| | FOR IMMEDIATE RELEASE | |
| | Media Contact Information: Ron O’Brien | Investor Contact Information: Ken Apicerno |
| | Phone: 781-622-1242 | Phone: 781-622-1294 |
| | E-mail: ron.obrien@thermofisher.com | E-mail: ken.apicerno@thermofisher.com |
| | Website: www.thermofisher.com | |
Thermo Fisher Scientific Reports Third Quarter 2010 Results
Achieves Record EPS Performance
Raises Guidance for Full Year 2010
WALTHAM, Mass. (October 27, 2010) – Thermo Fisher Scientific Inc. (NYSE: TMO), the world leader in serving science, today reported financial results for the third quarter ended October 2, 2010.
Highlights
| · | Adjusted earnings per share (EPS) grew 15% to a third quarter record of $0.90, versus $0.78 in the 2009 quarter. |
| · | Revenues grew 6% to $2.68 billion, compared with $2.53 billion in the 2009 quarter. Acquisitions contributed 3% to the growth, and the unfavorable effect of currency translation lowered revenues by 1%. |
| · | Adjusted operating income increased 8% over the year-ago quarter. |
| · | Adjusted operating margin increased 30 basis points to 17.6%, compared with 17.3% in the year-ago quarter. |
| · | Completed previously announced acquisition of Fermentas for $260 million. |
| · | Repurchased 10.1 million shares for $475 million in the quarter. |
Adjusted EPS, adjusted operating income, adjusted operating margin and free cash flow are non-GAAP measures that exclude certain items detailed later in this press release under the heading “Use of Non-GAAP Financial Measures.”
GAAP diluted EPS was $0.66 in the third quarter of 2010, versus $0.53 in the year-ago period. GAAP operating income for the third quarter was $319 million, compared with $276 million in the 2009 quarter, and GAAP operating margin was 11.9%, compared with 10.9% in 2009.
“We are pleased to report excellent financial results for the third quarter,” said Marc N. Casper, president and chief executive officer of Thermo Fisher Scientific. “We delivered record EPS performance, driven by strong growth in instruments and equipment as well as continued strength in our clinical diagnostics and biosciences businesses.
“We continue to grow the company through a combination of ongoing investment in innovation, expansion in emerging markets and complementary acquisitions. In the quarter, we introduced a workflow for immunosuppressant drug analysis that includes our recently launched test kits and automated sample-handling platform. Also, our previously announced acquisition of Fermentas significantly strengthens our offerings for genomics workflows and PCR-based testing.”
Casper added, “At this point in the year, we are positioned well to achieve our 2010 goals. Looking forward, we remain confident that we will continue our track record of creating shareholder value through strong operating and financial performance, as well as disciplined capital deployment.”
Annual Guidance
Thermo Fisher announced that it is raising its 2010 adjusted EPS guidance to a new range of $3.47 to $3.53, which would result in 14% to 16% EPS growth over 2009. The company is also raising its 2010 revenue guidance to a new range of $10.72 billion to $10.80 billion, for 6% to 7% revenue growth year to year.
The company’s previously announced guidance for 2010 was $3.40 to $3.50 of adjusted EPS and $10.60 billion to $10.75 billion in revenues. The 2010 guidance does not include any future acquisitions or divestitures and is based on current foreign 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.
Analytical Technologies Segment
Revenues in the Analytical Technologies Segment increased 14% in the third quarter of 2010 to $1.16 billion, compared with 2009 revenues of $1.02 billion. Segment adjusted operating income increased 23% in the third quarter of 2010, and adjusted operating margin increased to 21.5%, versus 2009 results of 19.9%.
Laboratory Products and Services Segment
In the Laboratory Products and Services Segment, revenues grew 1% in the third quarter of 2010 to $1.65 billion, compared with 2009 revenues of $1.63 billion. Adjusted operating income for the segment decreased 6% in the third quarter of 2010, and adjusted operating margin decreased to 13.4%, versus 2009 results of 14.4%.
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. We also use a non-GAAP measure, free cash flow, which excludes operating cash flows from discontinued opera tions and deducts net capital expenditures. 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. 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 and significant transaction costs. 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 2010 excludes approximately $0.91 of expense for the amortization of acquisition-related intangible assets for acquisitions completed through the end of the third quarter of 2010. 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 (such as the one-time effect on deferred tax balances of enacted changes in tax rates), 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. For example, we exclude gains/losses from items such as the sale of a business or real estate, gains or losses on significant litigation-related matters, gains on curtailments of pension plans, the early retirement of debt and discontinued operations.
We also report free cash flow, which is operating cash flow, net of capital expenditures, and also excludes operating cash flows from discontinued operations to provide a view of the continuing operations’ ability to generate cash for use in acquisitions and other investing and financing activities.
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 and cash flows 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, October 27, at 8:30 a.m. Eastern time. To listen, dial (866) 804-6922 within the U.S. or (857) 350-1668 outside the U.S., and use conference ID 27442368. 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 “Financial Results.” An audio archive of the call will be available under “Webcasts and Presentations” through Friday, November 26, 2010.
About Thermo Fisher Scientific
Thermo Fisher Scientific Inc. (NYSE: TMO) is the world leader in serving science. Our mission is to enable our customers to make the world healthier, cleaner and safer. With revenues of more than $10 billion, we have approximately 35,000 employees and serve customers within pharmaceutical and biotech companies, hospitals and clinical diagnostic labs, universities, research institutions and government agencies, as well as in environmental and process control industries. We create value for our key stakeholders through two premier brands, Thermo Scientific and Fisher Scientific, which offer a unique combination of continuous technology development and the most convenient purchasing options. Our products and services help accelerate the pace of scientific discovery, and solve analytical challenges ranging from complex research to routine testing to field applications. 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 in the company’s Quarterly Report on Form 10-Q for the quarter ended July 3, 2010, under the caption “Risk Factors,” which is on file with the Securities and Exchange Commission and available in the “Investors” section of our Website under the heading “SEC Filings.” Important factors that could cause actual results to differ materially from those indicated by forward-looking statements include risks and uncertainties relating to: c ompetition 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; general worldwide economic conditions and related uncertainties; dependence on customers’ capital spending policies and government funding policies; the effect of exchange rate fluctuations on international operations; the effect of healthcare reform legislation; use and protection of intellectual property; the effect of changes in governmental regulations; the effect of laws and regulations governing government contracts; and the effect of competing with certain of our customers and suppliers. 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 t o today.
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