10-QPeriod: Q2 FY2009

THERMO FISHER SCIENTIFIC INC. Quarterly Report for Q2 Ended May 1, 2009

Filed May 1, 2009For Securities:TMO

Summary

Thermo Fisher Scientific Inc. reported its first-quarter 2009 financial results, reflecting a challenging economic environment. Revenues for the quarter decreased by 12% year-over-year to $2.26 billion, primarily due to reduced customer demand amidst the global economic downturn, compounded by unfavorable currency translation effects. Operating income saw a significant decline of 35% to $190 million, with operating margins contracting from 11.4% to 8.4%. This decline was attributed to lower revenues, increased restructuring costs, and productivity pressures, partially offset by cost-saving measures and reduced amortization expenses. Despite the revenue and profitability headwinds, the company maintained a strong cash flow from operations, totaling $359 million, an increase from the prior year, largely driven by improved working capital management. The company ended the quarter with a robust cash and short-term investments balance of $1.57 billion, and sufficient borrowing capacity to meet its foreseeable cash requirements for at least the next 24 months. Management is actively implementing cost-saving measures and restructuring actions to navigate the current economic climate.

Financial Statements
Beta
Revenue$2.48B
Cost of Revenue$1.27B
Gross Profit$988.30M
SG&A Expenses$660.90M
Operating Expenses$2.23B
Operating Income$259.00M
Interest Expense$29.60M
Net Income$206.90M
EPS (Basic)$0.50
EPS (Diluted)$0.49
Shares Outstanding (Basic)415.30M
Shares Outstanding (Diluted)423.70M

Key Highlights

  • 1Consolidated revenues for Q1 2009 decreased 12% to $2.26 billion compared to Q1 2008 ($2.55 billion), driven by lower demand due to the economic downturn and unfavorable currency translation.
  • 2Operating income decreased 35% to $190.1 million in Q1 2009 from $290.4 million in Q1 2008, with operating margin declining from 11.4% to 8.4%.
  • 3Net income for the quarter was $148.9 million, down from $229.7 million in the prior year's comparable period, resulting in diluted EPS of $0.35 compared to $0.53.
  • 4Cash flow from operating activities increased significantly to $358.7 million in Q1 2009 from $243.0 million in Q1 2008, driven by improved working capital management.
  • 5The company reported $13.6 million in restructuring and other costs in Q1 2009, related to actions taken in response to the economic downturn, with further charges of approximately $22 million identified for the remainder of 2009.
  • 6As of March 28, 2009, the company had $1.56 billion in cash and cash equivalents, indicating a strong liquidity position.
  • 7The company completed the acquisition of Biolab for approximately $120 million on April 30, 2009, demonstrating ongoing strategic expansion.

Frequently Asked Questions

The primary driver for the decrease in revenue was a decline in customer demand attributed to the prevailing global economic downturn. Unfavorable currency translation effects also contributed to the revenue reduction.

Thermo Fisher Scientific Inc. demonstrated strong cash flow from operating activities, which increased to $358.7 million in Q1 2009 from $243.0 million in Q1 2008. This improvement was mainly due to better management of working capital, particularly reductions in accounts receivable and other current assets, along with the timing of payments for accounts payable.

The company incurred $13.6 million in restructuring and other costs in the first quarter of 2009, primarily related to actions taken in response to the economic downturn, such as headcount reductions and facility consolidations. Management has identified further restructuring actions expected to result in approximately $22 million in additional charges for the remainder of 2009.

The company maintained a strong liquidity position, with cash and cash equivalents totaling $1.56 billion as of March 28, 2009. This, combined with future operating cash flow and available credit, is deemed sufficient to meet business requirements for at least the next 24 months.