Acquired by Thermo Fisher Scientific in 2014, Life Technologies was a biotechnology tools company. Company products were also used in forensics, food and water testing and other industrial applications.
A company creates wealth for its long-term shareholders in 2 main ways - through dividend payments and through the accumulation of retained earnings. This graph shows the accumulation of per-share equity of long-term shareholders (green bars), which consists of the retained earnings plus all capital invested in the company, and the cumulative dividends the company has paid over time per share of its stock (blue bars).
In the words of Warren Buffett: "We're looking for... businesses earning good returns on equity while employing little or no debt."
Return on equity is a key metric of financial performance, indicating a company's ability to generate earnings using shareholder capital. Over time, ROE is one of the major determinants of the rate at which a company creates shareholder wealth. The average ROE for large U.S. companies is 12%, and many investors use it as a threshold for attractive investments.
Companies can boost ROE by increasing leverage, which reduces the safety of the investment. Therefore, it is useful to look at the return on assets (ROA), which measures a company's earning power regardless of its capital structure. A widening gap between ROE and ROA may be a warning sign that should be thoroughly investigated.
Earnings per share is a popular metric used to value a company (using P/E ratio); growth in EPS is often used to judge company growth potential. However, many investors believe that EPS is an inferior metric to ROE, because it ignores the amount of capital the company used to generate earnings.
Free cash flow shows how much cash a company generates from operations, above and beyond what is required to maintain or expand its productive assets. This cash can be returned to investors, or spent by management on growing the company or paying back its debts.
Balance sheets of many companies contain intangible assets such as goodwill, trademarks, patents, etc. Many investors consider intangibles more difficult to value than physical assets. If intangible assets had been valued incorrectly, they must be impaired, resulting in a loss charged against shareholder equity. This chart demonstrates the potential loss to shareholder equity from such impairments.
Companies often use debt financing to increase their return on equity. However, as the amount of debt financing increases relative to the amount of equity financing, the company becomes more sensitive to down turns and other negative events. As a result, many investors use the ratio of debt to equity as a measure of a company's financial risk, and avoid companies that have this ratio above 1.
This chart shows shareholder equity as a percentage of total assets, allowing investors to judge the overall leverage. Companies with a higher proportion of equity can be viewed as safer investments. This metric is particularly important for highly leveraged institutions, such as banks, where it must be at least 4% according to government regulations.
The ratio of current assets to current liabilities is known as the current ratio. This metric is a quick measure of the company's ability to pay its short-term obligations. A current ratio below 1 is a warning sign that should be investigated, especially for companies that cannot count on adequate cash flow from operations.
This chart shows the cumulative dilution of investor ownership in a company over time. Dilution reduces an investor's participation in the future earnings. Dilution increases when a company issues new shares, and decreases when a company buys its shares back. Many investors avoid companies with large chronic dilution.
analysis provides insight into factors affecting the Return On Equity of a company.
The DuPont equation decomposes ROE as follows:
ROE = (Net margin) * (Asset turnover) * (Asset to equity ratio)
Net margin indicates operating efficiency, Asset turnover measures the total asset use efficiency, and the Asset to equity ratio is a measure of financial leverage.
The dividend payout ratio tells investors what percentage of earnings a company returns to shareholders, and what percentage it retains and reinvests. This ratio represents a major capital allocation decision by the company, and can be used to judge management rationality. Rational management should pay out all earnings that cannot be productively reinvested. Therefore, a low dividend payout ratio for a profitable company with a low growth potential may be a warning sign.
Many investors use the P/B ratio as a quick way of judging company valuation. Value investors - followers of Graham and Dodd - specifically seek out companies with low P/B ratios. However, investors should be careful not to make investment decisions on this metric alone, without considering a company's earning and growth potential, since a low P/B ratio can be a sign of a bleak future for the business.
P/E ratio is a popular way of making a quick judgment of a company valuation. Value investors - followers of Graham and Dodd - often seek solid companies with low P/E ratios as investment opportunities. However, P/E ratio represents an oversimplified approach to business valuation, and can often lead to incorrect investment decisions.
In February 1999, the Company completed its initial public offering and issued 3,525,000 newly issued shares of its Common Stock at a price of $15.00 per share. The Company received $48.1 million in cash, net of underwriting discounts, commissions and other offering costs.
In February 1999, the Company completed its initial public offering... Simultaneously with the closing of the initial public offering, each of the 2,202,942 outstanding shares of Series A Cumulative Convertible Preferred Stock was automatically converted into 2,202,942 shares of Common Stock and 2,202,942 shares of Series A Redeemable Preferred Stock (RPS). At the closing of the IPO, the RPS was redeemed for $14,015,000 and accumulated dividends on the Series A Cumulative Convertible Preferred Stock of $1,538,000 were paid. In 1997, when the stock was issued, a charge to equity of $15 million was recorded to reflect the beneficial conversion feature of the convertible preferred stock.
In November 1999, we completed an equity offering and issued 2,400,000 shares of our common stock at a price of $25.00 per share. We received $56.5 million in cash, net of underwriting discounts, commissions and offering costs.
On February 2, 2000 we completed our merger with Research Genetics, Inc. As consideration for the merger, we issued 3,200,000 shares of our common stock for all of the capital stock of Research Genetics. Upon their employment by Invitrogen's subsidiary, we also issued options to purchase 750,000 shares of our common stock to employees of Research Genetics.
On September 14, 2000, the Company completed a merger with both Life Technologies, Inc. (Life Technologies), a supplier of molecular biology and cell culture products for the life science industry, and Dexter Corporation (Dexter), which owned approximately 75% of Life Technologies' outstanding common stock prior to the completed merger. Under the terms of the agreements, the Company acquired all of the outstanding common stock of Dexter for $62.50 per share and all of the outstanding common stock of Life Technologies, other than the shares held by Dexter, for $60.00 per share. The Company expects to issue approximately 6 million shares of Invitrogen common stock (at an exchange ratio of 1.0) and cash totaling approximately $365.3 million for all of the outstanding common stock of Life Technologies, other than the shares owned by Dexter. The Company also expects to issue approximately 21.4 million shares of Invitrogen common stock (at an exchange ratio of 1.0417) and cash totaling approximately $1.4 billion for all of the outstanding common stock of Dexter.
In August 2006, the Company's Board of Directors authorized a $500 million share repurchase program of the Company's common stock. During the three months ended September 30, 2006, the Company repurchased 4.7 million shares at a total cost of approximately $286.7 million, which is reported as a reduction in stockholders' equity as treasury stock.
On June 11, 2008, the Company entered into a definitive merger agreement 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 enables the two companies to broaden their customer offering to include a full range of instruments, equipment, reagents, consumables and services. The merger agreement provides that at the effective time of the merger, each outstanding share of AB stock would be 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 laid out 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 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 $1,798.6 million paid in stock and $3,229.2 million paid in cash and $23.8 million related to the exchange of Applied Biosystems stock options for Life Technologies stock options. Upon the completion of the merger, AB's shareholders owned approximately 46.6 percent of the combined company. As a result of the Company owning more than a majority of the combined company, the premium paid to AB shareholders and a majority of the management and board of the Company representing senior management, the Company is considered to be the acquirer for accounting purposes.
On October 1, 2010, the Company acquired all outstanding equity shares of Ion Torrent with an upfront payment of $375.0 million, and time and technology based milestones of $350.0 million. The acquisition includes a $50.0 million milestone, which was earned and paid in November 2010 and a subsequent milestone of $300.0 million that, if earned, will be paid in January 2012, all of which milestones are paid with a combination of cash and the Companys common stock. The Company issued, as part of the upfront payment and satisfaction of the $50.0 million milestone, 3.4 million shares of common stock through December 31, 2010, or the equivalent of $159.3 million, and cash in the amount of $263.2 million. In performing the accounting for the transaction, all consideration transferred was measured at its acquisition date fair value. Ion Torrent has developed a new method of DNA sequencing by enabling a direct connection between chemical and digital information through the use of proven semiconductor technology. Ion Torrents proprietary chip-based sequencing represents a new paradigm in DNA sequencing by using PostLighttm sequencing technology, the first of its kind to eliminate the cost and complexity associated with the extended optical detection currently used in all other sequencing platforms. The result is a sequencing system that is simpler, faster, less expensive and more scalable than other sequencing technologies.
Thermo Fisher Scientific announced that it has completed its acquisition of Life Technologies Corporation (NASDAQ: LIFE) for $76.13 in cash per fully diluted common share, or approximately $13.6 billion, plus the assumption of $1.5 billion in net debt.