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

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 November 2, 2009, 178,337,721 shares of the Registrant’s common stock were outstanding.

 

 

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION			3
ITEM 1. Financial Statements			3
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			27
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk			36
ITEM 4. Controls and Procedures			39
PART II. OTHER INFORMATION			39
ITEM 1. Legal Proceedings			39
ITEM 1A. Risk Factors			39
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds			39
ITEM 3. Defaults Upon Senior Securities			39
ITEM 4. Submission of Matters to a Vote of Security Holders			39
ITEM 5. Other Information			39
ITEM 6. Exhibits			39
SIGNATURES			40
INDEX TO EXHIBITS			41
EX-31.1
EX-31.2
EX-32.1
EX-32.2

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements

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

		September 30,				December 31,
		2009				2008
		(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents		$	518,936			$	335,930
Short-term investments			9,347				—
Restricted cash and investments			52,172				112,387
Trade accounts receivable, net of allowance for doubtful accounts of $11,997 and $14,649, respectively			596,541				580,907
Inventories, net			373,673				420,029
Deferred income tax assets			23,214				25,563
Prepaid expenses and other current assets			132,829				137,355
Total current assets			1,706,712				1,612,171
Long-term investments (includes $35,100 and $35,600 measured at fair value, respectively)			371,663				490,853
Property and equipment, net			783,432				748,056
Goodwill			3,852,122				3,574,779
Intangible assets, net			2,116,034				2,291,767
Deferred income tax assets			36,889				—
Other assets			156,993				181,133
Total assets		$	9,023,845			$	8,898,759
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt		$	442,241			$	80,000
Accounts payable			178,263				204,279
Restructuring accrual			27,280				69,099
Deferred compensation and related benefits			243,929				231,851
Deferred revenues and reserves			114,665				81,166
Accrued expenses and other current liabilities			214,941				235,418
Accrued income taxes			91,802				105,429
Total current liabilities			1,313,121				1,007,242
Long-term debt			2,798,483				3,396,420
Pension liabilities			204,646				201,833
Deferred income tax liabilities			684,921				674,215
Income taxes payable			109,026				65,128
Other long-term obligations, deferred credits and reserves			103,777				97,383
Total liabilities			5,213,974				5,442,221
Commitments and contingencies (Note 6)
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; 193,848,091 and 189,629,084 shares issued, respectively			1,938				1,896
Additional paid-in-capital			4,670,591				4,508,259
Accumulated other comprehensive loss			(1,775	)			(98,807	)
Retained earnings			105,292				9,610
Less cost of treasury stock: 16,213,029 and 16,158,839 respectively			(966,175	)			(964,420	)
Total stockholders’ equity			3,809,871				3,456,538
Total liabilities and stockholders’ equity		$	9,023,845			$	8,898,759

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 nine months
		ended September 30,								ended September 30,
(Unaudited)		2009				2008				2009				2008
Revenues		$	800,729			$	361,696			$	2,409,229			$	1,079,705
Cost of revenues			266,499				125,865				866,912				365,688
Purchased intangibles amortization			71,445				17,677				213,217				51,995
Gross profit			462,785				218,154				1,329,100				662,022
Operating expenses:
Selling, general and administrative			240,016				118,301				734,125				347,562
Research and development			82,724				31,430				244,843				95,235
Purchased in-process research and development			—				18,901				—				18,901
Business integration costs			23,345				14,176				79,635				16,090
Total operating expenses			346,085				182,808				1,058,603				477,788
Operating income			116,700				35,346				270,497				184,234
Other income (expense):
Interest income			1,009				6,263				3,092				20,535
Interest expense			(47,792	)			(17,448	)			(145,628	)			(51,889	)
Loss on early extinguishment of debt			(6,814	)			—				(6,814	)			—
Other income (expense)			2,627				(629	)			2,190				808
Total other expense, net			(50,970	)			(11,814	)			(147,160	)			(30,546	)
Income from continuing operations, before provision for income taxes			65,730				23,532				123,337				153,688
Income tax provision			(24,594	)			(4,756	)			(27,655	)			(35,918	)
Net income from continuing operations			41,136				18,776				95,682				117,770
Net income from discontinued operations, net of tax			—				—				—				1,359
Net income		$	41,136			$	18,776			$	95,682			$	119,129
Basic earnings per common share:
Net income from continuing operations		$	0.23			$	0.20			$	0.55			$	1.28
Net income from discontinued operations			—				—				—				0.01
Net income		$	0.23			$	0.20			$	0.55			$	1.29
Weighted average shares outstanding			176,387				92,298				174,941				92,357
Diluted earnings per common share:
Net income from continuing operations		$	0.22			$	0.19			$	0.53			$	1.21
Net income from discontinued operations			—				—				—				0.01
Net income		$	0.22			$	0.19			$	0.53			$	1.22
Weighted average shares outstanding			183,428				96,995				179,326				97,329

See accompanying notes to unaudited consolidated financial statements.

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

		For the nine months
		ended September 30,
		2009				2008
		(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income		$	95,682			$	119,129
Adjustments to reconcile net income to net cash provided by operating activities, net of effects of businesses acquired and divested:
Depreciation			82,838				30,387
Amortization of intangible assets			221,409				51,995
Amortization of deferred debt issue costs			21,467				2,501
Amortization of purchased inventory adjustments			62,747				1,409
Amortization of purchased deferred revenue adjustments			30,184				—
Share-based compensation			42,847				33,030
Incremental tax benefits from stock options exercised			(7,652	)			(16,972	)
Deferred income taxes			21,334				(3,823	)
Loss on disposal of assets			3,607				1,194
Purchased in-process research and development			—				18,901
Debt discount amortization			31,870				29,874
Other non-cash adjustments			66				1,675
Changes in operating assets and liabilities:
Trade accounts receivable			(10,689	)			(3,906	)
Inventories			(9,146	)			(23,069	)
Prepaid expenses and other current assets			12,671				10,539
Other assets			7,357				(10,401	)
Accounts payable			(37,985	)			11,752
Accrued expenses and other liabilities			4,260				(8,055	)
Income taxes			(121,845	)			(11,619	)
Net cash provided by operating activities			451,022				234,541
CASH FLOWS FROM INVESTING ACTIVITIES:
Maturities of available-for-sale securities			—				24,930
Purchases of investments			(9,970	)			(3,397	)
Net cash paid for business combinations			(24,782	)			(56,964	)
Net cash paid for asset purchases			(25,176	)			(21,007	)
Purchases of property and equipment			(103,640	)			(52,846	)
Proceeds from sale of assets			3,942				—
Proceeds from asset divestitures			15,239				—
Net cash used in investing activities			(144,387	)			(109,284	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term obligations			(275,000	)			(142	)
Purchase of treasury stock			(1,755	)			(104,139	)
Incremental tax benefits from stock options exercised			7,652				16,972
Proceeds from issuance of common stock			116,641				44,252
Capital lease payments			(323	)			—
Net cash used in financing activities			(152,785	)			(43,057	)
Effect of exchange rate changes on cash			29,156				(15,265	)
Net increase in cash and cash equivalents			183,006				66,935
Cash and cash equivalents, beginning of period			335,930				606,145
Cash and cash equivalents, end of period		$	518,936			$	673,080

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 November 4, 2009, 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, 2008 filed with the SEC on March 2, 2009.

     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. For purposes of these Notes to Consolidated Financial Statements, gross profit is defined as revenues less cost of revenues including amortization of purchased intangibles 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.

Reclassification

     The Company has reclassified the historically presented “sales and marketing” and “general and administrative” expense classifications on the Statement of Operations as one combined classification of “selling, general and administrative” costs as this reflects the underlying nature of the incurred costs.

     In connection with the acquisition of Applied Biosystems, Inc. (AB) and resulting reorganization, the Company has determined it operates as one operating segment in accordance with The Financial Accounting Standards Board (FASB) Accounting Standards Codification, or ASC, Topic of Segment Reporting. The Company believes our chief operating decision maker (CODM) makes decisions based on the Company as a whole. In addition, the Company shares the common basis of organization, types of products and services which derive revenues and consistent product margins, and the economic environments. Accordingly, the Company operates and bases decisions as one reporting unit. The Company will disclose the revenues for each of its internal divisions to allow the reader of the financial statements the ability to gain transparency into the operations of the Company in Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations”. We have restated historical divisional revenue information to conform to the current year presentation.

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.

Computation of Earnings Per Share

     On April 30, 2008, the Company announced a two-for-one stock split in the form of a 100% stock dividend with a record date of May 16, 2008, and a distribution date of May 27, 2008. Share and per share amounts have been restated to reflect the stock splits for all periods presented.

     Basic earnings per share are computed by dividing net income 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 subordinated notes where the effect of those securities is dilutive;
	•		Dilutive stock options;
	•		Dilutive restricted stock; and
	•		Dilutive Employee Stock Purchase Plan (ESPP)

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

		Net Income				Shares				Earnings
(in thousands, except per share data) (unaudited)		(Numerator)				(Denominator)				Per Share
Three Months Ended September 30, 2009
Basic earnings per share:
Net income from continuing operations		$	41,136
Total basic earnings		$	41,136				176,387			$	0.23
Diluted earnings per share:
Dilutive stock options			—				4,312
Dilutive restricted stock			—				221
Employee Stock Purchase Plan			—				59
2% Convertible Senior Notes due 2023			22				2,449
Net income from continuing operations plus assumed conversions			41,158
Total diluted earnings		$	41,158				183,428			$	0.22
Potentially dilutive securities not included above since they are antidilutive:
Antidilutive stock options							4,825
3 1/4% Convertible Senior Notes due 2025							7,124
1 1/2% Convertible Senior Notes due 2024							8,821
Three Months Ended September 30, 2008
Basic earnings per share:
Net income from continuing operations		$	18,776
Total basic earnings		$	18,776				92,298			$	0.20
Diluted earnings per share:
Dilutive stock options			—				2,302
Dilutive restricted stock			—				366
Employee Stock Purchase Plan			—				13
2% Convertible Senior Notes due 2023			25				1,940
1 1/2% Convertible Senior Notes due 2024			9				76
Net income from continuing operations plus assumed conversions		$	18,810
Total diluted earnings		$	18,810				96,995			$	0.19
Potentially dilutive securities not included above since they are antidilutive:
Antidilutive stock options							4,415
3 1/4% Convertible Senior Notes due 2025							7,124

		Net Income				Shares				Earnings
(in thousands, except per share data) (unaudited)		(Numerator)				(Denominator)				Per Share
Nine Months Ended September 30, 2009
Basic earnings per share:
Net income from continuing operations		$	95,682
Net income from discontinued operations, net of tax			—
Total basic earnings		$	95,682				174,941			$	0.55
Diluted earnings per share:
Dilutive stock options			—				2,860
Dilutive restricted stock			—				287
Employee Stock Purchase Plan			—				59
2% Convertible Senior Notes due 2023			148				1,179
Net income from continuing operations plus assumed conversions			95,830
Net income from discontinued operations, net of tax, plus assumed conversions			—
Total diluted earnings		$	95,830				179,326			$	0.53
Potentially dilutive securities not included above since they are antidilutive:
Antidilutive stock options							10,341
3 1/4% Convertible Senior Notes due 2025							7,124
1 1/2% Convertible Senior Notes due 2024							8,821
Nine Months Ended September 30, 2008
Basic earnings per share:
Net income from continuing operations		$	117,770
Net income from discontinued operations, net of tax			1,359
Total basic earnings		$	119,129				92,357			$	1.29
Diluted earnings per share:
Dilutive stock options			—				2,243
Dilutive restricted stock			—				370
Employee Stock Purchase Plan			—				28
2% Convertible Senior Notes due 2023			73				2,255
1 1/2% Convertible Senior Notes due 2024			28				76
Net income from continuing operations plus assumed conversions		$	117,871
Net income from discontinued operations, net of tax, plus assumed conversions			1,359
Total diluted earnings		$	119,230				97,329			$	1.22
Potentially dilutive securities not included above since they are antidilutive:
Antidilutive stock options							2,980
3 1/4% Convertible Senior Notes due 2025							7,124

Share-Based Compensation

     The Company has various stock plans in which share-based compensation has been made or will be made in future periods. Under these plans, the Company has the ability to grant stock options, restricted stock units and restricted stock awards. Stock option awards are granted to eligible employees and directors at an exercise price equal to no less than the fair market value of such stock on the date of grant, generally vest over a period of time ranging up to five years, 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.

     In addition, the Company has a qualified employee stock purchase plan (purchase rights) whereby eligible employees of Life Technologies (previously known as Invitrogen Corporation) 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 Company also has a qualified employee stock purchase plan (purchase rights) whereby eligible legacy Applied Biosystems employees may 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 used 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 considered 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 used 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 two years to estimate the expected volatility assumption input to the Black-Scholes model in accordance with The ASC Topic of 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 U.S. 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. The Company currently anticipates that it will retain all of its future earnings for use in the development and expansion of its business, for debt repayment and for general corporate purposes.

Stock Options and Purchase Rights

     The underlying assumptions used to value employee stock options and purchase rights granted during the nine months ended September 30, 2009 and 2008 were as follows:

		Nine months ended
		September 30
(unaudited)		2009				2008
Stock Options
Weighted average risk free interest rate			1.84	%			2.99	%
Expected term of share-based awards			4.4	yrs			4.9	yrs
Expected stock price volatility			43	%			31	%
Expected dividend yield			0	%			0	%
Weighted average fair value of share-based awards granted		$	13.17			$	15.00
Purchase Rights
Weighted average risk free interest rate			0.96	%			4.60	%
Expected term of share-based awards			0.3	yrs			1.7	yrs
Expected stock price volatility			61	%			32	%
Expected dividend yield			0	%			0	%
Weighted average fair value of share-based awards granted		$	7.66			$	10.32

     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 5.5% and 6.7% per year for the nine months ended September 30, 2009 and 2008, 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 September 30, 2009, there was $55.6 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 nine months ended September 30, 2009 as the amounts involved were not material.

     Total share-based compensation expense for employee stock options and purchase rights for the three and nine months ended September 30, 2009 and 2008 was comprised of the following:

		Three months ended								Nine months ended
		September 30,								September 30,
(in thousands, except per share amounts) (unaudited)		2009				2008				2009				2008
Cost of revenues		$	947			$	866			$	2,545			$	3,085
Selling, general and administrative			7,238				6,248				21,308				18,566
Research and development			1,300				918				3,744				2,803
Share-based compensation expense before taxes			9,485				8,032				27,597				24,454
Related income tax benefits			3,036				2,417				8,992				7,412
Share-based compensation expense, net of taxes		$	6,449			$	5,615			$	18,605			$	17,042
Net share-based compensation expense per common share:
Basic		$	0.04			$	0.06			$	0.11			$	0.18
Diluted		$	0.04			$	0.06			$	0.10			$	0.18

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 vesting terms which range from one to five years, however, these units generally vest over two to 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 nine months ended September 30, 2009 and 2008. For the three months ended September 30, 2009 and 2008, the Company recognized $5.7 million and $3.3 million, respectively, and for the nine months ended September 30, 2009 and 2008, the Company recognized $15.2 million and $8.6 million, respectively, in share-based compensation cost related to these restricted stock unit awards. At September 30, 2009, there was $58.7 million remaining in unrecognized compensation cost related to these awards, which is expected to be recognized over a weighted average period of 2.4 years. The weighted average fair value of restricted stock units granted during the nine months ended September 30, 2009 and 2008 was $35.80 and $43.01, respectively.

Recent Accounting Pronouncements

     In June 2009, FASB issued The FASB Accounting Standards Codification™ and the Hierarchy of Generally Accepted Accounting Principles—a replacement of FASB Statement No. 162. The Codification became the source of authoritative U.S. generally accepted accounting principles (GAAP) recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission (SEC) under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. The Codification superseded all then-existing non-SEC accounting and reporting standards and all other nongrandfathered, non-SEC accounting literature not included in the Codification became nonauthoritative. The Company adopted this guidance and the Codification in the interim period beginning July 1, 2009 without material impact on the Company’s financial results.

     Since January 1, 2009, The ASC Topic of Debt with Conversion and Other Options has required that cash settled convertible debt to be separated into debt and equity components at issuance and a value to be assigned to each, which impacted the accounting for the Company’s $1,150.0 million aggregate principal amount of convertible notes that are currently outstanding. The value assigned to the debt component is the estimated fair value, as of the issuance date, of a similar bond without the conversion feature. The difference between the bond cash proceeds and this estimated fair value is recorded as a debt discount and amortized to interest expense over the expected life of the bond, with the corresponding offset to additional paid in capital. Although this adoption has no impact on the Company’s actual past or future cash flows, it requires the Company to record a significant amount of non-cash interest expense as the debt discount is amortized. As a result, there was a material adverse impact on the results of operations and earnings per share upon retrospective adoption in both the current year and prior year results of operations. In addition, if our convertible debt is redeemed or converted prior to maturity, any unamortized debt discount would result in a loss on extinguishment. Refer to Note 4, “Long-Term Debt”, for additional discussion. The Company adopted this requirement in the period beginning January 1, 2009.

     Since January 1, 2009, The ASC Topic of Business Combinations has changed the required measurement of assets and liabilities in a business combination in favor of a fair value method consistent with the guidance provided in The ASC Topic of Fair Value Measurements and Disclosures (see below). Additionally, the Topic requires a change in accounting for certain acquisition related expenses and business adjustments which no longer are considered part of the purchase price. The Topic requires prospective application for all acquisitions beginning

with the date of adoption. Additionally, the Topic changes the accounting for acquisition costs, restructuring costs, in-process research and development and the resolution of certain acquired tax items. The Company adopted these requirements prescribed by the Topic in the period beginning January 1, 2009, and the adoption is expected to have significant impacts for all business combinations in the current and future years.

     Since June 2008, The ASC Topic of Derivatives and Hedging has ratified the determination of whether an instrument or embedded feature is indexed to an entity’s own stock to address whether certain instruments must be accounted for as derivatives under the Topic and provided specific guidance for an entity to consider if an embedded features is indexed to the entity’s own stock. The Company currently has outstanding convertible debt with embedded features which are considered indexed to the entity’s own stock and as a stand alone instrument would have been included in stockholders’ equity, and therefore subject to a scope exception. The Company adopted this guidance in the current year beginning January 1, 2009, without material impact to the financial statements as the embedded features continue to be considered indexed to the Company’s own stock under the guidance.

     Since January 1, 2008, The ASC Topic of 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 Company adopted this requirement for financial assets and liabilities measured at fair value on a recurring basis in the year beginning January 1, 2008, and non-financial assets and liabilities measured at fair value on a nonrecurring basis in the year beginning January 1, 2009 without material impacts.

2. Composition of Certain Financial Statement Items

Fair Value of Financial Instruments

     The Company has certain financial instruments in which the carrying value does not equal the fair value. The estimated fair value of the convertible notes is determined by using observable market information and valuation methodologies that correlate fair value with the market price of the Company’s common stock, and the estimated fair value of the term loans and the secured loan is determined by using observable market information.

     The fair value and carrying amounts of the Company’s long-term debt obligations were as follows:

		Fair Value								Carrying Amounts
		September 30,				December 31,				September 30,				December 31,
		2009				2008				2009				2008
(in thousands)		(unaudited)								(unaudited)
3 1/4% Convertible Senior Notes (principal due 2025)		$	402,024			$	308,000			$	334,343			$	328,114
1 1/2% Convertible Senior Notes (principal due 2024)			493,889				342,000				405,068				391,924
2% Convertible Senior Notes (principal due 2023)			478,543				332,128				335,276				322,774
Term Loan A (principal due 2013)			1,316,700				1,260,000				1,330,000				1,400,000
Term Loan B (principal due 2015)			797,453				927,675				792,500				997,500
Secured Loan (principal due 2010)			35,100				35,600				35,100				35,600

     For details on the carrying amounts of the long-term debt obligations, refer to Note 4 “Long-Term Debt”.

     The carrying amounts of financial instruments such as cash equivalents, foreign cash accounts, accounts receivable, prepaid expenses, other current assets, accounts payable, accrued expenses, other current liabilities, and other long term liabilities approximate the related fair values due to the short-term maturities of these instruments.

     The Company invests its excess cash in 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. These instruments are readily convertible into cash. The Company has established guidelines that maintain safety and liquidity. The Company considers all highly liquid investments with maturities of three months or less from the date of purchase to be cash equivalents.

     Investments consisted of the following:

		September 30,				December 31,
(in thousands)		2009				2008
		(unaudited)
Short-term
Bank deposits		$	9,347			$	—
Total short-term investments			9,347				—
Long-term
Auction rate securities			30,840				29,407
Put option			4,260				6,193
Equity securities			336,563				455,253
Total long-term investments			371,663				490,853
Total investments		$	381,010			$	490,853

     The amortized cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity. The amortization and accretion, interest income and realized gains and losses are included in interest income within the Consolidated Statements of Operations. The cost of securities sold is based on the specific identification method.

     The Company evaluates its investments in equity and debt securities that are accounted for using the equity method or cost method or that are classified as available-for-sale or held-to-maturity to determine whether an other-than-temporary impairment or a credit loss exists at period end for such investments. At September 30, 2009, the aggregate carrying amounts of cost method investments in non-publicly traded companies, which approximated the fair value of the investments, was $7.7 million. The assessment of fair value is based on valuation methodologies using level 3 unobservable inputs, which include discounted cash flows, estimates of sales proceeds and appraisals, as appropriate. At September 30, 2009, the Company did not carry any available-for-sale securities. During the three months and nine months ended September 30, 2009, there were no unrealized gains or losses 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. In addition, the Company did not recognize any net gains or losses related to the trading securities for the three months and nine months ended September 30, 2009.

     The ASC Topic of 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 Company adopted this requirement for financial assets and liabilities measured at fair value on a recurring basis in the year beginning January 1, 2008, and non-financial assets and liabilities measured at fair value on a nonrecurring basis in the year beginning January 1, 2009. The framework requires for 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).

Assets and Liabilities Measured at Fair Value on a Recurring Basis

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

						Fair Value Measurements at Reporting Date Using
						Quoted Prices in
		Balance at				Active Markets				Significant Other				Significant
(in thousands)(unaudited)		September 30,				for Identical Assets				Observable Inputs				Unobservable Inputs
Description		2009				(Level 1)				(Level 2)				(Level 3)
Bank time deposits		$	9,347			$	9,347			$	—			$	—
Money market funds			114,777				113,000				—				1,777
Deferred compensation plan assets			23,034				23,034				—				—
Assets-derivative forward exchange contracts			7,905				—				7,905				—
Auction rate securities			30,840				—				—				30,840
Put option			4,260				—				—				4,260
Total assets		$	190,163			$	145,381			$	7,905			$	36,877
Liabilities-derivative forward exchange contracts			45,031				—				45,031				—
Liabilities-derivative swap contracts			5,778				—				5,778				—
Total liabilities		$	50,809			$	—			$	50,809			$	—

     At September 30, 2009, the carrying value of the financial instruments measured and classified within Level 1 was based on quoted prices and marked to market.

     Exchange traded derivatives are valued using quoted market prices 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. Level 2 derivatives also include interest rate swap agreements for which fair value is determined by using quoted active market prices adjusted by risk-adjusted discount rates. The risk-adjusted discount rate is derived by U.S. 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.

     The valuation technique of money market funds based on Level 3 unobservable inputs consisted of recommended fair values provided by our broker combined with internal analysis of interest rate spreads and credit quality. The Company holds unsecured commercial paper within the Reserve Primary Money Market Fund (Fund) which is currently in orderly liquidation subject to the supervision of the SEC, estimated to be completed by the end of fiscal year 2009. The most recent net asset values (NAV) communicated by the Fund were $0.97 per share in February 2009, however, under the terms of the Plan of Liquidation adopted by the Fund, distributions are to be made up to the amount of a special reserve to cover the cost and possible liabilities associated with the liquidation. Consequently Fund distributions are currently being made at $0.92 per share. The Company recognized other-than-temporary impairment of $5.4 million in the first quarter of 2009 against the purchase price of AB. Due to the Fund management’s expectations to liquidate at or above amortized cost, recent cash recoveries, future expected proceeds and taking into consideration the short-term nature of the Fund’s weighted average maturity, management concluded that the last published NAV was a reasonable fair value, and what the Company expects to recover. The valuation of the Fund as of September 30, 2009 was included in other current assets in the Consolidated Balance Sheets.

     As of September 30, 2009, the Company holds $35.1 million in AAA rated auction rate securities with UBS Investment Bank. Auction rate securities are collateralized long-term debt instruments that provide liquidity through a Dutch auction process that resets the applicable interest rate at pre-determined intervals, typically every 7 to 35 days. The underlying assets of the auction rate securities we hold, including the securities for which auctions have failed, are student loans which are guaranteed by the U.S. government under the Federal Education Loan Program. Beginning in February 2008, auctions failed for the Company’s holdings because sell orders exceeded buy orders. As a result of the failed auctions, the Company is holding illiquid securities because the funds associated with these failed auctions will not be accessible until the issuer calls the security, a successful auction occurs, a buyer is found outside of the auction process, or the security matures. In August 2008, UBS announced that it agreed to a settlement in principle with the SEC and other state regulatory agencies represented by North American Securities Administrators Association to restore liquidity to all remaining clients who hold auction rate securities. UBS committed to repurchase auction rate securities from their private clients at par beginning January 1, 2009. During the three months and nine months ended September 30, 2009, UBS repurchased $0.3 million and $0.5 million, respectively, of auction rate securities at par from the Company. The Company intends to have the settlement of the remaining balance of $35.1 million completed by July 2012. Until UBS fully redeems the Company’s auction rate securities, UBS has loaned the Company at par without recourse and with accrued interest charges at the same rate as the yields earned on the underlying securities that serve as collateral for the loan. Because the Company has a right to sell its auction rate securities to UBS, this right is considered to be a put option, however, this put option does not meet the definition of a derivative under The ASC Topic of Derivatives and Hedging, as auction rate securities are not readily convertible to cash. Thus, this put option will not be subsequently adjusted to fair value each reporting period. To create accounting symmetry for the fair value movement between auction rate securities and the put option, the Company elected the fair value option for the put option in accordance with The ASC Topic of Financial Instruments, upon the execution of the loan agreement with UBS on the election date in November 2008. At the same time, the Company elected a transfer of auction rate securities from available-for-sale securities to trading securities due to the nature of the market conditions and the Company’s intended holding period.

     The Company anticipates that any future changes in the fair value of the put option will be offset by the changes in the underlying fair value of the related auction rate securities with no material net impact to the Consolidated Statements of Operations. This is further supported as the Company has already been provided a loan for the par value of the auction rate securities by UBS. The put option will continue to be measured at fair value utilizing Level 3 inputs until the earlier of its maturity or exercise. During the three months and nine months ended September 30, 2009, the Company did not recognize a net gain or loss related to the auction rate securities and the related put option. The fair market value of auction rate securities and the put option at September 30, 2009 and December 31, 2008 are reflected in long term investments in the Consolidated Balance Sheets.

     For those financial instruments with significant Level 3 inputs, the following table summarizes the activity for the nine months ended September 30, 2009 by investment type:

		Fair Value Measurements Using Significant
		Unobservable Inputs (Level 3)
		Auction Rate								Money Market
(in thousands)(unaudited)		Securities				Put Option				Funds				Total
Beginning balance at January 1, 2009		$	29,407			$	6,193			$	18,260			$	53,860
Transfers into Level 3			—				—				—				—
Total realized/unrealized gains (losses)
Included in earnings			1,933				(1,933	)			—				—
Revalued as part of Applied Biosystems merger			—				—				(5,358	)			(5,358	)
Purchases, issuances and settlements			(500	)			—				(11,125	)			(11,625	)
Ending balance at September 30, 2009		$	30,840			$	4,260			$	1,777			$	36,877
Total amount of unrealized losses for the period included in other comprehensive loss attributable to the change in fair market value of related assets still held at the reporting date		$	—			$	—			$	—			$	—

     All realized and unrealized gains or losses related to financial instruments whose fair value is determined based on Level 3 inputs are included in other income.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

     The 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 non-financial assets and liabilities deemed to be other-than-temporarily impaired and measured at fair value on a nonrecurring basis for the three months and nine months ended September 30, 2009.

Derivative Financial Instruments

     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 or 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 $1.4 million and $(0.2) million for the three months ended September 30, 2009 and September 30, 2008, respectively, and $(5.4) million and $1.9 million for the nine months ended September 30, 2009 and September 30, 2008, respectively, and such gains and losses are included in other income in the Consolidated Statements of Operations.

     To manage the foreign currency exposure risk, we use derivatives for activities in entities which 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 The ASC Topic of Derivatives and Hedging. These contracts, which settle October 2009 through February 2010, effectively fix the exchange rate at which these specific receivables and payables will be settled in, so that gains or losses on the forward contracts offset the gains or losses from changes in the value of the underlying receivables and payables. At September 30, 2009, the Company had a notional principal amount of $918.0 million in foreign currency forward contracts outstanding to hedge currency risk relative to our foreign receivables and payables.

     The Company’s international operating units conduct business in, and have functional currencies that differ from the parent entity, and therefore, the ultimate conversion of these sales to cash in U.S. dollars is subject to fluctuations in foreign currency. The Company’s intent is to limit this exposure on the Company’s Consolidated Statement of Operations and Consolidated Statement of

Cash Flows from changes in currency exchange rates through hedging. Upon entering derivative transactions, when the U.S. dollar strengthens significantly against foreign currencies, the decline in the U.S. dollar value of future foreign currency revenue is offset by gains in the value of the forward contracts designated as hedges. Conversely, when the U.S. dollar weakens, the opposite occurs. The Company’s currency exposures vary, but are primarily concentrated in the euro, British pound sterling, Japanese yen and Canadian dollar. The Company uses foreign currency forward contracts to mitigate foreign currency risk on forecasted foreign currency intercompany sales which are expected to be settled through December 2010. The change in fair value prior to their maturity is accounted for as cash flow hedges, and recorded in other comprehensive income, net of tax, in the Consolidated Balance Sheets according to The ASC Topic of Derivatives and Hedging. To the extent any portion of the forward contracts is determined to not be an effective hedge, the increase or decrease in value prior to the maturity is recorded in other income or expense in the Consolidated Statements of Operations.

     At September 30, 2009, the Company had a notional principal amount of $833.7 million in foreign currency forward contracts outstanding to hedge foreign currency revenue risk under The ASC Topic of Derivatives and Hedging. During the three and nine months ended September 30, 2009, the Company did not have any material losses or gains related to the ineffective portion of its hedging instruments in other expense in the Consolidated Statements of Operations. No hedging relationships were terminated as a result of ineffective hedging or forecasted transactions no longer probable of occurring. The Company continuously monitors the probability of forecasted transactions as part of the hedge effectiveness testing. The Company reclasses deferred gains or losses reported in accumulated other comprehensive income into revenue when the consolidated earnings are impacted, which for intercompany sales are when the inventory is sold to a third party. For intercompany sales hedging, the Company uses an inventory turnover ratio for each international operating unit to align the timing of a hedged item and a hedging instrument to impact the Consolidated Statements of Operations during the same reporting period. At September 30, 2009, the Company expects to recognize $12.0 million of net losses on derivative instruments currently classified under accumulated other comprehensive income to revenue offsetting the change in revenue due to foreign currency translation during the next twelve months.

     The Company entered into interest rate swap agreements that effectively convert variable rate interest payments to fixed rate interest payments for a notional amount of $1,000.0 million in January 2009, of which $300.0 million of swap payment arrangements expire in January of 2012 and $700.0 million of swap payment arrangements expire in January of 2013. The Company has entered into such swap arrangements to manage variability of cash flows and interest expense related to the interest payments on a portion of the Company’s term loan A facility. The change in fair value prior to their maturity is accounted for as cash flow hedges, and recorded in other comprehensive income, net of tax, in the Consolidated Balance Sheets according to The ASC Topic of Derivatives and Hedging. To the extent any portion of the swap agreements is determined to not be an effective hedge, the increase or decrease in value prior to the maturity was recorded in other income or expense in the Consolidated Statements of Operations. During the three and nine months ended September 30, 2009, there was no recognized gain or loss related to the ineffective portion of its hedging instruments in other expense in the Consolidated Statements of Operations. No hedging relationships were terminated as a result of ineffective hedging or forecasted transactions no longer probable of occurring. The Company continuously monitors the underlying term loan principal balance as part of the hedge effectiveness testing.

     The following table summarizes the fair values of derivative instruments at September 30, 2009:

		Asset Derivatives								Liability Derivatives
		Balance Sheet								Balance Sheet
(in thousands)(unaudited)		Location				Fair Value				Location				Fair Value
Derivatives instruments designated and qualified in cash flow hedges
Forward exchange contracts		Other current assets				$	3,905			Other current liabilities				$	27,704
Interest rate swap contracts		Other assets					—			Other long-term obligations					5,778
Total						$	3,905							$	33,482
Derivatives instruments not designated in cash flow hedges
Forward exchange contracts		Other current assets				$	4,000			Other current liabilities				$	17,327
Total						$	4,000							$	17,327
Total derivatives at September 30, 2009						$	7,905							$	50,809

     The following table summarizes the effect of derivative instruments on the Consolidated Statements of Operations for the three and nine months ended September 30, 2009:

		Three months ended September 30,												Nine months ended September 30,
		2009												2009
										Amount of												Amount of
		Amount of				Location of				Gain/(Loss)				Amount of				Location of				Gain/(Loss)
		(Gain)/Loss				(Gain)/Loss				Reclassified from				(Gain)/Loss				(Gain)/Loss				Reclassified from
		Recognized in				Reclassified from				AOCI				Recognized in				Reclassified from				AOCI
		OCI				AOCI into Income				into Income				OCI				AOCI into Income				into Income
(in thousands)(unaudited)		Effective Portion												Effective Portion
Derivatives instruments designated and qualified in cash flow hedges
Foreign exchange contracts		$	15,049			Revenue				$	(2,808	)		$	6,744			Revenue				$	(1,962	)
Interest rate swap contracts			7,184			Interest expense					—				3,526			Interest expense					—
Total derivatives		$	22,233							$	(2,808	)		$	10,270							$	(1,962	)

Three months ended September 30,

Nine months ended September 30,

2009

2009

Amount of

Amount of

Location of

(Gain)/Loss

Location of

(Gain)/Loss

(Gain)/Loss

recognized in

(Gain)/Loss

recognized in

Recognized in Income

Income

Recognized in Income

Income

(in thousands)(unaudited)

Ineffective Portion

Ineffective Portion

Derivatives instruments designated and qualified in cash flow hedges

Foreign exchange contracts

Other (income)/expense

$

*

Other (income)/expense

$

*

Interest rate swap contracts

Other (income)/expense

—

Other (income)/expense

—

Total derivatives

$

*

$

*

		Three months ended September 30,								Nine months ended September 30,
		2009								2009
		Location of (Gain)/Loss				Amount of (Gain)/Loss				Location of (Gain)/Loss				Amount of (Gain)/Loss
(in thousands)(unaudited)		Recognized in Income				Recognized in Income				Recognized in Income				Recognized in Income
Derivatives instruments not designated in cash flow hedges
Forward exchange contracts		Other income				$	19,595			Other income				$	(12,246	)
Total Derivatives						$	19,595							$	(12,246	)

Concentration of Credit Risk

     Our derivatives instruments have an element of risk in that the counterparties may be unable to meet the terms of the agreements. We attempt to minimize this risk by limiting the counterparties to a diverse group of highly-rated domestic and international financial institutions. In the event of non-performance by these counterparties, the asset position carrying values of our financial instruments represent the maximum amount of loss we could incur as of September 30, 2009. However, we do not expect to record any losses as a result of counterparty default in the foreseeable future. We do not require and are not required to pledge collateral for these financial instruments. The Company does not use derivative financial instruments for speculation or trading purposes nor for activities other than risk management, and we are not a party to leveraged derivatives. In addition, we do not carry any master netting arrangements to mitigate the credit risk. The Company continually evaluates the costs and benefits of its hedging program.

     Other financial instruments that potentially subject us to concentrations of credit risk are cash and cash equivalents, investments, and accounts receivable. We attempt to minimize the risks related to cash and cash equivalents and investments by using highly-rated financial institutions that invest in a broad and diverse range of financial instruments. We have established guidelines relative to credit ratings and maturities intended to maintain safety and liquidity. Concentration of credit risk with respect to accounts receivable is limited due to our large and diverse customer base, which is dispersed over different geographic areas. Allowances are maintained for potential credit losses and such losses have historically been within our expectations. Our investment portfolio is maintained in accordance with our investment policy which defines allowable investments, specifies credit quality standards and limits the credit exposure of any single issuer.

Inventories

     Inventories consisted of the following:

		September 30,				December 31,
(in thousands)		2009				2008
		(unaudited)
Raw materials and components		$	97,696			$	94,332
Work in process (materials, labor and overhead)			51,475				58,091
Finished goods (materials, labor and overhead)			224,502				204,858
Adjustment to write up acquired finished goods inventory to fair value			—				62,748
Total inventories, net		$	373,673			$	420,029

Property and Equipment

     Property and equipment consisted of the following:

		Estimated				September 30,				December 31,
(in thousands)		useful life				2009				2008
		(unaudited)
Land			—			$	134,640			$	127,197
Building and improvements		1-50 years					388,513				363,385
Machinery and equipment		1-10 years					340,809				304,389
Internal use software		1-10 years					141,815				124,305
Construction in process			—				97,892				71,641
Total property and equipment							1,103,669				990,917
Accumulated depreciation and amortization							(320,237	)			(242,861	)
Total property and equipment, net						$	783,432			$	748,056

Goodwill and Other Intangible Assets

     The $277.3 million increase in goodwill on the Consolidated Balance Sheet from December 31, 2008 to September 30, 2009 was the result of $229.5 million in additions, adjustments, and purchase price allocations to goodwill related to the AB merger and $48.9 million in foreign currency translation adjustments, offset by $1.1 million in goodwill adjustments related to other mergers.

     Intangible assets consisted of the following:

		September 30, 2009												December 31, 2008
		Weighted												Weighted
		average				Gross carrying				Accumulated				average				Gross carrying				Accumulated
(in thousands)		Life				amount				amortization				Life				amount				amortization
						(unaudited)
Amortized intangible assets:
Purchased technology		7 years				$	1,088,039			$	(683,045	)		8 years				$	1,056,395			$	(605,864	)
Purchased tradenames and trademarks		9 years					307,020				(67,552	)		9 years					314,312				(55,174	)
Purchased customer base		12 years					1,421,986				(137,980	)		12 years					1,421,925				(48,344	)
Other intellectual property		5 years					248,968				(68,853	)		5 years					235,304				(34,238	)
Total intangible assets						$	3,066,013			$	(957,430	)						$	3,027,936			$	(743,620	)
Intangible assets not subject to amortization:
Purchased tradenames and trademarks						$	7,451											$	7,451

     Amortization expense related to purchased intangible assets for the three months ended September 30, 2009 and 2008 was $71.4 million and $17.7 million, respectively and for the nine months ended September 30, 2009 and 2008 was $213.2 million and $52.0 million, respectively. The increase in amortization expense year over year is due to the AB merger which occurred in the fourth quarter of 2008. Estimated aggregate amortization expense is expected to be $72.8 million for the remainder of fiscal year 2009. Estimated aggregate amortization expense for fiscal years 2010, 2011, 2012 and 2013 is $279.1 million, $272.6 million, $253.5 million and $241.1 million, respectively.

     In addition, the Company recorded $2.4 million and zero of amortization expense in other income (expense) for the three months ended September 30, 2009 and 2008, respectively, and $7.2 million and zero of amortization expense for the nine months ended September 30, 2009 and 2008, respectively, in connection with its joint venture investment.

Comprehensive Income (Loss)

     Total comprehensive income consisted of the following:

		Three months ended								Nine months ended
		September 30,								September 30,
(in thousands, unaudited)		2009				2008				2009				2008
Net income, as reported		$	41,136			$	18,776			$	95,682			$	119,129
Unrealized loss on investments, net of related tax effects			—				(550	)			—				(2,019	)
Realized loss on hedging transactions, reclassed into earnings, net of related tax effects			2,808				—				1,962				—
Unrealized (loss) on hedging transactions, net of related tax effects			(22,233	)			—				(10,270	)			—
Foreign currency translation adjustment, net of related tax effects			31,521				(83,018	)			105,340				(34,981	)
Total comprehensive income		$	53,232			$	(64,792	)		$	192,714			$	82,129

Accrued Expenses and Other Current Liabilities

     Accrued expenses and other current liabilities consisted of the following:

		September 30,				December 31,
(in thousands)		2009				2008
		(unaudited)
Accrued hedge liabilities		$	45,031			$	58,602
Accrued royalties			51,323				50,794
Accrued warranty			11,546				12,616
Accrued other			107,041				113,406
Total accrued expenses and other current liabilities		$	214,941			$	235,418

3. Business Combinations and Consolidations Costs

Merger with Applied Biosystems, Inc.

     On November 21, 2008, the Company completed the merger with Applied Biosystems, Inc. (AB), formerly known as Applera Corporation, under which the Company acquired all outstanding shares of AB in a cash and stock transaction. AB is a global leader in the development and marketing of instrument-based systems, consumables, software, and services for academic research, the life science industry and commercial markets. AB commercializes innovative technology solutions for DNA, RNA, protein and small molecule analysis. Customers across the disciplines of academic and clinical research, pharmaceutical research and manufacturing, forensic DNA analysis, and agricultural biotechnology use AB’s tools and services to accelerate scientific discovery, improve processes related to drug discovery and development, detect potentially pathogenic microorganisms, and identify individuals based on DNA sources. AB has a comprehensive service and field applications support team for a global installed base of high-performance genetic and protein analysis solutions. The merger enabled the two companies to broaden their customer offering to include a full range of instruments, equipment, reagents, consumables and services.

     At the effective time of the merger, each outstanding share of AB stock was converted into the right to receive either a combination of cash and shares of Life Technologies common stock or all cash or all shares of Life Technologies common stock, in each case subject to the election and allocation procedures provided in the prospectus as selected by the shareholder. The consideration was based on the 20 day weighted average price of the Company immediately preceding the merger date. Based on the weighted average closing price prior to the merger the ultimate consideration paid under Emerging Issues Task Force (EITF) abstract 99-12, Determination of the Measurement Date for the Market Price of Acquirer Securities Issued in a Purchase Business Combination, the value was $22.25 per share with $1,801.8 million paid in stock and $3,229.2 million paid in cash and $23.8 million related to the exchange of AB stock options for Life Technologies stock options.

     Had the merger with AB been completed as of the beginning of 2008, the Company’s pro forma results would have been as follows:

		Nine months ended
		September 30, 2008
(in thousands, except per share data)		(unaudited)
Revenue		$	2,373,005
Operating income			284,370
Net income			172,456
Earnings per share: basic		$	1.00
Diluted		$	0.97
Basic weighted average shares			173,157
Diluted weighted average shares			178,129

     The primary adjustments relate to the purchase accounting impacts of the acquired intangible assets and increased debt associated with the merger. The above pro forma information was determined based on historical GAAP results adjusted for the purchase price allocation and estimated related changes in income associated with the merger with AB. Excluded from the pro forma results are purchase accounting adjustments related to in-process research and development, the fair market value adjustment of inventory and deferred revenue as these adjustments do not reflect ongoing operations. Additionally, the Company excluded the impact of the expense associated with the acceleration of equity vesting and discontinuation of hedging relationships associated with the Applied Biosystems merger as these adjustments do not reflect ongoing operations as if the Companies merged on January 1, 2008.

     The Company is still finalizing the allocation of the purchase price. The Company expects to complete the allocation of the purchase price during the fourth quarter of 2009. The components of the purchase consideration for AB as of September 30, 2009 are as follows:

		September 30,
(in thousands)		2009
Fair value of common stock issued to AB Shareholders		$	1,801,770
Fair value of Life Technologies options exchanged for AB options			23,773
Cash paid to AB shareholders			3,229,192
Transaction costs			38,847
Cash acquired			(529,181	)
Total purchase consideration		$	4,564,401

The components of the preliminary purchase price allocation for AB as of September 30, 2009 are as follows:

		September 30,
		2009
(in thousands)		(unaudited)
Current assets		$	893,252
Property, plant, and equipment			391,488
Acquired intangible assets			2,167,400
In-process research and development			65,400
Goodwill			2,562,919
Other assets			401,308
Liabilities assumed			(1,917,366	)
Total purchase consideration		$	4,564,401

The acquired identified intangible assets with definite lives from the merger with AB are as follows:

		September 30,
		2009
(in thousands)		(unaudited)
Customer relationships		$	1,396,000
Purchased technology			342,700
Acquired tradenames			239,700
PCR royalty contracts			189,000
Total acquired intangible assets		$	2,167,400

     The weighted-average amortization periods for intangible assets with definite lives are: 12 years for customer relationships, 7 years for purchased technology, 9 years for tradenames and 5 years for acquired PCR Royalty contracts. The acquired purchase technology relates to Applied Biosystems Molecular Cell Biology business which includes the SOLiD high throughput instruments and consumables, genomic assays technology for both research and applied markets, functional analysis and the Proteomics and Small Molecule business which includes Mass Spectrometry. The acquired tradenames primarily relate to the acquired Applied Biosystems and Ambion tradenames. The Company amortizes these intangibles based on the straight line method of amortization, which approximates the timing of expected cash flows of the acquired intangibles.

     The Company allocated $65.4 million of the purchase price in connection with the merger to purchased in-process research and development. This amount estimates the fair value of various acquired in-process projects that have not yet reached technological feasibility and do not have future alternative use as of the date of the merger. The in-process research and development is primarily related to the ongoing research projects which seek to enhance the Company’s current technology platform. The Company included this allocated value into expense as a separate line item on the financial statements as of the date of the merger.

     The purchase price exceeded the value of acquired tangible and identifiable intangible assets, and therefore the Company has allocated $2,562.9 million to goodwill. Of this allocation of purchase price to goodwill, none is expected to be deductible for tax purposes. Included in the goodwill amount is $1,069.6 million related to deferred tax liabilities recorded as a result of the inability to deduct intangible amortization expense associated with the merger. The Company’s tax cost basis in the intangible assets is zero requiring an adjustment to the deferred tax liability to properly capture the Company’s ongoing tax rate. The remainder of the goodwill balance is related to estimated synergies in the purchase price and non-capitalizable intangible assets (i.e. employee workforce) acquired in association with the merger. The Company anticipates cost savings and revenue synergies as a result of the combination of the two businesses. The cost savings are expected to be driven by operating efficiencies and elimination of redundant positions as well as the elimination of duplicate facilities. Revenue synergies are expected to be driven by increased market presence and leveraging of the combination of reagent and instrument sales platforms.

     As part of the merger with AB, the Company acquired a joint venture, Applied Biosystems/MDS Analytical Technologies Instruments, of which the Company is a 50% owner. The Company accounts for its investment in the joint venture totaling $328.8 million using the equity method, consistent with the guidance in The ASC Topic of Investments—Equity Method and Joint Ventures, the Company believes the equity method is appropriate as the Company is unable to unilaterally influence the operating or financial decisions of the investee, shares in the risks and rewards of all related business activities and the joint venture is a stand alone legal entity. The Company accounts for the results of the joint venture in the Consolidated Statements of Operations in the “other income/(expense)” line. The Company accounts for non-operating and stand alone assets and liabilities, which includes goodwill and intangibles associated with the acquisition, of the joint venture in the “long term investment” line in the Consolidated Balance Sheet. The Company continues to assign value and allocate the purchase price to the various acquired components of the Applied Biosystems merger, including the valuation of the acquired joint venture. Due to the nature of the joint venture, with sales, distribution and service commingled with the Company’s operations, operating assets and liabilities specifically related to the joint venture are commingled or inseparable. As a result, for operating assets and liabilities the Company records these assets in the functional operating asset and liability classifications which represent the underlying asset or liability and do not record these assets or liabilities in the “long term investment” account.

     The Company has undertaken restructuring activities in connection with the AB merger. These activities, which have been accounted for in accordance with Emerging Issues Task Force (EITF) Issue No. 95-3, Recognition of Liabilities in Connection with a Purchase Business Combination, primarily include one-time termination costs, specifically severance costs related to elimination of duplicative positions and change in control agreements to mostly sales, finance, IT, research and development, and customer services employees of AB. The restructuring plan also includes charges associated with closure of certain AB leased facilities and one-time relocation costs for AB employees, whose employment positions have been moved to another location. The Company expects that the restructuring plan will add approximately $104.1 million to the purchase price of AB, which consists of $89.9 million for one-time termination costs, $1.5 million for one-time relocation costs and $12.8 million for site closure costs. In accordance with EITF Issue No. 95-3, the Company will finalize its restructuring plan no later than one year from the date of the AB merger. Upon finalization of the restructuring plan for less than the expected amount, any excess reserves will be reversed with a corresponding decrease in goodwill. If the finalization of the restructuring plan exceeds the expected amount, any additional costs will be recorded in business consolidation costs in the Consolidated Statements of Operations.

     The following table summarizes the restructuring activity in connection with the AB merger for the period ended September 30, 2009, as well as the remaining restructuring accrual in the Consolidated Balance Sheets at September 30, 2009:

		One-Time				One-Time				One-Time
		Termination				Site Closure				Relocation
(in thousands) (unaudited)		Costs				Costs				Costs				Total
Restructuring accrual at December 31, 2008		$	65,502			$	—			$	379			$	65,881
Additional costs recorded to goodwill			19,902				4,857				733				25,492
Amounts paid			(69,783	)			(562	)			(448	)			(70,793	)
Foreign currency translation			26				—				—				26
Restructuring accrual at September 30, 2009		$	15,647			$	4,295			$	664			$	20,606