10-QPeriod: Q3 FY2006

THERMO FISHER SCIENTIFIC INC. Quarterly Report for Q3 Ended Sep 30, 2006

Filed November 3, 2006For Securities:TMO

Summary

Thermo Fisher Scientific Inc. (TMO) reported its third-quarter 2006 financial results, showing a 7% increase in revenue to $725.0 million compared to the prior year's quarter. This growth was driven by strong demand across its Life and Laboratory Sciences and Measurement and Control segments, particularly for mass spectrometry and spectroscopy instruments. The company also highlighted significant progress towards its merger with Fisher Scientific International Inc., announced in May 2006, which is expected to close by November 9, 2006, subject to regulatory approval. This merger, a tax-free, stock-for-stock exchange valued at approximately $10.3 billion, will create a combined entity named Thermo Fisher Scientific Inc. The company also made several strategic acquisitions in the quarter to broaden its product offerings. Operationally, Thermo Fisher Scientific demonstrated improved profitability with an operating income of $75.1 million, up from $62.1 million in the prior year's quarter, leading to an increased operating income margin of 10.4%. Diluted earnings per share from continuing operations were $0.30. The company also provided an update on its cash flow, with $200.2 million provided by operating activities for the first nine months of 2006, an increase from the same period in 2005. Management expressed confidence in its liquidity and ability to meet capital requirements, further supported by a new $1 billion revolving credit agreement to become effective upon the merger's closing.

Key Highlights

  • 1Revenue increased by 7% to $725.0 million for the third quarter of 2006, compared to $679.4 million in the same period of 2005.
  • 2Operating income grew to $75.1 million, an increase from $62.1 million in Q3 2005, with the operating margin improving to 10.4% from 9.1%.
  • 3Net income for the quarter was $48.8 million, resulting in diluted earnings per share of $0.30 for continuing operations.
  • 4Significant progress was made on the pending merger with Fisher Scientific International Inc., with shareholder approvals obtained and expected closing by November 9, 2006.
  • 5The company completed several strategic acquisitions in Q3 2006, including GV Instruments Limited and EGS Gauging, Inc., to expand its product portfolio.
  • 6Cash provided by operating activities for the first nine months of 2006 was $200.2 million, up from $144.9 million in the prior year's period.
  • 7As of September 30, 2006, the company's goodwill was $2.0 billion, reflecting the strategy of growth through acquisitions.

Frequently Asked Questions

The merger with Fisher Scientific International Inc. was announced on May 8, 2006, and received shareholder approval on August 30, 2006. The transaction is a tax-free, stock-for-stock exchange valued at approximately $10.3 billion. The combined company will be named Thermo Fisher Scientific Inc. The merger is subject to regulatory approvals, with the European Commission's decision expected by November 9, 2006. The company expects to close the merger on that date if cleared.

Thermo Fisher Scientific reported a 7% increase in revenue for the third quarter of 2006, reaching $725.0 million, up from $679.4 million in the same period of 2005. This growth was attributed to increased demand in both the Life and Laboratory Sciences and Measurement and Control segments, as well as favorable currency translation effects.

The company believes its existing cash, short-term investments, future operating cash flow, and available credit facilities are sufficient to meet its capital requirements for the foreseeable future. A new $1 billion revolving credit agreement has been negotiated, set to become effective upon the closing of the Fisher Scientific merger, which will replace existing credit facilities.

In the third quarter of 2006, Thermo Fisher Scientific completed several acquisitions to enhance its product offerings. These included GV Instruments Limited, a UK-based provider of isotope ratio mass spectrometry instruments, and EGS Gauging, Inc., a Massachusetts-based provider of flat polymer web gauging products. The company also acquired a small manufacturer of on-line elemental analyzer products and a product line with a small distributor.