, 400,000,000 shares authorized; 210,070,828 and 207,243,588 shares issued, respectively			2,101				2,072
Additional paid-in-capital			5,376,521				5,222,859
Accumulated other comprehensive income			156,261				96,612
Retained earnings			721,652				532,499
Less cost of treasury stock; 30,360,215 shares and 24,992,450 shares, respectively			(1,707,215	)			(1,419,966	)
Total Life Technologies stockholders’ equity			4,549,320				4,434,076
Non-controlling interest			3,950				3,953
Total equity			4,553,270				4,438,029
Total liabilities and equity		$	9,124,623			$	9,486,199

See accompanying notes to unaudited consolidated financial statements.

LIFE TECHNOLOGIES CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)

		For the three months								For the six months
		ended June 30,								ended June 30,
(Unaudited)		2011				2010				2011				2010
Revenues		$	941,135			$	903,732			$	1,837,029			$	1,788,675
Cost of revenues			340,075				293,000				640,778				574,754
Purchased intangibles amortization			76,476				70,051				152,627				140,137
Gross profit			524,584				540,681				1,043,624				1,073,784
Operating expenses:
Selling, general and administrative			254,764				252,813				507,606				512,499
Research and development			91,085				90,344				183,859				176,697
Purchased in-process research and development			—				1,650				—				1,650
Business integration costs			18,666				23,446				33,349				48,712
Total operating expenses			364,515				368,253				724,814				739,558
Operating income			160,069				172,428				318,810				334,226
Other income (expense):
Interest income			1,153				1,105				2,040				2,452
Interest expense			(42,774	)			(39,309	)			(85,919	)			(80,827	)
Loss on early extinguishment of debt			—				—				—				(54,185	)
Gain (loss) on divestiture of equity investments			—				(7,876	)			—				37,260
Other income (expense)			(3,589	)			2,019				(4,941	)			(1,977	)
Total other expense, net			(45,210	)			(44,061	)			(88,820	)			(97,277	)
Income before provision for income taxes			114,859				128,367				229,990				236,949
Income tax provision			(19,646	)			(17,826	)			(41,198	)			(34,902	)
Net income			95,213				110,541				188,792				202,047
Net loss attributable to noncontrolling interests			253				27				361				27
Net income attributable to Life Technologies		$	95,466			$	110,568			$	189,153			$	202,074
Earnings per common share attributable to Life Technologies stockholders:
Basic		$	0.53			$	0.61			$	1.05			$	1.11
Diluted		$	0.52			$	0.58			$	1.02			$	1.06
Weighted average shares used in per share calculations:
Basic			179,031				182,484				179,698				181,675
Diluted			184,761				191,084				185,513				190,459

See accompanying notes to unaudited consolidated financial statements.

LIFE TECHNOLOGIES CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

		For the six months
		ended June 30,
		2011				2010
		(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income		$	188,792			$	202,047
Adjustments to reconcile net income to net cash provided by operating activities, net of effects of businesses acquired and divested:
Depreciation			60,366				61,005
Amortization of intangible assets			155,069				143,419
Amortization of deferred debt issuance costs			3,546				59,615
Amortization of inventory fair market value adjustments			527				522
Amortization of deferred revenue fair market value adjustment			1,731				4,321
Share-based compensation expense			43,063				40,032
Incremental tax benefits from stock options exercised			(9,040	)			(15,582	)
Deferred income taxes			(43,000	)			(100,195	)
Purchase of in-process research and development			—				1,650
Loss on disposal of assets			365				834
Gain on sale of equity investment			—				(37,260	)
Debt discount amortization and other non-cash interest expense			17,919				22,491
Other non-cash adjustments			3,369				17,007
Changes in operating assets and liabilities:
Trade accounts receivable			(55,616	)			(58,464	)
Inventories			(39,643	)			(32,964	)
Prepaid expenses and other current assets			(10,305	)			1,083
Other assets			22,012				(5,059	)
Accounts payable			30,813				(59,700	)
Accrued expenses and other liabilities			(31,629	)			(26,866	)
Income taxes			22,157				55,660
Cash impact of hedging activities			(40,957	)			25,743
Net cash provided by operating activities			319,539				299,339
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of investments			(9,021	)			(18,609	)
Net cash paid for business combinations			(28	)			(120,616	)
Net cash paid for asset purchases			(457	)			(3,500	)
Purchases of property and equipment			(33,799	)			(55,513	)
Net cash received (paid) for divestiture of equity investment			(40,595	)			410,352
Net cash provided by (used in) investing activities			(83,900	)			212,114
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term obligations			—				1,496,693
Principal payments on long-term obligations			(350,000	)			(1,972,512	)
Issuance cost payments on long-term obligations			(940	)			(16,627	)
Incremental tax benefits from stock options exercised			9,040				15,582
Proceeds from sale of common stock			86,482				73,146
Capital lease payments			(1,054	)			(1,052	)
Purchase of treasury stock			(287,249	)			(16,789	)
Net cash used in financing activities			(543,721	)			(421,559	)
Effect of exchange rate changes on cash			14,641				(15,202	)
Net increase (decrease) in cash and cash equivalents			(293,441	)			74,692
Cash and cash equivalents, beginning of period			813,569				596,587
Cash and cash equivalents, end of period		$	520,128			$	671,279

See accompanying notes to unaudited consolidated financial statements.

LIFE TECHNOLOGIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1. Basis of Presentation

Financial Statement Preparation

     The unaudited consolidated financial statements have been prepared by Life Technologies Corporation according to the rules and regulations of the Securities and Exchange Commission (SEC) and, therefore, certain information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been omitted. The Company has evaluated subsequent events through the date the financial statements were issued.

     In the opinion of management, the accompanying unaudited consolidated financial statements for the periods presented reflect all adjustments, which are normal and recurring, necessary to fairly state the financial position, results of operations and cash flows. These unaudited consolidated financial statements should be read in conjunction with the audited financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2010 filed with the SEC on February 25, 2011.

     The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Principles of Consolidation

     The consolidated financial statements include the accounts of Life Technologies Corporation and its majority owned or controlled subsidiaries, collectively referred to as Life Technologies (the Company). All significant intercompany accounts and transactions have been eliminated in consolidation. When there is a portion of equity in an acquired subsidiary not attributable, directly or indirectly, to the parent, the Company records the fair value of the noncontrolling interests at the acquisition date and classifies the amounts attributable to noncontrolling interests separately in equity in the Company’s Consolidated Financial Statements. Any subsequent changes in a parent’s ownership interest while the parent retains its controlling financial interest in its subsidiary are accounted for as equity transactions. For details on the noncontrolling interests, refer to Note 2 of the Consolidated Financial Statements, “Reconciliation of Equity”.

     For purposes of these Notes to Consolidated Financial Statements, gross profit is defined as revenues less cost of revenues and purchased intangibles amortization and gross margin is defined as gross profit divided by revenues. Operating income is defined as gross profit less operating expenses and operating margin is defined as operating income divided by revenues.

Long-Lived Assets

     The Company periodically re-evaluates the original assumptions and rationale utilized in the establishment of the carrying value and estimated lives of its long-lived assets. The criteria used for these evaluations include management’s estimate of the asset’s continuing ability to generate income from operations and positive cash flow in future periods as well as the strategic significance of any intangible asset to the Company’s business objectives. If assets are considered to be impaired, the impairment recognized is the amount by which the carrying value of the assets exceeds the fair value of the assets, which is determined by applicable market prices, when available. The Company did not recognize a significant impairment during the period.

Fair Value of Financial Instruments

     We account for our financial instruments at fair value based on ASC Topic 820, Fair Value Measurements and Disclosures and ASC Topic 815, Derivatives and Hedging. In determining fair value, we consider both the credit risk of our counterparties and our own creditworthiness. ASC Topic 820, Fair Value Measurements and Disclosures, defines fair value and establishes a framework for measuring fair value. The framework requires the valuation of investments using a three tiered approach. The Company applies the valuation techniques consistently, and reviews and evaluates the adequacy of the valuation techniques periodically.

     A derivative is an instrument whose value is derived from an underlying instrument or index, such as interest rates, equity securities, currencies, commodities or credit spreads. Derivatives include futures, forwards, swaps, or option contracts, or other financial instruments with similar characteristics. Derivative contracts often involve future commitments to exchange interest payment streams or currencies based on a notional or contractual amount (e.g., interest rate swaps or currency forwards).

     The accounting for changes in fair value of a derivative instrument depends on the nature of the derivative and whether the derivative qualifies as a hedging instrument in accordance with ASC Topic 815, Derivatives and Hedging. Those hedging instruments that qualify for hedge accounting are included as an adjustment to revenue or interest expense, depending upon the underlying transactions the Company is hedging. Those hedges that do not qualify for hedge accounting are included in non-operating income. The Company does not engage in speculative hedging.

     For further details on the assets and liabilities subject to fair value measurements and the related valuation techniques used, and for details on derivative instruments, refer to Note 10 of the Consolidated Financial Statements, “Fair Value of Financial Instruments”.

Computation of Earnings Per Share

     Basic earnings per share was computed by dividing net income attributable to Life Technologies by the weighted average number of common shares outstanding during the period. Diluted earnings per share reflect the potential dilution that could occur from the following items:

•

Convertible senior notes where the effect of those securities is dilutive;

•

Dilutive stock options and restricted stock units;

•

Dilutive performance awards; and

•

Dilutive Employee Stock Purchase Plan (ESPP).

     Computations for basic and diluted earnings per share are as follows:

		Net Income
		Attributable to
		Life
		Technologies				Shares				Earnings
(in thousands, except per share data) (unaudited)		(Numerator)				(Denominator)				Per Share
Three Months Ended June 30, 2011
Basic earnings per share:
Net income attributable to Life Technologies		$	95,466				179,031			$	0.53
Diluted earnings per share:
Dilutive stock options and restricted stock units			—				4,770
Employee Stock Purchase Plan			—				14
1 1/2% Convertible Senior Notes due 2024			33				413
3 1/4% Convertible Senior Notes due 2025			—				533
Net income attributable to Life Technologies plus assumed conversions		$	95,499				184,761			$	0.52
Potentially dilutive securities not included above since they are antidilutive:
Antidilutive stock options							2,001
Three Months Ended June 30, 2010
Basic earnings per share:
Net income attributable to Life Technologies		$	110,568				182,484			$	0.61
Diluted earnings per share:
Dilutive stock options and restricted stock units			—				4,703
Employee Stock Purchase Plan			—				109
2% Convertible Senior Notes due 2023			18				3,434
1 1/2% Convertible Senior Notes due 2024			32				81
3 1/4% Convertible Senior Notes due 2025			—				273
Net income attributable to Life Technologies plus assumed conversions		$	110,618				191,084			$	0.58
Potentially dilutive securities not included above since they are antidilutive:
Antidilutive stock options							2,929

		Net Income
		attributable to
		Life
		Technologies				Shares				Earnings
(in thousands, except per share data) (unaudited)		(Numerator)				(Denominator)				Per Share
Six Months Ended June 30, 2011
Basic earnings per share:
Net income attributable to Life Technologies		$	189,153				179,698			$	1.05
Diluted earnings per share:
Dilutive stock options and restricted stock units			—				4,814
Employee Stock Purchase Plan			—				19
1 1/2% Convertible Senior Notes due 2024			66				433
3 1/4% Convertible Senior Notes due 2025			—				549
Net income attributable to Life Technologies plus assumed conversions		$	189,219				185,513			$	1.02
Potentially dilutive securities not included above since they are antidilutive:
Antidilutive stock options							2,010
Six Months Ended June 30, 2010
Basic earnings per share:
Net income attributable to Life Technologies		$	202,074				181,675			$	1.11
Diluted earnings per share:
Dilutive stock options and restricted stock units			—				4,763
Dilutive performance awards			—				133
Employee Stock Purchase Plan			—				134
2% Convertible Senior Notes due 2023			38				3,421
1 1/2% Convertible Senior Notes due 2024			63				75
3 1/4% Convertible Senior Notes due 2025			—				258
Net income attributable to Life Technologies plus assumed conversions		$	202,175				190,459			$	1.06
Potentially dilutive securities not included above since they are antidilutive:
Antidilutive stock options							3,409

Share-Based Compensation

     Under the Life Technologies Corporation 2009 Equity Incentive Plan (the “2009 Plan”), the Company has the ability to grant stock options, stock appreciation rights, restricted stock units, restricted stock awards, performance awards, and deferred stock awards with 11.0 million shares of the Company’s common stock reserved for the granting of new awards. Stock option awards are granted to eligible employees and directors at an exercise price equal to the fair market value of such stock on the date of grant, generally vest over four years, and are exercisable in whole or in installments and expire ten years from the date of grant. Restricted stock awards and restricted stock units are granted to eligible employees and directors and represent rights to receive shares of common stock at a future date, generally vesting over three or four years. An exercise price and monetary payment are not required for receipt or issuance of restricted stock awards and restricted stock units, instead, consideration is furnished in the form of the participant’s services to the Company. The compensation cost for these awards is valued based on the estimated fair value of such award on the date of grant.

     Effective February 1, 2010 the Company’s qualified employee stock purchase plan (the 2010 Plan) covered all eligible employees of the Company. Eligible employees may elect to withhold up to 15% of their compensation to purchase shares of the Company’s stock on a quarterly basis at a discounted price equal to 85% of the lower of the employee’s offering price or the closing price of the stock on the date of purchase. The 2010 Plan replaced the 1999 Plan acquired as a result of the Applied Biosystems Inc. (AB) acquisition and the 2004 Plan. Prior to February 1, 2010, the Company had a qualified (the 2004 Plan) employee stock purchase plan (purchase rights) whereby eligible employees of Life Technologies (previously known as Invitrogen Corporation) could elect to withhold up to 15% of their compensation to purchase shares of the Company’s stock on a quarterly basis at a discounted price equal to 85% of the lower of the employee’s offering price or the closing price of the stock on the date of purchase. The Company also had a qualified (the 1999 Plan) employee stock purchase plan whereby eligible legacy AB employees could elect to withhold up to 10% of their compensation to purchase shares of the Company’s stock on a quarterly basis at a discounted price equal to 85% of the lower of

the employee’s offering price or the closing price of the stock on the date of purchase.

     The Company uses the Black-Scholes option-pricing model (Black-Scholes model) to value share-based employee stock option and purchase right awards. The determination of fair value of stock-based payment awards using an option-pricing model requires the use of certain estimates and assumptions that affect the reported amount of share-based compensation cost recognized in the Consolidated Statements of Operations. Among these include the expected term of options, estimated forfeitures, expected volatility of the Company’s stock price, expected dividends and the risk-free interest rate.

     The expected term of share-based awards represents the weighted-average period the awards are expected to remain outstanding and is an input in the Black-Scholes model. In determining the expected term of options, the Company considers various factors including the vesting period of options granted, employees’ historical exercise and post-vesting employment termination behavior, expected volatility of the Company’s stock and aggregation by homogeneous employee groups. The Company uses a combination of the historical volatility of its stock price and the implied volatility of market-traded options of the Company’s stock with terms of up to approximately one year to estimate the expected volatility assumption input to the Black-Scholes model in accordance with ASC Topic 718, Compensation—Stock Compensation. The Company’s decision to use a combination of historical and implied volatility was based upon the availability of actively traded options of its stock and its assessment that such a combination was more representative of future expected stock price trends. The risk-free interest rate is based upon United States Treasury securities with remaining terms similar to the expected term of the share-based awards. The expected dividend yield assumption is based on the Company’s expectation of future dividend payouts. The Company has never declared or paid any cash dividends on its common stock and currently does not anticipate paying such cash dividends.

Stock Options and Purchase Rights

     The underlying assumptions used to value employee stock options and purchase rights granted during the six months ended June 30, 2011 and 2010 were as follows:

		Six months ended
		June 30,
(unaudited)		2011				2010
Stock Options
Weighted average risk free interest rate			2.06	%			1.99	%
Expected term of share-based awards		4.3 yrs				4.4 yrs
Expected stock price volatility			31	%			31	%
Expected dividend yield			0	%			0	%
Weighted average fair value of share-based awards granted		$	15.93			$	14.77
Purchase Rights
Weighted average risk free interest rate			0.47	%			0.67	%
Expected term of share-based awards		1.0 yrs				0.9 yrs
Expected stock price volatility			28	%			42	%
Expected dividend yield			0	%			0	%
Weighted average fair value of share-based awards granted		$	9.99			$	9.17

     The Company is required to estimate forfeitures at the time of grant and revise those estimates in subsequent periods on a cumulative basis in the period the estimated forfeiture rate changes. The Company considered its historical experience of pre-vesting option forfeitures as the basis to arrive at its estimated annual pre-vesting option forfeiture rate of 6.0% and 4.9% per year for the six months ended June 30, 2011 and 2010, respectively. All option awards, including those with graded vesting, were valued as a single award with a single average expected term and are amortized on a straight-line basis over the requisite service period of the awards, which is generally the vesting period. At June 30, 2011, there was $35.3 million remaining in unrecognized compensation cost related to employee stock options, which is expected to be recognized over a weighted average period of 1.8 years. No compensation cost was capitalized in inventory during the six months ended June 30, 2011 as the amounts involved were not material.

     Total share-based compensation expense for employee stock options and purchase rights for the three and six months ended June 30, 2011 and 2010 was comprised of the following:

		Three months ended								Six months ended
		June 30,								June 30,
(in thousands, except per share amounts) (unaudited)		2011				2010				2011				2010
Cost of revenues		$	886			$	1,230			$	2,033			$	2,535
Selling, general and administrative			6,682				7,798				13,900				15,379
Research and development			1,104				1,510				2,311				3,132
Share-based compensation expense before taxes			8,672				10,538				18,244				21,046
Related income tax benefits			3,170				3,238				6,419				6,078
Share-based compensation expense, net of taxes		$	5,502			$	7,300			$	11,825			$	14,968
Net share-based compensation expense per common share:
Basic		$	0.03			$	0.04			$	0.07			$	0.08
Diluted		$	0.03			$	0.04			$	0.06			$	0.08

Restricted Stock Units

     Restricted stock units represent a right to receive shares of common stock at a future date determined in accordance with the participant’s award agreement. An exercise price and monetary payment are not required for receipt of restricted stock units or the shares issued in settlement of the award. Instead, consideration is furnished in the form of the participant’s services to the Company. Restricted stock units have either graded vesting terms of four years, or cliff vesting terms which generally vest over three years. Compensation cost for these awards is based on the estimated fair value on the date of grant and recognized as compensation expense on a straight-line basis over the requisite service period. There were no pre-vesting forfeitures estimated for the six months ended June 30, 2011 and 2010. At June 30, 2011, there was $147.3 million remaining in unrecognized compensation cost related to these awards, which is expected to be recognized over a weighted average period of 2.9 years. The weighted average fair value of restricted stock units granted during the six months ended June 30, 2011 and 2010 was $53.38 and $52.11, respectively.

     Total share-based compensation expense for restricted stock units for the three and six months ended June 30, 2011 and 2010 was composed of the following:

		Three months ended								Six months ended
		June 30,								June 30,
(in thousands, except per share amounts) (unaudited)		2011				2010				2011				2010
Cost of revenues		$	1,214			$	991			$	1,996			$	1,621
Selling, general and administrative			12,683				8,355				20,523				14,910
Research and development			1,116				1,550				2,152				2,455
Share-based compensation expense before taxes			15,013				10,896				24,671				18,986
Related income tax benefits			5,526				3,895				9,036				7,022
Share-based compensation expense, net of taxes		$	9,487			$	7,001			$	15,635			$	11,964
Net share-based compensation expense per common share:
Basic		$	0.05			$	0.04			$	0.09			$	0.07
Diluted		$	0.05			$	0.04			$	0.08			$	0.06

Deferred Stock Awards and Restricted Stock Awards

     Deferred stock awards are fully vested and expensed when issued, but shares are placed in a deferral account under the Life Technologies Corporation Deferred Compensation Plan (the “Deferred Compensation Plan”), at an eligible employee’s or director’s discretion, until distributed to the employee or director at a future date. The Deferred Compensation Plan allows eligible directors and employees to defer, on a pre-tax basis, a portion or all of their compensation, bonuses, or director’s fees in the form of cash or deferred stock awards. The deferred compensation plan provides matching contributions by the Company to the participants, based on the deferred compensation plan agreement, in the form of restricted stock awards. During the six months ended June 30, 2011, the Company granted restricted stock awards with a total deferred compensation value of $1.4 million, which will be recognized over the requisite service period of 3 years. The restricted stock awards, issued but unvested, are also held in the deferral account, and are

subject to a three year cliff vesting. Refer to Note 10 of the Consolidated Financial Statements, “Fair Value of Financial Instruments” for further information on the fair market valuation of the deferred compensation plan assets.

Recent Accounting Pronouncements

     In June 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2011-05, Presentation of Comprehensive Income, updating ASC Topic 220, Comprehensive Income. Under the amended ASC Topic 220, an entity has the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The guidance eliminates the current option to present other comprehensive income and its components in the Statement of Stockholders’ Equity. This guidance does not change the components that are recognized in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011, and is to be applied retrospectively. The Company does not believe the adoption of this guidance in the first quarter of 2012 will have an impact on its consolidated financial statements or on future operating results.

     In May 2011, the FASB issued ASU 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS, updating ASC Topic 820, Fair Value Measurement. This guidance clarifies existing fair value guidance and expands disclosure requirements on, among other things, fair value measurements using Level 3 unobservable inputs. This guidance requires disclosures of quantitative information about the inputs used in Level 3 valuations, the valuation process used, and the sensitivity of the fair value measurements to changes in unobservable inputs. This guidance is effective for interim and annual periods beginning after December 15, 2011, and is to be applied prospectively. The Company does not believe the adoption of this guidance in the first quarter of 2012 will have a material impact on its consolidated financial statements or on future operating results.

2. Composition of Certain Financial Statement Items

Inventories

     Inventories consisted of the following:

		June 30,				December 31,
		2011				2010
(in thousands)		(unaudited)
Raw materials and components		$	102,309			$	87,557
Work in process (materials, labor and overhead)			66,310				63,772
Finished goods (materials, labor and overhead)			199,102				171,989
Total inventories, net		$	367,721			$	323,318

Prepaid Expenses and Other Current Assets

     Prepaid expenses and other current assets consisted of the following:

		June 30,				December 31,
		2011				2010
(in thousands)		(unaudited)
Hedge assets		$	12,718			$	15,189
Prepaid expenses			83,445				70,395
Other current assets			96,822				104,419
Total prepaid expenses and other current assets		$	192,985			$	190,003

Property and Equipment

     Property and equipment consisted of the following:

		Estimated useful				June 30,				December 31,
		life				2011				2010
(in thousands)						(unaudited)
Land			—			$	140,521			$	139,638
Building and improvements		1-50 years					463,022				449,962
Machinery and equipment		1-10 years					447,204				413,004
Internal use software		1-10 years					218,247				207,904
Construction in process			—				70,104				59,236
Total property and equipment							1,339,098				1,269,744
Accumulated depreciation and amortization							(498,917	)			(421,760	)
Total property and equipment, net						$	840,181			$	847,984

Goodwill and Other Intangible Assets

     The $36.3 million increase in goodwill on the Consolidated Balance Sheet from December 31, 2010 to June 30, 2011 was primarily the result of $35.6 million of foreign currency translation adjustments and $0.7 million of net immaterial business combinations.

     Intangible assets consisted of the following:

		June 30, 2011												December 31, 2010
		Weighted												Weighted
		average				Gross carrying				Accumulated				average				Gross carrying				Accumulated
		Life				Amount				Amortization				Life				Amount				Amortization
(in thousands)						(unaudited)
Amortized intangible assets:
Purchased technology		7 years				$	1,233,201			$	(856,184	)		7 years				$	1,227,942			$	(797,694	)
Purchased tradenames and trademarks		9 years					327,282				(137,932	)		9 years					323,863				(120,573	)
Purchased customer base		11 years					1,446,627				(368,872	)		12 years					1,441,781				(305,865	)
Other intellectual property		6 years					302,140				(138,144	)		6 years					299,586				(111,216	)
Total intangible assets						$	3,309,250			$	(1,501,132	)						$	3,293,172			$	(1,335,348	)
Intangible assets not subject to amortization:
Purchased tradenames and trademarks						$	7,451											$	7,451
In-process research and development							74,900												74,900

     Amortization expense related to purchased intangible assets for the three months ended June 30, 2011 and 2010 was $76.5 million and $70.1 million, respectively and for the six months ended June 30, 2011 and 2010 was $152.6 million and $140.1 million, respectively. Estimated aggregate amortization expense is expected to be $149.5 million for the remainder of fiscal year 2011. Estimated aggregate amortization expense for fiscal years 2012, 2013, 2014 and 2015 is $288.8 million, $276.3 million, $236.3 million, and $214.3 million, respectively. During the six months ended June 30, 2011, there were no material assets identified for impairment.

     The Company capitalized $74.9 million of acquired in-process research and development and assigned it an indefinite life according to ASC Topic 805, Business Combinations. Such assets are accounted for as indefinite life intangible assets subject to annual impairment testing, or earlier if an event or circumstance indicates that impairment may have occurred, until completion or abandonment of the acquired projects. Upon reaching the end of the research and development project, the Company will amortize the acquired in-process research and development over its estimated useful life, or expense the acquired in-process research and development should the research and development project be unsuccessful with no future alternative use.

Accrued Expenses and Other Current Liabilities

     Accrued expenses and other current liabilities consisted of the following:

		June 30,				December 31,
		2011				2010
(in thousands)		(unaudited)
Accrued hedge liabilities		$	13,651			$	46,290
Accrued royalties			71,436				64,552
Accrued warranty			6,818				7,177
Accrued other			151,967				139,968
Total accrued expenses and other current liabilities		$	243,872			$	257,987

Reconciliation of Equity

     The following table provides a reconciliation of the beginning and ending carrying amounts of total equity, equity attributable to the Company, and equity attributable to non-controlling interests:

																		Accumulated
																		Other								Non-
						Common				Additional				Treasury				Comprehensive				Retained				Controlling
(in thousands)(unaudited)		Total				Stock				Paid-in-Capital				Stock				Income				Earnings				Interests
Balance at December 31, 2010		$	4,438,029			$	2,072			$	5,222,859			$	(1,419,966	)		$	96,612			$	532,499			$	3,953
Business combinations			(28	)			—				(28	)			—				—				—				—
Amortization of stock based compensation			43,063				—				43,063				—				—				—				—
Common stock issuance under employee stock plans			86,459				27				86,460				(28	)			—				—				—
Tax benefit on employee stock plans			9,040				—				9,040				—				—				—				—
Common stock issuance for convertible debt			9,374				—				9,374				—				—				—				—
Issuance of restricted shares, net of repurchased for minimum tax liability			(842	)			1				—				(843	)			—				—				—
Issuance of deferred stock			5,754				1				5,753				—				—				—				—
Purchase of treasury stock			(286,378	)			—				—				(286,378	)			—				—				—
Realized loss on hedging transactions, reclassed into earnings, net of related tax effects			33,831				—				—				—				33,831				—				—
Unrealized loss on hedging transactions, net of related tax effects			(13,852	)			—				—				—				(13,852	)			—				—
Pension liability, net of deferred taxes			2,484				—				—				—				2,484				—				—
Foreign currency translation adjustment, net of related tax effects			37,544				—				—				—				37,186				—				358
Net income (loss)			188,792				—				—				—				—				189,153				(361	)
Balance at June 30, 2011		$	4,553,270			$	2,101			$	5,376,521			$	(1,707,215	)		$	156,261			$	721,652			$	3,950

     The effects of changes in the Company’s ownership interest in its subsidiaries during the six months ended June 30, 2011 and 2010 were as follows.

(in thousands)(unaudited)		2011				2010
Net income attributable to Life Technologies		$	189,153			$	202,074
Decrease in Life Technologies’ paid-in capital for purchases of subsidiaries’ shares			—				(129	)
Change from net income attributable to Life Technologies and transfers to noncontrolling interests		$	189,153			$	201,945

Comprehensive Income

     Total comprehensive income consisted of the following and is shown net of related tax effects:

		Three months ended								Six months ended
		June 30,								June 30,
(in thousands)(unaudited)		2011				2010				2011				2010
Net income, as reported		$	95,213			$	110,541			$	188,792			$	202,047
Realized (gain) loss on hedging transactions, reclassed into earnings			19,762				(4,978	)			33,831				(2,497	)
Unrealized gain (loss) on hedging transactions			(3,404	)			9,019				(13,852	)			22,993
Pension liability adjustment			—				—				2,484				(2,523	)
Foreign currency translation adjustment			20,753				20,624				37,544				15,396
Total comprehensive income		$	132,324			$	135,206			$	248,799			$	235,416
Comprehensive loss attributable to noncontrolling interest			163				27				3				27
Total comprehensive income attributable to the Company		$	132,487			$	135,233			$	248,802			$	235,443

3. Business Combinations and Divestitures

Business Combinations

     The Company completed several acquisitions that were not individually or collectively considered material to the overall consolidated financial statements and the results of the Company’s operations. These acquisitions have been included in the consolidated financial statements from the respective dates of the acquisitions. Certain acquisitions, including Ion Torrent Systems Incorporated (Ion Torrent), contain contingent consideration arrangements that require the Company to assess the acquisition date fair value of the contingent consideration liabilities, which is recorded as part of the purchase consideration of the acquisition. The Company continuously assesses and adjusts the fair value of the contingent consideration liabilities, if necessary, until the settlement or expiration of the contingency occurs.

     In October 2010, the Company acquired all outstanding equity shares of Ion Torrent with an upfront payment of $375.0 million, and time and technology based milestones of $350.0 million. The merger agreement stipulates that consideration to Ion Torrent’s former equity-holders (for the upfront payment and any milestone payments) be paid in a combination of cash and the Company’s common stock. During 2010, the Company delivered, in satisfaction of both the upfront payment and a milestone, which was earned and paid in November 2010, 3.4 million shares of common stock, or the equivalent of $159.3 million at the time of delivery, and cash in the aggregate of $263.2 million. If earned, the remaining time and technology based milestone will be paid in January 2012 with a combination of cash and Company’s common stock equal to $300.0 million. Under ASC Topic 805, Business Combinations, the Company is required to fair value contingent consideration at the date of acquisition. At the date of acquisition, the Company considered the $300.0 million milestone a contingent consideration and fair valued this contingent consideration at $260.8 million by applying a weighted average probability on the achievement of the milestone based on the assessment developed during the valuation process, then deriving the present value of the outcome from the time at which the obligation is settled by applying a discount rate that incorporated a market participant’s view of the risk associated with the expected milestone payment. The Company periodically assesses the fair value of contingent consideration, reflecting any revisions in the Consolidated Statement of Operations. The $50.0 million milestone (paid in November 2010) was assessed at 100% probability of occurring, and therefore considered a financing arrangement and accrued at the acquisition date. Refer to Note 10 of the Consolidated Financial Statements, “Fair Value of Financial Instruments”, for additional information on the fair market valuation of the contingent consideration liabilities and subsequent adjustments.

Divestiture of Equity Investment

     In January 2010, the Company completed the sale of its 50% ownership stake in the Applied Biosystems/MDS Analytical Technologies Instruments joint venture and selected assets and liabilities directly attributable to the joint venture for $428.1 million in cash, excluding taxes and transaction costs, and recorded a gain of $37.3 million in other income in the Consolidated Statement of Operations for the six months ended June 30, 2010. Included in the sale was the carrying value of the equity investment of $330.4 million, accounts receivable of $71.3 million, net inventory of $55.1 million, other current assets of $17.6 million, long-term assets of $13.7 million, accounts payable of $9.8 million, other current liabilities of $80.8 million, and long-term liabilities of $6.7 million.

Business Consolidation Costs

     The Company continues to integrate recent and pending acquisitions and divestitures into its operations and recorded approximately $18.7 million and $23.4 million for the three months ended June 30, 2011 and 2010, respectively, and approximately $33.3 million and $48.7 million for the six months ended June 30, 2011 and 2010, respectively. The expenses were primarily related to severance and other costs associated with the integration of acquired and existing businesses.

4. Long-Term Debt

     Long-term debt consisted of the following:

		June 30,				December 31,
		2011				2010
(in thousands)		(unaudited)
3.375% Senior Notes (principal due 2013), net of unamortized discount		$	249,933			$	249,914
4.400% Senior Notes (principal due 2015), net of unamortized discount			498,747				498,592
3.500% Senior Notes (principal due 2016), net of unamortized discount			399,418				399,360
6.000% Senior Notes (principal due 2020), net of unamortized discount			748,625				748,565
5.000% Senior Notes (principal due 2021), net of unamortized discount			398,292				398,224
1 1/2% Convertible Senior Notes (principal due 2024), net of unamortized discount			438,178				428,356
3 1/4% Convertible Senior Notes (principal due 2025), net of unamortized discount			—				345,360
Capital leases			5,986				7,002
Total debt			2,739,179				3,075,373
Less current portion			(440,706	)			(347,749	)
Total long-term debt		$	2,298,473			$	2,727,624

Senior Notes

     On February 10, 2010, the Company filed a prospectus that allows the Company to issue in one or more offerings, senior or subordinated debt securities covered by the prospectus by filing a prospectus supplement that contains specific information about the securities and specific terms being offered. In aggregate, the Company has issued a principal amount of $2,300.0 million of fixed unsecured and unsubordinated Senior Notes (the “Notes”) as of June 30, 2011, of which $1,500.0 million were offered in February 2010 and $800.0 million were offered in December 2010. During February 2010, the Company issued $1,500.0 million of fixed rate unsecured notes which consisted of an aggregate principal amount of $250.0 million of 3.375% Senior Notes due 2013 (the “2013 Notes”) at an issue price of 99.95%, an aggregate principal amount of $500.0 million of 4.40% Senior Notes due 2015 (the “2015 Notes”) at an issue price of 99.67% and an aggregate principal amount of $750.0 million of 6.00% Senior Notes due 2020 (the “2020 Notes”) at an issue price of 99.80%. During December 2010, the Company issued an additional $800.0 million of fixed rate unsecured notes which consisted of an aggregate principal amount of $400.0 million of 3.50% Senior Notes due 2016 (the “2016 Notes”) at an issue price of 99.84% and an aggregate principal amount of $400.0 million of 5.00% Senior Notes due 2021 (the “2021 Notes”) at an issue price of 99.56%.

     As a result, the Company recorded an aggregate $3.3 million of debt discounts for the 2013 Notes, 2015 Notes and 2020 Notes at the time of issuance in February 2010, and an aggregate $2.4 million of debt discounts for the 2016 Notes and 2021 Notes at the time of issuance in December 2010. At June 30, 2011, the unamortized debt discount balance was $2.7 million for the 2013 Notes, 2015 Notes, and 2020 Notes, and $2.3 million for the 2016 Notes and 2021 Notes. The debt discounts are amortized over the lives of the associated Notes using the effective interest method.

     The aggregate net proceeds from the offering in February 2010 were $1,484.8 million after deducting the debt discount as well as an underwriting discount of $11.9 million. Total deferred financing costs associated with the issuance of these senior notes were $14.4 million, including the $11.9 million underwriting discount and $2.5 million of legal and accounting fees. The aggregate net proceeds from the offering in December 2010 were $791.6 million after deducting the debt discount as well as underwriting discounts of $6.0 million. Total deferred financing costs were $7.4 million, including the $6.0 million underwriting discount and $1.4 million of legal and accounting fees.

     At June 30, 2011, the unamortized issuance costs for the Senior Notes were $11.6 million for the February 2010 offering, which are expected to be recognized over a weighted average period of 6.5 years, and $6.7 million for the December 2010 offering, which are expected to be recognized over a weighted average period of 7.3 years. The Company recognized aggregate interest expense, net of hedging transactions, of $18.9 million and $8.5 million for the three months ended June 30, 2011, and $37.8 million and $17.0 million for the six months ended June 30, 2011 for the February 2010 offering and December 2010 offering, respectively, based on the effective interest rates of 3.39%, 4.47%, 3.53%, 6.03%, and 5.06% for the 2013, 2015, 2016, 2020 and 2021 Notes, respectively, with interest payments due semi-annually. The Company recognized total interest expense of $19.0 million and $27.4 million for the three and six months ended June 30, 2010, respectively, for the February 2010 offering.

     The Company, at its option, may redeem the Notes (prior to October 15, 2020 for the 2021 Notes) in whole or in part at any time at a redemption price equal to the greater of 100% of the principal amount of the notes to be redeemed or the sum of the present values of the remaining scheduled payments of the notes to be redeemed discounted on a semi-annual basis at a treasury rate equal to a comparable United States Treasury Issue at the redemption date plus 25 basis points for the 2016 Notes, 30 basis points for the 2013 Notes, the 2015 Notes, and the 2021 Notes, and 35 basis points for the 2020 Notes, plus accrued and unpaid interest through the date of redemption, if any. Commencing on October 15, 2020, the Company may redeem the 2021 Notes, in whole or in part, at any time, at a redemption price equal to 100% of the principal amount of the notes being redeemed plus accrued and unpaid interest through the redemption date. Upon the occurrence of a change of control of the Company that results in a downgrade of the notes below an investment grade rating, the indenture requires under certain circumstances that the Company makes an offer to purchase then outstanding Senior Notes equal to 101% of the principal amount plus any accrued and unpaid interest to the date of repurchase.

     The indentures governing the Senior Notes contain certain covenants that, among other things, limit the Company’s ability to create or incur certain liens and engage in sale and leaseback transactions. In addition, the indenture limits the Company’s ability to consolidate, merge, sell, convey, transfer, lease or otherwise dispose of all or substantially all of its property and assets. These covenants are subject to certain exceptions and qualifications.

     During the year ended December 31, 2010, the Company entered into forward interest rate swap agreements for a notional amount totaling $1,500.0 million for a certain part of Senior Notes issuances. These agreements were to hedge the variability in future probable interest payments attributable to changes in the benchmark interest rate from the date the Company entered into the forward interest rate swap agreements to the date the Company issued the Senior Notes. These agreements effectively hedged a series of semi-annual future interest payments to the fixed interest rates for forecasted debt issuances. The Company recorded total proceeds of $4.3 million from the forward interest rate swaps in accumulated other comprehensive income, which will be reclassified to interest expense in the same period during which the hedged transactions affect interest expense.

     The entire net proceeds from the 2013, 2015, and 2020 Notes offering in February 2010 were used to repay the outstanding balance of term loan A and term loan B, together with the net of tax proceeds from the sale of our 50% ownership stake in the Applied Biosystems/MDS Analytical Technologies Instruments joint venture and selected assets and liabilities directly attributable to the joint venture, and cash on hand. A portion of the net proceeds from the 2016 and 2021 Notes offering in December 2010 was used to retire the Company’s $350.0 million 3 1/4% Convertible Senior Notes (2025 Notes) in June 2011. The remaining proceeds will be used for general corporate purposes, which may include the repayment of existing indebtedness.

The Credit Agreement

     In November 2008, the Company entered into a $2,650.0 million credit agreement (the Credit Agreement) consisting of a revolving credit facility of $250.0 million, a term loan A facility of $1,400.0 million, and a term loan B facility of $1,000.0 million to fund a portion of the cash consideration paid for the AB merger. During February 2010, the Company used the proceeds from the issuance of the Senior Notes, the net of tax proceeds from the sale of its 50% ownership stake in the Applied Biosystems/MDS

Analytical Technologies Instruments joint venture and selected assets and liabilities directly attributable to the joint venture, along with cash on hand to pay off the entire outstanding term loan principal of $1,972.5 million, which consisted of the carrying value of $1,330.0 million of term loan A and $642.5 million of term loan B, plus respective accrued interest due on the date of repayment. The Company recognized a loss of $54.2 million on unamortized deferred financing costs associated with the repayments of term loan A and term loan B during the six months ended June 30, 2010. After the repayment of the term loans, the Credit Agreement was amended and restated for the revolving credit facility. For details on the revolving credit facility, refer to Note 5 of the Consolidated Financial Statements, “Lines of Credit”.

     The Company entered into interest rate swaps with a $1,000.0 million notional amount in January 2009 to convert a portion of variable rate interest payments of term loan A to fixed rate interest payments. As a result of the repayment of term loan A in February 2010, the Company de-designated and terminated the interest rate swaps in accordance with ASC Topic 815, Derivatives and Hedging, as the underlying transaction was no longer probable of occurring. The Company recognized a $12.9 million loss in conjunction with the termination of the interest rate swaps during the six months ended June 30, 2010.

     The contractual interest rates the Company made the interest payments on from the inception of the loan to the date of retirement were from 2.75% to 3.91% on term loan A based on LIBOR plus 2.5%, and from 5.25% to 6.00% on term loan B based on the base rate plus 2.0%. The Company recognized aggregate interest expense, net of hedging transactions, of $11.0 million during the six months ended June 30, 2010 on the term loans.

Convertible Senior Notes

     The Company adopted a bifurcation requirement prescribed by ASC Topic 470-20, Debt with Conversion and Other Options, with the retrospective application for our then outstanding $1,150.0 million of Convertible Senior Notes, which consisted of $350.0 million related to the 2% Convertible Senior Note (2023 Notes), $450.0 million related to the 1 1/2% Convertible Senior Note (2024 Notes) and $350.0 million related to the 3 1/4% Convertible Senior Note (2025 Notes). The Company retroactively recognized the carrying amount of $100.0 million, $129.8 million, and $47.6 million for the equity components of the 2023, 2024 and 2025 Notes, respectively, with deferred tax impacts of $39.1 million, $50.7 million and $18.6 million for the 2023, 2024 and 2025 Notes, respectively, and a liability component classified in long-term debt of $250.0 million, $320.2 million and $302.4 million for the 2023, 2024 and 2025 Notes, respectively. In conjunction with the adoption of the provision, the Company applied the guidance to the Company’s debt issuance costs. As a result, the Company allocated the underlying issuance costs associated with the Convertible Senior Notes to equity in the same ratio as when determining the appropriate debt discount. The Company allocated $6.9 million to equity with a deferred tax impact of $2.7 million, and reduced the amount of the debt issuance costs by $6.9 million.

     The indenture for each set of convertible notes allowed the Note holders to require the Company to purchase all or a portion of the Notes at par plus accrued and unpaid interest, and also allowed the Company to redeem, in whole or in part, the Notes at the Company’s option on or after August 1, 2010, June 15, 2011, and February 15, 2012, for 2023 Notes, 2025 Notes, and 2024 Notes, respectively. The terms of the 2023 Notes, 2024 Notes, and 2025 Notes required the Company to settle the par value of such notes in cash and deliver shares for the excess of the notes’ conversion value based on conversion prices of $34.12, $51.02, and $49.13 per share, respectively, over their par values.

     During May 2011 and July 2010, the Company notified the holders of 2025 Notes and 2023 Notes, respectively, of its intention to redeem all of the outstanding Notes on June 15, 2011 and August 6, 2010 at par value. In response to the Company’s announcement and prior to the redemption dates, holders of a principal value of $347.5 million of 2025 Notes and $347.8 million of 2023 Notes exercised their options to convert the Notes based on the conversion prices of $49.13 and $34.12, respectively, and settled the par value in cash and the excess of the Notes’ conversion value over par in 0.4 million shares (issued in July 2011) and 2.4 million shares, respectively, of the Company’s common stock. The remaining outstanding Notes, approximately $2.5 million and $2.2 million, respectively, were settled in cash or the Company’s common stock. The amortization of the debt discounts and the issuance costs for the Notes was completed commensurate with the redemption dates above, per the respective indenture. The Company did not recognize any gain or loss on the settlement of the 2025 Notes or 2023 Notes.

     At June 30, 2011, the Company held the carrying value of $438.2 million for the 2024 Notes in current liabilities. In the event that the Note holders do not require the Company to purchase their Notes or the Company does not redeem the Notes on February 15,

2012, the remaining balance of the Notes will potentially be reclassified back to long-term debt. At June 30, 2011, the Company carried an unamortized debt discount of $11.8 million for the 2024 Notes, which is expected to be recognized over 0.6 years. At December 31, 2010 the Company carried unamortized debt discounts of $21.6 million and $4.6 million for the 2024 and 2025 Notes, respectively. The Company recognized total interest cost of $11.4 million and $17.7 million for the three months ended June 30, 2011 and 2010, respectively, and $23.1 million and $35.1 million for the six months ended June 30, 2011 and 2010, respectively, based on the effective interest rates of 7.21%, 6.10% and 5.95% for the 2023, 2024 and 2025 Notes, respectively, during the periods these Notes were outstanding. The interest expense consisted of $4.1 million and $6.3 million of contractual interest based on the stated coupon rate and $7.3 million and $11.4 million of amortization of the discount on the liability component for the three months ended June 30, 2011 and 2010, respectively. The interest expense consisted of $8.6 million and $12.6 million of contractual interest based on the stated coupon rate and $14.5 million and $22.5 million of amortization of the discount on the liability component for the six months ended June 30, 2011 and 2010, respectively.

5. Lines of Credit

     Under the Credit Agreement, the Company entered into a revolving credit facility of $250.0 million (the Revolving Credit Facility) with Bank of America, N.A. in November 2008. In May 2010, the Company amended and restated the Credit Agreement, expanding the Revolving Credit Facility to $500.0 million for the purpose of general working capital, capital expenditures, and/or other capital needs. Fees associated with the Revolving Credit Facility include a commitment fee for unused funds ranging from 25.0 to 50.0 basis points; letter of credit fees ranging from 150.0 to 250.0 basis points; and interest on borrowings accrued at the Company’s election based on base rate borrowing or Eurocurrency rate borrowing. The base rate borrowing rate is a margin of 50.0 to 150.0 basis points plus the higher of a) the Federal Funds Rate plus 50.0 basis points, b) Bank of America’s prime rate, or c) the Eurocurrency rate plus 100.0 basis points. The Eurocurrency borrowing rate is a margin of 150.0 to 250.0 basis points plus the Eurocurrency borrowing rate.

     Margins and fees are based on a rate table specified in the agreement and determined by the Company’s consolidated leverage ratio for the period. As of June 30, 2011, the Company has issued $12.7 million of letters of credit under the Revolving Credit Facility and accordingly, the remaining available credit is $487.3 million. The applicable borrowing rate would have been 2.50% and 1.80% at June 30, 2011 and December 31, 2010, respectively.

     As of June 30, 2011 foreign subsidiaries in Japan, Mexico, India, and China had available bank lines of credit denominated in local currency to meet short-term working capital requirements. Each credit facility would bear interest at a fixed rate or a variable rate indexed to a local interbank offering rate or equivalent, should there be withdrawals. Under these lines of credit, the United States dollar equivalent of these facilities totaled $13.3 million at June 30, 2011, none of which was outstanding at June 30, 2011.

6. Commitments and Contingencies

Letters of Credit

     The Company had outstanding letters of credit totaling $37.2 million at June 30, 2011, of which $17.7 million was to support performance bond agreements, $9.5 million was to support liabilities associated with the Company’s self-insured worker’s compensation programs, $5.2 million was to support its building lease requirements, and $4.8 million was to support duty on imported products.

Executive Employment Agreements

     The Company has employment contracts with key executives that provide for the continuation of salary if terminated for reasons other than cause, as defined in those agreements. At June 30, 2011, future employment contract commitments for such key executives were approximately $33.7 million. In certain circumstances, the employment agreements call for the acceleration of equity vesting. The non-cash financial impact of the acceleration of equity vesting is not reflected in the above information.

Acquisition-Related Contingent Obligations

     The Company may have future payment obligations due to the contingent consideration arrangements agreed to between the Company and the respective sellers in conjunction with business combinations entered into. Such payments are based on certain technological milestones, patent milestones or the achievement of targeted sales milestones. According to the ASC Topic 805,

Business Combinations, the Company records these obligations at fair value at the time of acquisition with subsequent fair value adjustments to the contingent consideration reflected in the line items of the Consolidated Statement of Operations commensurate with the nature of the contingent consideration. At June 30, 2011, the total amount accrued for contingent consideration liabilities was $269.2 million, of which $266.5 million was included in current liabilities. At December 31, 2010, the total amount accrued for contingent consideration liabilities was $263.3 million, none of which was included in current liabilities. During the six months ended June 30, 2011, fair value adjustments to contingent consideration liabilities of $1.9 million was recorded in cost of revenues, offset by a time value accretion of $4.6 million recorded in interest expense on previously recognized contingent considerations. The Company could be required to make additional contingent payments based on currently existing purchase agreements through 2013. For more information on business combination accounting, refer to Note 3 of the Consolidated Financial Statements, “Business Combinations and Divestitures”.

     For the acquisitions the Company accounted for as asset purchases, contingent consideration liabilities are recorded and become an additional element of cost of the acquired assets when the contingency is resolved.

Environmental Liabilities

     As a result of previous mergers and acquisitions, the Company assumed certain environmental exposure liabilities. At June 30, 2011, aggregate undiscounted environmental reserves were $9.4 million, including current reserves of $4.8 million. Based upon currently available information, the Company believes that it has adequately provided for these environmental exposures and that the outcome of these matters will not have a material adverse effect on its Consolidated Statement of Operations.

Litigation

     We are subject to potential liabilities under government regulations and various claims and legal actions that are pending or may be asserted. These matters arise in the ordinary course and conduct of our business, and, at times, as a result of our acquisitions and dispositions. They include, for example, commercial, intellectual property, environmental, securities, and employment matters. Some are expected to be covered, at least partly, by insurance. We intend to continue to defend ourselves vigorously in such matters. We regularly assess contingencies to determine the degree of probability and range of possible loss for potential accrual in our financial statements. An estimated loss contingency is accrued in our financial statements if it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Based on our assessment, we currently have accrued an immaterial amount in our financial statements for contingent liabilities associated with these legal actions and claims. Litigation is inherently unpredictable, and unfavorable resolutions could occur. As a result, assessing contingencies is highly subjective and requires judgment about future events. The amount of ultimate loss may exceed our current accruals, and it is possible that our cash flows or results of operations could be materially affected in any particular period by the unfavorable resolution of one or more of these contingencies.

Indemnifications

     In the normal course of business, we enter into some agreements under which we indemnify third-parties for intellectual property infringement claims or claims arising from breaches of representations or warranties. In addition, from time to time, we provide indemnity protection to third-parties for claims relating to past performance arising from undisclosed liabilities, product liabilities, environmental obligations, representations and warranties, and other claims. In these agreements, the scope and amount of remedy, or the period in which claims can be made, may be limited. It is not possible to determine the maximum potential amount of future payments, if any, due under these indemnities due to the conditional nature of the obligations and the unique facts and circumstances involved in each agreement. Historically, payments made related to these indemnifications have not been material to our consolidated financial position.

Guarantees

     The Company is a guarantor of a pension plan benefit that was assumed in conjunction with the AB merger, that is accounted for under the ASC Topic 460, Guarantees. As part of the divestiture of the Analytical Instruments business in 1999 by AB, the purchaser of the Analytical Instruments business has agreed to pay for the pension benefits for employees of a former German subsidiary. However, the Company was required to guarantee payment of these pension benefits should the purchaser fail to do so, because these payment obligations were not transferable to the buyer under German law. The guaranteed payment obligation is not expected to have a material adverse effect on the Consolidated Financial Statements.

7. Pension Plans and Postretirement Health and Benefit Program

     The Company has several defined benefit pension plans covering its United States employees and employees in several foreign countries.

     The components of net periodic pension cost or (benefit) for the Company’s pension plans and postretirement benefits plans for the three and six months ended June 30, 2011 and 2010 were as follows:

		Domestic Plans
		Three months ended								Six months ended
		June 30,								June 30,
(in thousands) (unaudited)		2011				2010				2011				2010
Service cost		$	261			$	538			$	522			$	538
Interest cost			9,958				11,863				19,916				20,725
Expected return on plan assets			(10,798	)			(12,430	)			(21,596	)			(20,988	)
Amortization of prior service cost			15				15				30				29
Amortization of actuarial loss			437				212				874				689
Settlement gain*			—				—				—				(5,473	)
Net periodic pension cost (benefit)		$	(127	)		$	198			$	(254	)		$	(4,480	)

		Postretirement Plans
		Three months ended								Six months ended
		June 30,								June 30,
(in thousands) (unaudited)		2011				2010				2011				2010
Service cost		$	16			$	7			$	32			$	52
Interest cost			451				613				902				942
Expected return on plan assets			(119	)			(120	)			(238	)			(217	)
Amortization of prior service cost			(474	)			(468	)			(948	)			(409	)
Amortization of actuarial loss			183				157				366				353
Total periodic pension cost		$	57			$	189			$	114			$	721

		Foreign Plans
		Three months ended								Six months ended
		June 30,								June 30,
(in thousands) (unaudited)		2011				2010				2011				2010
Service cost		$	897			$	917			$	1,758			$	1,903
Interest cost			1,408				1,339				2,750				2,758
Expected return on plan assets			(1,208	)			(1,035	)			(2,361	)			(2,129	)
Amortization of actuarial loss			49				53				95				110
Settlement (gain) loss			(46	)			17				(89	)			35
Net periodic pension cost		$	1,100			$	1,291			$	2,153			$	2,677

8. Income Taxes

     Income taxes are determined using an estimated annual effective tax rate applied against income, and then adjusted for the tax impacts of certain significant and discrete items. For the six months ended June 30, 2011, the Company treated the tax impact related to the following as discrete events for which the tax effect was recognized separately from the application of the estimated annual effective tax rate: (i) expenses related to foreign return to provision adjustments and reduced Medicare subsidies; offset by (ii) benefits related to the reversal of tax liabilities and reserves for uncertain tax positions and disqualifying dispositions of qualified stock grants. The Company’s effective tax rate recorded for the six months ended June 30, 2011 was 17.9%. Excluding the impact of the discrete items discussed above, the effective tax rate would have been 22.2%.

     In accordance with the disclosure requirements as described in ASC Topic 740, Income Taxes, the Company has classified uncertain tax positions as non-current income tax liabilities, or a reduction in non-current deferred tax assets, unless expected to be paid in one year. The Company’s continuing practice is to recognize interest and/or penalties related to income tax matters in income tax expense. It is reasonably possible that there will be a reduction to the balance of unrecognized tax benefits up to $31.6 million in the next twelve months.

9. Stock Repurchase Program

     In December 2010, the Board of Directors of the Company approved a program (the December 2010 program), authorizing management to repurchase up to $500.0 million of common stock. During the six months ended June 30, 2011, the Company repurchased 3.9 million shares of its common stock under the December 2010 program at a total cost of approximately $203.0 million. The cost of repurchased shares is included in treasury stock and reported as a reduction in total equity when a repurchase occurs. No shares were repurchased under this program in 2010.

     In July 2010, the Board of Directors of the Company approved a program (the July 2010 program) authorizing management to repurchase up to $520.0 million of common stock over the next two years. As of December 31, 2010, the Company completed repurchasing 8.4 million shares at a total cost of $436.6 million which was included in treasury stock and reported as a reduction in total equity. During the six months ended June 30, 2011, the Company repurchased an additional 1.5 million shares of its common stock at a total cost of $83.4 million, thereby completing the July 2010 program by repurchasing an aggregate of 9.9 million shares at a total cost of $520.0 million, the maximum amount authorized.

10. Fair Value of Financial Instruments

     The carrying amounts of financial instruments such as cash equivalents, foreign cash accounts, accounts receivable, prepaid expenses, other current assets, accounts payable, accrued expenses, and other current liabilities approximate the related fair values due to the short-term maturities of these instruments. The Company invests its excess cash into financial instruments which are readily convertible into cash, such as marketable securities, money market funds, corporate notes, government securities, highly liquid debt instruments, time deposits, and certificates of deposit with original maturities of three months or less at the date of purchase. The Company considers all highly liquid investments with maturities of three months or less from the date of purchase to be cash equivalents. The Company has established guidelines to maintain safety and liquidity for our financial instruments, and the cost of securities sold is based on the specific identification method.

     Investments consisted of the following:

		June 30,				December 31,
		2011				2010
(in thousands)		(unaudited)
Short-term
Bank time deposits		$	24,678			$	20,425
Foreign bonds			2,898				2,654
Total short-term investments			27,576				23,079
Long-term
Equity securities			26,650				22,448
Total long-term investments			26,650				22,448
Total investments		$	54,226			$	45,527

     ASC Topic 820, Fair Value Measurements and Disclosures has redefined fair value and required the Company to establish a framework for measuring fair value and expand disclosures about fair value measurements. The framework requires the valuation of assets and liabilities subject to fair value measurements using a three tiered approach and fair value measurement be classified and disclosed in one of the following three categories:

Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

Level 2: Quoted prices for similar assets and liabilities in active markets, quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability;

Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e. supported by little or no market activity).

     The following table represents the financial instruments measured at fair value on a recurring basis on the financial statements of the Company subject to ASC Topic 820, Fair Value Measurements and Disclosures and the valuation approach applied to each class of financial instruments:

						Fair Value Measurements at Reporting Date Using
						Quoted Prices in
		Balance at				Active Markets				Significant Other				Significant
(in thousands)(unaudited)		June 30,				for Identical Assets				Observable Inputs				Unobservable Inputs
Description		2011				(Level 1)				(Level 2)				(Level 3)
Bank time deposits		$	24,678			$	24,678			$	—			$	—
Foreign bonds			2,898				2,898				—				—
Money market funds			283,964				283,964				—				—
Deferred compensation plan assets-mutual funds			28,584				28,584				—				—
Assets-derivative forward exchange contracts			12,718				—				12,718				—
Total assets		$	352,842			$	340,124			$	12,718			$	—
Liabilities-derivative forward exchange contracts			13,651				—				13,651				—
Contingent considerations			269,161				—				—				269,161
Total liabilities		$	282,812			$	—			$	13,651			$	269,161

     At June 30, 2011, the carrying value of the financial instruments measured and classified within Level 1 was based on quoted prices and marked to market.

     The Company held foreign bonds which were classified as available-for-sale securities with a fair value of $2.9 million as of June 30, 2011. During the six months ended June 30, 2011, there was no material gain or loss recorded in accumulated other comprehensive income, and there were no gains or losses reclassified out of accumulated other comprehensive income to earnings as a result of the sales of available-for-sale securities.

     The Company manages the Life Technologies Corporation Deferred Compensation Plan (the “Deferred Compensation Plan”) which allows eligible directors and employees to defer, on a pre-tax basis, a portion or all of their compensation, bonuses, or director’s fees. As of June 30, 2011, the Company held $28.6 million in deferred compensation plan assets which were invested in mutual funds. The fair market value of the assets held in the Deferred Compensation Plan was based on unadjusted quoted prices in active markets. The Company carries a corresponding deferred compensation liability of $28.6 million as of June 30, 2011 in other long-term obligations in its Consolidated Balance Sheet.

     Exchange traded derivatives are valued using quoted market prices, when available, and classified within Level 1 of the fair value hierarchy. Level 2 derivatives include foreign currency forward contracts for which fair value is determined by using observable market spot rates and forward points adjusted by risk-adjusted discount rates. The risk-adjusted discount rate is derived by United States dollar zero coupon yield bonds for the corresponding duration of the maturity of derivatives, then adjusted with a counter party default risk for the value of our derivative assets or our credit risk for the value of our derivative liabilities. Credit risk is derived by observable credit default swaps (CDS) spreads. Because CDS spreads information is not available for our Company, our credit risk is determined by analyzing CDS spreads of similar size public entities in the same industry with similar credit ratings. The value of our derivatives discounted by risk-adjusted discount rates represents the present value of amounts estimated to be received for the assets or paid to transfer the liabilities at the measurement date from a marketplace participant in settlement of these instruments.

     Contingent consideration arrangements obligate the Company to pay former owners of an acquired entity if specified future events occur or conditions are met such as the achievement of certain technological milestones, patent milestones or the achievement of targeted revenue milestones. The Company measures such liabilities using level 3 unobservable inputs, applying the income approach, such as the discounted cash flow technique, or the probability-weighted scenario method. The Company used various key assumptions, such as the probability of achievement on the agreed milestones arrangement and the discount rate, to represent the non-performing risk factors and time value when applying the income approach. The Company continuously monitors the fair value of the contingent considerations, with subsequent revisions reflected in the Statement of Operations in the line items commensurate with the underlying nature of milestone arrangements. For a further discussion on contingent consideration accounting, refer to Note 3 of the

Consolidated Financial Statements, “Business Combinations and Divestitures” and Note 6 “Commitments and Contingencies”.

     For financial instrument liabilities with significant Level 3 inputs, the following table summarizes the activity for the six months ended June 30, 2011:

		Fair Value Measurements Using
		Significant
		Unobservable Inputs (Level 3)
		Contingent
(in thousands) (unaudited)		Considerations				Total
Beginning balance at January 1, 2011		$	263,311			$	263,311
Transfers into Level 3 from business combinations			3,107				3,107
Total unrealized losses included in earnings			2,743				2,743
Ending balance at June 30, 2011		$	269,161			$	269,161
Total amount of unrealized losses for the period included in other comprehensive loss attributable to the change in fair market value of related liabilities still held at the reporting date		$	—			$	—

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

     Non-financial assets and liabilities are recognized at fair value subsequent to initial recognition when they are deemed to be other-than-temporarily impaired. There were no material non-financial assets and liabilities deemed to be other-than-temporarily impaired and measured at fair value on a nonrecurring basis for the six months ended June 30, 2011.

     The Company evaluates its investments in equity and debt securities that are accounted for using the equity method or cost method to determine whether an other-than-temporary impairment or a credit loss exists at period end. At June 30, 2011, the Company held an aggregate $26.7 million of long-term investments in non-publicly traded companies that are accounted for under the cost method. The Company assesses these investments for impairment each quarter, but does not calculate a fair value. Due to the nature of these investments, mainly non-public and early stage companies, the Company believes calculating a fair value not to be practicable. In the event the Company identified an indicator of impairment, the assessment of fair value would be based on all available factors, and may include valuation methodologies using level 3 unobservable inputs, which include discounted cash flows, estimates of sales proceeds, net investment values and appraisals, as appropriate. At June 30, 2011, the Company determined that there was no event or change in circumstances that occurred which had a significant adverse effect on the fair value of the cost method investments during the six months ended June 30, 2011, and accordingly no material impairment charges were recorded during the period.

Foreign Currency and Derivative Financial Instruments

     The Company translates the financial statements of its foreign subsidiaries using end-of-period exchange rates for assets and liabilities and average exchange rates during each reporting period for results of operations. Net gains or losses resulting from the translation of foreign financial statements and the effect of exchange rate changes on intercompany receivables and payables of a long-term investment nature are recorded as a separate component of stockholders’ equity. These adjustments will affect net income only upon sale or liquidation of the underlying investment in a foreign subsidiary.

     Some of the Company’s reporting entities conduct a portion of their business in currencies other than the entity’s functional currency. These transactions give rise to receivables and payables that are denominated in currencies other than the entity’s functional currency. The value of these receivables and payables is subject to changes in currency exchange rates from the point in which the transactions are originated until the settlement in cash. Both realized and unrealized gains and losses in the value of these receivables and payables are included in the determination of net income. Net currency exchange gains (losses) recognized on business transactions, net of hedging transactions, were $(1.6) million and $1.2 million for the three months ended June 30, 2011 and June 30, 2010, respectively, and $(3.7) million and $5.0 million for the six months ended June 30, 2011 and June 30, 2010, respectively, and such gains and losses are included in other income/(expense) in the Consolidated Statements of Operations.

     To manage the foreign currency exposure risk, the Company uses derivatives for activities in entities that have receivables and payables denominated in a currency other than the entity’s functional currency. Realized and unrealized gains or losses on the value of financial contracts entered into to hedge the exchange rate exposure of these receivables and payables are also included in the determination of net income as they have not been designated for hedge accounting under ASC Topic 815, Derivatives and Hedging.