-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ECWoeScHwqh8GaEqgf8MiQsMOWz4i5f5sjkZJNKAcKy3MwJAxD2UiDhma+po9KwX GJup1kzWAAQV1kUB5Skf7A== 0000936392-03-000835.txt : 20030610 0000936392-03-000835.hdr.sgml : 20030610 20030610170714 ACCESSION NUMBER: 0000936392-03-000835 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20030328 ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20030610 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INVITROGEN CORP CENTRAL INDEX KEY: 0001073431 STANDARD INDUSTRIAL CLASSIFICATION: BIOLOGICAL PRODUCTS (NO DIAGNOSTIC SUBSTANCES) [2836] IRS NUMBER: 330373077 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-25317 FILM NUMBER: 03739460 BUSINESS ADDRESS: STREET 1: 1600 FARADAY AVE CITY: CARLSBAD STATE: CA ZIP: 92008 BUSINESS PHONE: 7606037200 MAIL ADDRESS: STREET 1: 1600 FARADAY AVE CITY: CARLSBAD STATE: CA ZIP: 92008 8-K/A 1 a90795a1e8vkza.htm AMENDMENT NO. 1 TO FORM 8-K Invitrogen Corporation
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SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 8-K/A

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): March 28, 2003

INVITROGEN CORPORATION

(Exact name of registrant as specified in its charter)
         
Delaware   0-25317   33-0373077
 
 
(State or other jurisdiction of
incorporation)		   (Commission File No.)   (IRS Employer Identification
No.)
     
1600 Faraday Avenue, Carlsbad, CA   92008
 
(Address of principal executive offices)   (Zip Code)

Registrant’s telephone number, including area code: (760) 603-7200

Not Applicable

(Former name or former address, if changed since last report)

This Form 8-K/A is being filed to report the information required by Items 7(a) and (b) of the registrant’s Form 8-K filed on April 11, 2003.

 

ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
SIGNATURES
EXHIBIT 23.1
EXHIBIT 99.1
EXHIBIT 99.2

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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.

     On March 28, 2003, Invitrogen Corporation and Vertex Pharmaceuticals Incorporated completed the sale of certain products and technology rights of PanVera LLC, a wholly owned subsidiary of Vertex, to Invitrogen for approximately $94,840,000 in cash. The purchase price was determined by arms length negotiation of the parties and was paid by Invitrogen out of its working capital.

     Under the terms of the asset purchase agreement by and among Invitrogen, Vertex and PanVera, Invitrogen acquired PanVera’s biochemical and cellular assay capabilities and its portfolio of proprietary reagents, probes and proteins. Invitrogen also acquired PanVera’s research and development and manufacturing facility in Madison, Wisconsin. Invitrogen intends to continue to use this facility for such purposes. These assets and related liabilities are referred to as the PanVera Acquired Business.

     The description of the transaction contemplated by the asset purchase agreement contained in this Item 2 is qualified in its entirety by reference to the full text of the asset purchase agreement, which is included as Exhibit 2.1 to Invitrogen’s Report on Form 8-K filed on April 11, 2003.

ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.

     
(a)   Financial statements of business acquired.
     
    The audited financial statements required by this Item 7 related to the PanVera Acquired Business as of and for the year ended December 31, 2002, are filed as an exhibit hereto and are incorporated herein by reference.
     
(b)   Pro forma financial information.
     
    The pro forma financial information required by this Item 7 for the combined results of Invitrogen and the PanVera Acquired Business as of and for the year ended December 31, 2002, is filed as an exhibit hereto and is incorporated herein by reference.
     
(c)   Exhibits
         
Exhibit   Description    
 
   
23.1   Consent of PricewaterhouseCoopers LLP    
         
99.1   PanVera Acquired Business audited (i) Balance sheet as of December 31, 2002; (ii) Statement of Income and Comprehensive Income for the year ended December 31, 2002; (iii) Statement of Cash Flows for the year ended December 31, 2002; and (iv) related Notes to Financial Statements    
         
99.2   Invitrogen Corporation and PanVera Acquired Business Unaudited Pro Forma (i) Combined Balance Sheet as of December 31, 2002; (ii) Combined Statement of Income for the year ended December 31, 2002; and (iii) related Notes to Combined Financial Statements    

2

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

     
           INVITROGEN CORPORATION
     
Date: June 10, 2003   By:/s/ C. Eric Winzer     
    C. Eric Winzer
Chief Financial Officer
(Principal Financial Officer and
Authorized Signatory)

3 EX-23.1 3 a90795a1exv23w1.txt EXHIBIT 23.1 EXHIBIT 23.1 CONSENT OF PRICEWATERHOUSECOOPERS LLP CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Registration Statement on Form S-3 (Nos. 333-84134, 333-37964 and 333-52896), Form S-4 (Nos. 333-4374 and 333-82593), and Form S-8 (Nos. 333-46146, 333-36606, 333-86531 and 333-74061) of Invitrogen Corporation of our report dated June 4, 2003 relating to the financial statements of the PanVera Acquired Business which appears in this Current Report on Form 8-K/A of Invitrogen Corporation. PricewaterhouseCoopers LLP San Diego, California June 9, 2003 EX-99.1 4 a90795a1exv99w1.txt EXHIBIT 99.1 EXHIBIT 99.1 PANVERA ACQUIRED BUSINESS FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2002 REPORT OF INDEPENDENT ACCOUNTANTS 1 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Stockholders of Invitrogen Corporation: In our opinion, the accompanying balance sheet and the related statements of income and comprehensive income and of cash flows present fairly, in all material respects, the financial position of PanVera Acquired Business at December 31, 2002, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Business' management; our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. The Business was historically an integrated business of PanVera LLC, a wholly owned subsidiary of Vertex Pharmaceuticals, Inc. Consequently, as indicated in Note 1, these financial statements have been derived from the consolidated financial statements and accounting records of PanVera LLC and reflect significant assumptions and allocations. Moreover, as indicated in Note 1, the Business relies on PanVera LLC and Vertex Pharmaceuticals, Inc. for certain administrative, management and other services. Accordingly, these financial statements do not necessarily reflect the financial position, results of operations, and cash flows of the Business had it been a separate, stand-alone entity during the period presented. /s/ PricewaterhouseCoopers LLP San Diego, California June 4, 2003 2 PANVERA ACQUIRED BUSINESS BALANCE SHEET DECEMBER 31, 2002 (IN THOUSANDS) ASSETS Current assets: Short-term investments....................................... $ 341 Accounts receivable, net of allowance for doubtful accounts of $22............................................. 2,311 Inventories.................................................. 1,584 Deferred income tax assets, net.............................. 372 Prepaid expenses and other current assets.................... 408 ------- Total current assets....................................... 5,016 Property and equipment, net.................................... 8,608 Intangible assets, net......................................... 156 Long-term investments.......................................... 7,570 Other assets................................................... 320 ------- Total assets............................................... $21,670 =======
LIABILITIES AND BUSINESS UNIT EQUITY Current liabilities: Current portion of long-term debt............................ $ 230 Accounts payable............................................. 671 Accrued expenses............................................. 1,397 Deferred revenue............................................. 2,235 ------- Total current liabilities.................................. 4,533 Long-term debt, less current portion........................... 5,845 ------- Total liabilities.......................................... 10,378 ------- Commitments (Note 7) Business unit equity: Accumulated other comprehensive income....................... 45 Other business unit equity................................... 11,247 ------- Total business unit equity................................. 11,292 ------- Total liabilities and business unit equity................. $21,670 =======
See accompanying notes to the financial statements. 3 PANVERA ACQUIRED BUSINESS STATEMENT OF INCOME AND COMPREHENSIVE INCOME FOR THE YEAR ENDED DECEMBER 31, 2002 (IN THOUSANDS) Licensing, grant and royalty revenue.................. $ 22,667 Related party licensing revenue....................... 1,060 Product revenue....................................... 13,745 Service revenue....................................... 3,974 -------- Total revenue...................................... 41,446 -------- Cost of revenue: Cost of licensing, grant and royalty revenue........ 1,579 Cost of related party licensing and royalty revenue. 16 Cost of product revenue............................. 3,520 Cost of service revenue............................. 1,769 -------- Total cost of revenue............................ 6,884 -------- Gross margin....................................... 34,562 -------- Operating Expenses: Selling, general and administrative................. 9,457 Research and development............................ 5,275 -------- Total operating expenses......................... 14,732 -------- Income from operations......................... 19,830 -------- Other expense: Interest expense.................................... (184) Impairment charges on short-term investments........ (665) -------- Total other expense.............................. (849) -------- Income before provision for income taxes.............. 18,981 Provision for income taxes............................ (7,341) -------- Net income............................................ 11,640 Other comprehensive income, net of tax: Unrealized gains on short-term investments.......... 54 -------- Comprehensive income.................................. $ 11,694 ========
See accompanying notes to the financial statements. 4 PANVERA ACQUIRED BUSINESS STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 2002 (IN THOUSANDS) CASH FLOWS FROM OPERATING ACTIVITIES: Net income........................................................ $ 11,640 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization................................... 502 Deferred income taxes........................................... (205) Non-cash impairment charges on investments...................... 665 Loss on disposal of assets...................................... 39 Changes in operating assets and liabilities: Trade accounts receivable...................................... 2,285 Inventories.................................................... (480) Prepaid expenses and other current assets...................... 256 Accounts payable............................................... 108 Accrued expenses............................................... (554) Deferred revenue............................................... (12,097) ----------- Net cash provided by operating activities..................... 2,159 ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment............................... (2,094) Payments for intangible assets.................................... (63) ----------- Net cash used in investing activities......................... (2,157) ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Principal payments on long-term obligations....................... (499) Net funding provided by parent company............................ 497 ----------- Net cash used in financing activities......................... (2) ----------- Net change in cash and cash equivalents....................... - Cash and cash equivalents, beginning of period.................... - ----------- Cash and cash equivalents, end of period.......................... $ - =========== SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid for interest............................................ $ 114 ===========
See accompanying notes to the financial statements. 5 NOTES TO FINANCIAL STATEMENTS 1. ASSET ACQUISITION AND BASIS OF PRESENTATION On March 28, 2003, Invitrogen Corporation ("Invitrogen") acquired from Vertex Pharmaceuticals, Inc. ("Vertex") certain assets and liabilities of PanVera LLC ("PanVera"), a wholly owned subsidiary of Vertex, for $94.8 million in cash. The products and rights acquired include biochemical and cellular assay capabilities and PanVera's commercial portfolio of proprietary reagents, probes and proteins (the "PanVera Acquired Business"). The PanVera Acquired Business is a supplier of products and services that are designed to accelerate the discovery of new medicines by the pharmaceutical and biopharmaceutical industries. The PanVera Acquired Business' primary location is in Madison, Wisconsin. The accompanying financial statements as of and for the year ended December 31, 2002, have been prepared, on a carve out basis, for the purpose of complying with the rules and regulations of the Securities and Exchange Commission ("SEC") for inclusion in Invitrogen's Current Report on Form 8-K. These financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and are intended to present the financial position and results of operations of the PanVera Acquired Business as though it had been an independent company. The statements of income and comprehensive income and of cash flows include only the revenue and costs associated with the operations of the PanVera Acquired Business. The results of operations include direct charges for expenses and indirect charges for other common expenses and corporate expenses. Common expenses include, but are not limited to, shared function services, such as human resources, financial services and legal services. These common expenses are charged to the business unit based on practical and reasonable methods, which include relative revenue or headcount of the PanVera Acquired Business. However, these financial statements are not necessarily indicative of the results of operation that would have occurred if the PanVera Acquired Business had been an independent company. The PanVera Acquired Business does not maintain separate cash balances; rather cash was managed on a centralized basis by PanVera LLC. Receipts and disbursements were settled through business unit equity. A statement of business unit equity has not been provided as the only changes in business unit equity are as follows: (in thousands) Business unit deficit at December 31, 2001...... $ (899) Net funding from parent company................. 497 Unrealized gain on investments, net of tax...... 54 Net income...................................... 11,640 --------- Business unit equity at December 31, 2002..... $ 11,292 =========
2. ACCOUNTING POLICIES Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reported period. Significant estimates in these financial statements include useful lives for depreciation and amortization, inventory valuation, collectibility of accounts receivable and the estimated fair value of equity instruments and whether any decline in such fair value is other-than-temporary. Actual results could differ from those estimates. Segment and Geographic Information The PanVera Acquired Business operates in one segment. Revenues from customers located in the United States totaled $38.3 million and revenues from customers in foreign countries totaled $3.1 million for the year ended December 31, 2002. Revenues for the year ended December 31, 2002, from unrelated customers in any individual country outside of the United States were not material. Short-Term Investments At December 31, 2002, short-term investments were classified as available-for-sale and consisted of publicly traded equity securities. These securities are stated at fair value in the accompanying Balance Sheet with unrealized gains and losses, net of the related tax effect, included as a component of accumulated other comprehensive income until 6 realized. The fair value of these securities is based on quoted market prices. Realized gains and losses are determined on the specific identification method and are included in interest income. Gross unrealized gains at December 31, 2002, were $45,000, net of taxes of $30,000. If a decline in the fair value is considered other-than-temporary, based on available evidence, the decline in fair value is recorded as a charge to income. For the year ended December 31, 2002, the PanVera Acquired Business recorded $665,000 in charges to write down certain marketable securities because the decline in value was considered other-than-temporary. Concentration of Risk Revenue has been generated from a limited number of customers in the biotechnology and pharmaceuticals industries primarily in the US. For the year ended December 31, 2002, revenue transactions with Merck & Co., Inc., and Pfizer, Inc., accounted for 25% and 17% of total revenue, respectively. The loss of such customers could have a material adverse impact on future revenues. No single customer accounted for more than 10% of the PanVera Acquired Business accounts receivable balance at December 31, 2002. Accounts receivable include an unbilled amount for $200,000 at December 31, 2002. Unbilled receivables represent amounts due from customers that will be billed at future dates in accordance with contract terms. The unbilled receivable at December 31, 2002, is expected to be billed and collected within one year. Inventories Inventories are stated at lower of cost, determined by the average cost method, or market. Property and Equipment Property and equipment are recorded at cost. Depreciation and amortization are provided using the straight-line method over the lesser of the lease terms or the estimated useful lives of the related assets, generally three to seven years for furniture and equipment, and forty years for buildings. Major additions and betterments are capitalized; maintenance and repairs, which do not improve or extend the life of the respective assets, are charged to operations. Intangible Assets Intangible assets are recorded at cost and are comprised of licenses. Amortization is provided using the straight-line method over the estimated useful lives of the related assets, generally five to fifteen years. Long-Term Investments Long-term investments at December 31, 2002 totaled $7.6 million and consisted of investments in equity securities of three privately held companies. These investments are recorded using the cost method of accounting for equity securities as the ownership interest is less than 20% and the management of the PanVera Acquired Business does not have the ability to exercise significant influence over the investees' operating activities. Impairment losses are recorded when the decline in fair value is considered other-than-temporary. As these companies are privately held, there is no quoted market price. Therefore, management considers information provided by the investees, including, but not limited to, subsequent financings to determine fair value. No such losses on long-term investments were recorded in 2002. Impairment of Long-Lived Assets Long-lived assets are assessed for potential impairment when there is evidence that events or changes in circumstances indicate that the carrying amount of an asset may not be recovered. An impairment loss would be recognized when an asset's fair value, determined based on undiscounted cash flows expected to be generated by the asset, is less than its carrying amount. The impairment loss would be measured as the amount by which the asset's carrying value exceeds its fair value, and would be recorded as a reduction in the carrying value of the related asset with a corresponding charge to income. Revenue Recognition The PanVera Acquired Business generates revenue through licensing, grant and royalty agreements as well as product sales, assay development and contract protein services. LICENSING REVENUE - Revenue from perpetual licenses is recognized when the license is issued, provided that there are no significant continuing obligations and the payment is non-refundable and non-creditable. Revenue from licenses where the PanVera Acquired Business has continuing obligations is recognized over the period of the license. GRANT REVENUE - Grant revenue is recognized as funds are earned based upon qualified expenses being incurred for activities specified under the grant. Agencies awarding the grants have the right to audit related accounting 7 records. Audit adjustments, which have not been significant, are reconciled and adjusted for in the period they become known. ROYALTY REVENUE - Royalty revenue is recognized based upon the terms of the license agreements and sales information provided by the licensees. PRODUCT REVENUE - Revenue from sales of biotechnology products is recognized upon shipment, when the title to the product and associated risk of loss has passed to the customer, collectibility is reasonably assured and, if applicable, upon acceptance when acceptance criteria are specified. SERVICE REVENUE - Service revenues include assay development, contract protein services, and contracted product development. Service revenue is recognized as the services are performed. Certain contracts contain obligations to sell technology licenses in addition to providing assay development services. Each of these separable elements may be individually delivered and is not considered essential to the functionality of the others. The PanVera Acquired Business allocates revenue under such contracts to each of the separable elements based on the relative fair value of each element, which under most of the agreements approximates the stated price in the contract. Research and Development Research and development costs are expensed as incurred. Advertising Advertising costs are expensed as incurred. During the year ended December 31, 2002 advertising expenses totaled $440,000. Stock-Based Compensation In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based Compensation, Transition and Disclosure" ("SFAS 148"). SFAS 148 amends SFAS No. 123 "Accounting for Stock-Based Compensation" ("SFAS 123"), to provide alternative methods of transition for a voluntary change to the fair-value based method of accounting for stock-based employee compensation. In addition, SFAS 148 amends the disclosure requirements of SFAS 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based compensation and the effect of the method used on reported results. The transition and annual disclosure requirements of SFAS 148 are effective for the fiscal year ending December 31, 2002. The PanVera Acquired Business has adopted SFAS 148 as required for the fiscal year ending December 31, 2002. In accordance with SFAS 148, the PanVera Acquired Business has adopted the disclosure-only provisions of SFAS 123 and applies Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25") and related interpretations in accounting for all awards granted to employees. Under APB 25, provided other criteria are met, when the exercise price of options granted to employees under these plans equals the market price of the common stock on the date of grant, no compensation cost is required. When the exercise price of options granted to employees under these plans is less than the market price of the common stock on the date of grant, compensation costs are expensed over the vesting period. Subsequent changes to option terms can also give rise to compensation. At December 31, 2002, Vertex had three stock-based employee compensation plans, under which employees of the PanVera Acquired Business received stock options. No stock-based employee compensation cost is reflected in net income, as all options granted under the plans had an exercise price equal to the market value of the underlying common stock on the date of grant. Employees of the PanVera Acquired Business also received purchase rights to purchase stock under two employee stock purchase plans administered by Vertex, one of which was terminated in the second quarter of 2002 following a semi-annual purchase. The following table illustrates the effect on net income as if the fair value recognition provisions of SFAS 123 were applied for the year ended December 31, 2002: (in thousands) Net income, as reported..................... $ 11,640 Deduct: Total stock-based employee compensation expense determined under the fair value based method for all awards, net of tax................................. (1,143) --------- Pro forma net income...................... $ 10,497 =========
8 The fair value of each option granted during 2002 was estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions: Expected life (in years).................... 5.50 Expected volatility......................... 75.00% Risk free interest rate..................... 4.18% Dividend yield.............................. -
The fair value of each purchase right granted during 2002 was $6.04 and was estimated at the beginning of the withholding period using the Black-Scholes option pricing model with the following weighted average assumptions: Expected life (in years).................... .50 Expected volatility......................... 75.00% Risk free interest rate..................... 1.53% Dividend yield.............................. -
Income Taxes The PanVera Acquired Business was a portion of PanVera which is a wholly owned subsidiary of Vertex. Therefore the PanVera Acquired Business is not a separate legal entity. The tax provision has been prepared on a separate return basis for the PanVera Acquired Business. Deferred tax assets and liabilities are recognized based on the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the difference is expected to reverse. Valuation allowances against deferred tax assets are provided when, in the opinion of management, it is more likely than not that such assets will not be realized. New Accounting Pronouncements In November 2002, the Emerging Issues Task Force reached a consensus on Issue No. 00-21 ("EITF 00-21"), "Revenue Arrangements with Multiple Deliverables." EITF 00-21 provides guidance on how to account for arrangements that involve the delivery or performance of multiple products, services and/or rights to use assets. The provisions of EITF 00-21 will apply to revenue arrangements entered into in fiscal periods beginning after June 15, 2003. Management does not believe that the adoption of EITF 00-21 will have a material effect on the financial position and results of operations of the PanVera Acquired Business. In June 2001, the Financial Accounting Standards Board (FASB") issued SFAS No. 143, "Accounting for Asset Retirement Obligations." SFAS No. 143 addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. It applies to legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development and/or the normal operation of a long-lived asset. The PanVera Acquired Business is required to adopt SFAS No. 143 as of January 1, 2003. Management has not yet determined the financial impact of the adoption of SFAS No. 143 on its financial position or results of operations. 3. INVENTORIES Inventories consist of the following at December 31, 2002: (in thousands) Raw materials............................... $ 200 Work in process............................. 1,033 Finished goods.............................. 351 --------- $ 1,584 =========
9 4.PROPERTY AND EQUIPMENT, NET Property and equipment, net, consists of the following at December 31, 2002: (in thousands) Building.................................... $ 6,134 Furniture and equipment..................... 3,088 Land improvements........................... 444 Construction in progress.................... 63 --------- Total property and equipment, gross....... 9,729 Less accumulated depreciation and amortization............................... (1,121) --------- $ 8,608 =========
Depreciation expense for the year ended December 31, 2002 was $465,000. 5. ACCRUED EXPENSES Accrued expenses and other current liabilities consist of the following at December 31, 2002: (in thousands) Payroll and benefits........................ $ 613 Royalties................................... 550 Other....................................... 234 --------- $ 1,397 =========
6. LONG-TERM DEBT In October 1998, the City of Madison, Wisconsin issued $6.3 million of Variable Rate Demand Industrial Revenue Bonds, Series 1998 and then loaned the proceeds to the PanVera Acquired Business, which utilized the proceeds to finance the construction of a new laboratory, production and office facility in Madison, Wisconsin. The PanVera Acquired Business began occupying the facility in June 2001. Terms of the loan agreement between the PanVera Acquired Business and the City of Madison are subject to the terms of the bonds. The loan bears interest payable monthly at a rate that is the lesser of a variable rate based upon the prevailing market conditions required to resell the bonds at par value, or 12%. Variable rate adjustments are made at specified periodic determination dates. The interest rate on the bonds may be converted to a fixed rate at the option of the PanVera Acquired Business. At December 31, 2002, the variable rate of interest was 1.8%. Interest incurred during the year ended December 31, 2002 was $106,000. Principal payments are due in annual installments beginning in October 2002 through October 2018. In October 2002 a payment of $225,000 was made; the remaining balance at December 31, 2002 was $6.1 million. The loan agreement is supported by an irrevocable letter of credit. The PanVera Acquired Business incurred $209,000 in debt issuance costs which have been deferred and included in other assets in the Balance Sheet and amortized over the term of the loan. The unamortized balance at December 31, 2002 was $165,000, and amortization expense, included in interest expense in the Statement of Income and Comprehensive Income, totaled $10,000 for the year ended December 31, 2002. At December 31, 2002, loan obligations were due as follows: (in thousands) Years Ending December 31, 2003............................... $ 230 2004............................... 240 2005............................... 245 2006............................... 255 2007............................... 260 Thereafter......................... 4,845 --------- $ 6,075 =========
In May 2003, the remaining principal balance and accrued interest were paid in full. 10 7. COMMITMENTS Letter of Credit The PanVera Acquired Business had an irrevocable letter of credit outstanding at December 31, 2002, for $6.2 million to support the payment of the loan agreement with the City of Madison. The letter of credit is secured by a General Business Security Agreement, subject to certain financial covenants. This letter of credit was terminated in May 2003 upon full repayment of the loan from the City of Madison. Operating Leases The PanVera Acquired Business leases land and equipment under non-cancelable operating leases. The leases have terms through the year 2048. At December 31, 2002, future minimum commitments under operating leases with non-cancelable terms of more than one year are as follows: (in thousands) Years Ending December 31, 2003............................... $ 574 2004............................... 502 2005............................... 343 2006............................... 235 2007............................... 145 Thereafter......................... 5,959 --------- $ 7,758 =========
Rent expense is recognized on a straight-line basis and totaled $615,000 for the year ended December 31, 2002. The equipment under leases at December 31, 2002, with future minimum commitments totaling $1.1 million was subsequently purchased by Invitrogen from the lessors in March 2003. Royalties Certain products are sold under license agreements that require the PanVera Acquired Business to pay royalties to the licensor based upon a percentage of the sales of products containing licensed materials or technology. The aggregate amount of royalty expense included in cost of revenue for the year ended December 31, 2002, totaled $1.6 million. 8. INCOME TAXES The difference between the U.S federal statutory tax rate and the PanVera Acquired Business effective tax rate is as follows for the year ended December 31, 2002: Federal statutory rate .................. 35.0% State income tax, net of federal benefit. 5.1% Non-deductible expenses.................. 0.2% Research and development credit.......... (1.6)% ---- Effective income tax rate............. 38.7% ====
The income tax provision consists of the following for the year ended December 31, 2002: (in thousands) Current: Federal .......................... $ 6,180 State............................. 1,366 --------- Total current provision........ 7,546 --------- Deferred: Federal .......................... (165) State............................. (40) --------- Total deferred provision....... (205) --------- Total provision.............. $ 7,341 =========
11 Significant components of the deferred tax assets consist of the following at December 31, 2002: (in thousands) Deferred tax assets: Accrued royalties................. $ 221 Other accruals and reserves....... 181 --------- Total deferred tax assets...... 402 --------- Deferred tax liability: Unrealized gain on investments.... (30) --------- Net deferred tax assets........ $ 372 =========
9. RELATED PARTY TRANSACTIONS Product revenue and cost of revenue includes $235,000 and $66,000, respectively, related to sales for the year ended December 31, 2002, to PanVera's parent company, Vertex. Direct charges for expenses and indirect charges for other common expenses and corporate expenses from Vertex totaled $592,000 for the year ended December 31, 2002. In connection with the sale of assets to Invitrogen, Vertex has agreed with Invitrogen that Vertex may use in their drug discovery activities, but will not engage, for a term of five years, in the business of providing reagents, probes or assay development services. Vertex has also agreed to purchase a minimum of $3.0 million of the PanVera Acquired Business products annually from Invitrogen for three years after the completion of the sale on March 28, 2003. The PanVera Acquired Business assets include a long-term investment in Affinium Pharmaceuticals, Inc. ("Affinium"), of $4.1 million at December 31, 2002, that was obtained in connection with a collaboration agreement entered into with Affinium in May 2001. The investment is accounted for using the cost method and is included in long-term investments on the Balance Sheet. As part of this multi-element collaboration agreement, Affinium agreed to pay the PanVera Acquired Business $7.5 million in license fee installments over a four-year period from the date of the agreement. As of March 28, 2003, three installment payments totaling $5.3 million remained payable by Affinium. Total revenue recognized from this agreement for the year ended December 31, 2002, was $1.1 million. In connection with Invitrogen's acquisition of the PanVera Acquired Business on March 28, 2003, Vertex guaranteed to Invitrogen the payment of the $5.3 million due from Affinium related to the license fee. 12 EX-99.2 5 a90795a1exv99w2.txt EXHIBIT 99.2 EXHIBIT 99.2 INVITROGEN UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS On March 28, 2003, Invitrogen Corporation ("Invitrogen") acquired from Vertex Pharmaceuticals, Inc. ("Vertex") certain assets and liabilities of PanVera LLC ("PanVera"), a wholly owned subsidiary of Vertex, for $94.8 million in cash, assumed $6.1 million in debt, and paid $1.3 million to acquire equipment under operating leases. The products and rights acquired include biochemical and cellular assay capabilities and PanVera's commercial portfolio of proprietary reagents, probes and proteins (the "PanVera Acquired Business"). We have presented below unaudited pro forma combined financial statements that reflect the acquisition of assets and liabilities using the purchase method of accounting. The pro forma adjustments are preliminary and based on management's estimates of the fair value and useful lives of the assets acquired and liabilities assumed and have been prepared to illustrate the estimated effect of the acquisition. In addition, the final valuation of acquired purchased technology and assessment of useful lives has not yet been completed, which will affect the allocation of the purchase price to these assets and the related amortization expense. Consequently, the amounts reflected in the unaudited pro forma combined financial statements are subject to change, and the final amounts may differ substantially. The unaudited pro forma condensed combined income statement for the year ended December 31, 2002, gives effect to the acquisition of the PanVera Acquired Business as if it was completed on January 1, 2002. The unaudited pro forma condensed combined balance sheet as of December 31, 2002, gives effect to the acquisition as if it was completed on that date. The assets, liabilities and results of operations of PanVera's instruments business and a distribution arrangement have been excluded from the pro forma financial information since the related assets and liabilities were not part of the acquisition. The pro forma condensed combined financial statements should be read in conjunction with the separate historical consolidated financial statements and the notes thereto contained in the Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q of Invitrogen and the audited financial statements of the PanVera Acquired Business included in this filing. The pro forma information is presented for illustrative purposes only and is not necessarily indicative of the operating results or financial position that would have occurred if the acquisition had occurred as of the date or during the periods presented nor is it necessarily indicative of future operating results or financial positions. 1 INVITROGEN CORPORATION UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET AFTER GIVING EFFECT TO THE ACQUISITION DECEMBER 31, 2002 (IN THOUSANDS)
PANVERA HISTORICAL ACQUIRED PRO FORMA PRO FORMA INVITROGEN BUSINESS ADJUSTMENTS COMBINED ---------- -------- ----------- -------- ASSETS Current assets: Cash and cash equivalents....................... $ 537,817 $ - $(104,060)a) $ 433,757 Short-term investments.......................... 184,188 341 - 184,529 Restricted cash and investments................. 9,370 - 6,085 a) 15,455 Trade accounts receivable, net.................. 95,104 2,311 (49)k) 97,366 Inventories..................................... 85,531 1,584 5,049 d) 92,164 Deferred income tax assets...................... 28,679 372 (372)b) 28,679 Prepaid expenses and other current assets....... 27,762 408 1,750 c) 29,920 ------------- -------- --------- ------------- Total current assets.......................... 968,451 5,016 (91,597) 881,870 Property and equipment, net....................... 136,151 8,608 1,108 h) 145,867 Goodwill.......................................... 768,459 - 4,410 a)-i) 772,869 Net intangible assets............................. 344,180 156 70,144 i) 414,480 Long-term investments............................. 338,488 7,570 - 346,058 Other assets...................................... 59,237 320 2,875 c),g) 62,432 ------------- -------- --------- ------------- Total assets.................................. $ 2,614,966 $ 21,670 $ (13,060) $ 2,623,576 ============= ========= ========= ============= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of long-term obligations........ $ 2,456 $ 230 $ 5,845 j) $ 8,531 Accounts payable................................ 20,430 671 (49)k) 21,052 Accrued expenses and other current liabilities.. 87,591 3,632 (1,719)e),f) 89,504 Income taxes.................................... 30,478 - - 30,478 ------------- -------- --------- ------------- Total current liabilities..................... 140,955 4,533 4,077 149,565 Long-term obligations, deferred credits and reserves........................................ 24,664 5,845 (5,845)j) 24,664 Pension liabilities............................... 21,997 - - 21,997 Deferred income tax liabilities................... 108,737 - - 108,737 2 -1/4% Convertible Subordinated Notes due 2006... 500,000 - - 500,000 5 -1/2% Convertible Subordinated Notes due 2007... 172,500 - - 172,500 ------------- -------- --------- ------------- Total liabilities............................. 968,853 10,378 (1,768) 977,463 ------------- -------- --------- ------------- Minority interest................................. 3,503 - - 3,503 ------------- -------- --------- ------------- Commitments and contingencies Stockholders' equity: Common stock.................................... 533 - - 533 Additional paid-in-capital...................... 1,871,795 - - 1,871,795 Accumulated other comprehensive income.......... 14,906 45 (45)b) 14,906 Accumulated deficit............................. (144,624) - - (144,624) Less cost of treasury stock..................... (100,000) - - (100,000) Business unit equity............................ - 11,247 (11,247)b) - ------------- -------- --------- ------------- Total stockholders' equity.................... 1,642,610 11,292 (11,292) 1,642,610 ------------- -------- --------- ------------- Total liabilities and stockholders' equity.... $ 2,614,966 $ 21,670 $ (13,060) $ 2,623,576 ============= ========= ========= =============
See Notes to Unaudited Pro Forma Combined Condensed Financial Statements. 2 INVITROGEN CORPORATION UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME AFTER GIVING EFFECT TO THE ACQUISITION YEAR ENDED DECEMBER 31, 2002 (IN THOUSANDS, EXCEPT PER SHARE DATA)
PANVERA HISTORICAL ACQUIRED PRO FORMA PRO FORMA INVITROGEN BUSINESS ADJUSTMENTS COMBINED -------- ---------- --------- --------- Revenues.......................................... $648,597 $ 41,446 $ (161) k) $ 689,882 Cost of revenues.................................. 269,898 6,884 5,107 d),k) 281,889 -------- ---------- --------- --------- Gross margin................................... 378,699 34,562 (5,268) 407,993 Operating Expenses: Sales and marketing............................. 124,859 - 4,137 l) 128,996 General and administrative...................... 71,105 - 5,320 l) 76,425 Selling, general and administrative............. - 9,457 (9,457) l) - Research and development........................ 33,698 5,275 (116) k) 38,857 Purchased intangibles amortization.............. 64,302 - 8,613 i) 72,915 Business integration and merger costs........... 16,207 - - 16,207 -------- ---------- --------- --------- Total operating expenses..................... 310,171 14,732 8,497 333,400 -------- ---------- --------- --------- Income from operations..................... 68,528 19,830 (13,765) 74,593 -------- ---------- --------- --------- Interest and other income and expense, net...... 2,648 (849) (2,271) m) (472) -------- ---------- --------- --------- Income before provision for income taxes and minority interest.............................. 71,176 18,981 (16,036) 74,121 Income tax benefit (provision).................... (22,207) (7,341) 6,516 n) (23,032) Minority interest................................. (1,302) - - (1,302) -------- ---------- --------- --------- Net income........................................ $ 47,667 $ 11,640 $ (9,520) $ 49,787 ======== ========== ========= ========= Earnings per share: Basic $ 0.91 $ 0.95 ======== ======== Diluted......................................... $ 0.90 $ 0.94 ======== ======== Weighted average shares used in per share calculation: Basic 52,643 52,643 Diluted......................................... 52,963 52,963
See Notes to Unaudited Pro Forma Combined Condensed Financial Statements. 3 INVITROGEN CORPORATION NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS 1. BASIS OF PRESENTATION The unaudited pro forma condensed combined financial statements of Invitrogen have been prepared using the purchase method of accounting based on the historical financial statements of Invitrogen and the PanVera Acquired Business for the year ended December 31, 2002. The unaudited pro forma combined balance sheet has been prepared as if the acquisition of assets and liabilities had been consummated at December 31, 2002 and the unaudited pro forma combined statements of income assume consummation of the acquisition on January 1, 2002. The unaudited pro forma combined financial statements also exclude the assets, liabilities and results of operations of PanVera LLC's instruments business and a distribution arrangement since they were not part of the assets acquired by Invitrogen. The unaudited pro forma combined financial statements also assume the repayment of acquired debt and the related decrease in interest expense and income from the repayment as well as the net cash paid for the acquisition. Included in revenues for the PanVera Acquired Business are $15.3 million for the year ended December 31, 2002, in revenues received for perpetual licenses. These revenues are not expected to recur in 2003. 2. PRO FORMA ADJUSTMENTS AND ASSUMPTIONS a) PURCHASE PRICE The purchase price of the net assets was based on the cash paid for the net assets acquired and estimated direct transaction costs to be incurred by Invitrogen. The estimated direct costs of the transaction to be incurred by Invitrogen include advisory fees for attorneys and accountants, filing fees and certain restructuring costs. The estimates below are subject to change and the final amounts may differ substantially. (in thousands) Cash..................................................... $ 94,840 Cash paid to escrow for repayment of long-term debt assumed................................................. 6,085 Cash paid to acquire leased equipment.................... 1,304 Estimated direct costs................................... 1,831 --------- Estimated purchase price............................. $ 104,060 =========
The allocation of the above purchase price is estimated to be as follows: Fair value of net tangible assets acquired.............. $ 37,960 Fair value of identifiable intangible assets acquired... 70,300 Goodwill................................................ 4,410 Fair value of liabilities assumed....................... (8,610) --------- $ 104,060 =========
The allocation of the excess cost over net assets acquired is preliminary and is pending completion of the independent third-party valuation of the intangible assets acquired. b) ADJUSTMENTS TO PURCHASED BALANCE SHEET Eliminates deferred tax assets not assumed in the acquisition of $0.4 million to purchase price in excess of net assets acquired. Eliminates unrealized gain on securities of $45,000 to purchase price in excess of net assets acquired. Eliminates business unit equity of $11.2 million to purchase price in excess of net assets acquired. c) RECEIVABLE GUARANTEED BY PARENT Add discounted short-term and long-term receivable balances guaranteed by parent of $1.8 million and $3.0 million, respectively. d) PURCHASED INVENTORY REVALUATION Increases inventory by $5.0 million to fair market value, less costs to sell or dispose. Adds the estimated amortization expense of $5.2 million for the non-cash write-up to cost of revenues in the Statement of Income. 4 e) DEFERRED REVENUES Eliminates acquired deferred revenue balances of $1.9 million where Invitrogen has no additional cost or legal obligation to provide further services. The revenues were previously recognized based on the passage of time. f) ACCRUED RESTRUCTURING COSTS Accrues for estimated severance and outplacement costs of $0.2 million for seven employees. g) BOND ISSUE COSTS Adjusts unamortized bond issue costs of $0.2 million to zero for purchase accounting. h) PROPERTY, PLANT AND EQUIPMENT Adds the fair value of $1.3 million for property and equipment acquired under lease obligations by Invitrogen. Eliminates property, plant and equipment of $0.2 million with fair values less than Invitrogen's capitalization threshold to comply with Invitrogen's policy on capitalizing property, plant and equipment. i) PURCHASED INTANGIBLE ASSETS AND AMORTIZATION Adjusts the Combined Balance Sheet to arrive at the total estimated fair value of purchased intangible assets of $70.3 million, which includes developed product technology, customer contracts and a supply agreement, which is preliminary and may change significantly upon completion of the valuation of the intangible assets acquired. Adds to the Statement of Income the estimated first-year amortization expense of $8.6 million for purchased intangible assets over an eight-year weighted average life, which is preliminary and may change significantly upon completion of the valuation of the intangible assets acquired. j) DEBT Reclasses long-term portion of debt of $5.8 million to current as loan was paid in full by Invitrogen subsequent to the acquisition of assets and assumption of liabilities. k) INTERCOMPANY TRANSACTIONS Eliminates intercompany receivables and payables of $49,000. Eliminates intercompany sales and related cost of sales of $161,000 and $45,000, respectively. l) EXPENSE RECLASSIFICATION Reclassify selling, general and administrative expenses of $9.5 million to sales and marketing expense of $4.1 million and general and administrative expense of $5.3 million to conform to Invitrogen's expense classifications. m) INTEREST INCOME AND EXPENSE Reduces interest income by $2.4 million for estimated lost interest income, calculated at 2.28%, from cash used to purchase the net assets, cash used to acquire the leased equipment, cash used for acquisition expenses and cash used to repay the debt acquired. Reduces interest expense by $0.1 million for estimated saved interest at 1.8% from the repayment of debt acquired. n) PROVISION FOR INCOME TAXES Adjusts the income tax provision to an amount equal to 39.55% (Invitrogen's marginal US tax rate) of the excess of the pro forma combined income before provision for income taxes and minority interest over that for historical Invitrogen, less tax credits for research and development expenditures. 5 -----END PRIVACY-ENHANCED MESSAGE-----