10-QPeriod: Q3 FY2011

THERMO FISHER SCIENTIFIC INC. Quarterly Report for Q3 Ended Jul 2, 2011

Filed August 5, 2011For Securities:TMO

Summary

Thermo Fisher Scientific Inc. reported solid financial results for the quarter ending July 2, 2011, demonstrating revenue growth and improved operational efficiency. The company saw a significant increase in revenue driven by acquisitions, notably Dionex, and favorable currency translation effects. While operating income saw a slight decrease year-over-year, this was largely attributed to acquisition-related charges and amortization expenses. The company also made substantial progress in its strategic acquisition of Phadia, indicating a forward-looking approach to expanding its diagnostics capabilities. Liquidity remains strong, with substantial cash and cash equivalents bolstered by operating activities and proceeds from asset sales. The company is well-positioned to fund its ongoing strategic initiatives, including the Phadia acquisition, through a combination of existing cash, operational cash flow, and available credit facilities. Investors should note the company's active acquisition strategy, which is a key driver of growth, alongside continued efforts in operational efficiency and integration.

Financial Highlights

53 data points
Beta

Revenue

$2.85B

40.7% Gross Margin

Net Income

$523.40M

18.3% Net Margin

EPS (Diluted)

$1.36

Total Assets

$24.07B

Cash & Equivalents

$1.36B

Free Cash Flow

$301.00M

Financial Statements
Beta
Revenue$2.85B
Cost of Revenue$1.43B
Gross Profit$1.16B
SG&A Expenses$772.90M
Operating Expenses$2.59B
Operating Income$265.10M
Interest Expense$38.90M
Net Income$523.40M
EPS (Basic)$1.37
EPS (Diluted)$1.36
Shares Outstanding (Basic)381.90M
Shares Outstanding (Diluted)385.90M

Key Highlights

  • 1Revenue increased by 12% to $2.90 billion for the second quarter of 2011 compared to the prior year, driven by acquisitions (Dionex) and favorable currency translation.
  • 2Operating income decreased by 11% to $266 million, impacted by $75 million in acquisition-related charges and $13 million in increased amortization expense following the Dionex acquisition.
  • 3The company completed the sale of Athena Diagnostics and Lancaster Laboratories for $920 million in cash and escrowed proceeds, resulting in an after-tax gain of $304 million.
  • 4Thermo Fisher announced a pending acquisition of Phadia for approximately $3.51 billion, aiming to expand its allergy and autoimmunity diagnostics business.
  • 5Cash flow from operating activities increased to $693 million for the first six months of 2011, up from $627 million in the same period of 2010, indicating strong operational cash generation.
  • 6The company repurchased $763 million of its common stock during the first six months of 2011, demonstrating a commitment to returning capital to shareholders.

Frequently Asked Questions

Revenue growth was primarily driven by acquisitions, specifically the acquisition of Dionex, and favorable currency translation effects. Organic growth from existing businesses also contributed to a lesser extent.

The acquisition of Dionex contributed to revenue growth but also resulted in increased operating expenses, including $75 million in acquisition-related charges and a $13 million increase in amortization expense in the second quarter of 2011. Pro forma revenues show the significant impact the acquisition would have had if completed earlier.

Thermo Fisher has secured short-term financing commitments of up to $3 billion for the Phadia acquisition. The company expects to replace this with long-term debt financing and plans to use a combination of available cash, operational cash flow, and borrowing capacity to fund the transaction.

Key risks include the potential impact of currency exchange rate fluctuations, changes in healthcare reform legislation, intellectual property protection challenges, and the integration risks associated with its active acquisition strategy. The company's significant debt also poses a risk, potentially restricting investment opportunities.