01—Abstract
Summary
Summary of the 10-K/A filed March 5, 2015. Cited figures are marked; the original filing is the authoritative source.
Thermo Fisher Scientific Inc. (TMO) filed its amended Annual Report (10-K/A) for the fiscal year ended December 31, 2014, on March 4, 2015.
The primary purpose of this amendment was to correct a table within the "Results of Operations" section, with no other changes to the original filing. The report highlights a significant year driven by the acquisition of Life Technologies for $15.30 billiona, which substantially boosted revenues and expanded the Life Sciences Solutions segment. Despite substantial integration costs and amortization related to the acquisition, Thermo Fisher demonstrated robust performance, with total revenues increasing by $3.80 billion year-over-year, reaching $16.89 billion.
Operating income and margin also saw substantial improvements, largely attributable to the Life Technologies acquisition and gains from strategic divestitures. Investors should note the company's active M&A strategy, as evidenced by the Life Technologies acquisition and subsequent divestitures of non-core assets. The company also completed the sale of its Cole-Parmer specialty channel business.
Management expressed confidence in the company's liquidity and ability to meet future cash requirements through existing cash, operational cash flow, and available credit facilities, despite facing some short-term debt obligations. The report also touches upon critical accounting policies, particularly concerning business combinations, intangible assets, and goodwill, reflecting the complexities introduced by recent acquisitions.
02—Key points
Key Highlights
- In 2014, Thermo Fisher Scientific completed the significant acquisition of Life Technologies for $15.30 billion, a move that substantially reshaped its business and revenue streams, particularly within the Life Sciences Solutions segment.
- Total revenues for 2014 reached $16.89 billion, an increase of $3.80 billion from 2013, driven primarily by acquisitions (+$3.31 billion net of divestitures) and organic growth (+$549 million or 4%).
- Operating income significantly improved to $2.50 billion in 2014 from $1.61 billion in 2013, with the operating margin increasing from 12.3% to 14.8%, benefiting from the Life Technologies integration and business divestiture gains.
- Strategic divestitures of non-core assets, including the legacy sera and media business (to GE Healthcare for $1.06 billion) and the Cole-Parmer specialty channel business (for $480 million), were completed to streamline operations and secure antitrust approval for the Life Technologies acquisition.
- The company maintained a strong liquidity position, with $1.35 billion in cash and short-term investments as of December 31, 2014, and ample borrowing capacity under its revolving credit facility, which was increased to $2.00 billion in February 2015.
- Despite a substantial increase in interest expense due to debt raised for the Life Technologies acquisition, the company reported a strong increase in income from continuing operations to $1.90 billion in 2014 from $1.28 billion in 2013.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2014, Thermo Fisher Scientific kept $0.11.
- Revenue$16.89B100.0%
- Cost of revenue−$7.93B47.0%
- Gross profit$8.95B53.0%
- Operating costs−$6.45B38.2%
- Operating income$2.50B14.8%
- Interest, other & tax−$608.6M3.6%
- Net income$1.89B11.2%
Where FY2014 revenue went
$16.89B- Cost of revenue: $7.93B, 47% of revenue
- SG&A: $4.90B, 29% of revenue
- Net income: $1.89B, 11% of revenue
- R&D: $691.1M, 4.1% of revenue
- Other operating costs: $864.7M, 5.1% of revenue
- Interest, other & tax: $608.6M, 3.6% of revenue
Kept 11% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-K/AFY2014filed March 5, 2015Financial Statements
FY2014 against FY2013
| Line item | FY2014FY2013 | Change |
|---|---|---|
| Revenue | $16.89B$13.09B | +29.0% |
| Cost of Revenue | $7.93B$6.31B | +25.8% |
| Gross Profit | $8.95B$6.78B | +32.1% |
| R&D Expenses | $691.10M$395.50M | +74.7% |
| SG&A Expenses | $4.90B$3.45B | +42.1% |
| Operating Expenses | $14.39B$11.48B | +25.3% |
| Operating Income | $2.50B$1.61B | +55.5% |
| Interest Expense | $479.90M$262.10M | +83.1% |
| Net Income | $1.89B$1.27B | +48.8% |
| EPS (Basic) | $4.76$3.53 | +34.8% |
| EPS (Diluted) | $4.71$3.48 | +35.3% |
| Shares Outstanding (Basic) | 398.20M360.30M | +10.5% |
| Shares Outstanding (Diluted) | 402.30M365.80M | +10.0% |
05—Questions
Frequently Asked Questions
What was the primary driver of Thermo Fisher Scientific's financial performance in 2014?
The primary driver was the significant acquisition of Life Technologies Corporation for $15.30 billion. This acquisition substantially increased the company's revenue, particularly in the Life Sciences Solutions segment, and contributed significantly to the overall growth in operating income and operating margin.
How did the company manage its debt and liquidity following the Life Technologies acquisition?
The company funded the acquisition through a combination of debt issuance and equity. While interest expense increased due to new debt, Thermo Fisher maintained a strong liquidity position with $1.35 billion in cash and short-term investments at year-end 2014 and an expanded $2.00 billion revolving credit facility. They expressed confidence in meeting future cash requirements.
What impact did the divestitures have on the company's financial results?
The company completed strategic divestitures of non-core businesses, such as its legacy sera and media business and the Cole-Parmer specialty channel business. These sales generated significant cash proceeds ($1.06 billion and $480 million, respectively) and contributed to pre-tax gains, helping to offset acquisition-related costs and streamline the company's portfolio.
What is the company's outlook regarding currency fluctuations?
The company noted that unfavorable currency translation effects decreased revenues by $60 million in 2014. Based on currency movements in late 2014 and early 2015, Thermo Fisher expected a significant adverse effect on reported revenues and operating income in 2015 due to a stronger U.S. dollar.
06—Continue