<PAGE>
 
                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549

                                --------------
                                   FORM 10-K

(Mark One)
[X] ANNUAL  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
    EXCHANGE ACT OF 1934
          For the fiscal year ended    December 31, 1998
                                       -----------------------
                                      OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934
          For the transition period from _______ to _______
 
                        Commission file number  0-14991
                                                -------        

                            LIFE TECHNOLOGIES, INC.
            (Exact name of registrant as specified in its charter)
 
     DELAWARE                                          34-0431300      
     (State or other jurisdiction                      (I.R.S. Employer
     of incorporation or organization)                 Identification No.)
     9800 MEDICAL CENTER DRIVE, ROCKVILLE, MD          20850
     (Address of principal executive offices)          (Zip Code)

                       --------------------------------

      Registrant's telephone number, including area code: (301) 610-8000
       Securities registered pursuant to Section 12(b) of the Act:  None
          Securities registered pursuant to Section 12(g) of the Act:

                         Common Stock, $.01 Par Value
                         ----------------------------
                             (Title of each class)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.  Yes  x   No_____
                                       -----        

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [   ]

The aggregate market value of the voting stock held by non-affiliates of the
registrant as of March 5, 1999 was $249,515,560.

The number of shares of Common Stock outstanding as of March 5, 1999 was
24,944,867.

                      Documents Incorporated By Reference

Portions of the registrant's definitive Proxy Statement for its Annual Meeting
of Stockholders to be held on May 4, 1999 are incorporated by reference in Part
III of this Report.
<PAGE>
 
As used herein, the terms "LTI" and the "Company" shall mean Life Technologies,
Inc. and its subsidiaries unless the context otherwise indicates and the term
"Proxy Statement" shall mean the definitive Proxy Statement for the Company's
Annual Meeting of Stockholders to be held on May 4, 1999.


                                    PART I
                                    ------

ITEM 1.   BUSINESS
-------   --------

                                    GENERAL
                                    -------

LTI, originally incorporated in Ohio in 1915 and reincorporated in Delaware in
1986, develops, manufactures and supplies more than 3,000 products used in life
sciences research and commercial manufacture of genetically engineered products.
The Company's products include sera, other cell growth media, biochemicals and
enzymes and other biological products necessary for recombinant DNA procedures.
These and related products and services provided by the Company are used in
cellular biochemistry and molecular biology research and in the production of
genetically engineered pharmaceuticals such as interferons, interleukins and
tissue plasminogen activator ("t-PA").

The Company's products are sold to more than 20,000 customers consisting of
laboratories generally associated with universities, medical research centers,
and government institutions as well as biotechnology, pharmaceutical, energy,
agricultural and chemical companies.  The Company sells its products principally
through its own direct sales organization which is supplemented by a network of
distributors.

The Company's activities are focused on the following areas:

  o  PRODUCTS FOR LIFE SCIENCES RESEARCH

     CELL CULTURE PRODUCTS -  The Company is a leading supplier of sera and
     other cell and tissue culture media used by life sciences researchers to
     grow cells under laboratory conditions.

     CELL AND MOLECULAR BIOLOGY PRODUCTS - The Company is a leading supplier of
     enzymes, nucleic acids, custom primers, reagent systems, biochemicals and
     other products used by life sciences researchers to identify, isolate and
     manipulate the metabolic processes and genetic material of living
     organisms.

  o  PRODUCTS FOR COMMERCIAL PROCESSES USING GENETICALLY ENGINEERED CELLS

     The Company is a leading supplier of sera, cell culture media and reagents
     used for the commercial production of pharmaceuticals and other materials
     made by genetically engineered cells.  This use of the Company's products
     is also referred to as "industrial bioprocessing".

                                    MARKETS
                                    -------

The Company serves two principal markets: life sciences research and commercial
manufacture of genetically engineered products.

The life sciences research market consists of laboratories generally associated
with universities, medical research centers, government institutions such as the
National Institutes of Health, and other research institutions as well as
biotechnology, pharmaceutical, energy, agricultural and chemical companies.

Life sciences researchers require special biochemical research tools capable of
performing precise functions in a given experimental procedure.  The Company

                                       1
<PAGE>
 
serves two principal disciplines of the life sciences research market: cellular
biochemistry and molecular biology.

Cellular biochemistry involves the study of the genetic functioning and
biochemical composition of cells as well as their proliferation,
differentiation, growth and death.  The understanding gained from such study has
broad application in the field of developmental biology and is important in the
study of carcinogenesis, virology, immunology, vaccine design and production and
agriculture.  To grow the cells required for research, researchers use cell or
tissue culture media which simulate under laboratory conditions (in vitro) the
environment which surrounds such cells naturally (in vivo) and which facilitate
their growth.

Molecular biology involves the study of the genetic information systems of
living organisms.  The genetic material of living organisms consists of long,
double-stranded molecules of DNA (deoxyribonucleic acid).  DNA contains the
information required for the production of proteins by means of RNA (ribonucleic
acid), a single-stranded molecule similar in structure to DNA. Proteins have
many different functional properties and include antibodies, certain hormones
and enzymes.  Many researchers study the various steps of gene expression from
DNA to RNA to protein products, and the impact of these proteins on cellular
function.  Other researchers are interested in manipulating the DNA-RNA system
in order to modify its functioning.  Through techniques that are commonly termed
"genetic engineering" or "gene-splicing," a researcher can modify an organism's
naturally occurring DNA to produce a desired protein not usually produced by the
organism, or to produce a naturally produced protein at an increased rate.

The Company also serves industries which apply genetic engineering to the
commercial production of otherwise rare or difficult to obtain substances with
potential for significant utility.  For example, in the biotechnology industry,
these substances include interferons, interleukins, t-PA and monoclonal
antibodies.  The manufacturers of these materials require larger quantities of
the same sera and other cell growth media that are also purchased in smaller
quantities as research tools.  Some of these new substances are manufactured in
full scale production facilities, while others are being manufactured on a pre-
production basis.  Other industries involved in the commercial production of
genetically engineered products include the pharmaceutical, food processing and
agricultural industries.

The Company is expanding its activities into related new markets for its
products.  These include genetic and identity testing, cell therapy and tissue
engineering involving cell culture media and plant biotechnology applications.

                             PRODUCTS AND SERVICES
                             ---------------------

Information regarding the Company's products and services is contained in the
Financial Note entitled "Segment Reporting and Related Information" on pages F-
22 through F-24 of this 1998 Annual Report on Form 10-K.

                                       2
<PAGE>
 
                 GEOGRAPHIC AND OPERATING SEGMENT INFORMATION
                 --------------------------------------------
                                        
Information regarding geographic and operating segment information is contained
in the Financial Note entitled "Segment Reporting and Related Information" on
pages F-22 through F-24 of this 1998 Annual Report on Form 10-K.

                              SALES AND MARKETING
                              -------------------

At December 31, 1998, the Company had approximately 174 employees worldwide who
were employed in direct field sales.  Most of the Company's products are sold
throughout the world by its own sales employees, and the remaining products are
sold through agents or distributors.

                           RESEARCH AND DEVELOPMENT
                           ------------------------

The Company believes that a strong research and product development effort is
important to its future growth.  The Company's investment in research and
development was $21.9 million in 1998, $21.3 million in 1997 and $19.1 million
in 1996.  R&D expenses in 1998, 1997 and 1996 were primarily directed toward
developing new products and business solutions for the Company's customers in
the life sciences research and industrial bioprocessing areas and toward
improving production processes.

The Company conducts most of its research and development activities at its own
facilities using its own personnel.  At December 31, 1998, the Company had
approximately 146 employees principally engaged in research and development. The
Company's scientific staff is augmented by advisory relationships with a number
of scientists.

The Company's research and development activity is aimed at maintaining a
leadership position in providing research tools to the life sciences research
market and enhancing its market position as a supplier of products used to
manufacture genetically engineered pharmaceuticals and other materials.

                                  COMPETITION
                                  -----------

Only one company is known to compete with the Company in all its major product
lines, but in each product line competition is offered by a number of companies,
including companies substantially larger and with greater financial resources
than LTI.  In the Company's view, competitive position in its markets is
determined by product quality, speed of delivery, technical support, price,
breadth of product line, and timely product development.  The Company believes
its customers are diverse and place varying degrees of importance on the
competitive attributes listed above.  While it is difficult to rank these
attributes for all its customers in the aggregate, the Company believes it is
well positioned to compete in each category.

                             PATENTS AND LICENSES
                             --------------------

The Company has a number of U.S and foreign patents and has numerous pending
patent applications. In addition to its patent portfolio, the Company also owns
other intellectual property, and on a case by case basis, the Company grants
licenses to others to use such intellectual property.  The Company does not
believe that license revenue is material to its business as a whole.  In
addition, it is the Company's policy to obtain nondisclosure and confidentiality
agreements from all its employees believed to have access to proprietary
information.

The Company has obtained rights to products and technologies under a number of
license agreements with universities and others.  In 1998, approximately 17% of
the Company's net sales were related to products which were licensed from others
or which incorporated technologies licensed from others.  The Company 

                                       3
<PAGE>
 
intends to continue its current strategy of seeking licenses to technologies and
products from sources around the world.

                                   CUSTOMERS
                                   ---------

LTI has no single customer for its products which it deems to be material to its
business as a whole.  However, many of the Company's customers receive funding
for their research either directly or indirectly from the federal government in
the United States and from government agencies in various countries throughout
the world.

                                   SUPPLIERS
                                   ---------

The Company buys materials for its products from many suppliers, including
certain affiliated joint ventures, and is not dependent on any one supplier or
group of suppliers.  Raw materials, other than raw fetal bovine serum ("FBS"),
are generally readily available at competitive prices from a number of
suppliers.  Although there is a well-established market for FBS, one of the
Company's major products, its price is unstable, and its supply could be limited
because the availability of slaughtered cattle tends to be cyclical. The Company
acquires raw FBS products from various suppliers, including affiliated joint
ventures. Some of these suppliers provide a major portion of the FBS available
from a specific geographic region, although no single supplier provides a
majority of the total FBS available to the Company.

The Company believes it maintains a quantity of FBS inventory adequate to insure
reasonable customer service levels while guarding against normal volatility in
the supply of FBS available to the Company.  FBS inventory quantities can
fluctuate significantly as the Company balances varying customer demand for FBS
against fluctuating supplies of FBS available to the Company. The Company
believes it will be able to continue to acquire FBS in quantities sufficient to
meet its customers' current requirements.

                             GOVERNMENT REGULATION
                             ---------------------

Certain of the Company's cell culture products are subject to regulation under
the U.S. Federal Food, Drug and Cosmetic Act with respect to testing, safety,
efficacy, marketing, labeling and other matters.  In addition, the Company's
manufacturing facilities for the production of in vitro diagnostic cell culture
products are subject to periodic inspection by the U.S. Food and Drug
Administration ("FDA") and other product-oriented federal agencies and various
state and local authorities in the U.S.  Such facilities are believed to be in
compliance in all material respects with the requirements of the FDA's current
Good Manufacturing Practices, other federal, state and local regulations and
other quality standards such as ISO 9000.

The U.S. federal government oversees certain recombinant DNA research activities
through the National Institutes of Health Guidelines for research involving
recombinant DNA molecules (the "NIH Guidelines").  The NIH Guidelines prohibit
or restrict certain recombinant DNA experiments, set forth levels of biological
and physical containment of recombinant DNA molecules to be met for various
types of research and require that institutional biosafety committees approve
certain experiments before they are initiated.  The NIH Guidelines now exempt
most of the experiments conducted by the Company.  The Company, however,
voluntarily complies with the NIH Guidelines for its molecular and cell biology
experiments. Compliance with the NIH Guidelines has not had, and the Company
does not believe it will have in the future, a material effect on the capital
expenditures, earnings or competitive position of the Company.

The Company has an Institutional Biosafety Committee, which has been approved
and certified by the NIH Office of Recombinant DNA Activities, to oversee its

                                       4
<PAGE>
 
laboratory practices concerning biological agents.  Through training, practices,
equipment and facilities, LTI follows the NIH Guidelines' hazard classification
system recommendations for handling bacterial and viral agents, with
capabilities through biosafety level three.

In addition to the foregoing, the Company is subject to other federal, state and
local laws and ordinances applicable to its business, including the Occupational
Safety and Health Act, the Clean Water Act, the Toxic Substances Control Act,
the Clean Air Act, various statutes and regulations applicable to the use of
radioactive material, national restrictions on technology transfer, import,
export and customs regulations, statutes and regulations relating to government
contracting, and similar laws and regulations in foreign countries. In
particular, the Company is subject to European regulations regarding importation
of animal-derived products such as FBS.

                                   EMPLOYEES
                                   ---------

At December 31, 1998, the Company had approximately 1,759 full-time and 49 part-
time employees, approximately 677 of whom were employed outside the United
States.  No employees are covered by a collective bargaining agreement.
Management believes that its relations with its employees are good.

ITEM 2.     PROPERTIES
-------     ----------

The Company owns or leases property at the following principal locations, each
of which contains manufacturing, storage, laboratory or office facilities:

Rockville, Maryland  (Owned)
Frederick, Maryland  (Owned and leased)
Glasgow area, principally Inchinnan, Scotland  (Owned and leased)
Grand Island, New York  (Owned)
Auckland, New Zealand (Owned and leased)

The Company owns or leases certain other properties throughout the world in
addition to the principal properties listed.  The terms of the leases for
properties to which the Company is a party range in expiration dates from 1999
to 2020, and some are renewable.

Many of the Company's plants have been constructed, renovated, or expanded one
or more times during the past ten years.  The Company is currently using
substantially all of its space with some space available for expansion at some
of its locations.  The Company considers the facilities to be in a condition
suitable for their current uses.  Because of anticipated growth in the business
and due to the increasing requirements of customers or regulatory agencies, the
Company may need to acquire additional space or upgrade and enhance existing
space during the next five years.

Additional information regarding the Company's properties is contained in Item 7
of this 1998 Annual Report on Form 10-K in the sections entitled "1998 Cash
Flows" and "1999 Cash Flows" as well as in the Financial Notes entitled
"Property, Plant and Equipment" and "Leases" on pages F-10 and F-11 of this 1998
Annual Report on Form 10-K.

Item 3.  LEGAL PROCEEDINGS
-------  -----------------

The Company is involved in various legal proceedings, including class actions,
that are incidental to its business.  The Company is not involved in any pending
legal proceedings which the Company believes could reasonably be expected to
have a material adverse effect on the Company's financial condition or results
of operations.

                                       5
<PAGE>
 
From July 8 to July 10, 1998, several lawsuits purporting to be brought as class
actions on behalf of the Company's public stockholders were filed against the
Company, Dexter Corporation ("Dexter") and the Company's directors (with whom
the Company has indemnification agreements) in the Court of Chancery of the
State of Delaware.  In September 1998 these lawsuits were consolidated into a
single action, titled In re Life Technologies, Inc. Shareholders Litigation
(Consolidated Civil Action No. 16513).  On November 6, 1998, an Amended
Consolidated Class Action Complaint, a motion for preliminary injunction and a
motion for expedited proceedings were filed in the Court of Chancery of the
State of Delaware.  The amended consolidated complaint alleges, among other
things, that Dexter and the defendant directors of the Company who are
affiliated with Dexter or are officers of the Company have breached their
respective fiduciary duties to the Company's public stockholders.  The amended
consolidated complaint seeks to enjoin defendants, preliminarily and
permanently, from consummating a tender offer by Dexter, to require Dexter to
supplement its Offer to Purchase and to recover monetary damages and fees and
expenses of litigation.  On November 9, 1998, the Delaware Chancery Court
scheduled a hearing to be held on November 24, 1998, with respect to the motion
for preliminary injunction filed on November 6, 1998.  At the November 24, 1998
hearing, the Court of Chancery of the State of Delaware denied the plaintiffs'
motion for preliminary injunction.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
-------  ---------------------------------------------------

None.

EXECUTIVE OFFICERS OF THE REGISTRANT
------------------------------------

The Board of Directors elects all executive officers of the Company.  Each
executive officer holds his or her office until the earlier of his or her death,
resignation, removal from office or the election or appointment of his or her
successor.  No family relationships exist among any of the Company's executive
officers, directors or persons nominated to serve as such.  The positions held
and period during which the executive officers have served in those positions
are set forth below:

J. STARK THOMPSON, PH.D. (age: 57; years of service: 10) was elected President
and Chief Executive Officer of the Company in August 1988 and became a director
of the Company in September 1988.  Prior to joining the Company, he had been
with E.I. DuPont de Nemours & Company ("DuPont") for 21 years.

JOHN V. COOPER (age 47; years of service: 7) was elected Senior Vice President
and General Manager, Americas Research Products Division, effective February 2,
1999.  Prior thereto, he held the position of Vice President and General
Manager, Americas Research Products Division, effective April 13, 1993.  Prior
thereto, he held several managerial positions with the Company since joining the
Company in 1992.  Prior to joining the Company, he had been a Worldwide Business
Manager in Printed Circuit Materials for DuPont.

THOMAS M. COUTTS (age: 54; years of service: 29) was elected Senior Vice
President and General Manager, European Division, effective March 1, 1989. Prior
thereto, he had been Vice President of Life Technologies, Europe.

BRIAN D. GRAVES (age: 57; years of service: 17) was elected Vice President and
General Manager, U.S. Industrial Bioproducts Division, effective July 1, 1990.
Prior thereto, he had been Vice President of Sales and Marketing, U.S. Research
Products Division, for the Company.

TIMOTHY E. PIERCE, PH.D. (age: 57; years of service: 8) was elected Vice
President and General Manager, Asia Pacific Division, effective September 18,
1990.

                                       6
<PAGE>
 
JOSEPH C. STOKES, JR. (age: 51; years of service: 10) was elected Senior Vice
President and Chief Financial Officer, effective July 16, 1996.  Prior thereto,
he held the position of Vice President, Finance, Secretary and Treasurer,
effective March 1, 1989.  He was appointed a director of the Company on February
2, 1999.

ROSEMARY J. VERSTEEGEN, PH.D. (age: 50; years of service: 17) was elected a Vice
President of the Company on April 16, 1991.  Prior thereto, she held several
managerial positions with the Company since joining the Company in 1982.

DEREK E. WOODS, PH.D. (age: 48; years of service: 3) was elected Vice President,
Research and Development on April 15, 1997, and prior thereto had served in that
position as an appointed officer since joining the Company in 1996.  Prior
thereto, he worked for Johnson & Johnson in various research and business
development positions.

                                    PART II
                                    -------

ITEM 5.  MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
-------  -----------------------------------------------------------------
         MATTERS
         -------

The Company's Common Stock is quoted on the OTC Bulletin Board under the symbol:
LTEK.  Prior to the close of business on February 1, 1999, the Company's Common
Stock was quoted on the Nasdaq National Market under the symbol:  LTEK.

Effective with the close of business on February 1, 1999, the Company's Common
Stock was delisted from the Nasdaq Stock Market, because of the Company's
inability to remain in compliance with certain maintenance standards required
for continued listing on the Nasdaq National Market, including the number of
shareholders and public float requirements.  The Company fell out of compliance
with certain requirements as a result of the completed tender offer for the
Company's Common Stock by Dexter Corporation.  The high and low sales prices for
the Company's Common Stock for each quarter of 1997 and 1998 as reported by The
Nasdaq Stock Market are contained in the Financial Notes entitled "Quarterly
Financial Information" on page F-21 of this 1998 Annual Report on Form 10-K.

The number of stockholders of record of the Company's Common Stock at March 5,
1999 was 354.  At March 5, 1999, Dexter Corporation owned approximately 71% of
the outstanding Common Stock of the Company.

The Company's Board of Directors has declared regular quarterly cash dividends
in each fiscal quarter since the second quarter of 1991.  For the previous three
years, cash dividends declared were: $0.03-1/3 per share in the first quarter of
1996, $0.04 per share for the remaining three fiscal quarters of 1996 and the
first two quarters of 1997, and $0.05 per share for the last two quarters of
1997 and all four quarters of 1998.  The Company's Board of Directors expects to
consider the declaration and payment of quarterly dividends based on future
operating results.


ITEM 6.  SELECTED FINANCIAL DATA
-------  -----------------------

This information has been derived from, and should be read in conjunction with,
the related consolidated financial statements and Management's Discussion and
Analysis of Financial Condition and Results of Operations included elsewhere in
this 1998 Annual Report on Form 10-K.

                            SELECTED FINANCIAL DATA
                            -----------------------
                 (amounts in thousands, except per share data)

                                       7
<PAGE>
 
<TABLE>
<CAPTION>
 
                                        1998      1997      1996      1995      1994
                                      --------  --------  --------  --------  --------
<S>                                   <C>       <C>       <C>       <C>       <C>
FOR THE YEAR
  Revenues                            $364,206  $332,808  $310,339  $272,299  $235,262
  Research and development
    expenses                            21,880    21,281    19,084    15,871    15,000
  Shareholder acquisition expenses       5,335         -         -         -         -
  Gain on product line disposal              -         -     2,569         -         -
  Operating income                      50,509    50,934    46,101    34,152    28,040
  Net income                            31,303    32,235    28,700    22,277    18,207
  Additions to property, plant
    and equipment                     $ 18,024  $ 23,386  $ 42,151  $ 11,159  $ 12,123
  Average shares outstanding:
    Basic                               23,687    23,171    22,881    22,601    22,457
    Diluted                             24,204    23,945    23,504    22,929    22,607
AT DECEMBER 31
  Cash and cash equivalents           $ 56,047  $ 19,076  $ 15,326  $ 23,201  $ 13,246
  Working capital                      160,403   100,927    84,196    96,761    71,255
  Total assets                         353,587   280,274   253,931   208,744   171,747
  Long-term debt                             -     4,564     4,668     1,451         -
  Stockholders' equity                 276,108   208,724   182,919   153,925   130,129
    Per share                         $  11.07  $   8.94  $   7.97  $   6.76  $   5.79
  Shares outstanding                    24,941    23,351    22,951    22,773    22,471
PER SHARE
  Net income:
    Basic                             $   1.32  $   1.39  $   1.25  $    .99  $    .81
    Diluted                               1.29      1.35      1.22       .97       .81
  Cash dividends declared                  .20       .18   .15 1/3   .13 1/3   .13 1/3
  Market price:
    High                                    40    35 7/8    26 1/2    18 1/3    13 1/2
    Low                                 29 3/8    24 1/4    15 1/3    11 2/3        10
    Close                               38 7/8    33 1/4        25    18 1/6        13
</TABLE>

                                       8
<PAGE>
 
ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 
-------   ---------------------------------------------------------------
          RESULTS OF OPERATIONS
          ---------------------

Statements in this Annual Report on Form 10-K concerning the Company's business
outlook or future economic performance; anticipated profitability, revenues,
expenses or other financial items; and statements concerning assumptions made or
expectations as to any future events, conditions, performance or other matters,
are "forward-looking statements" as that term is defined under the Federal
Securities Laws.  Forward-looking statements are subject to risks, uncertainties
and other factors which could cause actual results to differ materially from
those stated in such statements. Such risks, uncertainties and factors include,
but are not limited to, changes in government funding for life sciences
research, changes in pricing or availability of fetal bovine serum, changes in
currency exchange rates, changes and delays in new product introduction,
customer acceptance of new products, changes in government regulations, changes
in pricing or other actions by competitors and general economic conditions, as
well as other risks detailed in the Company's filings with the Securities and
Exchange Commission, including this 1998 Annual Report on Form 10-K.  See in
particular the sections entitled "Business Outlook" and "1999 Cash Flows".

The information in this Item 7 should be read in conjunction with the related
consolidated financial statements and notes thereto contained elsewhere in this
1998 Annual Report on Form 10-K.

GENERAL

The Company develops, manufactures, and sells cell culture and cell and
molecular biology products, services and technologies.  Many of the Company's
products are sold under the GIBCO BRL brand name.  Cell culture products and
services are used to grow cells under laboratory conditions and for the
commercial manufacture of pharmaceuticals and other life sciences products. Cell
culture products include cell and tissue culture media, reagents, fetal bovine
("FBS") and other animal sera, growth and attachment factors, and plasticware.
Cell and molecular biology products, services and technologies are used to
identify, isolate, and manipulate the metabolic processes and genetic material
of living organisms. Cell and molecular biology products include enzymes,
nucleic acids, lipids, competent cells, custom oligonucleotides, and related
products.

RESULTS OF OPERATIONS

REVENUES

Revenues for the Company's operating segments in 1998, 1997 and 1996 compare as
follows:

<TABLE>
<CAPTION>
  (amounts in thousands)    1998      1997      1996
------------------------  --------  --------  --------
<S>                       <C>       <C>       <C>
Americas Research         $129,428  $118,095  $108,041
U.S. Bioindustrial          71,634    61,335    51,025
Europe                     116,996   105,682   106,041
Asia Pacific                43,915    45,756    43,386
Other                        2,233     1,940     1,846
------------------------  --------  --------  --------
Consolidated revenues     $364,206  $332,808  $310,339
========================  ========  ========  ========
</TABLE>

Revenues for 1998 were $364.2 million, an increase of $31.4 million, or 9%, over
1997 revenues.  The effect of changes in currency exchange rates reduced 1998
revenues by $6.4 million, or 2%, when compared with 1997 revenues. Revenues for
the Americas Research segment increased approximately 10% when comparing 1998
with 1997.  The effect of changes in currency exchange rates reduced 1998
revenues for the Americas Research segment by $0.9 million, or 1%, when compared
with 1997 revenues.  Revenues in Latin America increased 

                                       9
<PAGE>
 
significantly in 1998 when compared with 1997. This increase was directly
related to the establishment of a Company subsidiary in Brazil in late 1997.
Sales of custom oligonucleotides for the Americas Research segment increased
approximately 29% in 1998 compared with 1997 and contributed approximately 2% of
the 10% increase in segment revenues. Revenues for the U.S. Bioindustrial
segment increased approximately 17% when comparing 1998 with 1997. Sales of
enzymes increased approximately 70%, reflecting a significant increase in enzyme
sales to customers for use in commercial diagnostic applications. Sales of
custom oligonucleotides for the U.S. Bioindustrial segment increased
approximately 47% in 1998 compared with 1997. Revenues for the European segment
increased approximately 11% in 1998 compared with 1997. The effect of changes in
currency exchange rates reduced 1998 revenues for the European segment by $1.1
million, or 1%, when compared with 1997 revenues. Sales of cell and molecular
biology products increased 13% on a currency comparable basis and included a 33%
increase in custom oligonucleotide sales. Revenues for the Asia Pacific segment
decreased approximately 4% when comparing 1998 with 1997. The effect of changes
in currency exchange rates reduced 1998 revenues for the Asia Pacific segment by
$4.3 million, or 9%, when compared with 1997 revenues. Sales of cell and
molecular biology products increased 11% on a currency comparable basis in the
Asia Pacific segment when comparing 1998 revenues with 1997.

Revenues for 1997 were $332.8 million, an increase of $22.5 million, or 7%, over
1996 revenues.  The effect of changes in currency exchange rates reduced 1997
revenues by $12.7 million, or 4% when compared with 1996 revenues. Revenues for
the Americas Research segment increased approximately 9% when comparing 1997
with 1996. The effect of changes in currency exchange rates decreased 1997
revenues for the Americas Research segment by $0.2 million when compared with
revenues in 1996.  Sales of cell and molecular biology products increased 13% on
a currency comparable basis and included a 56% increase in custom
oligonucleotide sales.  Revenues for the U.S. Bioindustrial segment increased
approximately 20% in 1997 compared with 1996 revenues.  Sales of cell and
molecular biology products for the U.S. Bioindustrial Segment increased 30% when
comparing 1997 revenues with 1996 and included increases in custom
oligonucleotide and enzyme sales of 80% and 45%, respectively.  Revenues for the
European segment were essentially unchanged in 1997 from 1996.  The effect of
changes in currency exchange rates decreased 1997 revenues for the European
segment by $9.0 million, or 9%, when compared with revenues in 1996. Sales of
cell and molecular biology products for the European segment increased 14% on a
currency comparable basis and included an 82% increase in custom oligonucleotide
sales.  Revenues for the Asia Pacific segment increased approximately 6% in 1997
over 1996.  The effect of changes in currency exchange rates decreased 1997
revenues for the Asia Pacific segment by $3.5 million, or 8%, when compared with
1996.  Sales of cell and molecular biology products for the Asia Pacific segment
increased 23% on a currency comparable basis and included a 114% increase in
custom oligonucleitide sales.

Royalty income was $2.5 million, $1.8 million and $0.9 million in 1998, 1997 and
1996, respectively.  Royalty income relates principally to the Company's
patented technology to improve the accuracy of amplification based assays. The
Company generally grants a license to this technology for an up-front fee and
future royalties on sales of products which incorporate the licensed technology.
Royalty income based on licensee sales of products incorporating technology
licensed from the Company was $2.2 million in 1998, $1.6 million in 1997 and
$0.4 million in 1996.

COST OF SALES - GROSS MARGIN

Gross margins were 53.6% of net sales in 1998 compared with 53.9% of net sales
in 1997.  FBS gross margins improved slightly in 1998 when compared with 1997,
as unit costs decreased at a greater rate than unit selling prices.  The Company
reduced its LIFO reserves in the amount of $0.2 million during 1998, 

                                      10
<PAGE>
 
largely as a result of lower unit costs for FBS. Gross margins benefited from
production efficiencies when comparing 1998 with 1997 but were negatively
affected by unfavorable currency comparisons.

Gross margins were 53.9% of net sales in 1997 compared with 52.5% of net sales
in 1996.  FBS gross margins improved in 1997 when compared with 1996,
principally due to lower unit costs in 1997 compared with 1996.  The Company
reduced its LIFO reserves in the amount of $1.4 million during 1997, largely as
a result of lower unit costs for FBS.  Gross margins also benefited from a
favorable change in the mix of sales, production efficiencies and lower scrap
costs.

MARKETING AND ADMINISTRATIVE EXPENSES

Marketing and administrative expenses were 32.8% of net sales in 1998 and 32.6%
of net sales in both 1997 and 1996.  The Company has increased its spending for
marketing and administrative expenses over the period from 1996 to 1998,
expressed as a percentage of sales, to implement its new core business
enterprise management information systems and to acquire and protect
intellectual property rights.  Costs related to operating the Company's new
Brazilian subsidiary increased marketing and administrative expenses as a
percentage of sales when comparing 1998 with 1997.

RESEARCH AND DEVELOPMENT ("R&D") EXPENSES

Research and development expenses were $21.9 million in 1998, $21.3 million in
1997 and $19.1 million in 1996.  R&D expenses in 1998, 1997 and 1996 were
directed primarily toward developing new products and business solutions for the
Company's customers in the life sciences research and industrial bioprocessing
areas and toward improving production processes.

Research and development expenses represented 6.0%, 6.4% and 6.2% of net sales
in 1998, 1997 and 1996, respectively.

SHAREHOLDER ACQUISITION EXPENSES

The Company reported $5.3 million in expenses in 1998 related to the acquisition
of additional shares of the Company by Dexter Corporation ("Dexter").  Dexter
announced on July 7, 1998 its intention to acquire, for $37 per share in cash,
the shares of the Company it did not already own. Shortly thereafter, the Board
of Directors of the Company appointed a special committee of the board,
consisting of independent directors, to evaluate Dexter's proposal. The special
committee engaged legal and investment banking advisors to support their
evaluation.  On November 2, 1998, Dexter commenced a tender offer to acquire the
shares of the Company it did not already own which ultimately resulted in their
acquisition of an additional 22% of the Company in late December, 1998.
Approximately $4.0 million of the shareholder acquisition expenses reported in
1998 was for investment banking services in support of the special committee's
evaluation.  The remaining shareholder acquisition expenses were primarily legal
expenses associated with the transaction.  As of December 31, 1998, Dexter owned
approximately 71% of the Company.

GAIN ON PRODUCT LINE DISPOSAL

The Company reported a $2.6 million gain in 1996 on the disposal of its
molecular diagnostics product line which was sold in 1990 for book value plus a
$2.6 million note receivable.  The Company delayed recognition of the gain on
this sale until the note was collected because of reasonable doubt as to whether
the note might be collected.  The Company received payments on the note,
primarily for interest, from the time the note was first issued.  All interest
payments were included in interest income.

                                      11
<PAGE>
 
OPERATING INCOME

Operating income for 1998 was $50.5 million, a decrease of 1% compared with
1997.  Excluding the $5.3 million in expenses related to the acquisition of
additional shares by Dexter, operating income increased 10% in 1998 when
compared with 1997.  Changes in currency exchange rates used to translate non-
U.S. earnings to U.S. dollars decreased operating income in 1998 by $0.9 million
when compared with 1997.

Operating income for 1997 was $50.9 million, an increase of 10% compared with
1996. The increase in operating income was 17% when comparing 1997 results with
1996 operating income and excluding the one-time gain on the product line
disposal from 1996 results.  The percentage increase in adjusted operating
income was greater than the percentage increase in net sales principally due to
the improvement in gross margins.  Changes in currency exchange rates used to
translate non-U.S. earnings to U.S. dollars decreased operating income in 1997
by $1.1 million when compared with 1996.

OTHER INCOME AND EXPENSES

Investment income was $0.7 million in 1998, $0.5 million in 1997 and $0.7
million in 1996.  Investment income in 1996 included $0.1 million related to an
interest bearing note received upon the disposition of the Company's molecular
diagnostics product line in late 1990.  Apart from the interest on the
aforementioned note, interest income varied from 1996 to 1998 based on changes
in available cash and prevailing interest rates.

INCOME TAXES

Income taxes were 37.5% of income before taxes in 1998 compared with 36.0% of
income before taxes in both 1997 and 1996.  The effective income tax rate was
higher in 1998 reflecting limited income tax benefits related to the shareholder
acquisition expenses reported in 1998.  Apart from the effect on income tax
expense related to the shareholder acquisition expenses, the effective income
tax rate would have been 34.5% in 1998.  The reduction in the adjusted 1998
income tax rate compared with the 1997 income tax rate was due to the
realization of a higher proportion of taxable income in countries with lower tax
rates as well as greater benefits from tax credits recognized in 1998.

MINORITY INTERESTS

Income attributed to minority interest investors was $0.6 million in 1998, $0.6
million in 1997 and $1.2 million in 1996.  The decrease in 1997 compared with
1996 is due to lower minority ownership in the Company's Japanese subsidiary in
1997 compared with 1996, as well as lower earnings in 1997 at entities less than
100% owned by the Company.

NET INCOME

Net income was $31.3 million in 1998, $32.2 million in 1997 and $28.7 million in
1996.  Excluding shareholder acquisition expenses and the related income tax
effect from 1998 results, and the one-time gain on the product line disposal
from 1996 results, net income has increased 13%, 19% and 21% in 1998, 1997, and
1996, respectively.

EARNINGS PER SHARE

Diluted earnings per share were $1.29 in 1998, a 4% decrease compared with
diluted earnings per share of $1.35 in 1997.  Excluding approximately $5.3
million of expenses related to the acquisition of additional shares of the

                                      12
<PAGE>
 
Company by Dexter, 1998 diluted earnings per share were $1.50, an increase of
11% over the previous year.

Diluted earnings per share were $1.35 in 1997, which constituted an increase of
11% when compared with diluted earnings per share of $1.22 in 1996. Excluding
the one-time gain reported in 1996 related to the disposition of a product line,
diluted earnings per share increased 17%.

BUSINESS OUTLOOK

The Company expects to concentrate on its core cell culture and cell and
molecular biology product lines and related service and technology offerings in
1999.  Future trends in the Company's markets may be affected by government
funding for life sciences research, the number of new products developed and
introduced by the Company, its competitors and its customers, and changes in
technology and scientific discoveries.

Changes in currency exchange rates, economic and currency instability,
especially in Asia and Latin America, the supply and price of FBS, and the
availability of well-trained employees throughout the world are factors that
could have a significant effect on the Company in 1999. A strengthening of the
U.S. dollar and Pound Sterling against other currencies could have a negative
effect on the Company's operating results.

Volatility in the FBS market could significantly affect the Company's operating
results.  The market volatility of FBS and the increasing demand for alternative
media provide strong incentive to develop products and technologies which are
not dependent on animal sera raw materials.  To date, serum-free media has only
been developed for specific, relatively narrow purposes.  If a more broadly
applicable alternative to animal derived products were developed, it could have
a significant effect on the Company's operating results, which could be positive
or negative, depending on what rights were held by the Company in the
alternative products.

Heightened worldwide safety and environmental concerns are likely to lead to
increased regulation in these areas.  The Company is committed to promoting the
safety and health of its employees and the environment and will remain pro-
active in complying with federal, state and local regulations.

The Company is in the process of replacing its core financial, order
entry/distribution, and manufacturing systems at its major locations worldwide.
The Company has been advised by its software vendor that the release/version of
the software being implemented by the Company is Year 2000 compliant. The
Company began the installation of this software in the first quarter of 1998 in
the United States, and currently expects U.S. installation to be complete in the
third quarter of 1999. The Company plans to complete internal testing and
external validation of Year 2000 compliance with respect to this system during
the third quarter of 1999. The Company also currently expects to have these new
systems installed in Europe and in the Asia/Pacific region by the end of the
second quarter 1999, and to test and validate these systems by the end of the
century. The Company plans to certify software currently in use at other sites
and not replaced by the new systems for Year 2000 compliance by the third
quarter of 1999. As previously reported, although the Company decided to replace
these core systems several years ago for reasons unrelated to Year 2000
concerns, a portion of the overall project relates to an unanticipated software
upgrade implemented specifically to address Year 2000 issues. Due to the
significant amount of time and effort expended for overall systems replacement
activities, it is difficult to calculate the actual costs specifically
attributable to the Year 2000 software upgrade portion of the project. However,
the Company estimates that the cost of this upgrade (which represents external
costs incurred to
                                      13
<PAGE>
 
date directly related to Year 2000 remediation efforts) approximates $0.1
million.

The Company is also implementing a comprehensive project plan to identify other
internal and external systems which may require modification or upgrade to be
made Year 2000 compliant.  An inventory and assessment of these systems was
substantially complete by the end of 1998.  Remediation and testing of non-Year
2000 compliant systems is expected to be completed by the end of the third
quarter 1999.  As part of this project, the Company expects to develop and test
contingency plans by the third quarter of 1999 which identify workarounds in the
event of a malfunction of a system designated as a priority system at the
inventory stage.  In addition, the Company is in the process of identifying
suppliers of key goods and services to all business areas, and requesting
information about their Year 2000 readiness.  The Company plans to evaluate this
information on a continuing basis into Year 2000, and to develop contingency
plans where the information provided raises significant concerns about a
vendor's ability to supply the Company on an uninterrupted basis during the Year
2000 transition.  As of December 31, 1998, costs incurred related to this part
of the project were not material.  The Company believes that the cost of
modifications necessary to become Year 2000 compliant will be approximately $2.0
million, principally for capital expenditures.  There can be no assurance,
however, that the Company will be able to identify all aspects of its business
that are subject to Year 2000 problems, or identify Year 2000 problems of
customers or suppliers that affect the Company's business.  There also can be no
assurance that the Company's software vendors are correct in their assertions
that the software is Year 2000 compliant or that the Company's estimate of the
costs of systems preparation for Year 2000 compliance will prove ultimately to
be accurate.

LIQUIDITY AND CAPITAL RESOURCES

1998 CASH FLOWS

The Company generated $42.1 million in cash from operations during 1998.  Net
income after adjustments for depreciation and amortization was the principal
source of cash from operations in 1998.  The components of working capital
increased at a rate generally commensurate with the increase in net sales and,
in the aggregate, required $6.3 million in cash during 1998.

The Company paid $25.4 million in cash for capital expenditures in 1998. Capital
spending in 1998 included $4.6 million for land under a capital lease at the
Company's headquarters in Rockville, Maryland and $3.8 million to complete the
Company's new administrative and R&D facilities at that site.  The Company also
spent $6.9 million to relocate and consolidate its U.S.-based cell generation
and custom oligonucleotide production facilities to its core cell and molecular
biology production facility in Frederick, Maryland.  The balance of 1998 capital
spending was principally for new and replacement machinery and equipment and
management information systems related to the Company's ongoing business
operations.  The Company paid $1.1 million in deferred purchase payments related
to the 1996 acquisition of Custom Primers, Inc., a California-based producer of
oligonucleotides.  Cash provided from other investing activities was principally
related to the disposition of excess land owned by the Company in Gaithersburg,
Maryland at the former site of its cell and molecular biology R&D facility and
Company headquarters.

Financing activities provided $21.3 million in cash to the Company during 1998.
The Company received $27.1 million in cash during 1998 related to the exercise
of stock options.  Substantially all vested stock options were exercised prior
to consummation of Dexter's tender offer for additional shares of the Company in
December, 1998.  The Company used $4.7 million for its quarterly cash dividends
and $1.0 million to reduce debt in 1998.

                                      14
<PAGE>
 
1999 CASH FLOWS

Capital expenditures in 1999 are expected to range from $30-35 million.  The
Company is contemplating additional facility upgrades and expansions of $15-20
million with the balance of expected 1999 capital expenditures for new and
replacement machinery, equipment and management information systems.

The Company is actively evaluating licensing possibilities, as well as
acquisition candidates which complement the Company's core cell and molecular
biology and cell culture product lines.  The Company may fund these transactions
using cash from operations, debt, equity, or other sources.

The Board of Directors intends to consider the declaration and payment of
quarterly dividends in the future based on the operating performance of the
Company.

The Company currently has an unused short-term revolving credit facility with
Dexter Corporation, an affiliate of the Company, in the amount of $8.0 million.

The Company believes it will be able to generate sufficient cash from its
operations and its existing credit facility to meet all its anticipated cash
requirements in 1999, apart from any significant business acquisition which may
occur and which may be financed using cash from operations, debt, equity, or
other sources.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
--------  ----------------------------------------------------------

Life Technologies is exposed to market risk related to changes in foreign
currency exchange rates, commodity prices, and interest rates, and selectively
uses financial instruments to manage these risks.  The Company does not enter
into financial instruments for speculation or trading purposes.  A discussion of
the Company's accounting policies for derivative financial instruments is
included in the financial note entitled "Currency Effects" on pages F-17 and F-
18 of this 1998 Annual Report on Form 10-K.

ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-------   -------------------------------------------

The Financial Statements and Supplementary Data appear on pages F-1 through F-24
of this 1998 Annual Report on Form 10-K.

ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
-------   ---------------------------------------------------------------
          FINANCIAL DISCLOSURE
          --------------------

None
                                   PART III
                                   --------

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
--------  --------------------------------------------------

Information regarding directors of the Company and compliance by the directors
and officers of the Company with certain reporting requirements pursuant to
Section 16(a) of the Securities Exchange Act of 1934 is contained under the
caption  "Proposal No. 1 - Election of Directors" in the Company's Proxy
Statement, which is incorporated herein by reference.  Information regarding
executive officers of the Company is included in Part I hereof, under the
caption "Executive Officers of the Registrant."

ITEM 11.  EXECUTIVE COMPENSATION
--------  ----------------------

The information required by this item is contained under the captions "Executive
Compensation", "Compensation Committee Interlocks and Insider Participation" and
"Compensation of Directors" in the Company's Proxy Statement, which is
incorporated herein by reference.

                                      15
<PAGE>
 
ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
--------  --------------------------------------------------------------

The information required by this item is contained under the caption "Beneficial
Ownership of Common Stock" in the Company's Proxy Statement, which is
incorporated herein by reference.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
--------  ----------------------------------------------

None.
                                    PART IV
                                    -------

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
--------  ----------------------------------------------------------------

(a) (1)   Financial Statements:
 
          a.  Report of Independent Accountants

          b.  Consolidated Statement of Income for the
              years ended December 31, 1998, 1997 and 1996

          c.  Consolidated Statement of Comprehensive Income
              for the years ended December 31, 1998, 1997 and 1996

          d.  Consolidated Balance Sheet as of December 31,
              1998 and 1997

          e.  Consolidated Statement of Cash Flows for the
              years ended December 31, 1998, 1997 and 1996

          f.  Consolidated Statement of Changes in
              Stockholders' Equity for the years ended
              December 31, 1998, 1997 and 1996

          g.  Notes to Consolidated Financial Statements

(a) (2)   Financial Statement Schedules:

          None.

          All schedules have been omitted because they are not required, not
          applicable, or the information required to be set forth therein is
          included in the Company's consolidated financial statements.

(a) (3)   Exhibits:

          Exhibit numbers 10(A),(B),(C),(D),(E),(F),(G),(H),(I),(J),(K),(L) (M),
          (N), (O) and (P) are management contracts, compensatory plans,
          contracts or arrangements.

          3(A) Certificate of Incorporation of the Registrant, including
               Amendment to Certificate of Incorporation dated April 17, 1987
               and Amendment to Certificate of Incorporation dated April 14,
               1998, previously filed as Exhibit 3(A) to the Registrant's
               Quarterly Report on Form 10-Q for the quarter ended June 30,
               1998, SEC file no. 0-14991, which is incorporated herein by
               reference.

          3(B) By-laws of the Registrant, as amended and restated on April 16,
               1991, previously filed as Exhibit 3(B) to the Registrant's Annual
               Report on Form 10-K for the year ended 

                                      16
<PAGE>
 
                 December 31, 1991, SEC file no. 0-14991, which is incorporated
                 herein by reference.

          10(A)  1984 Stock Option Plan, previously filed as Exhibit 4.1 to the
                 Registrant's Registration Statement on Form S-8, No. 33-21807,
                 dated May 12, 1988, which is incorporated herein by reference.

          10(B)  Executive Supplemental Retirement Plan, previously filed as
                 Exhibit 10(B) to the Registrant's Annual Report on Form 10-K
                 for the year ended December 31, 1990, SEC file no. 0-14991,
                 which is incorporated herein by reference.

          10(C)  Executive Deferred Compensation Benefit Plan, previously filed
                 as Exhibit 10.8 to the Registrant's Registration Statement on
                 Form S-1, No. 33-7993, dated October 1, 1986, which is
                 incorporated herein by reference.

          10(D)  Change-in-Control Agreement dated February 13, 1997, between
                 the Registrant and Dr. J. Stark Thompson regarding certain
                 severance benefits in the event of termination of employment
                 following a change of control, as defined in the agreement,
                 previously filed as Exhibit 10.2 to the Registrant's Quarterly
                 Report on Form 10-Q for the quarter ended March 31, 1997, SEC
                 file no. 0-14991, which is incorporated herein by reference.

          10(E)  Change-in-Control Agreement dated February 13, 1997, between
                 the Registrant and Joseph C. Stokes, Jr. regarding certain
                 severance benefits in the event of termination of employment
                 following a change of control, as defined in the agreement,
                 previously filed as Exhibit 10.3 to the Registrant's Quarterly
                 Report on Form 10-Q for the quarter ended March 31, 1997, SEC
                 file no. 0-14991, which is incorporated herein by reference.

          10(F)  Change-in-Control Agreement dated February 13, 1997, between
                 the Registrant and Thomas M. Coutts regarding certain severance
                 benefits in the event of termination of employment following a
                 change of control, as defined in the agreement, previously
                 filed as Exhibit 10.1 to the Registrant's Quarterly Report on
                 Form 10-Q for the quarter ended March 31, 1997, SEC file no. 0-
                 14991, which is incorporated herein by reference.

          10(G)  Change-in-Control Agreement dated February 13, 1997, between
                 the Registrant and John V. Cooper regarding certain severance
                 benefits in the event of termination of employment following a
                 change of control, as defined in the agreement, previously
                 filed as Exhibit 10.5 to the Registrant's Quarterly Report on
                 Form 10-Q for the quarter ended March 31, 1997, SEC file no. 0-
                 14991, which is incorporated herein by reference.

          10(H)  Change-in-Control Agreement dated February 13, 1997, between
                 the Registrant and Brian D. Graves regarding certain severance
                 benefits in the event of termination of employment following a
                 change of control, as defined in the agreement.

          10(I)  Form of Employment Agreement effective February 13, 1997,
                 between the Registrant and certain executive officers of the
                 Registrant regarding certain severance benefits in the event of
                 termination of employment following a change in control, 

                                      17
<PAGE>
 
                 as defined in the agreement, previously filed as Exhibit 10.6
                 to the Registrant's Quarterly Report on Form 10-Q for the
                 quarter ended March 31, 1997, SEC file no. 0-14991, which is
                 incorporated herein by reference

          10(J)  1991 Stock Option Plan, previously filed as Exhibit 4 to the
                 Registrant's Registration Statement on Form S-8 No. 33-956,
                 dated May 9, 1991, which is incorporated herein by reference.

          10(K)  1995 Long-term Incentive Plan, previously filed as Exhibit 4 to
                 the Registrant's Registration Statement on Form S-8 No. 33-
                 59741, dated June 1, 1995, which is incorporated herein by
                 reference.

          10(L)  1996 Non-Employee Directors' Stock Option Plan, previously
                 filed as Exhibit 4(b) to the Registrant's Registration
                 Statement on Form S-8 No. 333-03773, dated May 15, 1996, which
                 is incorporated herein by reference.

          10(M)  1996 Non-Employee Directors' Annual Retainer Stock Plan,
                 previously filed as Exhibit 4(a) to the Registrant's
                 Registration Statement on Form S-8 No. 333-03773, dated May 15,
                 1996, which is incorporated herein by reference.

          10(N)  1997 Long-term Incentive Plan, previously filed as Exhibit 4 to
                 the Registrant's Registration Statement on Form S-8 No. 333-
                 28607, dated June 6, 1997, which is incorporated herein by
                 reference.

          10(O)  Form of Indemnity Agreement between Registrant and Directors.

          10(P)  Form of Indemnity Agreement between Registrant and Executive
                 Officers.

          21     Subsidiaries of the Registrant.

          23     Consent of Independent Accountants.

          27     Financial Data Schedule.

          Exhibits other than those incorporated herein by reference have been
          included in copies of this Form 10-K filed with the Securities and
          Exchange Commission.  The Registrant agrees that it will furnish,
          without charge, a copy of any such exhibits to each stockholder of the
          Registrant upon the written request therefore to the Registrant.

(b)       Reports on Form 8-K.

          The Company filed a Current Report on Form 8-K dated November 3, 1998,
          reporting that two directors of the Company, Frank E. Samuel, Jr. and
          Iain C. Wylie, resigned as members of the Company's Board of Directors
          effective November 3, 1998.  Copies of the letters of resignation
          (including attachments) and the Company's press release filed in
          connection with receipt of the resignations were included in the
          Current Report on Form 8-K.

(c)       Exhibits
          See (a) (3) above.

(d)       Financial Statement Schedules
          See (a) (2) above.

                                      18
<PAGE>
 
                                  SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

Dated:  March 9, 1999           LIFE TECHNOLOGIES, INC.
                                (Registrant)


                                By /s/ Joseph C. Stokes, Jr.
                                ----------------------------------------
                                Joseph C. Stokes, Jr.
                                Senior Vice President and
                                Chief Financial Officer and Director

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities indicated.


/s/ Thomas H. Adams, Ph.D.      /s/ J. Stark Thompson, Ph.D.
----------------------------    ---------------------------------------- 
Thomas H. Adams, Ph.D.          J. Stark Thompson, Ph.D.
Director                        President and Chief Executive Officer
                                and Director
                                (Principal Executive Officer)


/s/ Bruce H. Beatt              /s/ K. Grahame Walker
----------------------------    ---------------------------------------- 
Bruce H. Beatt                  K. Grahame Walker
Director                        Chairman of the Board of Directors


/s/ Kathleen Burdett            /s/ George M. Whitesides
----------------------------    ---------------------------------------- 
Kathleen Burdett                George M. Whitesides
Director                        Director


/s/ R. Barry Gettins, Ph.D.     /s/ Joseph C. Stokes, Jr.
----------------------------    ---------------------------------------- 
R. Barry Gettins, Ph.D.         Joseph C. Stokes, Jr.
Director                        Senior Vice President and
                                Chief Financial Officer and Director
                                (Principal Financial Officer)


/s/ Peter G. Kelly              /s/ C. Eric Winzer
----------------------------    ---------------------------------------- 
Peter G. Kelly                  C. Eric Winzer
Director                        Controller
                                (Principal Accounting Officer)

                                      19
<PAGE>
 
                                  SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

                                LIFE TECHNOLOGIES, INC.
                                (Registrant)


                                By
                                ----------------------------------------
                                Joseph C. Stokes, Jr.
                                Senior Vice President and
                                Chief Financial Officer and Director

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities indicated.


----------------------------    ---------------------------------------- 
Thomas H. Adams, Ph.D.          J. Stark Thompson, Ph.D.
Director                        President and Chief Executive Officer
                                and Director
                                (Principal Executive Officer)


----------------------------    ---------------------------------------- 
Bruce H. Beatt                  K. Grahame Walker
Director                        Chairman of the Board of Directors


----------------------------    ---------------------------------------- 
Kathleen Burdett                George M. Whitesides
Director                        Director


----------------------------    ---------------------------------------- 
R. Barry Gettins, Ph.D.         Joseph C. Stokes, Jr.
Director                        Senior Vice President and
                                Chief Financial Officer and Director
                                (Principal Financial Officer)

----------------------------    ---------------------------------------- 
Peter G. Kelly                  C. Eric Winzer
Director                        Controller
                                (Principal Accounting Officer)
<PAGE>
 
                  INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


<TABLE> 
<CAPTION> 
                                                                 Page
<S>                                                              <C>  
          Index to Consolidated Financial Statements              F-1
 
          Report of Independent Accountants                       F-2
 
          Consolidated Statement of Income for the
          years ended December 31, 1998, 1997 and 1996            F-3
 
          Consolidated Statement of Comprehensive Income
          for the years ended December 31, 1998, 1997 and 1996    F-3
 
          Consolidated Balance Sheet as of December 31,
          1998 and 1997                                           F-4
 
          Consolidated Statement of Cash Flows for the
          years ended December 31, 1998, 1997 and 1996            F-5
 
          Consolidated Statement of Changes in                    F-6
          Stockholders' Equity for the years ended
          December 31, 1998, 1997 and 1996

          Notes to Consolidated Financial Statements              F-7
</TABLE> 

                                      F-1
<PAGE>
 
                       REPORT OF INDEPENDENT ACCOUNTANTS


To the Stockholders and Board of Directors of
Life Technologies, Inc.


In our opinion, the accompanying consolidated balance sheets and related
consolidated statements  of income, comprehensive income, changes in
stockholders' equity and cash flows present fairly, in all material respects,
the consolidated financial position of Life Technologies, Inc. and its
subsidiaries at December 31, 1998 and 1997, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1998, in conformity with generally accepted accounting principles.  These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits.  We conducted our audits of these statements in accordance with
generally accepted auditing standards 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 audits provide a reasonable basis for the opinion expressed
above.



                                             /s/ PricewaterhouseCoopers LLP
                                             ------------------------------


McLean, Virginia
January 22, 1999

                                      F-2
<PAGE>
 
                            Life Technologies, Inc.
                       Consolidated Statement of Income
                 (amounts in thousands, except per share data)

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
For the years ended December 31,                                                           1998       1997        1996
====================================================================================================================================
<S>                                                                                      <C>        <C>         <C>
Revenues:
  Net sales                                                                              $361,726   $330,967    $309,455
  Net royalties                                                                             2,480      1,841         884
------------------------------------------------------------------------------------------------------------------------------------
   Total revenues                                                                         364,206    332,808     310,339
------------------------------------------------------------------------------------------------------------------------------------
Expenses:
  Cost of sales                                                                           167,862    152,547     146,926
  Marketing and administrative                                                            118,620    108,046     100,797
  Research and development                                                                 21,880     21,281      19,084
  Shareholder acquisition expenses                                                          5,335          -           -
  Gain on product line disposal                                                                 -          -      (2,569)
------------------------------------------------------------------------------------------------------------------------------------
   Total expenses                                                                         313,697    281,874     264,238
------------------------------------------------------------------------------------------------------------------------------------
Operating income                                                                           50,509     50,934      46,101
------------------------------------------------------------------------------------------------------------------------------------
Other income (expense):
  Investment income                                                                           697        474         708
  Interest expense                                                                            (91)       (70)        (89)
------------------------------------------------------------------------------------------------------------------------------------
   Total other income                                                                         606        404         619
------------------------------------------------------------------------------------------------------------------------------------
Income before income taxes                                                                 51,115     51,338      46,720
Income taxes                                                                               19,168     18,481      16,819
------------------------------------------------------------------------------------------------------------------------------------
Income before minority interests                                                           31,947     32,857      29,901
Minority interests                                                                           (644)      (622)     (1,201)
------------------------------------------------------------------------------------------------------------------------------------
Net income                                                                               $ 31,303   $ 32,235    $ 28,700
====================================================================================================================================
Earnings per share:
   Basic                                                                                 $   1.32   $   1.39    $   1.25
   Diluted                                                                               $   1.29   $   1.35    $   1.22
Average shares outstanding:
   Basic                                                                                   23,687     23,171      22,881
   Diluted                                                                                 24,204     23,945      23,504
Cash dividends declared per share                                                        $    .20   $    .18    $.15 1/3
====================================================================================================================================
</TABLE> 
The accompanying notes are an integral part of the consolidated financial
statements.


                            Life Technologies, Inc.
                Consolidated Statement of Comprehensive Income
                            (amounts in thousands)

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
For the years ended December 31,                                                          1998      1997      1996
====================================================================================================================================
<S>                                                                                      <C>      <C>       <C>
Net income                                                                               $31,303  $32,235   $28,700
Other comprehensive income
   Currency translation effects                                                            1,292   (8,414)   (1,378)
------------------------------------------------------------------------------------------------------------------------------------
Comprehensive income                                                                     $32,595  $23,821   $27,322
====================================================================================================================================
</TABLE> 
The accompanying notes are an integral part of the consolidated financial
statements.

                                      F-3
<PAGE>
 
                            Life Technologies, Inc.
                          Consolidated Balance Sheet
                   (amounts in thousands, except share data)

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
December 31,                                                                               1998       1997
====================================================================================================================================
<S>                                                                                      <C>        <C>
ASSETS
Current assets:
  Cash and cash equivalents                                                              $ 56,047   $ 19,076
  Trade accounts receivable, net                                                           67,797     57,103
  Inventories:
    FIFO                                                                                   75,739     69,696
    LIFO reserve                                                                           (1,420)    (1,633)
------------------------------------------------------------------------------------------------------------------------------------
    Total inventory                                                                        74,319     68,063
  Prepaid and other current assets                                                         16,121      6,799
  Current deferred tax assets                                                               5,871      5,738
------------------------------------------------------------------------------------------------------------------------------------
    Total current assets                                                                  220,155    156,779
Property, plant and equipment, net                                                        107,374    100,098
Investments and other assets                                                               15,392     12,353
Excess of cost over net assets of businesses
  acquired, net                                                                            10,666     12,365
------------------------------------------------------------------------------------------------------------------------------------
    Total assets                                                                         $353,587   $281,595
====================================================================================================================================

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Short-term debt                                                                        $  2,210   $  2,976
  Accounts payable                                                                         23,916     21,420
  Accrued and deferred income taxes                                                         2,755      8,558
  Accrued liabilities and expenses                                                         30,871     22,898
------------------------------------------------------------------------------------------------------------------------------------
    Total current liabilities                                                              59,752     55,852
Long-term debt                                                                                  -      4,564
Pension liabilities                                                                         9,103      5,768
Deferred income taxes                                                                       5,173      3,695
Minority interests                                                                          3,451      2,992
Commitments and contingencies
Stockholders' equity:
  Preferred stock, $.01 par value, one million
    shares authorized; none issued
  Common stock, $.01 par value, 50 million
    shares authorized; issued and outstanding
    24,941,180 in 1998 and
    23,350,979 in 1997                                                                        249        234
  Additional paid-in capital                                                               94,067     54,503
  Retained earnings                                                                       188,202    161,689
  Accumulated other comprehensive income (loss)                                            (6,410)    (7,702)
------------------------------------------------------------------------------------------------------------------------------------
    Total stockholders' equity                                                            276,108    208,724
------------------------------------------------------------------------------------------------------------------------------------
    Total liabilities and stockholders' equity                                           $353,587   $281,595
====================================================================================================================================
</TABLE> 
The accompanying notes are an integral part of the consolidated financial
statements.

                                      F-4
<PAGE>
 
                            Life Technologies, Inc.
                     Consolidated Statement of Cash Flows
                            (amounts in thousands)

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------                                    
For the years ended December 31,                        1998       1997       1996                                      
=====================================================================================                                   
<S>                                                   <C>        <C>        <C>                                         
CASH INFLOWS (OUTFLOWS)                                                                                                 
Operations:                                                                                                             
  Net income                                          $ 31,303   $ 32,235   $ 28,700                                    
  Non-cash items:                                                                                                       
    Depreciation                                        11,383     10,126      8,293                                    
    Amortization                                         2,947      2,591      2,283                                    
    Deferred income taxes                                  481       (627)      (533)                                   
    Gain on product line disposal                            -          -     (2,569)                                   
    Minority interests in net income                       644        622      1,201                                    
  Changes in assets and liabilities                                                                                     
      net of acquisitions:                                                                                              
    Trade accounts receivable                           (8,769)    (7,461)    (7,422)                                   
    Inventories                                         (5,953)    (9,035)       140                                    
    Prepaid and other current assets                    (4,745)    (1,367)       995                                    
    Accounts payable                                     2,433      3,286      3,261                                    
    Accrued income taxes                                 2,548     (1,783)    (1,764)                                   
    Accrued liabilities and expenses                     8,143      2,020      7,367                                    
    Other                                                1,697      1,003        312                                    
-------------------------------------------------------------------------------------                                   
  Cash provided by operating activities                 42,112     31,610     40,264                                    
-------------------------------------------------------------------------------------                                   
Investments:                                                                                                            
  Capital expenditures                                 (25,359)   (27,300)   (36,017)                                   
  Acquisitions and joint ventures                       (1,047)      (914)   (11,704)                                   
  Proceeds from product line disposal                        -          -      2,569                                    
  Other                                                    585       (127)       (30)                                   
-------------------------------------------------------------------------------------                                   
  Cash used in investing activities                    (25,821)   (28,341)   (45,182)                                   
-------------------------------------------------------------------------------------                                   
Financing:                                                                                                              
  Proceeds from exercise of stock options               27,051      4,052      1,998                                    
  Dividends paid                                        (4,711)    (3,929)    (3,351)                                   
  Short-term borrowings, net                              (971)     1,896        319                                    
  Long-term loan repayments                                (23)      (713)    (1,617)                                   
-------------------------------------------------------------------------------------                                   
  Cash provided by (used in)                                                                                            
    financing activities                                21,346      1,306     (2,651)                                   
-------------------------------------------------------------------------------------                                   
Effect of exchange rate changes on cash                   (666)      (825)      (306)                                   
-------------------------------------------------------------------------------------                                   
Increase (decrease) in cash and                                                                                         
  cash equivalents                                      36,971      3,750     (7,875)                                   
Cash and cash equivalents at beginning                                                                                  
  of year                                               19,076     15,326     23,201                                    
-------------------------------------------------------------------------------------                                   
Cash and cash equivalents at end of year              $ 56,047   $ 19,076   $ 15,326                                    
====================================================================================                                    
Supplemental cash flow information:                                                                                    
  Cash paid during the year:                                                                                           
    Income tax, net of refunds                        $ 16,120   $ 20,081   $ 18,092                                    
  Non-cash financing activity:                                                                                          
    Capital lease                                            -          -   $  4,739                                    
====================================================================================                                    
</TABLE> 

The accompanying notes are an integral part of the consolidated financial
statements.

                                      F-5
<PAGE>
 
                            Life Technologies, Inc.
           Consolidated Statement of Changes in Stockholders' Equity
                            (amounts in thousands)

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------                            
                                                                                       Accumulated                                 
                                                                                       Other                                       
                                                                Additional             Comprehensive                               
                                              Common  Stock     Paid-in    Retained    Income                                      
                                              Shares  Amount    Capital    Earnings    (Loss)     Total                            
--------------------------------------------------------------------------------------------------------                            
<S>                                           <C>     <C>       <C>        <C>        <C>       <C>                        
Balances at                                                                                                                        
  December 31, 1995                           22,773    $152     $45,995   $108,444   $  (666)  $153,925                           
  Net income                                                                 28,700               28,700                           
  Dividends-$.15-1/3 per share                                               (3,511)              (3,511)                          
  Shares issued under                                                                                                              
    stock option and stock                                                                                                         
    grant plans                                  178       2       1,996                           1,998                           
  Tax benefit on stock                                                                                                             
    option plans                                                     429                             429                           
  Stock split                                             76         (76)                              -                           
  Currency effects                                                                      1,378      1,378                           
--------------------------------------------------------------------------------------------------------                            
Balances at                                                                                                                        
  December 31, 1996                           22,951     230      48,344    133,633       712    182,919                           
  Net income                                                                 32,235               32,235                           
  Dividends-$.18 per share                                                   (4,179)              (4,179)                          
  Shares issued under                                                                                                              
    stock option and stock                                                                                                         
    grant plans                                  400       4       4,124                           4,128                           
  Tax benefit on stock                                                                                                             
    option plans                                                   2,035                           2,035                           
  Currency effects                                                                     (8,414)    (8,414)                          
--------------------------------------------------------------------------------------------------------                            
Balances at                                                                                                                        
  December 31, 1997                           23,351     234      54,503    161,689    (7,702)  $208,724                           
  Net income                                                                 31,303               31,303                           
  Dividends-$.20 per share                                                   (4,790)              (4,790)                          
  Shares issued under                                                                                                              
    stock option and stock                                                                                                         
    grant plans                                1,590      15      28,585                          28,600                           
  Tax benefit on stock                                                                                                             
    option plans                                                  10,979                          10,979                           
  Currency effects                                                                      1,292      1,292                           
--------------------------------------------------------------------------------------------------------                            
Balances at                                                                                                                        
  December 31, 1998                           24,941    $249     $94,067   $188,202   $(6,410)  $276,108                           
========================================================================================================                           
</TABLE> 

The accompanying notes are an integral part of the consolidated financial
statements.

                                      F-6
<PAGE>
 
                NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
BASIS OF CONSOLIDATION AND PRESENTATION

The consolidated financial statements include the accounts of Life Technologies,
Inc. (the "Company" or "Life Technologies") and its majority owned or controlled
subsidiaries. Intercompany accounts, transactions, and profits have been
eliminated in the consolidated financial statements. Investments in affiliated
companies (20% to 50% Life Technologies' ownership) are recorded in the
consolidated financial statements using the equity method of accounting except
in cases where the Company can effectively exercise control. In these cases, the
accounts of the affiliate are included in the Company's consolidated financial
statements. Certain amounts for prior years have been reclassified to conform
to, and be consistent with, the 1998 presentation.

Management has made estimates and assumptions in the preparation of these
financial statements 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 revenues and expenses during the
reporting periods. Actual results could differ from those estimates.

NATURE OF OPERATIONS

Life Technologies is a multinational firm that develops, manufactures, and sells
cell culture and cell and molecular biology products used principally in life
sciences research and commercial manufacture of genetically engineered products.
The Company's principal customers consist of laboratories generally associated
with universities, medical research centers, and government institutions as well
as biotechnology, pharmaceutical, energy, agricultural and chemical companies.

BUSINESS ACQUISITIONS

In January 1996, the Company paid $7.1 million to purchase 75% of the common
stock of Custom Primers, Inc. ("CPI"), a California-based producer of
oligonucleotides, increasing the Company's ownership to 100%. The Company had
acquired 25% of CPI in several transactions prior to 1996 valued at $0.8
million. Based upon the net assets purchased in January 1996 and the total cash
paid of $7.9 million, the Company recorded $7.4 million of acquisition costs in
excess of net assets acquired in 1996. The January 1996 purchase agreement
provides for additional earn-out contingencies based on the sales of
oligonucleotides over the five year period following the date of the purchase
agreement. For the years 1998, 1997 and 1996, the Company recorded additional
earn-outs of $1.1 million, $1.0 million and $0.8 million, respectively. The
original intangible is being amortized over five years and additional
intangibles resulting from earn-outs are being amortized over the remaining term
of the original amortization period.

In September 1996, the Company acquired an additional 29% ownership of its
Japanese subsidiary, Life Technologies Oriental, K.K., for $3.7 million.  This
additional purchase increased the Company's ownership from 51% to 80% and
resulted in $1.8 million of additional goodwill.

None of the businesses acquired during the period, individually or in the
aggregate, constitute a significant subsidiary of the Company.

TECHNOLOGY AGREEMENTS

                                      F-7
<PAGE>
 
The Company has obtained rights to products and technologies under a number of
licensing agreements or patents. Where the agreement requires the Company to pay
royalties on sales of licensed products or technologies, the Company includes
the royalty expense in cost of sales in the period of the sale. Where the
Company acquires technologies from outside sources for incorporation into its
own development efforts or products, the cost of the technology is capitalized
and amortized over the legal or expected useful life when the technology is
commercially applicable at the time acquired by the Company. Where considerable
development effort is required to have acquired technologies become part of the
Company's product lines, the cost of the acquired technologies is reported as
research and development expense in the period the technology is acquired.
Internal efforts to develop or patent technologies are expensed when incurred.

The Company also licenses technology it has developed to others. The Company
recognizes revenue on these licenses when payment is reasonably certain.
Revenues are reduced by related transaction expenses.

EARNINGS PER SHARE

Basic earnings per common share have been computed by dividing net income by the
weighted-average number of common shares outstanding during the period. Diluted
earnings per common share have been computed by dividing net income by the
weighted-average number of common shares outstanding plus an assumed increase in
common shares outstanding for dilutive securities. Net income as reported is
available to common stockholders and is not adjusted for basic or diluted
earnings per share. Dilutive securities consist entirely of options to acquire
common stock for a specified price and their dilutive effect is measured using
the treasury method.

The following table reconciles the weighted average number of common shares
outstanding during each period for basic earnings per share with the comparable
amount for diluted earnings per share.

<TABLE>
<CAPTION>

-------------------------------------------------------------------------------
(amounts in thousands)                                     1998    1997    1996 
===============================================================================
<S>                                                       <C>     <C>     <C>   
Weighted average shares outstanding-basic                 23,687  23,171  22,881
Stock options                                                517     774     623
--------------------------------------------------------------------------------
Weighted average shares outstanding-diluted               24,204  23,945  23,504
================================================================================
</TABLE>

RELATED PARTY - DEXTER

At December 31, 1998, Dexter Corporation ("Dexter") owned approximately 71% of
the outstanding shares of the Company's common stock. Dexter acquired
approximately 22% of the outstanding shares of the Company through a tender
offer consummated on December 22, 1998. Most transactions with Dexter are
administrative in nature (e.g., insurance) and are not significant in amount.
The Company has no significant product sales to Dexter or its affiliates. Three
executives of Dexter and two members of the Dexter board of directors served as
directors of the Company in 1998. Three executives of Dexter served as directors
of the Company in 1997 and 1996.

The Company can borrow up to $8.0 million under a revolving line of credit from
Dexter to finance short-term working capital needs.  There have been no amounts
outstanding under this line of credit since prior to 1996.

NEW ACCOUNTING PRONOUNCEMENTS

The Company adopted SFAS No. 130, Reporting Comprehensive Income, in the first
quarter of 1998. SFAS No. 130 establishes standards for reporting and display of
comprehensive income and its components. Comprehensive income consists of 

                                      F-8
<PAGE>
 
net income and foreign currency translation adjustments as presented in the
consolidated statement of comprehensive income. The adoption of SFAS No. 130 had
no impact on total stockholders' equity or net income.

The Company adopted SFAS No. 131, Disclosures about Segments of an Enterprise
and Related Information, in the fourth quarter of 1998. Disclosures required by
this new standard are included in the notes to the consolidated financial
statements under the caption "Segment Reporting and Related Information".

The Company adopted SFAS No. 132, Employers' Disclosures about Pension and Other
Postretirement Benefits, in 1998. SFAS No. 132 standardizes disclosure
requirements for pension and other postretirement benefits, requires additional
information on changes in the benefit obligations and fair values of plan
assets, and eliminates certain disclosures formerly required by accounting
standards applicable to pensions and other postretirement benefits. Disclosures
required under SFAS No. 132 are included under the caption "Retirement Benefits"
in the notes to the consolidated financial statements.

The Financial Accounting Standards Board has issued SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities, which becomes effective for years
beginning after June 15, 1999. SFAS No. 133, requires that every derivative
instrument be recorded in the balance sheet as either an asset or liability
measured at its fair value. The statement requires that changes in the
derivative's fair value be recognized in earnings unless specific hedge
accounting criteria are met. The Company will adopt SFAS No. 133 by January 1,
2000. Because of the Company's minimal use of derivatives, management does not
anticipate that adoption of this statement will have a material effect on the
earnings or financial position of the Company.

CASH AND CASH EQUIVALENTS

Cash equivalents are highly liquid short-term investments readily convertible
into cash.  Cash equivalents consist primarily of time deposits and certificates
of deposit with various financial institutions throughout the world.  These
investments are carried at cost, which approximates market, and mature within 90
days and, therefore, are subject to minimal risk.

TRADE ACCOUNTS RECEIVABLE

Trade accounts receivable are reduced by allowances of $2.0 million, $1.6
million and $1.5 million at December 31, 1998, 1997 and 1996, respectively.

INVENTORIES

Inventories are valued at the lower of cost or market. Inventories valued at 
cost using the LIFO method were approximately 29% and 30% of total inventories
at December 31, 1998 and 1997, respectively. Inventories were as follows:

                                      F-9
<PAGE>
 
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------------- 
  (amounts in thousands)                                                                 1998                   1997
================================================================================================================================
<S>                                                                                     <C>                 <C>
Materials and supplies                                                                $12,946                $12,082
Work-in-process                                                                        11,291                  9,906
Finished goods                                                                         51,502                 47,708              
--------------------------------------------------------------------------------------------------------------------------------
Total FIFO value                                                                       75,739                 69,696
LIFO reserve                                                                           (1,420)                (1,633)
--------------------------------------------------------------------------------------------------------------------------------
Total inventory                                                                       $74,319                $68,063
================================================================================================================================
</TABLE>

Inventories were reduced by allowances, other than the LIFO reserve, of $4.7
million, $3.5 million and $3.1 million at December 31, 1998, 1997 and 1996
respectively.

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are carried at cost. Depreciation is provided by
the straight-line method for financial reporting purposes based upon the
estimated useful lives of the assets which range from 3 to 50 years. The cost of
assets sold or retired and the related amounts of accumulated depreciation are
eliminated from the accounts and the resulting gain or loss is included in
income. Renewals and betterments are capitalized. Repairs and maintenance are
charged to expense when incurred and were $4.7 million in 1998, $4.5 million in
1997 and $3.4 million in 1996.

Interest expense is capitalized in connection with the construction of major
facilities. Capitalized interest is recorded as part of the cost of the asset to
which it relates and is amortized over the asset's estimated useful life. The
Company capitalized $0.1 million of interest cost in 1998 and $0.3 million of
interest cost in 1997, all of which interest related to debt associated with a
capital lease. No interest was capitalized in 1996.

The cost and accumulated depreciation of property, plant and equipment were as
follows:


<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
 (amounts in thousands)                                                                       1998              1997
===================================================================================================================================
<S>                                                                                       <C>              <C>
Land and land improvements                                                                $ 11,527          $  6,184
Land under a capital lease                                                                       -             4,739
Buildings and leasehold improvements                                                        67,244            63,545
Machinery and equipment                                                                     75,979            66,535
Construction-in-progress                                                                     4,790            10,365
-----------------------------------------------------------------------------------------------------------------------------------
Total cost                                                                                 159,540           151,368
Accumulated depreciation                                                                   (52,166)          (51,270)
-----------------------------------------------------------------------------------------------------------------------------------
Property, plant and equipment, net                                                        $107,374          $100,098
===================================================================================================================================
</TABLE>

                                     F-10
<PAGE>
 
LEASES

The Company leases buildings, automobiles and equipment under operating lease
arrangements. These leases contain various renewal options, purchase options and
escalation clauses. The total rental expense of all operating leases was $8.9
million in 1998, $6.3 million in 1997, and $5.8 million in 1996.

The future minimum rental payments required under noncancellable leases as of
December 31, 1998 were as follows:

<TABLE>
<CAPTION>
 ---------------------------------------------------------------------------------------------------------
(amounts in thousands)                                                                Operating Leases
==========================================================================================================
<S>                                                                                   <C>      
For the years ending     
           1999                                                                                $ 7,425
           2000                                                                                  5,409
           2001                                                                                  3,283
           2002                                                                                  1,528
           2003                                                                                  1,280
           2004 and thereafter                                                                   4,248
----------------------------------------------------------------------------------------------------------
Total minimum lease payments                                                                   $23,173
==========================================================================================================
</TABLE> 
 
INVESTMENTS AND OTHER ASSETS
 
Significant components of investments and other assets were as follows:
 
<TABLE> 
<CAPTION> 
--------------------------------------------------------------------------------------------------------
(amounts in thousands)                                                        1998              1997                                
========================================================================================================
<S>                                                                        <C>               <C>                                    
Pension and retirement related                                             $ 6,018           $ 4,683                                
Software, net of amortization                                                4,196             3,594                                
Deferred tax assets                                                          3,571             2,775                                
Other                                                                        1,607             1,301                                
--------------------------------------------------------------------------------------------------------
Investments and other assets                                               $15,392           $12,353                                
========================================================================================================
</TABLE>

EXCESS ACQUISITION COSTS

The excess of costs over the net asset values of businesses acquired prior to
1992 are being amortized on a straight-line basis principally over 30 years. The
excess of costs over net asset values of businesses acquired since 1992 are
being amortized on a straight-line basis over no more than 10 years. The Company
assesses the recoverability of net cost in excess of net assets of acquired
businesses by determining whether the amortization of this intangible asset over
its remaining life can be recovered through future operating cash flows. The
Company makes a specific provision against the asset when impairment is
identified. The Company did not make an impairment charge in 1998, 1997 or 1996.
Future acquisitions will be evaluated using this method and an appropriate
useful life will be determined for amortization of the excess of costs over the
net asset value of businesses acquired, if any.

Accumulated amortization at December 31, 1998 and 1997 amounted to $10.8 million
and $7.9 million, respectively.

                                     F-11
<PAGE>
 
ACCRUED LIABILITIES AND EXPENSES

Accrued liabilities and expenses were as follows:

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------
(amounts in thousands)                                                                             1998               1997
===========================================================================================================================
<S>                                                                                                <C>                <C>
Salaries, wages and benefits                                                                    $11,400            $10,080
Royalties                                                                                         5,867              3,179
Shareholder acquisition expenses                                                                  3,973                  -
Taxes, other than income                                                                          1,779              1,485
Dividends payable                                                                                 1,245              1,167
Deferred purchase and construction payments                                                       1,225              1,538
Other                                                                                             5,382              5,449
---------------------------------------------------------------------------------------------------------------------------
Accrued liabilities and expenses                                                                $30,871            $22,898
===========================================================================================================================
</TABLE> 
 
DEBT
 
The following is a summary of the outstanding debt at December 31, 1998 and
1997.

<TABLE> 
<CAPTION> 
---------------------------------------------------------------------------------------------------------------------------
(amounts in thousands)                                                                           1998               1997
===========================================================================================================================
<S>                                                                                             <C>                <C>   
Short-term debt:
  Japanese Yen bank borrowings                                                                  $ 2,210            $ 2,882
  Current portion of obligations under a capital lease                                                -                 94
---------------------------------------------------------------------------------------------------------------------------
Short-term debt                                                                                 $ 2,210            $ 2,976
===========================================================================================================================
Long-term debt:
  Capital lease (7.5%)                                                                                             $ 4,658
  Less: Current portion of long-term debt                                                             -                 94
---------------------------------------------------------------------------------------------------------------------------
Long-term debt                                                                                  $     -            $ 4,564
===========================================================================================================================
</TABLE>

Short-term debt consisted of notes payable to various banks denominated in
Japanese Yen. The carrying value of short-term borrowings approximates fair
value. The average interest rate on the Japanese Yen bank borrowings during the
year was 1.53% in 1998 and 1.56% in 1997. Year-end weighted average interest
rates were 1.47% in 1998 and 1.85% in 1997.

The Company exercised an option to purchase a parcel of land previously under a
capital lease in the first quarter of 1998 for $4.6 million. The parcel of land
is used for the new corporate R&D center and administrative office facility,
including the Company's headquarters.

INCOME TAXES

The differences between the U.S. federal statutory tax rate and the Company's
effective tax rate are as follows:

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------
                                                                          1998                   1997             1996
========================================================================================================================
<S>                                                                       <C>                    <C>              <C>
Statutory U.S. federal income tax rate                                    35.0%                  35.0%            35.0%
State income taxes                                                         2.0                    1.7              1.5
Non-U.S. tax rate differences                                              (.8)                   0.8              1.1
Repatriation of foreign earnings,
  net of related benefits                                                 (1.3)                  (0.7)            (3.3)
Non-deductible expenses                                                    5.1                    1.5              1.7
Other, including tax credits                                              (2.5)                  (2.3)               -
------------------------------------------------------------------------------------------------------------------------
Effective income tax rate                                                 37.5%                  36.0%            36.0%
========================================================================================================================
</TABLE> 
 
The provision (benefit) for taxes on income for 1998, 1997 and 1996 is
summarized below:

-------------------------------------------------------------------------------
(amounts in thousands)                               1998      1997      1996
===============================================================================

                                     F-12
<PAGE>
 
<TABLE> 
<S>                                                    <C>                      <C>                        <C> 
Current:
  United States                                        $ 9,443                  $ 9,540                    $ 7,348
  International                                          7,684                    8,569                      8,788
  State                                                  1,560                      999                      1,216
--------------------------------------------------------------------------------------------------------------------
Total current                                           18,687                   19,108                     17,352
--------------------------------------------------------------------------------------------------------------------
Deferred:
  United States                                            270                     (497)                      (838)
  International                                            162                      (46)                       545
  State                                                     49                      (84)                      (240)
--------------------------------------------------------------------------------------------------------------------
Total deferred                                             481                     (627)                      (533)
--------------------------------------------------------------------------------------------------------------------
Total provision for income taxes                       $19,168                  $18,481                    $16,819
====================================================================================================================
</TABLE>
 
Deferred tax assets and liabilities were comprised of the following:

<TABLE> 
<CAPTION>  
-------------------------------------------------------------------------------------------------------------------------
(amounts in thousands)                                                                     1998                  1997
=========================================================================================================================
<S>                                                                                     <C>                   <C> 
Deferred tax assets:
  Retirement benefits                                                                   $ 3,038               $ 2,211
  Expenses not currently deductible                                                       2,081                 2,075
  Intercompany profits                                                                    1,937                 2,328
  Inventory reserves                                                                      1,645                 1,170
  Other                                                                                     741                   729
-------------------------------------------------------------------------------------------------------------------------
Gross deferred tax assets                                                                 9,442                 8,513
-------------------------------------------------------------------------------------------------------------------------
Deferred tax liabilities:
  Fixed assets, principally depreciation                                                  4,768                 3,182
  Inventory                                                                                 582                   579
  Retirement benefits                                                                       399                   507
  Other                                                                                      25                    29
-------------------------------------------------------------------------------------------------------------------------
Gross deferred tax liabilities                                                            5,774                 4,297
-------------------------------------------------------------------------------------------------------------------------
Net deferred tax asset                                                                  $ 3,668               $ 4,216
=========================================================================================================================
</TABLE>

Management has determined that tax benefits associated with the net deferred tax
asset will more likely than not be realized based on the availability of taxable
income in prior carryback years against which future tax deductions may be
offset and on expectations that future operating income of the Company will also
be sufficient to realize fully these net deferred tax assets.

In 1998, 1997 and 1996, income tax benefits of $11.0 million, $2.0 million and
$0.4 million, respectively, attributable to employee stock option transactions
were allocated to stockholders' equity.

U.S. and international withholding taxes have not been provided on approximately
$89.1 million of undistributed earnings of foreign subsidiaries. The Company
remits only those earnings which are considered to be in excess of the
reasonably anticipated working capital needs of the foreign subsidiaries, with
the balance considered to be permanently reinvested in the operations of such
subsidiaries. It is impractical to estimate the total tax liability, if any,
until such a distribution is made. Pretax income from international operations
amounted to $27.2 million in 1998, $26.6 million in 1997, and $30.6 million in
1996.


RETIREMENT BENEFITS

The Company has a qualified pension plan ("defined benefit") and a 401(k) plan
("employee deferral" and "defined contribution") for substantially all United
States employees. With respect to its qualified U.S. pension plan, the Company's
policy is to deposit with an independent trustee amounts as are necessary on an
actuarial basis to provide for benefits in accordance with the requirements of
the Employee Retirement Income Security Act and any other

                                     F-13
<PAGE>
 
applicable Federal laws and regulations. The U.S. pension plan provides benefits
that are generally based upon the employee's highest average compensation in any
consecutive five year period in the ten years before retirement. The Company's
401(k) plan allows employees to contribute, on a tax-deferred basis, up to
fifteen percent of their annual base compensation subject to certain regulatory
and plan limitations. The Company matches one half of the employee's 401(k)
deferral up to a maximum Company match of three percent of annual base
compensation.

The Company also sponsors an unfunded, nonqualified supplementary retirement
plan for certain senior management. The Company has purchased life insurance on
the lives of participants designed to provide sufficient funds to recover all
costs of the plan. In addition to the above plans, the Company sponsors an
unfunded, nonqualified executive supplemental plan that provides for a target
benefit based upon the average annual compensation during the highest five
consecutive years of the last ten years before retirement, which benefit is then
offset by other work related benefits payable to the participant.

The retirement benefits for most employees of non-U.S. operations are generally
provided by government sponsored or insured programs and, in certain countries,
by defined benefit plans. The only significant non-U.S. defined benefit plan is
for United Kingdom employees. The Company's policy with respect to its U.K.
pension plan is to fund amounts as are necessary on an actuarial basis to
provide for benefits under the plan in accordance with local laws and income tax
regulations. The U.K. pension plan provides benefits based upon the employee's
highest average base compensation over three consecutive years.

                                     F-14
<PAGE>
 
The funded status of the Company's domestic pension plans and amounts recognized
at December 31, 1998, 1997 and 1996 were as follows:

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
(amounts in thousands)                                    1998                      1997                     1996
===================================================================================================================
<S>                                                   <C>                       <C>                       <C>
Change in benefit obligation:
Benefit obligation at beginning of year               $ 26,569                  $ 22,821                  $21,009
Service cost                                             2,244                     2,098                    1,827
Interest cost                                            1,900                     1,615                    1,324
Amendments                                               1,567                       437                        -
Actuarial (gain)/loss                                    2,317                       295                     (804)
Benefits paid                                             (692)                     (535)                    (427)
Expenses paid                                             (129)                     (162)                    (108)
-------------------------------------------------------------------------------------------------------------------
Benefit obligation at end of year                       33,776                    26,569                   22,821
-------------------------------------------------------------------------------------------------------------------
Change in plan assets:
Fair value of plan assets at
  beginning of year                                     19,611                    15,567                   12,442
Actual return on plan assets                             3,032                     3,058                    2,411
Employer contribution                                      411                     1,683                    1,249
Benefits paid                                             (692)                     (535)                    (427)
Expenses paid                                             (129)                     (162)                    (108)
-------------------------------------------------------------------------------------------------------------------
Fair value of plan assets at end of year                22,233                    19,611                   15,567
-------------------------------------------------------------------------------------------------------------------
Funded status:                                         (11,543)                   (6,958)                  (7,254)
Unrecognized actuarial (gain)/loss                         401                      (604)                     892
Unrecognized prior service cost                          3,544                     2,295                    2,128
-------------------------------------------------------------------------------------------------------------------
Net amount recognized                                 $( 7,598)                 $( 5,267)                 $(4,234)
===================================================================================================================
Amounts recognized in the statement
of financial position consist of:
Accrued benefit liability                               (9,265)                   (5,772)                  (4,550)
Intangible asset                                         1,667                       505                      316
-------------------------------------------------------------------------------------------------------------------
Net amount recognized                                 $( 7,598)                 $( 5,267)                 $(4,234)
===================================================================================================================
</TABLE> 
 
The weighted average assumptions used in accounting for the domestic pension
plans in 1998, 1997 and 1996 were as follows:

<TABLE>   
<CAPTION>
----------------------------------------------------------------------------------------------------------------
                                                        1998                  1997                      1996
================================================================================================================
<S>                                                     <C>                   <C>                       <C>
Discount rate                                           6.75%                 7.00%                     7.00%
Expected return on plan assets                          9.00%                 9.00%                     9.00%
Rate of compensation increase                           4.83%                 4.83%                     4.83%
================================================================================================================
</TABLE>

The discount rate is the estimated rate at which the obligation for pension
benefits could effectively be settled. The expected return on plan assets
reflects the average rate of earnings that the Company estimates will be
generated on the assets of the plans. The rate of compensation increase reflects
the Company's best estimate of the future compensation levels of the individual
employees covered by the plans.

                                     F-15
<PAGE>
 
The components of net periodic pension cost for the Company's domestic pension
plans for the years 1998, 1997 and 1996 are provided in the following table:

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------- 
(amounts in thousands)                                1998                            1997                    1996
=====================================================================================================================
<S>                                                  <C>                            <C>                   <C>
Service cost                                       $ 2,244                         $ 2,098                 $ 1,827
Interest cost                                        1,900                           1,615                   1,324
Expected return on plan assets                      (1,743)                         (1,375)                 (1,105)
Amortization of:
  Prior service cost                                   318                             270                     270
  Actuarial loss                                        23                             108                     226
---------------------------------------------------------------------------------------------------------------------
Net periodic pension cost                          $ 2,742                         $ 2,716                 $ 2,542
=====================================================================================================================
</TABLE>

The funded status of the Company's U.K. pension plan and amounts recognized at
December 31, 1998, 1997 and 1996 were as follows:

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------- 
(amounts in thousands)                                1998                            1997                    1996
======================================================================================================================
<S>                                                <C>                             <C>                     <C>
Change in benefit obligation:
Benefit obligation at beginning of year            $ 9,026                         $ 5,777                 $ 5,616
Service cost                                           513                             319                     361
Interest cost                                          682                             504                     432
Plan participants' contributions                       160                             154                     182
Amendments                                               -                              (9)                      -
Actuarial (gain)/loss                                2,270                           2,527                  (1,268)
Benefits paid                                         (110)                            (12)                   (202)
Foreign currency exchange rate changes                 123                            (234)                    656
---------------------------------------------------------------------------------------------------------------------
Benefit obligation at end of year                   12,664                           9,026                   5,777
---------------------------------------------------------------------------------------------------------------------
Change in plan assets:
Fair value of plan assets at
  beginning of year                                  7,217                           6,147                   4,895
Actual return on plan assets                         1,000                             724                     270
Employer contribution                                  471                             453                     471
Plan participants' contributions                       160                             154                     182
Benefits paid                                         (110)                            (12)                   (202)
Foreign currency exchange rate changes                  93                            (249)                    531
---------------------------------------------------------------------------------------------------------------------
Fair value of plan assets at end of year             8,831                           7,217                   6,147
---------------------------------------------------------------------------------------------------------------------
Funded status:                                      (3,833)                         (1,809)                    370
Unrecognized actuarial loss                          4,749                           2,943                     714
Unrecognized portion of net obligation
  at transition                                        654                            (307)                   (343)
Unrecognized prior service cost                       (287)                            697                     787
Fourth quarter contribution                            293                             112                     123
---------------------------------------------------------------------------------------------------------------------
Net amount recognized                              $ 1,576                         $ 1,636                 $ 1,651
=====================================================================================================================
Amounts recognized in the statement
of financial position consist of:
Prepaid benefit cost                                 1,576                           1,636                   1,651
---------------------------------------------------------------------------------------------------------------------
Net amount recognized                              $ 1,576                         $ 1,636                 $ 1,651
=====================================================================================================================
</TABLE>

                                     F-16
<PAGE>
 
The weighted average assumptions used in accounting for the U.K. pension plan in
1998, 1997 and 1996 were as follows:

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
                                                      1998      1997     1996
================================================================================
<S>                                                   <C>       <C>      <C> 
Discount rate                                         6.00%     7.50%    8.50%
Expected return on plan assets                        8.00%     8.00%    8.00%
Rate of compensation increase                         5.00%     6.00%    6.00%
================================================================================
</TABLE>

The components of net periodic pension costs for the Company's U.K. pension plan
for the years 1998, 1997 and 1996 are provided in the following table:

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
(amounts in thousands)                                1998      1997     1996
================================================================================
<S>                                                   <C>       <C>      <C>  
Service cost                                          $ 513     $ 319    $ 361
Interest cost                                           682       504      432
Expected return on plan assets                         (592)     (487)    (413)
Amortization of:                                                           
  Transition obligation                                 (23)      (23)     (22)
  Prior service cost                                     50        50       48
  Actuarial loss                                        119        31       61
--------------------------------------------------------------------------------
Net periodic pension cost                             $ 749     $ 394    $ 467
================================================================================
</TABLE>

The projected benefit obligations, accumulated benefit obligations and fair
value of plan assets for the pension plans with accumulated benefit obligations
in excess of plan assets were $4.5, $3.5 and $0, respectively, as of December
31, 1998; $2.4, $2.0, and $0, respectively, as of December 31, 1997 and $1.9,
$1.7 and $0, respectively, as of December 31, 1996.

The Company's match to the 401(k) plan totaled $1.1 million, $1.1 million and
$1.0 million in 1998, 1997 and 1996, respectively.  The Company's contribution
to its remaining plans totaled $0.3 million, $0.6 million and $0.5 million in
1998, 1997 and 1996, respectively.

CONTINGENCIES

The Company is subject to potential liability under government regulations and
various claims and legal actions which are pending or may be asserted.  These
claims and legal actions have arisen in the ordinary course and conduct of the
Company's business and some are expected to be covered, at least partly, by
insurance.  Estimated amounts for claims that are probable and can be reasonably
estimated are reflected as liabilities of the Company. The ultimate resolution
of these claims is subject to many uncertainties.  It is reasonably possible
that some of the actions or proceedings referred to above could be decided
unfavorably to the Company. These matters, if resolved in a manner different
than the estimates, could have a material adverse effect on the Company's
consolidated financial position, operating results or cash flows when resolved
in a future reporting period.

CURRENCY EFFECTS

The financial statements of the Company's non-U.S. operations are translated to
U.S. dollars for consolidation using exchange rates at period end for assets and
liabilities and average exchange rates during each reporting period for results
of operations.  Net exchange gains or losses resulting from the translation of
foreign financial statements, the effect of exchange rate changes on
intercompany transactions of a long-term investment nature, and net exchange
rate gains and losses on foreign currency transactions that are designated as,
and are effective as, economic hedges of the net investment in a foreign entity
are recorded as a separate component of equity.  These 

                                      F-17
<PAGE>
 
adjustments will affect net income only upon sale or liquidation of the
underlying non-U.S. investment.

Many 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 or payables that are denominated in currencies other than
the entity's functional currency.  Changes in the exchange rates between the
functional currency and the currency in which the transaction is denominated
result in currency transaction gains and losses that are included in the
determination of income.  Currency exchange gains and losses realized on
business transactions were $0.3 million of net gains in 1998, $1.0 million of
net losses in 1997, and $0.2 million of net losses in 1996.

The Company utilizes forward exchange contracts to hedge non-local currency
transactions and commitments.  Gains and losses on forward exchange contracts
that hedge specific currency commitments are deferred and recognized in income
in the same period as the hedged transaction.  Gains and losses on forward
contracts that do not hedge an identifiable currency commitment are included in
income as the gain or loss arises.

The market risk associated with forward exchange contracts is caused by
fluctuations in exchange rates subsequent to entering into the forward exchange
contracts.  Forward exchange contracts outstanding at year-end 1998 were short-
term in nature and related to non-local currency transactions of the Company's
Japanese subsidiary.  The equivalent U.S. dollar purchase amounts of all forward
contracts were $3.1 million, $2.9 million, and $6.2 million as of December 31,
1998, 1997 and 1996, respectively.  There were no sale amounts outstanding as of
December 31, 1998, 1997 and 1996.  Deferred unrealized gains and losses at
December 31, 1998, 1997 and 1996 were not significant.

STOCK INCENTIVE PLANS

In 1997, the Company established a long-term incentive plan for certain key
management and other personnel.  The Company's 1997 long-term incentive plan
provides that up to 1,000,000 shares of common stock may be awarded through
various stock and stock related awards.  For options awarded under the Plan, the
option price cannot be less than 100 percent of the fair market value of common
stock at the time the option is granted.  Through December 31, 1998 the Company
has granted 540,000 stock options under this plan.

In 1996, the Company established a Non-Employee Directors' Annual Retainer Stock
Plan enabling members of the Board of Directors who are not officers or
employees of the Company to receive common stock in lieu of all or a portion of
the annual cash retainer fee and to receive an automatic annual amount of 300
shares of common stock for services rendered.  The plan provides that up to
112,500 shares may be granted based on the fair market value of the common stock
at the date of issue.  There have been 6,035 shares granted through December 31,
1998 under this plan.  The plan was terminated, effective as of February 1,
1999.

In 1996, the Company established a Non-Employee Directors' Stock Option Plan
that provides for each of the Company's non-employee directors to receive an
automatic, annual option to purchase 6,750 shares of common stock.  The plan
provides that up to 750,000 shares may be granted based on the fair market value
of the common stock at the annual grant date.  There have been 121,500 stock
options granted through December 31, 1998 under this plan.  The plan was
terminated, effective as of February 1, 1999.

                                      F-18
<PAGE>
 
All other stock option plans have been frozen and no further grants under the
frozen plans can be made.  These plans are listed under "Former Plans No Longer
Granting Options."

Most options become exercisable on a cumulative basis over a three year period
of service and are generally exercisable for a period not exceeding ten years
from the date of grant. At December 31, 1998 there were 490,916 and 639,750
shares of common stock available for future grant under the 1997 and 1996 stock
option plans, respectively.

The transactions under the stock option plans were as follows:

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
                                            1997           1996    Former Plans
                                       Long-term   Non-Employee       No Longer
                                       Incentive      Directors'       Granting
                                            Plan           Plan         Options
================================================================================
<S>                                    <C>         <C>             <C>
December 31, 1995                                                    1,755,137
  Granted at average price                                                    
    of $24.44 per share                                  40,500        509,900
  Expired or canceled at average                                              
    price of $15.50 per share                                          (22,592)
  Exercised at average price                                                  
    of $11.70 per share                                               (187,164)
--------------------------------------------------------------------------------
December 31, 1996                                        40,500      2,055,281 
  Granted at average price                                      
    of $34.26 per share                  524,000         33,750 
  Expired or canceled at average                                
    price of $21.10 per share                            (4,500)        (6,241) 
  Exercised at average price                                                    
    of $10.96 per share                                  (2,250)      (413,186)
--------------------------------------------------------------------------------
December 31, 1997                        524,000         67,500      1,635,854
  Granted at average price                                      
    of $35.56 per share                   16,000         47,250 
  Expired or canceled at average                                
    price of $27.45 per share            (30,916)        (6,750)       (39,729)
  Exercised at average price                                                   
    of $18.00 per share                 (148,557)       (27,000)    (1,418,493) 
--------------------------------------------------------------------------------
December 31, 1998                        360,527         81,000        177,632
================================================================================
Price range:                                                    
  Minimum                              $   34.41       $  22.88    $      4.83 
  Maximum                              $   38.19       $  38.29    $     25.00
Weighted average price                 $   34.58       $  25.88    $     18.43
================================================================================
Exercisable                               16,167          6,750         22,042
================================================================================
</TABLE>

                                      F-19
<PAGE>
 
Information with respect to stock options outstanding at December 31, 1998 is as
follows:

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
                                    Weighted
                                     Average   Weighted                 Weighted
                      Number of    Remaining    Average    Number of     Average
                        Options  Contractual   Exercise      Options    Exercise
Price Range         Outstanding         Life      Price  Exercisable       Price
================================================================================
<S>                 <C>          <C>          <C>       <C>            <C>     
$ 8.83 to $12.42          6,216          1.9    $11.18        6,216      $11.18
$16.00 to $18.00         17,050          7.0    $17.23        6,550      $16.00
$22.87 to $22.88         13,500          7.8    $22.88        4,500      $22.88
$25.00 to $25.00        154,366          7.8    $25.00        9,276      $25.00
$31.87 to $33.25         54,000          9.4    $32.73        2,250      $31.88
$34.41 to $34.41        344,527          8.8    $34.41       16,167      $34.41
$38.18 to $38.29         29,500          9.4    $38.21            -           - 
================================================================================
$ 8.83 to $38.29        619,159          8.5    $31.14       44,959      $25.29
================================================================================
</TABLE>

The Company elected the disclosure-only presentation of  SFAS No. 123,
Accounting for Stock-Based Compensation, in 1996 and, consequently, makes no
charge against income in the financial statements with respect to options
granted at fair market value.  To measure stock-based compensation in accordance
with SFAS No. 123, the fair value of each option grant was estimated on the date
of grant using the Black-Scholes option-pricing model. The following table sets
forth the assumptions used and the pro forma net income and earnings per share
resulting from applying SFAS No. 123.

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
                                                       1998      1997      1996
================================================================================
<S>                                                 <C>       <C>       <C>     
Net income (amounts in thousands)                                               
   As reported                                      $31,303   $32,235   $28,700 
   Pro forma                                         28,784    30,501    27,918 
                                                                                
Basic earnings per share (in dollars)                                           
   As reported                                      $  1.32   $  1.39   $  1.25 
   Pro forma                                        $  1.22   $  1.32   $  1.22 
                                                                                
Diluted earnings per share (in dollars)                                         
   As reported                                      $  1.29   $  1.35   $  1.22 
   Pro forma                                        $  1.19   $  1.27   $  1.19 
                                                                                
Average Shares Outstanding (in thousands)                                       
   Actual                                            23,687    23,171    22,881 
   Assuming Dilution                                 24,204    23,945    23,504 
                                                                                
Risk-free interest rate                                 4.6%      5.8%      6.1%
Dividend yield                                          0.5%      0.5%      0.6%
Expected life in years                                  3.4       5.0       4.0 
Volatility                                               28%       29%       31%
Weighted average remaining contractual                                          
    life in years                                       8.5       7.0       6.3 
Weighted average fair value at date                                             
    of grant(in dollars)                            $  9.82   $ 11.93   $  7.94
================================================================================
</TABLE>

                                      F-20
<PAGE>
 
QUARTERLY FINANCIAL INFORMATION
(amounts in thousands, except per share data)

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------- 
  (quarterly amounts are unaudited)    First    Second    Third   Fourth     Year
==================================================================================
<S>                                  <C>      <C>       <C>      <C>      <C>
1998:
Net sales                            $88,355  $ 91,544  $89,084  $92,743  $361,726
Net royalties                            437       689      518      836     2,480
Cost of sales                         41,076    42,701   40,833   43,252   167,862
Shareholder acquisition expenses           -         -      310    5,025     5,335
Operating income                      13,489    14,675   13,319    9,026    50,509
Net income                             8,625     9,447    8,754    4,477    31,303
Basic earnings per share             $   .37  $    .40  $   .37  $   .18  $   1.32
Diluted earnings per share           $   .36  $    .39  $   .36  $   .18  $   1.29
Shares outstanding
  Basic                               23,447    23,575   23,668   24,050    23,687
  Stock options                          582       547      541      401       517
  Diluted                             24,029    24,122   24,209   24,451    24,204
Market price per share:
  High                               $38 1/2  $ 39 1/2  $39 3/8  $40      $ 40     
  Low                                $30      $ 30 3/4  $30 1/2  $29 3/8  $ 29 3/8
==================================================================================
1997:
Net sales                            $80,168  $ 84,556  $83,243  $83,000  $330,967
Net royalties                            344       463      430      604     1,841
Cost of sales                         36,116    39,069   38,126   39,236   152,547
Operating income                      12,461    13,220   12,429   12,824    50,934
Net income                             7,838     8,338    7,873    8,186    32,235
Basic earnings per share             $   .34  $    .36  $   .34  $   .35  $   1.39
Diluted earnings per share           $   .33  $    .35  $   .33  $   .34  $   1.35
Shares outstanding
  Basic                               22,984    23,137   23,243   23,316    23,171
  Stock options                          810       735      727      788       774
  Diluted                             23,794    23,872   23,970   24,104    23,945
Market price per share:
  High                               $28 3/4  $30       $31 1/4  $35 7/8  $ 35 7/8
  Low                                $24 1/4  $25 5/16  $26 7/8  $29 1/2  $ 24 1/4
==================================================================================
</TABLE>

                                      F-21
<PAGE>
 
SEGMENT REPORTING AND RELATED INFORMATION

Life Technologies adopted SFAS No. 131, Disclosures about Segments of an
Enterprise and Related Information, in the fourth quarter of 1998.  SFAS No. 131
establishes standards for the way that public business enterprises report
information about operating segments in annual financial statements and requires
selected information about operating segments in interim financial reports.  It
also establishes standards for related disclosures about products and services
and geographic areas.  While SFAS No. 131 supersedes SFAS No. 14, Financial
Reporting for Segments of a Business Enterprise, it retains requirements to
report information about major customers.

Operating segments are components of an enterprise about which separate
financial information is available that is evaluated regularly by the chief
operating decision maker, or decision making group, in deciding how to allocate
resources and in assessing performance.  Life Technologies is managed in a
matrixed fashion with some organizational units focused on delivering the
Company's product and service offerings to customers.  These organizational
units have been established primarily by geography.  Other organizational units
are focused on developing and managing various components of the product and
service offerings.  While the chief operating decision maker reviews financial
information with respect to all of these organization units, the units based on
geography are most routinely reviewed by the chief operating decision maker in
terms of assessing performance with respect to revenues and related expenses.

The Company has four operating segments.  The Americas Research segment serves
universities, medical research centers, government institutions and other
related "not-for-profit" research institutions in the United States as well as
all customers in Canada, Mexico, Latin and South America.  The U.S.
Bioindustrial segment delivers products and services to biotechnology,
pharmaceutical, chemical and related "for-profit" companies in the United
States. The European segment serves customers in Europe, Africa and the Middle
East.  The Asia Pacific segment serves customers in Asia, including Japan,
Australasia, China and India.  All four of the operating segments offer
essentially the same products and services.

The accounting policies of the operating segments are the same as those
described in the notes to the consolidated financial statements.  Intercompany
transactions between geographic areas are eliminated prior to reporting
operating segment financial information to the chief operating decision maker.
All profit related to intercompany transactions between geographic areas is
reported in the operating segment in which the sale to the Company's trade
customer occurs.  Expenses related to developing and managing the Company's
product and service offerings, as well as some expenses managed globally or not
related to operating segments, are not included in operating segment results.
Operating segment identifiable assets are primarily inventories and receivables.
Long-lived assets are principally related to manufacturing or developing
products and services and are not allocated to operating segments.

                                      F-22
<PAGE>
 
Operating segment revenues for the years ending December 31, 1998, 1997 and 1996
were as follows:

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
(amounts in thousands)                            1998        1997        1996
================================================================================
<S>                                           <C>         <C>         <C>       
Americas Research                             $129,428    $118,095    $108,041  
U.S. Bioindustrial                              71,634      61,335      51,025  
Europe                                         116,996     105,682     106,041  
Asia Pacific                                    43,915      45,756      43,386  
Other                                            2,233       1,940       1,846  
--------------------------------------------------------------------------------
Total revenues                                $364,206    $332,808    $310,339  
================================================================================
</TABLE>

Operating segment profit and a reconciliation to reported operating income for
the years ending December 31, 1998, 1997 and 1996 was as follows:

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
(amounts in thousands)                            1998        1997        1996
================================================================================
<S>                                           <C>         <C>         <C>       
Americas Research                             $ 43,012      42,035      37,725  
U.S. Bioindustrial                              26,163      20,790      15,946  
Europe                                          29,607      29,045      30,492  
Asia Pacific                                    10,371      11,041       8,748  
Research and development                       (21,880)    (21,281)    (19,084) 
Other non-segment expenses                     (31,429)    (30,696)    (30,295) 
Shareholder acquisition expenses                (5,335)          -           -  
Gain on product line disposal                        -           -       2,569  
--------------------------------------------------------------------------------
Operating income                              $ 50,509    $ 50,934    $ 46,101  
================================================================================
</TABLE>

Identifiable operating segment assets and a reconciliation to total assets as of
December 31, 1998, 1997 and 1996 were as follows:

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
(amounts in thousands)                            1998        1997        1996
================================================================================
<S>                                               <C>         <C>     <C>
Americas Research                             $ 48,544    $ 45,088    $ 38,679  
U.S. Bioindustrial                              28,136      23,761      20,106
Europe                                          50,351      39,856      41,070
Asia Pacific                                    24,866      21,939      20,140
Property, plant & equipment, net               107,374     100,098      88,367
Other long-lived assets                         26,057      24,718      25,067
Cash and cash equivalents                       56,047      19,076      15,326
Other, principally tax-related                  12,212       7,059       5,176
--------------------------------------------------------------------------------
Total assets                                  $353,587    $281,595    $253,931
================================================================================
</TABLE>

Life Technologies offers numerous products, services and technologies that can
be characterized broadly into two categories:  cell culture and cell and
molecular biology.  Cell culture products and services are used to grow cells
under laboratory conditions and for the commercial manufacture of
pharmaceuticals and other life sciences products.  Cell culture products include
cell and tissue culture media, reagents, fetal bovine ("FBS") and other animal
sera, growth and attachment factors, and plasticware.  Cell and molecular
biology products, services and technologies are used to identify, isolate, and
manipulate the metabolic processes and genetic material of living organisms.
Cell and molecular biology products include enzymes, nucleic acids, lipids,
competent cells, custom oligonucleotides, and related products.

                                      F-23
<PAGE>
 
The major product line components of revenues for 1998, 1997 and 1996 compare as
follows:

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
(amounts in thousands)                            1998        1997        1996
--------------------------------------------------------------------------------
<S>                                           <C>         <C>         <C>     
Cell culture                                  $184,345    $172,598    $169,038
Cell and molecular biology                     179,861     160,210     141,301
--------------------------------------------------------------------------------
Total revenues                                $364,206    $332,808    $310,339
================================================================================
</TABLE>

Sales of FBS accounted for 12% of net sales in 1998, 13% of net sales in 1997
and 14% of net sales in 1996.  Historically, the availability and price of FBS
have been volatile and periodically have had a significant effect on the
Company's results.

The Company earns revenues from customers in many countries.  Other than the
United States, the Company's country of domicile, there is no individual country
in which revenues from external customers represent 10% or more of the Company's
consolidated revenues.  Revenues attributed to customers based in the United
States, as well as revenues from customers in all other countries combined, were
as follows:

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
(amounts in thousands)                            1998        1997        1996
================================================================================
<S>                                           <C>         <C>         <C>    
United States                                 $181,765    $161,863    $144,140 
All other countries                            182,441     170,945     166,199 
--------------------------------------------------------------------------------
Total revenues                                $364,206    $332,808    $310,339 
================================================================================
</TABLE> 

Long-lived assets by geographic area as of December 31, 1998, 1997 and 1996 were
as follows:

<TABLE> 
<CAPTION> 
--------------------------------------------------------------------------------
(amounts in thousands)                            1998        1997        1996
================================================================================
<S>                                           <C>         <C>         <C> 
United States                                 $104,598    $ 98,394    $ 83,934
United Kingdom                                  16,736      15,841      17,357
All other                                        8,526       7,806       9,978
--------------------------------------------------------------------------------
Total long-lived assets                       $129,860    $122,041    $111,269
================================================================================
</TABLE> 

                                      F-24
<PAGE>
 
<TABLE> 
                               INDEX TO EXHIBITS                                       PAGE#
                               -----------------
<S>                                                                                    <C> 
3(A)    Certificate of Incorporation of the Registrant, including Amendment to
        Certificate of Incorporation dated April 17, 1987 and Amendment to
        Certificate of Incorporation dated April 14, 1998, previously filed as
        Exhibit 3(A) to the Registrant's Quarterly Report on Form 10-Q for the
        quarter ended June 30, 1998, SEC file no. 0-14991, which is incorporated
        herein by reference.

3(B)    By-laws of the Registrant, as amended and restated on April 16, 1991,
        previously filed as Exhibit 3(B) to the Registrant's Annual Report on
        Form 10-K for the year ended December 31, 1991, SEC file no. 0-14991
        which is incorporated herein by reference.

10(A)   1984 Stock Option Plan, previously filed as Exhibit 4.1 to the
        Registrant's Registration Statement on Form S-8, No. 33-21807, dated May
        12, 1988, SEC file no. 0-14991, which is incorporated herein by
        reference.

10(B)   Executive Supplemental Retirement Plan, previously filed as Exhibit
        10(B) to the Registrant's Annual Report on Form 10-K for the year ended
        December 31, 1990, SEC file no. 0-14991, which is incorporated herein by
        reference.

10(C)   Executive Deferred Compensation Benefit Plan, previously filed as
        Exhibit 10.8 to the Registrant's Registration Statement on Form S-1, No.
        33-7993, dated October 1, 1986, which is incorporated herein by
        reference.

10(D)   Change-in-Control Agreement dated February 13, 1997, between the
        Registrant and Dr. J. Stark Thompson regarding certain severance
        benefits in the event of termination of employment following a change of
        control, as defined in the agreement, previously filed as Exhibit 10.2
        to the Registrant's Quarterly Report on Form 10-Q for the quarter ended
        March 31, 1997, SEC file no. 0-14991, which is incorporated herein by
        reference.

10(E)   Change-in-Control Agreement dated February 13, 1997, between the
        Registrant and Joseph C. Stokes, Jr. regarding certain severance
        benefits in the event of termination of employment following a change of
        control, as defined in the agreement, previously filed as Exhibit 10.3
        to the Registrant's Quarterly Report on Form 10-Q for the quarter ended
        March 31, 1997, SEC file no. 0-14991, which is incorporated herein by
        reference.

10(F)   Change-in-Control Agreement dated February 13, 1997, between the
        Registrant and Thomas M. Coutts regarding certain severance benefits in
        the event of termination of employment following a change of control, as
        defined in the agreement, previously filed as Exhibit 10.1 to the
        Registrant's Quarterly Report on Form 10-Q for the quarter ended March
        31, 1997, SEC file no. 0-14991, which is incorporated herein by
        reference.

10(G)   Change-in-Control Agreement dated February 13, 1997, between the
        Registrant and John V. Cooper regarding certain severance benefits in
        the event of termination of employment following a 
</TABLE> 
<PAGE>
 
<TABLE> 
<S>                                                                                    <C> 
        change of control, as defined in the agreement, previously filed as
        Exhibit 10.5 to the Registrant's Quarterly Report on Form 10-Q for the
        quarter ended March 31, 1997, SEC file no. 0-14991, which is
        incorporated herein by reference.

10(H)   Change-in-Control Agreement dated February 13, 1997, between the               E-1
        Registrant and Brian D. Graves regarding certain severance benefits in
        the event of termination of employment following a change of control, as
        defined in the agreement.

10(I)   Form of Employment Agreement effective February 13, 1997, between the
        Registrant and certain executive officers of the Registrant regarding
        certain severance benefits in the event of termination of employment
        following a change in control, as defined in the agreement, previously
        filed as Exhibit 10.6 to the Registrant's Quarterly Report on Form 10-Q
        for the quarter ended March 31, 1997, SEC file no. 0-14991, which is
        incorporated herein by reference.

10(J)   1991 Stock Option Plan, previously filed as Exhibit 4 to the
        Registrant's Registration Statement on Form S-8 No. 33-956, dated May 9,
        1991, which is incorporated herein by reference.

10(K)   1995 Long-term Incentive Plan, previously filed as Exhibit 4 to the
        Registrant's Registration Statement on Form S-8 No. 33-59741, dated June
        1, 1995, which is incorporated herein by reference.

10(L)   1996 Non-Employee Directors' Stock Option Plan, previously filed as
        Exhibit 4(b) to the Registrant's Registration Statement on Form S-8 No.
        333-03773, dated May 15, 1996, which is incorporated herein by
        reference.

10(M)   1996 Non-Employee Directors' Annual Retainer Stock Plan, previously
        filed as Exhibit 4(a) to the Registrant's Registration Statement on Form
        S-8 No. 333-03773, dated May 15, 1996, which is incorporated herein by
        reference.

10(N)   1997 Long-term Incentive Plan, previously filed as Exhibit 4 to the
        Registrant's Registration Statement on Form S-8 No. 333-28607, dated
        June 6, 1997, which is incorporated herein by reference.

10(O)   Form of Indemnity Agreement between Registrant and Directors and               E-17
        executive officers.

10(P)   Form of Indemnity Agreement between Registrant and Executive Officers          E-26

21      Subsidiaries of the Registrant.                                                E-35
 
23      Consent of Independent Accountants.                                            E-36
 
27      Financial Data Schedule.                                                       E-37
</TABLE>