10-QPeriod: Q3 FY2010

THERMO FISHER SCIENTIFIC INC. Quarterly Report for Q3 Ended Oct 2, 2010

Filed November 5, 2010For Securities:TMO

Summary

Thermo Fisher Scientific Inc. (TMO) reported solid revenue growth and improved profitability for the nine months ended October 2, 2010, compared to the same period in 2009. Consolidated revenues increased by 10% to $8.01 billion, driven by broad-based demand and strategic acquisitions, particularly in the Analytical Technologies segment. Operating income saw a significant increase of 27% to $924 million, with operating margin expanding to 11.5% from 10.0%, reflecting strong sales performance and ongoing productivity improvements, including benefits from restructuring actions. The company continued its strategy of inorganic growth, completing several acquisitions in the Analytical Technologies segment, such as Fermentas, Finnzymes, and Ahura Scientific, aimed at expanding its portfolio and market reach. Despite these investments and an increase in accounts receivable and inventory to support growth, Thermo Fisher maintained a healthy cash flow from operations of $1.06 billion for the period. The company also actively managed its balance sheet, undertaking debt extinguishments and share repurchases, and concluded the period with a strong liquidity position, believing its current cash, cash flow from operations, and credit facility are sufficient for at least the next 24 months.

Key Highlights

  • 1Consolidated revenues for the nine months ended October 2, 2010, increased by 10% to $8.01 billion compared to the prior year's period.
  • 2Operating income grew by 27% to $924 million, with operating margin improving to 11.5% from 10.0%.
  • 3The company completed multiple strategic acquisitions, primarily within the Analytical Technologies segment, to expand its product offerings and market presence.
  • 4Net cash provided by operating activities remained strong at $1.06 billion for the nine months ended October 2, 2010.
  • 5Thermo Fisher Scientific actively repurchased shares, with $663 million spent on stock repurchases during the nine-month period.
  • 6The company maintained a healthy liquidity position with $939 million in cash and short-term investments as of October 2, 2010.

Frequently Asked Questions

Revenue growth was driven by increased demand across both the Analytical Technologies and Laboratory Products and Services segments, coupled with strategic acquisitions. The company also benefited from higher stimulus-funded spending by customers, particularly in the first quarter, and price increases. Acquisitions, such as Fermentas, Finnzymes, and Ahura Scientific, played a significant role in expanding the company's offerings.

The company actively managed its debt by undertaking extinguishments, including the redemption of $500 million in Senior Subordinated Notes and the conversion of $326 million in Floating Rate Convertible Debentures. Financing activities also included the issuance of $741 million in long-term debt and $663 million in share repurchases. The company ended the period with $2.16 billion in outstanding debt and a revolving credit facility of $952 million.

Thermo Fisher Scientific expressed confidence in its ability to meet its cash requirements for at least the next 24 months. This confidence is based on its existing cash and short-term investments ($939 million as of October 2, 2010), future cash flow from operations, and available borrowing capacity under its revolving credit agreement.

Yes, the company recorded restructuring and other costs of $49 million in the first nine months of 2010, primarily related to headcount reductions, facility consolidations, and integration costs from acquisitions. These actions are part of an ongoing strategy to streamline operations and achieve cost savings.