| | 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 First Quarter 2014 Results
Raises Annual Guidance for 2014
WALTHAM, Mass. (April 23, 2014) – Thermo Fisher Scientific Inc. (NYSE: TMO), the world leader in serving science, today reported its financial results for the first quarter ended March 29, 2014. The company’s results include the addition of Life Technologies as of February 4, 2014, and exclude the previously announced related divestitures as of March 22, 2014.
First Quarter Highlights
| · | Completed the acquisition of Life Technologies to enhance our offering for customers in life sciences and applied markets worldwide and significantly strengthen our strategic position. |
| · | Grew adjusted earnings per share (EPS) by 12% to $1.53. |
| · | Increased revenue by 22% to $3.90 billion. |
| · | Expanded adjusted operating margin by 200 basis points to 21.3%. |
| · | Launched innovative new Thermo Scientific and Life Technologies products, including a new version of our Chromeleon chromatography data system, the Lab Execution informatics platform, Quantifiler Trio and HP kits for forensic analysis and Ion Chef system for automated preparation of DNA samples. |
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.”
“We had a number of key accomplishments during the quarter that demonstrate the intensity of our teams and position us for another successful year,” said Marc N. Casper, president and chief executive officer. “We closed our acquisition of Life Technologies, began to integrate the business and completed the related divestitures – all while staying focused on our customers and executing well to deliver solid first quarter results.
“I’m pleased to report that the integration is on track, and we are confident that we will deliver on our previously outlined synergy targets. Our enhanced technology offering was already apparent when we showcased innovative new Thermo Scientific and Life Technologies products side by side at industry conferences. In Asia-Pacific and emerging markets, our combined scale is a key advantage in providing customers with solutions to achieve their goals. Our unique customer value proposition is now even stronger, and we are committed to fully leveraging our new capabilities to drive growth and create shareholder value.”
First Quarter 2014
For the first quarter of 2014, adjusted EPS grew 12% to $1.53, versus $1.37 in the first quarter of 2013. Revenue for the quarter grew 22% to $3.90 billion in 2014, versus $3.19 billion in 2013. Organic revenue grew 2%, with currency translation having a negligible effect and acquisitions, net of divestitures, increasing revenue by 20%. Adjusted operating income for the first quarter of 2014 increased 35% compared with the year-ago period, and adjusted operating margin expanded to 21.3%, compared with 19.3% in the first quarter of 2013.
GAAP diluted EPS for the first quarter of 2014 was $1.36, versus $0.93 in the same quarter last year. GAAP operating income for the first quarter of 2014 was $875 million, compared with $387 million in 2013. The increases in GAAP EPS and operating income were largely due to gains as a result of the divestitures. GAAP operating margin increased to 22.4%, compared with 12.1% in the first quarter of 2013.
Annual Guidance for 2014
Thermo Fisher is raising its annual revenue and adjusted EPS guidance for full-year 2014 primarily to reflect the timing of the Life Technologies acquisition and related divestitures, as well as more favorable foreign exchange.
The company is raising its revenue guidance to a new range of $16.84 to $17.00 billion from its previous guidance of $16.63 to $16.83 billion, for 29% to 30% revenue growth year over year. It is also raising adjusted EPS guidance to a new range of $6.80 to $6.95 from the $6.70 to $6.90 previously announced, resulting in 25% to 28% adjusted EPS growth over 2013.
The 2014 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.”
Segment Results
Management uses adjusted operating results to monitor and evaluate performance of the company’s four business segments, as highlighted below.
Life Sciences Solutions Segment
As previously announced, the new Life Sciences Solutions Segment includes most of the Life Technologies businesses and the remaining Thermo Fisher Biosciences businesses. In the first quarter of 2014, segment revenue was $836 million, compared with revenue of $173 million in the first quarter of 2013. Segment adjusted operating income in the 2014 quarter was $245 million versus $41 million in the year-ago quarter, and adjusted operating margin was 29.3%, versus 23.8% in 2013.
Analytical Instruments Segment
Analytical Instruments Segment revenue increased 4% to $770 million in the first quarter of 2014, compared with revenue of $740 million in the first quarter of 2013. Segment adjusted operating income increased 9% in the first quarter of 2014, and adjusted operating margin was 17.0%, versus 16.3% in the 2013 quarter.
Specialty Diagnostics Segment
Specialty Diagnostics Segment revenue in the first quarter increased 1% to $814 million in 2014, compared with revenue of $806 million in the first quarter of 2013. Segment adjusted operating income was $221 million in the first quarter of 2014 versus $223 million in 2013, and adjusted operating margin was 27.2%, versus 27.7% in the 2013 quarter.
Laboratory Products and Services Segment
In the first quarter of 2014, Laboratory Products and Services Segment revenue increased 2% to $1.59 billion, compared with revenue of $1.56 billion in the first quarter of 2013. Segment adjusted operating income increased 1% in the first quarter of 2014, and adjusted operating margin was 14.7%, versus 14.8% in the 2013 quarter.
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 2014 excludes approximately $2.23 of expense for the amortization of acquisition-related intangible assets for acquisitions completed through the end of the first quarter of 2014. 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, April 23, 2014, at 8:30 a.m. Eastern time. To listen, dial (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, May 16, 2014.
About Thermo Fisher Scientific
Thermo Fisher Scientific Inc. (NYSE: TMO) is the world leader in serving science, with revenues of $17 billion and 50,000 employees in 50 countries. Our mission is to enable our customers to make the world healthier, cleaner and safer. We help our customers accelerate life sciences research, solve complex analytical challenges, improve patient diagnostics and increase laboratory productivity. Through our four premier brands – Thermo Scientific, Life Technologies, Fisher Scientific and Unity Lab Services – we offer an unmatched combination of innovative technologies, purchasing convenience and comprehensive support. For more information, please 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 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, as well as the possibility that expected benefits related to the Life Technologies acquisition may not materialize as expected; and the company being unable to successfully implement integration strategies or to achieve expected synergies and operating efficiencies within the expected time frames or at all. Additional important factors that could cause actual results to differ materially from those indicated by such forward-looking statements are set forth in our Annual Report on Form 10-K for the year ended December 31, 2013, which is on file with the SEC and available in the “Investors” section of our website under the heading “SEC Filings.” 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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