10-QPeriod: Q2 FY2005

THERMO FISHER SCIENTIFIC INC. Quarterly Report for Q2 Ended Apr 2, 2005

Filed May 6, 2005For Securities:TMO

Summary

Thermo Fisher Scientific Inc. (TMO) reported its first quarter 2005 financial results, showing a 7% year-over-year increase in revenues to $559.2 million. This growth was primarily driven by favorable currency translations and strategic acquisitions, partially offset by a slight decline in organic sales, particularly from pharmaceutical customers. The company's profitability improved, with operating income rising to $59.7 million from $52.9 million in the prior year's quarter, leading to diluted earnings per share of $0.30. Looking ahead, TMO is actively pursuing growth through acquisitions, notably the pending $833.5 million acquisition of Kendro Laboratory Products, which will be financed through a combination of existing cash and a new bridge loan. The company also recently acquired Niton LLC for $40.5 million. Despite these investments and ongoing restructuring efforts, Thermo Fisher maintains a positive outlook on its liquidity, expecting its cash flow from operations, existing credit facilities, and anticipated refinancing to be sufficient to meet its capital requirements.

Key Highlights

  • 1Total revenues increased by 7% to $559.2 million in Q1 2005 compared to $525.0 million in Q1 2004.
  • 2Diluted earnings per share (EPS) rose to $0.30 in Q1 2005, up from $0.26 in Q1 2004.
  • 3Operating income grew to $59.7 million, with the operating income margin improving to 10.7% from 10.1% year-over-year.
  • 4The company completed the acquisition of Niton LLC for $40.5 million in March 2005.
  • 5A significant acquisition of Kendro Laboratory Products for $833.5 million is expected to close in May 2005, to be financed with a bridge loan.
  • 6Cash flow from operating activities decreased to $30.3 million in Q1 2005 from $46.6 million in Q1 2004, mainly due to working capital investments.
  • 7The company ended the quarter with $351.6 million in cash and cash equivalents, an increase from $326.9 million at the end of 2004.

Frequently Asked Questions

Revenue growth was primarily driven by favorable currency translations, which added $11.5 million, and acquisitions, which contributed $24.6 million. Organic sales were relatively flat, with lower demand from pharmaceutical customers being offset by improved sales to industrial markets.

The company plans to finance the $833.5 million acquisition of Kendro Laboratory Products primarily through a $600 million bridge loan commitment and existing cash balances for the remainder of the purchase price. The company expects to refinance the bridge loan with a combination of short- and long-term debt instruments.

Thermo Fisher Scientific expects its current cash and short-term investments, future operating cash flow, available borrowings under its revolving credit agreement, the bridge loan for the Kendro acquisition, and anticipated refinancing to be sufficient to meet its capital requirements for at least the next 24 months.

Profitability improved in the first quarter of 2005. Operating income increased to $59.7 million from $52.9 million in the prior year, and the operating income margin improved to 10.7% from 10.1%. This was largely due to lower restructuring costs and an absence of certain charges to cost of revenues, partially offset by higher amortization expenses related to intangible assets from acquisitions.