10-QPeriod: Q3 FY2017

THERMO FISHER SCIENTIFIC INC. Quarterly Report for Q3 Ended Jul 1, 2017

Filed August 4, 2017For Securities:TMO

Summary

Thermo Fisher Scientific Inc. (TMO) reported strong performance for the second quarter and first six months of 2017, demonstrating revenue growth driven by both organic demand and strategic acquisitions. Total revenues increased by 10% for the quarter and 10% year-to-date, reaching $4.99 billion and $9.76 billion, respectively. This growth was significantly bolstered by acquisitions, which contributed $346 million in the quarter and $692 million year-to-date. The company's operating income also saw substantial improvement, increasing by 18% for the quarter and 19% year-to-date, reflecting effective cost management, productivity gains, and the positive impact of acquired businesses. The company is actively pursuing strategic growth, highlighted by the pending acquisition of Patheon N.V. for approximately $5.2 billion plus assumption of net debt, expected to close by year-end 2017. This move is poised to expand Thermo Fisher's offerings in drug development and manufacturing. Despite ongoing investments in strategic growth initiatives and the costs associated with integrating acquisitions, Thermo Fisher's financial health appears robust, supported by strong operating cash flow and sufficient liquidity to meet its obligations.

Financial Highlights

56 data points
Beta

Revenue

$4.99B

45.8% Gross Margin

Net Income

$612.00M

12.3% Net Margin

EPS (Diluted)

$1.56

Total Assets

$55.99B

Cash & Equivalents

$741.10M

Free Cash Flow

$1.58B

Financial Statements
Beta
Revenue$4.99B
Cost of Revenue$2.17B
Gross Profit$2.28B
R&D Expenses$217.00M
SG&A Expenses$1.40B
Operating Expenses$4.48B
Operating Income$634.00M
Interest Expense$157.00M
Net Income$612.00M
EPS (Basic)$1.57
EPS (Diluted)$1.56
Shares Outstanding (Basic)396.00M
Shares Outstanding (Diluted)400.00M

Key Highlights

  • 1Total revenues increased by 10% to $4.99 billion for the three months ended July 1, 2017, and by 10% to $9.76 billion for the six months ended July 1, 2017, compared to the prior year periods.
  • 2Operating income grew by 18% to $751.5 million for the three months ended July 1, 2017, and by 19% to $1.37 billion for the six months ended July 1, 2017.
  • 3Acquisitions contributed significantly to revenue growth, adding $346.1 million in the second quarter and $691.7 million in the first six months.
  • 4The company is pursuing a significant acquisition of Patheon N.V. for approximately $5.2 billion plus $2.0 billion in net debt, expected to close by the end of 2017.
  • 5Net income increased to $611.6 million for the quarter and $1.16 billion for the six months, up from $516.6 million and $918.8 million, respectively, in the prior year.
  • 6Diluted earnings per share (EPS) rose to $1.56 for the quarter and $2.95 for the six months, compared to $1.30 and $2.31 in the respective prior year periods.
  • 7Operating cash flow remained strong at $1.21 billion for the six months ended July 1, 2017, slightly down from $1.25 billion in the prior year, attributed to higher working capital investment.

Frequently Asked Questions

Thermo Fisher Scientific demonstrated strong financial performance with notable revenue and operating income growth for both the second quarter and the first six months of 2017. Revenues increased by 10% year-over-year for both periods, driven by a combination of organic growth and contributions from recent acquisitions. Operating income also saw significant increases of 18% for the quarter and 19% year-to-date, indicating effective operational management and successful integration of acquired businesses.

The primary growth drivers for Thermo Fisher Scientific are its strategic acquisitions and organic growth. Acquisitions have significantly contributed to revenue increases, adding substantial amounts in both the second quarter and year-to-date periods. Organic growth is supported by increased demand across its end markets, particularly in the pharmaceutical and biotech industries, and strong performance in Asia. The company also benefits from productivity improvements, strategic investments in commercial capabilities, and a diversified business segment structure.

Thermo Fisher Scientific is in the process of acquiring Patheon N.V., a leading provider of drug development and delivery solutions. This acquisition, valued at approximately $5.2 billion plus $2.0 billion in net debt, is expected to close by the end of 2017. It aims to expand Thermo Fisher's capabilities into the contract development and manufacturing organization (CDMO) market, adding a complementary service to its existing portfolio and strengthening its position in the pharmaceutical and biopharmaceutical sectors.

The company has a robust liquidity position, with $611 million in cash and cash equivalents as of July 1, 2017, and strong operating cash flow. To fund the Patheon acquisition, Thermo Fisher plans to utilize a combination of debt issuances and equity financing, supported by a committed bridge credit facility, though they do not anticipate drawing heavily on it. The company expects its existing cash, operating cash flow, and revolving credit facilities to be sufficient for its ongoing business needs for at least the next 24 months, apart from the acquisition funding.