10-QPeriod: Q2 FY2016

THERMO FISHER SCIENTIFIC INC. Quarterly Report for Q2 Ended Apr 2, 2016

Filed May 6, 2016For Securities:TMO

Summary

Thermo Fisher Scientific Inc. (TMO) reported solid financial results for the first quarter of 2016, with total revenues increasing by 10% year-over-year to $4.29 billion. This growth was driven by strong performance across its four business segments, particularly Life Sciences Solutions and Laboratory Products and Services, with contributions from both organic growth and strategic acquisitions. Net income rose to $402.2 million, or $1.01 per diluted share, up from $385.1 million, or $0.96 per diluted share, in the prior year's quarter. The company demonstrated effective cash flow generation, with operating activities providing $289.1 million. Significant strategic investment is evident through the $1.34 billion acquisition of Affymetrix, Inc., which is expected to expand its cellular and genetic analysis capabilities. Financially, Thermo Fisher maintains a robust balance sheet. While short-term debt saw an increase due to funding the Affymetrix acquisition, the company also successfully issued new long-term debt. The company’s cash and cash equivalents significantly increased to $826.8 million. Management expresses confidence in its ability to meet future cash requirements through existing cash, operational cash flow, and available credit facilities, underscoring a stable liquidity position. Investors should note the ongoing integration of acquisitions and strategic investments as key drivers for future performance.

Financial Highlights

56 data points
Beta

Revenue

$4.29B

45.6% Gross Margin

Net Income

$402.00M

9.4% Net Margin

EPS (Diluted)

$1.01

Total Assets

$42.95B

Cash & Equivalents

$826.80M

Free Cash Flow

$219.60M

Financial Statements
Beta
Revenue$4.29B
Cost of Revenue$1.93B
Gross Profit$1.96B
R&D Expenses$176.50M
SG&A Expenses$1.21B
Operating Expenses$3.78B
Operating Income$517.90M
Interest Expense$106.20M
Net Income$402.00M
EPS (Basic)$1.02
EPS (Diluted)$1.01
Shares Outstanding (Basic)395.80M
Shares Outstanding (Diluted)398.70M

Key Highlights

  • 1Total revenues increased 10% to $4.29 billion in Q1 2016, compared to $3.92 billion in Q1 2015, driven by organic growth and acquisitions.
  • 2Net income rose to $402.2 million ($1.01 per diluted share) from $385.1 million ($0.96 per diluted share) year-over-year.
  • 3The company completed the acquisition of Affymetrix, Inc. for $1.34 billion to enhance its cellular and genetic analysis offerings.
  • 4Cash provided by operating activities significantly improved to $289.1 million from $80.0 million in the prior year's quarter.
  • 5Cash and cash equivalents increased substantially to $826.8 million from $452.1 million at the end of the previous year.
  • 6Total assets grew to $42.95 billion from $40.83 billion, with a notable increase in Goodwill and Acquisition-related Intangible Assets.
  • 7Short-term obligations increased significantly to $3.38 billion from $1.05 billion, primarily due to debt financing for acquisitions.

Frequently Asked Questions

Revenue growth was primarily driven by increased demand across the company's end markets, particularly in pharmaceutical and biotech industries. Strategic acquisitions, like Affymetrix, also contributed to the revenue increase, alongside organic growth from existing businesses and four extra days in the fiscal quarter compared to the prior year.

The acquisition of Affymetrix, Inc. for $1.34 billion was a significant event in the quarter. It expanded the company's Life Sciences Solutions segment and contributed to an increase in total assets, goodwill, and acquisition-related intangible assets. The acquisition also led to a substantial increase in short-term debt used for financing. Management anticipates Affymetrix will enhance the company's portfolio in cellular and genetic analysis.

Thermo Fisher Scientific reported a strong liquidity position with cash and cash equivalents increasing to $826.8 million. The company believes its existing cash, future cash flow from operations, and available borrowing capacity under its revolving credit agreement are sufficient to meet its cash requirements for at least the next 24 months, indicating a stable outlook.

The company's effective tax rate was 4.9% in the first quarter of 2016, a significant decrease from prior periods, largely due to implemented tax planning initiatives related to non-U.S. subsidiaries. These initiatives resulted in substantial U.S. foreign tax credits, which provided a significant benefit and reduced the overall effective tax rate.