News
Exhibit 99.1
FOR IMMEDIATE RELEASE | ||
Media Contact Information: Karen Kirkwood | Investor Contact Information: Ken Apicerno | |
| Phone: 781-622-1306 | Phone: 781-622-1294 | |
| E-mail: karen.kirkwood@thermofisher.com | E-mail: ken.apicerno@thermofisher.com | |
| Website: www.thermofisher.com |
Thermo Fisher Scientific Reports Third Quarter 2013 Results
WALTHAM, Mass. (October 23, 2013) – Thermo Fisher Scientific Inc. (NYSE: TMO), the world leader in serving science, today reported its financial results for the third quarter ended September 28, 2013.
Third Quarter 2013 Highlights
| · | Grew adjusted earnings per share (EPS) 9% to a third quarter record of $1.30 |
| · | Increased revenue 3% to a third quarter record of $3.19 billion |
| · | Expanded adjusted operating margin 70 basis points to 19.4% |
| · | Strengthened innovation leadership – recently launched mass spectrometry systems are gaining excellent traction and newly introduced portable analyzer creates growth opportunity in agricultural quality control |
| · | Continued to expand presence in high-growth Asia-Pacific and emerging markets, including opening of new production facility in Singapore to support growing global demand for biologics |
| · | Life Technologies shareholders approved pending acquisition, and integration planning remains on track |
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.”
“I’m pleased to report another quarter of strong adjusted EPS results, with 9% growth year over year,” said Marc N. Casper, president and chief executive officer of Thermo Fisher Scientific. “We executed well in a challenging market environment, driving productivity and leveraging our PPI Business System to deliver solid adjusted operating margin expansion.
“On the technology front, we had great uptake of our mass spectrometry systems launched at ASMS from customers in both life sciences and applied markets. In the quarter, we introduced new technologies to improve bioprocessing quality and efficiency as well as a new portable analyzer for on-site inspection of animal feed.
“In Asia-Pacific and emerging markets, our China team continued its excellent growth momentum, with another quarter of strong double-digit revenue performance. During the quarter, we expanded our presence by opening a new production facility in Singapore to meet growing demand for vaccines and therapeutics.
“I am also pleased to report that we continue to make good progress on planning the integration of Life Technologies. We’re excited about the tremendous value this transaction will create for our customers, employees and shareholders, and remain on track to close early in 2014.”
Third Quarter 2013
For the third quarter of 2013, adjusted EPS grew 9% to $1.30, versus $1.19 in the third quarter of 2012. Revenue for the quarter grew 3% to $3.19 billion in 2013, versus $3.09 billion in 2012. Organic revenue growth was 2%, with acquisitions increasing revenue by 1% and currency translation having a nominal negative impact. Adjusted operating income for the third quarter of 2013 increased 8% compared with the year-ago period, and adjusted operating margin expanded to 19.4%, compared with 18.7% in the third quarter of 2012.
GAAP diluted EPS for the third quarter of 2013 was $0.86, versus $0.79 in the same quarter last year. GAAP operating income for the third quarter of 2013 increased 11% to $392 million, compared with $352 million in 2012. GAAP operating margin rose to 12.3%, compared with 11.4% in the third quarter of 2012.
Annual Guidance for 2013
Casper added, “With another strong quarter behind us, we’re in a great position to achieve our growth goals for the year.”
Thermo Fisher is raising the low end of its revenue guidance by $40 million to a new range of $12.87 to $12.95 billion, resulting in 3% to 4% revenue growth over 2012. The company is also raising the low end of its adjusted EPS guidance by $0.02 to a new range of $5.31 to $5.39, for 7% to 9% growth year over year.
The 2013 guidance does not include the pending acquisition of Life Technologies or the impact of related financing activities. As previously stated, the guidance does not include any other 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.”
Segment Results
Management uses adjusted operating results to monitor and evaluate performance of the company’s three business segments, as highlighted below.
Analytical Technologies Segment
In the third quarter of 2013, Analytical Technologies Segment revenue increased 1% to $997 million, compared with revenue of $987 million in the third quarter of 2012. Segment adjusted operating income decreased 3% in the 2013 quarter, and adjusted operating margin was 18.1%, versus 18.9% a year ago.
Specialty Diagnostics Segment
Specialty Diagnostics Segment revenue in the third quarter increased 7% to $759 million in 2013, compared with revenue of $707 million in the third quarter of 2012. Segment adjusted operating income rose 20% in the 2013 quarter, and adjusted operating margin increased to 26.8%, versus 24.1% a year ago.
Laboratory Products and Services Segment
In the third quarter of 2013, Laboratory Products and Services Segment revenue increased 4% to $1.58 billion, compared with revenue of $1.53 billion in the 2012 quarter. Segment adjusted operating income increased 7% in the 2013 quarter, and adjusted operating margin grew to 14.9%, versus 14.4% 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. We also use a non-GAAP measure, free cash flow, which excludes operating cash flows from discontinued operations 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 2013 excludes approximately $1.46 of expense for the amortization of acquisition-related intangible assets for acquisitions completed through the end of the third quarter of 2013. 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 23, 2013, at 8:30 a.m. Eastern time. To listen, call (877) 312-9206 within the U.S. or (408) 774-4001 outside the U.S. 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 22, 2013.
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 revenue of $13 billion, we have 39,000 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 three premier brands, Thermo Scientific, Fisher Scientific and Unity Lab Services, which offer a unique combination of innovative technologies, convenient purchasing options and a single solution for laboratory operations management. Our products and services help our customers solve complex analytical challenges, improve patient diagnostics and increase laboratory productivity. 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 June 29, 2013, 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: the need to develop new products and adapt to significant technological change; implementation of strategies for improving growth; general 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; and the effect of laws and regulations governing government contracts. 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 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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| Consolidated Statement of Income (unaudited) (a)(b) | Three Months Ended | ||||||||||
| September 28, | % of | September 29, | % of | ||||||||
| (In millions except per share amounts) | 2013 | Revenues | 2012 | Revenues | |||||||
| Revenues | $ | 3,191.8 | $ | 3,085.7 | |||||||
| Costs and Operating Expenses: | |||||||||||
| Cost of revenues (c) | 1,788.2 | 56.0% | 1,732.3 | 56.1% | |||||||
| Selling, general and administrative expenses (d) | 713.2 | 22.3% | 707.8 | 22.9% | |||||||
| Amortization of acquisition-related intangible assets | 191.0 | 6.0% | 186.2 | 6.0% | |||||||
| Research and development expenses | 95.9 | 3.0% | 92.0 | 3.0% | |||||||
| Restructuring and other costs, net (e) | 11.4 | 0.4% | 15.2 | 0.5% | |||||||
| 2,799.7 | 87.7% | 2,733.5 | 88.6% | ||||||||
| Operating Income | 392.1 | 12.3% | 352.2 | 11.4% | |||||||
| Interest Income | 7.1 | 5.9 | |||||||||
| Interest Expense | (64.3 | ) | (60.3 | ) | |||||||
| Other (Expense) Income, Net (f) | (15.9 | ) | (1.4 | ) | |||||||
| Income Before Income Taxes | 319.0 | 296.4 | |||||||||
| (Provision for) Benefit from Income Taxes (g) | (1.3 | ) | 3.0 | ||||||||
| Income from Continuing Operations | 317.7 | 299.4 | |||||||||
| Loss from Discontinued Operations, Net of Tax | (0.1 | ) | (4.1 | ) | |||||||
| Loss on Disposal of Discontinued Operations, Net of Tax | — | (4.9 | ) | ||||||||
| Net Income | $ | 317.6 | 10.0% | $ | 290.4 | 9.4% | |||||
| Earnings per Share from Continuing Operations: | |||||||||||
| Basic | $ | .88 | $ | .83 | |||||||
| Diluted | $ | .86 | $ | .82 | |||||||
| Earnings per Share: | |||||||||||
| Basic | $ | .88 | $ | .80 | |||||||
| Diluted | $ | .86 | $ | .79 | |||||||
| Weighted Average Shares: | |||||||||||
| Basic | 361.2 | 362.6 | |||||||||
| Diluted | 367.3 | 365.4 | |||||||||
| Reconciliation of Adjusted Operating Income and Adjusted Operating Margin | |||||||||||
| GAAP Operating Income (a) | $ | 392.1 | 12.3% | $ | 352.2 | 11.4% | |||||
| Cost of Revenues Charges (c) | 0.9 | 0.0% | 3.1 | 0.1% | |||||||
| Selling, General and Administrative Costs, Net (d) | 24.0 | 0.7% | 19.0 | 0.7% | |||||||
| Restructuring and Other Costs, Net (e) | 11.4 | 0.4% | 15.2 | 0.5% | |||||||
| Amortization of Acquisition-related Intangible Assets | 191.0 | 6.0% | 186.2 | 6.0% | |||||||
| Adjusted Operating Income (b) | $ | 619.4 | 19.4% | $ | 575.7 | 18.7% | |||||
| �� | |||||||||||
| Reconciliation of Adjusted Net Income | |||||||||||
| GAAP Net Income (a) | $ | 317.6 | 10.0% | $ | 290.4 | 9.4% | |||||
| Cost of Revenues Charges (c) | 0.9 | 0.0% | 3.1 | 0.1% | |||||||
| Selling, General and Administrative Costs, Net (d) | 24.0 | 0.7% | 19.0 | 0.7% | |||||||
| Restructuring and Other Costs, Net (e) | 11.4 | 0.4% | 15.2 | 0.5% | |||||||
| Amortization of Acquisition-related Intangible Assets | 191.0 | 6.0% | 186.2 | 6.0% | |||||||
| Restructuring and Other Costs, Net – Equity Investments | — | 0.0% | 0.9 | 0.0% | |||||||
| Amortization of Acquisition-related Intangible Assets – Equity Investments | 0.5 | 0.0% | 0.8 | 0.0% | |||||||
| Other Expense, Net (f) | 16.7 | 0.5% | — | 0.0% | |||||||
| Provision for Income Taxes (g) | (85.2 | ) | -2.7% | (91.4 | ) | -3.0% | |||||
| Discontinued Operations, Net of Tax | 0.1 | 0.0% | 9.0 | 0.3% | |||||||
| Adjusted Net Income (b) | $ | 477.0 | 14.9% | $ | 433.2 | 14.0% | |||||
| Reconciliation of Adjusted Earnings per Share | |||||||||||
| GAAP EPS (a) | $ | 0.86 | $ | 0.79 | |||||||
| Cost of Revenues Charges, Net of Tax (c) | — | — | |||||||||
| Selling, General and Administrative Costs, Net of Tax (d) | 0.05 | 0.04 | |||||||||
| Restructuring and Other Costs, Net of Tax (e) | 0.02 | 0.03 | |||||||||
| Amortization of Acquisition-related Intangible Assets, Net of Tax | 0.35 | 0.31 | |||||||||
| Restructuring and Other Costs, Net of Tax – Equity Investments | — | — | |||||||||
| Amortization of Acquisition-related Intangible Assets, Net of Tax – Equity Investments | — | — | |||||||||
| Other Expense, Net of Tax (f) | 0.03 | — | |||||||||
| Provision for Income Taxes (g) | (0.01 | ) | — | ||||||||
| Discontinued Operations, Net of Tax | — | 0.02 | |||||||||
| Adjusted EPS (b) | $ | 1.30 | $ | 1.19 | |||||||
| Reconciliation of Free Cash Flow | |||||||||||
| GAAP Net Cash Provided by Operating Activities (a) | $ | 505.5 | $ | 479.9 | |||||||
| Net Cash Used in Discontinued Operations | 1.6 | 12.0 | |||||||||
| Purchases of Property, Plant and Equipment | (56.3 | ) | (76.0 | ) | |||||||
| Proceeds from Sale of Property, Plant and Equipment | 12.3 | 3.9 | |||||||||
| Free Cash Flow (h) | $ | 463.1 | $ | 419.8 | |||||||
| Segment Data | Three Months Ended | ||||||||||
| September 28, | % of | September 29, | % of | ||||||||
| (In millions) | 2013 | Revenues | 2012 | Revenues | |||||||
| Revenues | |||||||||||
| Analytical Technologies | $ | 996.6 | 31.2% | $ | 986.5 | 32.0% | |||||
| Specialty Diagnostics | 759.2 | 23.8% | 706.7 | 22.9% | |||||||
| Laboratory Products and Services | 1,582.1 | 49.6% | 1,526.3 | 49.5% | |||||||
| Eliminations | (146.1 | ) | -4.6% | (133.8 | ) | -4.4% | |||||
| Consolidated Revenues | $ | 3,191.8 | 100.0% | $ | 3,085.7 | 100.0% | |||||
| Operating Income and Operating Margin | |||||||||||
| Analytical Technologies | $ | 180.4 | 18.1% | $ | 186.1 | 18.9% | |||||
| Specialty Diagnostics | 203.7 | 26.8% | 170.0 | 24.1% | |||||||
| Laboratory Products and Services | 235.3 | 14.9% | 219.6 | 14.4% | |||||||
| Subtotal Reportable Segments | 619.4 | 19.4% | 575.7 | 18.7% | |||||||
| Cost of Revenues Charges (c) | (0.9 | ) | 0.0% | (3.1 | ) | -0.1% | |||||
| Selling, General and Administrative Costs, Net (d) | (24.0 | ) | -0.7% | (19.0 | ) | -0.7% | |||||
| Restructuring and Other Costs, Net (e) | (11.4 | ) | -0.4% | (15.2 | ) | -0.5% | |||||
| Amortization of Acquisition-related Intangible Assets | (191.0 | ) | -6.0% | (186.2 | ) | -6.0% | |||||
| GAAP Operating Income (a) | $ | 392.1 | 12.3% | $ | 352.2 | 11.4% | |||||
(a) "GAAP" (reported) results were determined in accordance with U.S. generally accepted accounting principles (GAAP). In February 2013, in connection with a change in
management responsibility for two product lines, the company transferred its water analysis and research serum and media product lines to the Laboratory Products and
Services segment from the Analytical Technologies segment. Prior period segment information has been reclassified to reflect these transfers.
(b) Adjusted results are non-GAAP measures and for income measures exclude certain charges to cost of revenues (see note (c) for details); certain credits/charges to selling,
general and administrative expenses (see note (d) for details); amortization of acquisition-related intangible assets; restructuring and other costs, net (see note (e) for
details); certain other gains or losses that are either isolated or cannot be expected to occur again with any regularity or predictability (see note (f) for details); the tax
consequences of the preceding items and certain other tax items (see note (g) for details); and discontinued operations.
(c) Reported results in 2013 and 2012 include $0.9 and $1.0, respectively, of accelerated depreciation on manufacturing assets to be abandoned due to facility consolidations.
Reported results in 2012 also include $2.1 of charges for the sale of inventories revalued at the date of acquisition.
(d) Reported results in 2013 include $15.8 of transaction costs related to the pending acquisition of Life Technologies and a charge of $8.3 associated with product liability
litigation, offset in part by a credit of $0.1, net, for revision of estimated contingent consideration for recent acquisitions. Reported results in 2012 include $11.6 of
transaction costs related to the acquisition of One Lambda and a charge of $7.4 associated with product liability litigation.
(e) Reported results in 2013 and 2012 include restructuring and other costs, net, consisting principally of severance, abandoned facility and other expenses of headcount
reductions within several businesses and real estate consolidations.
(f) Reported results in 2013 include $20.0 of charges related to amortization of fees paid to obtain bridge financing commitments related to the Life Technologies acquisition,
offset in part by a $3.3 gain from the sale of an equity investment.
(g) Reported provision for income taxes includes i) $82.0 and $89.9 of incremental tax benefit in 2013 and 2012, respectively, for the pre-tax reconciling items between GAAP and
adjusted net income; ii) in 2013 and 2012, $3.2 and $1.5, respectively, of incremental tax benefit from adjusting the company's deferred tax balances as a result of tax rate
changes.
(h) Free cash flow in 2013 was reduced by $21.9 of fees to obtain bridge financing commitments and other transaction costs related to the pending acquisition of Life
Technologies.
Notes:
Consolidated depreciation expense in 2013 and 2012 is $59.4 and $59.0, respectively.
Consolidated equity compensation expense included in both reported and adjusted results is $22.9 and $20.3 in 2013 and 2012, respectively.
Consolidated Statement of Income (unaudited) (a)(b) | Nine Months Ended | ||||||||||
| September 28, | % of | September 29, | % of | ||||||||
| (In millions except per share amounts) | 2013 | Revenues | 2012 | Revenues | |||||||
| Revenues | $ | 9,623.4 | $ | 9,250.6 | |||||||
| Costs and Operating Expenses: | |||||||||||
| Cost of revenues (c) | 5,408.2 | 56.2% | 5,177.4 | 56.0% | |||||||
| Selling, general and administrative expenses (d) | 2,141.2 | 22.2% | 2,108.6 | 22.8% | |||||||
| Amortization of acquisition-related intangible assets | 574.2 | 6.0% | 553.5 | 6.0% | |||||||
| Research and development expenses | 290.8 | 3.0% | 277.9 | 3.0% | |||||||
| Restructuring and other costs, net (e) | 54.4 | 0.6% | 51.7 | 0.5% | |||||||
| 8,468.8 | 88.0% | 8,169.1 | 88.3% | ||||||||
| Operating Income | 1,154.6 | 12.0% | 1,081.5 | 11.7% | |||||||
| Interest Income | 21.4 | 19.0 | |||||||||
| Interest Expense | (193.1 | ) | (175.4 | ) | |||||||
| Other (Expense) Income, Net (f) | (41.0 | ) | 0.8 | ||||||||
| Income from Continuing Operations Before Income Taxes | 941.9 | 925.9 | |||||||||
| Provision for Income Taxes (g) | (5.8 | ) | (53.3 | ) | |||||||
| Income from Continuing Operations | 936.1 | 872.6 | |||||||||
| Loss from Discontinued Operations, Net of Tax | (0.7 | ) | (15.4 | ) | |||||||
| Loss on Disposal of Discontinued Operations, Net of Tax | (4.2 | ) | (55.7 | ) | |||||||
| Net Income | $ | 931.2 | 9.7% | $ | 801.5 | 8.7% | |||||
| Earnings per Share from Continuing Operations: | |||||||||||
| Basic | $ | 2.60 | $ | 2.39 | |||||||
| Diluted | $ | 2.57 | $ | 2.37 | |||||||
| Earnings per Share: | |||||||||||
| Basic | $ | 2.59 | $ | 2.19 | |||||||
| Diluted | $ | 2.56 | $ | 2.18 | |||||||
| Weighted Average Shares: | |||||||||||
| Basic | 359.8 | 365.6 | |||||||||
| Diluted | 364.1 | 368.2 | |||||||||
| Reconciliation of Adjusted Operating Income and Adjusted Operating Margin | |||||||||||
| GAAP Operating Income (a) | $ | 1,154.6 | 12.0% | $ | 1,081.5 | 11.7% | |||||
| Cost of Revenues Charges (c) | 27.2 | 0.3% | 42.5 | 0.5% | |||||||
| Selling, General and Administrative Costs (Income), Net (d) | 47.9 | 0.4% | 13.1 | 0.1% | |||||||
| Restructuring and Other Costs, Net (e) | 54.4 | 0.6% | 51.7 | 0.5% | |||||||
| Amortization of Acquisition-related Intangible Assets | 574.2 | 6.0% | 553.5 | 6.0% | |||||||
| Adjusted Operating Income (b) | $ | 1,858.3 | 19.3% | $ | 1,742.3 | 18.8% | |||||
| Reconciliation of Adjusted Net Income | |||||||||||
| GAAP Net Income (a) | $ | 931.2 | 9.7% | $ | 801.5 | 8.7% | |||||
| Cost of Revenues Charges (c) | 27.2 | 0.3% | 42.5 | 0.5% | |||||||
| Selling, General and Administrative Costs (Income), Net (d) | 47.9 | 0.4% | 13.1 | 0.1% | |||||||
| Restructuring and Other Costs, Net (e) | 54.4 | 0.6% | 51.7 | 0.5% | |||||||
| Amortization of Acquisition-related Intangible Assets | 574.2 | 6.0% | 553.5 | 6.0% | |||||||
| Restructuring and Other Costs, Net – Equity Investments | — | 0.0% | 2.1 | 0.0% | |||||||
| Amortization of Acquisition-related Intangible Assets – Equity Investments | 1.8 | 0.0% | 2.3 | 0.0% | |||||||
| Other Expense, Net (f) | 44.6 | 0.5% | 0.5 | 0.0% | |||||||
| Provision for Income Taxes (g) | (234.8 | ) | -2.4% | (221.3 | ) | -2.4% | |||||
| Discontinued Operations, Net of Tax | 4.9 | 0.0% | 71.1 | 0.8% | |||||||
| Adjusted Net Income (b) | $ | 1,451.4 | 15.1% | $ | 1,317.0 | 14.2% | |||||
| Reconciliation of Adjusted Earnings per Share | |||||||||||
| GAAP EPS (a) | $ | 2.56 | $ | 2.18 | |||||||
| Cost of Revenues Charges, Net of Tax (c) | 0.05 | 0.09 | |||||||||
| Selling, General and Administrative Costs (Income), Net of Tax (d) | 0.10 | 0.03 | |||||||||
| Restructuring and Other Costs, Net of Tax (e) | 0.11 | 0.09 | |||||||||
| Amortization of Acquisition-related Intangible Assets, Net of Tax | 1.10 | 0.99 | |||||||||
| Restructuring and Other Costs, Net of Tax – Equity Investments | — | — | |||||||||
| Amortization of Acquisition-related Intangible Assets, Net of Tax – Equity Investments | — | — | |||||||||
| Other Expense, Net of Tax (f) | 0.07 | — | |||||||||
| Provision for Income Taxes (g) | (0.01 | ) | 0.01 | ||||||||
| Discontinued Operations, Net of Tax | 0.01 | 0.19 | |||||||||
| Adjusted EPS (b) | $ | 3.99 | $ | 3.58 | |||||||
| Reconciliation of Free Cash Flow | |||||||||||
| GAAP Net Cash Provided by Operating Activities (a) | $ | 1,282.2 | $ | 1,379.4 | |||||||
| Net Cash Used in Discontinued Operations | 3.3 | 21.2 | |||||||||
| Purchases of Property, Plant and Equipment | (187.9 | ) | (210.7 | ) | |||||||
| Proceeds from Sale of Property, Plant and Equipment | 15.9 | 11.6 | |||||||||
| Free Cash Flow (h) | $ | 1,113.5 | $ | 1,201.5 | |||||||
| Segment Data | Nine Months Ended | ||||||||||
| September 28, | % of | September 29, | % of | ||||||||
| (In millions) | 2013 | Revenues | 2012 | Revenues | |||||||
| Revenues | |||||||||||
| Analytical Technologies | $ | 2,980.9 | 31.0% | $ | 2,938.9 | 31.8% | |||||
| Specialty Diagnostics | 2,358.4 | 24.5% | 2,170.5 | 23.5% | |||||||
| Laboratory Products and Services | 4,709.6 | 48.9% | 4,537.1 | 49.0% | |||||||
| Eliminations | (425.5 | ) | -4.4% | (395.9 | ) | -4.3% | |||||
| Consolidated Revenues | $ | 9,623.4 | 100.0% | $ | 9,250.6 | 100.0% | |||||
| Operating Income and Operating Margin | |||||||||||
| Analytical Technologies | $ | 534.4 | 17.9% | $ | 533.9 | 18.2% | |||||
| Specialty Diagnostics | 642.3 | 27.2% | 556.2 | 25.6% | |||||||
| Laboratory Products and Services | 681.6 | 14.5% | 652.2 | 14.4% | |||||||
| Subtotal Reportable Segments | 1,858.3 | 19.3% | 1,742.3 | 18.8% | |||||||
| Cost of Revenues Charges (c) | (27.2 | ) | -0.3% | (42.5 | ) | -0.5% | |||||
| Selling, General and Administrative Costs (Income), Net (d) | (47.9 | ) | -0.4% | (13.1 | ) | -0.1% | |||||
| Restructuring and Other Costs, Net (e) | (54.4 | ) | -0.6% | (51.7 | ) | -0.5% | |||||
| Amortization of Acquisition-related Intangible Assets | (574.2 | ) | -6.0% | (553.5 | ) | -6.0% | |||||
| GAAP Operating Income (a) | $ | 1,154.6 | 12.0% | $ | 1,081.5 | 11.7% | |||||
(a) "GAAP" (reported) results were determined in accordance with U.S. generally accepted accounting principles (GAAP). In February 2013, in connection with a change in
management responsibility for two product lines, the company transferred its water analysis and research serum and media product lines to the Laboratory Products and
Services segment from the Analytical Technologies segment. Prior period segment information has been reclassified to reflect these transfers.
(b) Adjusted results are non-GAAP measures and for income measures exclude certain charges to cost of revenues (see note (c) for details); certain credits/charges to selling,
general and administrative expenses (see note (d) for details); amortization of acquisition-related intangible assets; restructuring and other costs, net (see note (e) for
details); certain other gains or losses that are either isolated or cannot be expected to occur again with any regularity or predictability (see note (f) for details); the tax
consequences of the preceding items and certain other tax items (see note (g) for details); and discontinued operations.
(c) Reported results in 2013 and 2012 include $23.9 and $40.0, respectively, of charges for the sale of inventories revalued at the date of acquisition. Reported results in 2013
and 2012 also include $3.3 and $2.5, respectively, of accelerated depreciation on manufacturing assets to be abandoned due to facility consolidations.
(d) Reported results in 2013 include $26.1 of transaction costs related to the pending acquisition of Life Technologies, a charge of $13.5 for revision of estimated contingent
consideration for recent acquisitions and a charge of $8.3 associated with product liability litigation. Reported results in 2012 include $13.0 of transaction costs related to
the acquisition of One Lambda, a charge of $0.3 for revisions of estimated contingent consideration for a recent acquisition and a net gain of $0.2 associated with product
liability litigation.
(e) Reported results in 2013 and 2012 include restructuring and other costs, net, consisting principally of severance, abandoned facility and other expenses of headcount
reductions within several businesses and real estate consolidations.
(f) Reported results in 2013 include $60.5 of charges related to amortization of fees paid to obtain bridge financing commitments related to the Life Technologies acquisition,
offset in part by $10.5 of realized gains on available-for-sale investments irrevocably contributed to the company's UK pension plans and $5.4 of gains from sales of equity
investments. Reported results in 2012 include $0.5 of loss on extinguishment of debt facilities associated with the termination and replacement of the company's prior
revolving credit agreements.
(g) Reported provision for income taxes includes i) $229.8 and $223.7 of incremental tax benefit in 2013 and 2012, respectively, for the pre-tax reconciling items between GAAP
and adjusted net income; ii) in 2013, $5.0 of incremental tax benefit from adjusting the company's deferred tax balances as a result of tax rate changes; and iii) in 2012, $2.4 of
incremental tax provision from adjusting the company's deferred tax balances as a result of tax rate changes.
(h) Free cash flow in 2013 was reduced by $79.5 of fees to obtain bridge financing commitments and other transaction costs related to the pending acquisition of Life
(h) Free cash flow in 2013 was reduced by $79.5 of fees to obtain bridge financing commitments and other transaction costs related to the pending acquisition of Life
Technologies.
Notes:
Consolidated depreciation expense in 2013 and 2012 is $176.4 and $175.8, respectively.
Consolidated equity compensation expense included in both reported and adjusted results is $66.6 and $57.8 in 2013 and 2012, respectively.
| Condensed Consolidated Balance Sheet (unaudited) | |||||||
| September 28, | December 31, | ||||||
| (In millions) | 2013 | 2012 | |||||
| Assets | |||||||
| Current Assets: | |||||||
| Cash and cash equivalents | $ | 1,845.6 | $ | 805.6 | |||
| Short-term investments | 4.2 | 4.3 | |||||
| Accounts receivable, net | 1,945.1 | 1,804.9 | |||||
| Inventories | 1,546.8 | 1,443.3 | |||||
| Other current assets | 868.7 | 776.7 | |||||
| Total current assets | 6,210.4 | 4,834.8 | |||||
| Property, Plant and Equipment, Net | 1,708.7 | 1,726.4 | |||||
| Acquisition-related Intangible Assets | 7,248.2 | 7,804.5 | |||||
| Other Assets | 609.9 | 604.4 | |||||
| Goodwill | 12,495.3 | 12,474.5 | |||||
| Total Assets | $ | 28,272.5 | $ | 27,444.6 | |||
| Liabilities and Shareholders' Equity | |||||||
| Current Liabilities: | |||||||
| Short-term obligations and current maturities of long-term obligations | $ | 393.6 | $ | 93.1 | |||
| Other current liabilities | 2,059.4 | 2,000.2 | |||||
| Total current liabilities | 2,453.0 | 2,093.3 | |||||
| Other Long-term Liabilities | 2,664.3 | 2,855.4 | |||||
| Long-term Obligations | 6,717.9 | 7,031.2 | |||||
| Total Shareholders' Equity | 16,437.3 | 15,464.7 | |||||
| Total Liabilities and Shareholders' Equity | $ | 28,272.5 | $ | 27,444.6 | |||
During 2013, the company determined that $45 of cash that was restricted from withdrawal due to serving as collateral for short-term borrowings in Asia was included in its
previously reported year-end 2012 cash balance. Presentation of this amount has been revised to other current assets from cash in the above balance sheet as of December 31,
2012 to properly reflect the restriction on withdrawal. Cash used for investing activities in the accompanying cash flow statement for the first nine months of 2012 reflects an
increase of $34 from previously reported amounts for the increase in restricted cash as of September 29, 2012. The company has evaluated the impact of this revision, which
had no impact on net income, net assets or cash flows from operations, and concluded it is immaterial to all prior period financial statements.
| Condensed Consolidated Statement of Cash Flows (unaudited) | Nine Months Ended | ||||||
| September 28, | September 29, | ||||||
| (In millions) | 2013 | 2012 | |||||
| Operating Activities | |||||||
| Net income | $ | 931.2 | $ | 801.5 | |||
| Loss from discontinued operations | 0.7 | 15.4 | |||||
| Loss on disposal of discontinued operations | 4.2 | 55.7 | |||||
| Income from continuing operations | 936.1 | 872.6 | |||||
| Adjustments to reconcile income from continuing operations to net cash provided by operating activities: | |||||||
| Depreciation and amortization | 750.6 | 729.3 | |||||
| Change in deferred income taxes | (204.5 | ) | (243.3 | ) | |||
| Other non-cash expenses, net | 67.7 | 114.2 | |||||
| Changes in assets and liabilities, excluding the effects of acquisitions and dispositions | (264.4 | ) | (72.2 | ) |
| Net cash provided by continuing operations | 1,285.5 | 1,400.6 | |||||
| Net cash used in discontinued operations | (3.3 | ) | (21.2 | ) | |||
| Net cash provided by operating activities | 1,282.2 | 1,379.4 | |||||
| Investing Activities | |||||||
| Acquisitions, net of cash acquired | (5.5 | ) | (1,072.4 | ) | |||
| Purchases of property, plant and equipment | (187.9 | ) | (210.7 | ) | |||
| Proceeds from sale of property, plant and equipment | 15.9 | 11.6 | |||||
| Increase in restricted cash | (24.7 | ) | (33.7 | ) | |||
| Other investing activities, net | 8.9 | 1.7 | |||||
| Net cash used in continuing operations | (193.3 | ) | (1,303.5 | ) | |||
| Net cash provided by discontinued operations | — | 3.4 | |||||
| Net cash used in investing activities | (193.3 | ) | (1,300.1 | ) | |||
| Financing Activities | |||||||
| (Decrease) Increase in debt, net | (5.5 | ) | 445.4 | ||||
| Dividends paid | (162.0 | ) | (95.3 | ) | |||
| Purchases of company common stock | (89.8 | ) | (800.0 | ) | |||
| Net proceeds from issuance of company common stock | 204.9 | 131.3 | |||||
| Tax benefits from stock-based compensation awards | 39.8 | 12.8 | |||||
| Other financing activities, net | (0.9 | ) | (4.5 | ) | |||
| Net cash used in financing activities | (13.5 | ) | (310.3 | ) | |||
| Exchange Rate Effect on Cash | (35.4 | ) | 13.0 | ||||
| Increase (Decrease) in Cash and Cash Equivalents | 1,040.0 | (218.0 | ) | ||||
| Cash and Cash Equivalents at Beginning of Period | 805.6 | 1,016.3 | |||||
| Cash and Cash Equivalents at End of Period | $ | 1,845.6 | $ | 798.3 | |||
| Free Cash Flow (a)(b) | $ | 1,113.5 | $ | 1,201.5 |
(a) Free cash flow is net cash provided by operating activities of continuing operations less net purchases of property, plant and equipment.
(b) Free cash flow in the first nine months of 2013 was reduced by $79.5 of fees paid to obtain bridge financing commitments and other transaction costs related to the
pending acquisition of Life Technologies.