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| | FOR IMMEDIATE RELEASE | |
| | Media Contact Information: Lori Gorski | Investor Contact Information: Ken Apicerno |
| | Phone: 781-622-1242 | Phone: 781-622-1111 |
| | E-mail: lori.gorski@thermofisher.com | E-mail: ken.apicerno@thermofisher.com |
| | Website: www.thermofisher.com | |
Thermo Fisher Scientific Reports Strong Growth in Revenues
and Adjusted EPS in Fourth Quarter 2006
WALTHAM, Mass., February 8, 2007 - Thermo Fisher Scientific Inc. (NYSE: TMO), the world leader in serving science, reported that revenues more than doubled to $1.67 billion in the fourth quarter of 2006 (including $849 million from the merger with Fisher Scientific, completed on November 9, 2006), compared with $741 million in the 2005 quarter. GAAP diluted earnings per share (EPS) were $.08 in 2006, versus $.34 in the year-ago period. GAAP operating income for the 2006 quarter was $26.8 million, compared with $88.5 million in 2005, and GAAP operating margin was 1.6%, compared with 11.9% a year ago. GAAP results in 2006 include $125 million of pre-tax charges related to the merger with Fisher.
Adjusted EPS grew 21% to $.57 in the fourth quarter of 2006, versus $.47 in the 2005 quarter. Adjusted operating income increased 132% in the 2006 quarter, and adjusted operating margin increased 50 basis points to 15.8%, compared with 15.3% in the 2005 period. Adjusted EPS, adjusted operating income and adjusted operating margin are non-GAAP measures that exclude certain items detailed later in this press release under the heading “Use of Non-GAAP Financial Measures,” and include results from Fisher since the merger date.
For a better year-to-year comparison of the company’s performance, we are also presenting adjusted operating results on a pro forma basis, as if Thermo and Fisher had been combined in both periods. Pro forma revenues grew 11% to $2.35 billion in the fourth quarter of 2006, versus $2.12 billion in the 2005 quarter. Acquisitions (including those by Fisher prior to the merger) contributed 3% of the growth, and currency translation increased revenues by 3%. Pro forma adjusted operating income for the 2006 quarter increased 21% over 2005, and pro forma adjusted operating margin expanded 130 basis points in the 2006 quarter to 15.2%, compared with 13.9% in the 2005 period.
For full-year 2006, Thermo Fisher reported 44% revenue growth to $3.79 billion (including $849 million of Fisher revenues since the merger date), compared with $2.63 billion in 2005. GAAP diluted EPS was $.84 in 2006, versus $1.36 in 2005. GAAP operating income in 2006 decreased 8%, and GAAP operating margin was 6.4% in 2006, versus 10.0% in 2005. The 2006 results were affected by costs related to the merger with Fisher, as noted above.
Full-year adjusted EPS grew 30% to $1.91 in 2006, compared with $1.47 in 2005. Adjusted operating income increased 63% in 2006, and adjusted operating margin rose 180 basis points year over year, to 15.1% from 13.3% in 2005.
Pro forma revenues for the full year, as if the companies had been combined in both periods, grew 10% to $8.87 billion in 2006, compared with $8.07 billion in 2005. Acquisitions (including those by Fisher prior to the merger) contributed 4% of the growth, and currency translation increased revenues by 1%. Pro forma adjusted operating income in 2006 rose 21% over 2005, and pro forma adjusted operating margin expanded 130 basis points to 14.7% in 2006, versus 13.4% a year ago.
Fourth Quarter Highlights
| · | Completed industry-transforming merger with Fisher Scientific International; integration on track |
| · | Pro forma revenues grew 11% |
| · | Pro forma adjusted operating income rose 21% |
| · | Pro forma adjusted operating margin expanded 130 basis points |
| · | Strengthened integrated liquid chromatography/mass spectrometry offering with acquisition of Cohesive Technologies |
“Our strong growth momentum throughout 2006, bolstered by our industry-transforming merger with Fisher in November, led to a banner year,” said Marijn E. Dekkers, president and chief executive officer of Thermo Fisher Scientific. “Our revenues were in line with our growth targets and our adjusted operating margin expanded well beyond our goal of 100 basis points. Most significantly, full-year adjusted EPS topped our expectations at $1.91, for 30% growth over our strong performance in 2005. It’s been a very busy year, and we’ve accomplished a lot thanks to the employees throughout this great new company who made it possible.
“In addition, the integration of Fisher is moving along very well, with teams throughout the company continuing to make excellent progress. We are well on our way to achieving the $75 million of synergies we identified for 2007. Therefore, we are reiterating the 2007 adjusted EPS estimate of $2.35 to $2.45 that we presented at our analyst meeting in December 2006, which would result in 23 to 28% growth over our strong 2006 results. We expect revenues in 2007 to grow to $9.4 to $9.5 billion, an increase of approximately 6 to 8% over our pro forma 2006 revenues.” (This guidance includes the favorable impact of a full year of results from 2006 acquisitions and also takes into account the unfavorable effects of 2006 divestitures. The 2007 guidance does not factor in any acquisitions or divestitures that may be completed during the year, and is based on present currency exchange rates. In addition, the adjusted EPS estimate excludes amortization expense for acquisition-related intangible assets and certain other items detailed later in this press release under the heading “Use of Non-GAAP Financial Measures.”)
Management uses adjusted operating results to monitor and evaluate performance of the company’s business segments. Results in the following segment information are reported on a pro forma adjusted basis, as if Thermo and Fisher had been combined for both periods.
Analytical Technologies Segment
Pro forma revenues for the Analytical Technologies Segment grew 16% in the fourth quarter of 2006 to $1.02 billion, compared with $885 million in the 2005 quarter. Pro forma adjusted operating income increased 25% in 2006, and pro forma adjusted operating margin rose to 17.9%, versus 16.6% in the year-ago quarter.
For the full year, pro forma segment revenues grew 11% to $3.74 billion in 2006, compared with $3.37 billion in 2005. Pro forma adjusted operating income for the segment grew 19% in 2006, and pro forma adjusted operating margin increased to 17.2%, versus 16.1% a year ago.
Laboratory Products and Services Segment
In the Laboratory Products and Services Segment, pro forma revenues grew 7% in the fourth quarter of 2006 to $1.40 billion, compared with $1.31 billion in the 2005 quarter. Pro forma adjusted operating income increased 17% in 2006, and pro forma adjusted operating margin rose to 12.4%, versus 11.3% in the year-ago quarter.
For the full year, pro forma segment revenues grew 9% to $5.44 billion in 2006, compared with $4.98 billion in 2005. Pro forma adjusted operating income for the segment grew 23% in 2006, and pro forma adjusted operating margin increased to 12.2%, versus 10.8% a year ago.
Use of Non-GAAP Financial Measures
In addition to the financial measures prepared in accordance with generally accepted accounting principles (GAAP), we use certain non-GAAP financial measures, including adjusted EPS, adjusted operating income and adjusted operating margin, which exclude restructuring and other costs/income and amortization of acquisition-related intangible assets. Adjusted EPS also excludes certain other gains and losses, tax provisions/benefits related to the previous items, benefits from tax credit carryforwards, the impact of significant tax audits or events and discontinued operations. We exclude the above items because they are outside of our normal operations and/or, in certain cases, are difficult to forecast accurately for future periods. For purposes of comparison, 2005 consolidated adjusted results reflect the pro forma effect of stock option expense as if it had been required in that period. We believe that the use of non-GAAP measures helps investors to gain a better understanding of our core operating results and future prospects, consistent with how management measures and forecasts the company’s performance, especially when comparing such results to previous periods or forecasts.
For example:
We exclude costs and tax effects associated with restructuring activities, such as reducing overhead and consolidating facilities in connection with the Fisher merger and our Kendro acquisition. We believe that the costs related to these restructuring activities are not indicative of our normal operating costs.
We exclude certain acquisition-related costs, including charges for the sale of inventories revalued at the date of acquisition, accelerated vesting of our equity-based arrangements resulting from the change in control occurring at the date of the Fisher merger ($36.7 million) and Fisher merger-related professional fees. We exclude these costs because we do not believe they are indicative of our normal operating costs.
We exclude the expense and tax effects associated with the amortization of acquisition-related intangible assets because a significant portion of the purchase price for acquisitions may be allocated to intangible assets that have lives of 5 to 20 years. Our adjusted EPS estimate for 2007 excludes approximately $.84 of expense for the amortization of acquisition-related intangible assets for acquisitions completed through 2006. Exclusion of the amortization expense allows comparisons of operating results that are consistent over time for both our newly acquired and long-held businesses and with both acquisitive and non-acquisitive peer companies.
We also exclude certain gains/losses and related tax effects, benefits from tax credit carryforwards and the impact of significant tax audits or events, which are either isolated or cannot be expected to occur again with any regularity or predictability and that we believe are not indicative of our normal operating gains and losses. We exclude gains/losses from the sale of our equity interests in Newport Corporation and Thoratec Corporation, as well as other items such as the sale of a business or real estate, the early retirement of debt and debt facilities and discontinued operations. (We sold our remaining shares of Newport and Thoratec during the second quarter of 2005.)
Thermo Fisher’s management uses these non-GAAP measures, in addition to GAAP financial measures, as the basis for measuring the company’s core operating performance and comparing such performance to that of prior periods and to the performance of our competitors. Such measures are also used by management in their financial and operating decision-making and for compensation purposes.
The non-GAAP financial measures of Thermo Fisher’s results of operations included in this press release are not meant to be considered superior to or a substitute for Thermo Fisher’s results of operations prepared in accordance with GAAP. Reconciliations of such non-GAAP financial measures to the most directly comparable GAAP financial measures are set forth in the accompanying tables. Thermo Fisher’s earnings guidance, however, is only provided on an adjusted basis. It is not feasible to provide GAAP EPS guidance because the items excluded, other than the amortization expense, are difficult to predict and estimate and are primarily dependent on future events, such as acquisitions and decisions concerning the location and timing of facility consolidations.
Conference Call
Thermo Fisher Scientific will hold its earnings conference call today, February 8, at 9:00 a.m. Eastern time. To listen, dial 866-814-1913 within the U.S. or 703-639-1357 outside the U.S., and use conference ID 1026514. You may also listen to the call live on our Website, www.thermofisher.com, by clicking on “Investors.” You will find this press release, including the accompanying reconciliation of non-GAAP financial measures and related information, in that section of our Website under “Quarterly Results.” An audio archive of the call will be available under “Webcasts and Presentations” through Thursday, March 8, 2007.
About Thermo Fisher Scientific
Thermo Fisher Scientific Inc. (NYSE: TMO) is the world leader in serving science, enabling our customers to make the world healthier, cleaner and safer. With an annual revenue rate of more than $9 billion, we employ 30,000 people and serve over 350,000 customers within pharmaceutical and biotech companies, hospitals and clinical diagnostic labs, universities, research institutions and government agencies, as well as environmental and industrial process control settings. Serving customers through two premier brands, Thermo Scientific and Fisher Scientific, we help solve analytical challenges from routine testing to complex research and discovery. Thermo Scientific offers customers a complete range of high-end analytical instruments as well as laboratory equipment, software, services, consumables and reagents to enable integrated laboratory workflow solutions. Fisher Scientific provides a complete portfolio of laboratory equipment, chemicals, supplies and services used in healthcare, scientific research, safety and education. Together, we offer the most convenient purchasing options to customers and continuously advance our technologies to accelerate the pace of scientific discovery, enhance value for customers and fuel growth for shareholders and employees alike. Visit www.thermofisher.com.
The following constitutes a “Safe Harbor” statement under the Private Securities Litigation Reform Act of 1995: This press release contains forward-looking statements that involve a number of risks and uncertainties. Important factors that could cause actual results to differ materially from those indicated by such forward-looking statements are set forth under the heading “Risk Factors” in Thermo Electron’s and Fisher Scientific’s Quarterly Reports on Form 10-Q for the third quarter of 2006. We also may make forward-looking statements about the benefits of the merger of Thermo Electron and Fisher Scientific, including statements about future financial and operating results, the new company’s plans, objectives, expectations and intentions and other statements that are not historical facts. These include risks and uncertainties relating to: the risk that the businesses will not be integrated successfully; the risk that the cost savings and any other synergies from the transaction may not be fully realized or may take longer to realize than expected; disruption from the transaction making it more difficult to maintain relationships with customers, employees or suppliers; competition and its effect on pricing, spending, third-party relationships and revenues; the need to develop new products and adapt to significant technological change; implementation of strategies for improving internal growth; use and protection of intellectual property; dependence on customers’ capital spending policies and government funding policies; realization of potential future savings from new productivity initiatives; dependence on customers that operate in cyclical industries; general worldwide economic conditions and related uncertainties; the effect of changes in governmental regulations; exposure to product liability claims in excess of insurance coverage; and the effect of exchange rate fluctuations on international operations. While we may elect to update forward-looking statements at some point in the future, we specifically disclaim any obligation to do so, even if our estimates change and, therefore, you should not rely on these forward-looking statements as representing our views as of any date subsequent to today.
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