10-KPeriod: FY2010

THERMO FISHER SCIENTIFIC INC. Annual Report, Year Ended Dec 31, 2010

Filed February 24, 2011For Securities:TMO

Summary

Thermo Fisher Scientific Inc. (TMO) reported robust performance for the fiscal year ending December 30, 2010, with revenues reaching $10.79 billion, a 7% increase over the prior year, driven by strong demand across its Analytical Technologies and Laboratory Products and Services segments. The company demonstrated operational resilience by increasing operating income by 21% to $1.26 billion, with an improved operating margin of 11.7%. This growth was supported by strategic acquisitions, including Fermentas, Finnzymes, and Ahura Scientific, which expanded its capabilities in genomics and analytical devices, and was further bolstered by a pending acquisition of Dionex Corporation for approximately $2.1 billion. Financially, Thermo Fisher maintained a healthy liquidity position with $926 million in cash and short-term investments, and a strong operating cash flow of $1.50 billion. The company actively managed its capital structure, repurchasing $1.01 billion of its common stock while also issuing $2.2 billion in senior notes to fund acquisitions. While facing some headwinds such as currency translation impacts and the cessation of a supply contract, the company's diversified business model and strategic focus on innovation and customer productivity position it for continued growth. Investors should note the company's continued commitment to R&D, with significant investments made in this area, and its proactive approach to managing operational and financial risks.

Financial Statements
Beta
Revenue$10.39B
Cost of Revenue$5.26B
Gross Profit$5.13B
R&D Expenses$284.40M
SG&A Expenses$2.73B
Operating Expenses$9.21B
Operating Income$1.19B
Interest Expense$84.70M
Net Income$1.04B
EPS (Basic)$2.57
EPS (Diluted)$2.53
Shares Outstanding (Basic)403.30M
Shares Outstanding (Diluted)409.40M

Key Highlights

  • 1Thermo Fisher Scientific reported a 7% year-over-year increase in revenue, reaching $10.79 billion for the fiscal year 2010.
  • 2Operating income saw a significant 21% increase, rising to $1.26 billion, with operating margin improving to 11.7% from 10.4% in the prior year.
  • 3The company completed several strategic acquisitions in 2010 (Fermentas, Finnzymes, Ahura Scientific) and announced a significant pending acquisition of Dionex Corporation for approximately $2.1 billion.
  • 4Operating cash flow remained strong at $1.50 billion, indicating robust operational performance.
  • 5The company actively engaged in capital allocation, repurchasing $1.01 billion in common stock and issuing $2.2 billion in senior notes.
  • 6Research and Development spending was substantial, totaling $287.2 million in 2010, reflecting a commitment to innovation.
  • 7The company is well-positioned to meet its financial obligations, with $926 million in cash and short-term investments and sufficient borrowing capacity.

Frequently Asked Questions

Thermo Fisher Scientific's revenue growth in 2010 was primarily driven by increased demand across both its Analytical Technologies and Laboratory Products and Services segments. Strategic acquisitions, such as Fermentas and Finnzymes, also contributed significantly by expanding its product offerings and market reach, particularly in genomics and molecular biology research. Additionally, stimulus-funded spending by customers, especially in the first quarter, provided a notable boost.

The company demonstrated strong financial health and liquidity in 2010. It generated $1.50 billion in cash flow from operations and maintained $926 million in cash and short-term investments. Thermo Fisher also actively managed its capital structure by issuing $2.2 billion in senior notes to fund acquisitions and repurchasing $1.01 billion of its own stock, reflecting confidence in its future performance and a commitment to shareholder returns.

Key risks and challenges include the need for continuous innovation and adaptation to rapid technological change, potential impacts of general economic conditions on customer demand and capital spending, currency exchange rate fluctuations, healthcare reform legislation, intellectual property protection, and the successful integration of acquisitions. The company also highlighted risks associated with supply chain disruptions and potential increases in fuel and raw material prices.

The announcement of the pending acquisition of Dionex Corporation for approximately $2.1 billion is significant as Dionex is a leader in chromatography systems and sample preparation. This acquisition is expected to enhance Thermo Fisher's capabilities in chemical analysis and further strengthen its position in key markets like life sciences and environmental analysis. The company secured significant financing for this transaction, underscoring its strategic importance.