Raises Full-year 2016 Guidance
Thermo Fisher Scientific Inc. (NYSE: TMO), the world leader in
serving science, today reported its financial results for the first
quarter of 2016, ended April 2, 2016.
First Quarter 2016 Highlights
- Reported adjusted earnings per share
(EPS) of $1.80 and GAAP diluted EPS of $1.01.
- Reported record revenue of $4.29
billion.
- Strengthened our Thermo Scientific
analytical instrument offering for applied markets with new product
launches at Pittcon, highlighted by the Integrion high-pressure ion
chromatography system (HPIC) for environmental, food safety and
industrial markets.
- Delivered strong performance in
emerging markets, led by double-digit growth in China and
India.
- Completed $1.3 billion acquisition of
Affymetrix, enhancing our customer value proposition by
strengthening our leadership in biosciences and expanding our
opportunities in genetic analysis.
- Deployed $1 billion of capital on share
buybacks 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.”
“We’re pleased with our strong start to the year,” said Marc N.
Casper, president and chief executive officer of Thermo Fisher
Scientific. “We delivered excellent EPS growth on great top-line
performance, demonstrating that our growth strategy is clearly
working.
“We made good progress in implementing our plans to meet the
needs of our customers, and effectively deployed our capital to
create shareholder value. We kicked off the year with a number of
new product launches at Pittcon, including our Integrion HPIC
system, which sets a new standard of performance for customers in
applied markets. We also had a strong start across all of our major
geographies, led by very strong performance in China.
“During the quarter, we deployed $2.4 billion of capital on
M&A, stock buybacks and our dividend to create value for both
customers and shareholders. I’m excited about our acquisition of
Affymetrix, which we completed at quarter-end. This is another
great example of how we continue to enhance our customer value
proposition.
“In summary, with an excellent first quarter behind us, we’re
positioned to deliver a strong 2016.”
First Quarter 2016
As previously communicated, the company’s 2016 fiscal calendar
includes four additional days in the first quarter versus the first
quarter of 2015. Consequently, revenue results in the 2016 quarter
benefitted from the extra days, and operating margin was negatively
affected due to costs related to the extra days.
For the first quarter of 2016, adjusted EPS grew 10% to $1.80,
versus $1.63 in the first quarter of 2015. Revenue for the quarter
also grew 10%, to $4.29 billion in 2016, versus $3.92 billion in
2015. Organic revenue growth was 10%; acquisitions increased
revenue by 1% and currency translation decreased revenue by 2%.
Adjusted operating income for the first quarter of 2016 increased
9% compared with the year-ago quarter. Adjusted operating margin
was 21.7%, compared with 21.9% in the first quarter of 2015.
GAAP diluted EPS for the first quarter of 2016 increased to
$1.01, versus $0.96 in the same quarter last year. GAAP operating
income for the first quarter of 2016 increased 6% to $518 million,
compared with $487 million in 2015. GAAP operating margin was
12.1%, compared with 12.4% in the first quarter of 2015.
2016 Guidance Update
Thermo Fisher is raising its revenue and adjusted EPS guidance
for 2016 to reflect the inclusion of Affymetrix results for nine
months, a less adverse foreign exchange environment, additional
stock buybacks completed in the first quarter and stronger
operational performance. The company is raising revenue guidance to
a new range of $17.86 to $18.04 billion versus its original
guidance of $17.36 to $17.56 billion announced in January 2016.
This would result in 5 to 6 percent revenue growth over the
previous year. The company is raising its adjusted EPS guidance to
a new range of $8.05 to $8.19 versus the $7.80 to $7.96 previously
communicated, for 9 to 11 percent growth over 2015.
Segment Results
Management uses adjusted operating results to monitor and
evaluate performance of the company’s four business segments, as
highlighted below. Year-over-year results were negatively affected
by the impact of foreign currency exchange rates. In addition,
revenue results benefitted from the four extra days in the first
quarter of 2016 and operating margin was negatively affected due to
costs related to the extra days. The impact of both foreign
exchange and the extra days affects the business segments to
varying degrees.
Life Sciences Solutions Segment
In the first quarter of 2016, Life Sciences Solutions Segment
revenue grew 11% to $1.13 billion, compared with revenue of $1.02
billion in the first quarter of 2015. Segment adjusted operating
margin was 29.1%, versus 29.3% in 2015.
Analytical Instruments Segment
Analytical Instruments Segment revenue increased 4% to $759
million in the first quarter of 2016, compared with revenue of $727
million in the first quarter of 2015. Segment adjusted operating
margin was 14.7%, versus 16.7% in the 2015 quarter.
Specialty Diagnostics Segment
Specialty Diagnostics Segment revenue in the first quarter
increased 9% to $855 million in 2016, compared with revenue of $785
million in the first quarter of 2015. Segment adjusted operating
margin was 26.9%, versus 27.3% in the 2015 quarter.
Laboratory Products and Services Segment
In the first quarter of 2016, Laboratory Products and Services
Segment revenue grew 14% to $1.72 billion, compared with revenue of
$1.51 billion in the first quarter of 2015. Segment adjusted
operating margin increased to 15.0%, versus 14.7% in the 2015
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 certain acquisition-related costs, including charges for
the sale of inventories revalued at the date of acquisition and
significant transaction costs; restructuring and other
costs/income; and amortization of acquisition-related intangible
assets. Adjusted EPS also excludes certain other gains and losses
that are either isolated or cannot be expected to occur again with
any regularity or predictability, tax provisions/benefits related
to the previous items, benefits from tax credit carryforwards, the
impact of significant tax audits or events and the results of
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 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. 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. In
2016, based on acquisitions closed through the end of the first
quarter, our adjusted EPS will exclude approximately $2.29 of
expense for the amortization of acquisition-related intangible
assets. 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.
Thermo Fisher Scientific will hold its earnings conference call
today, April 28, 2016, at 8:30 a.m. Eastern time. To listen, dial
(877) 201-0168 within the U.S. or (647) 788-4901 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 13, 2016.
About Thermo Fisher Scientific
Thermo Fisher Scientific Inc. (NYSE: TMO) is the world
leader in serving science, with revenues of $17
billion and more than 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
premier brands – Thermo Scientific, Applied Biosystems, Invitrogen,
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.
Safe Harbor Statement
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 recent or pending
acquisitions may not materialize as expected. 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,
2015, 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.
Consolidated Statement of Income (unaudited) (a)(b) Three
Months Ended April 2, % of March 28, % of (In millions except per
share amounts) 2016 Revenues 2015 Revenues Revenues $
4,294.8 $ 3,918.8 Costs and Operating Expenses: Cost
of revenues (c) 2,235.9 52.1% 1,988.6 50.7% Selling, general and
administrative expenses (d) 991.9 23.1% 916.0 23.4% Amortization of
acquisition-related intangible assets 322.0 7.5% 329.1 8.4%
Research and development expenses 176.5 4.1% 165.8 4.2%
Restructuring and other costs, net (e) 50.6 1.2% 32.0
0.9% 3,776.9 87.9% 3,431.5 87.6% Operating
Income 517.9 12.1% 487.3 12.4% Interest Income 10.8 7.0 Interest
Expense (106.2 ) (108.4 ) Other Income (Expense), Net (f) 0.5
(3.9 ) Income Before Income Taxes 423.0 382.0
(Provision for) Benefit from Income Taxes (g) (20.7 ) 3.1
Income from Continuing Operations 402.3 385.1 Loss
from Discontinued Operations, Net of Tax (0.1 ) — Net
Income $ 402.2 9.4% $ 385.1 9.8% Earnings per
Share from Continuing Operations: Basic $ 1.02 $ 0.97
Diluted $ 1.01 $ 0.96 Earnings per Share:
Basic $ 1.02 $ 0.97 Diluted $ 1.01 $ 0.96
Weighted Average Shares: Basic 395.8 397.8
Diluted 398.7 401.4
Reconciliation of Adjusted Operating Income and Adjusted
Operating Margin GAAP Operating Income (a) $ 517.9 12.1% $
487.3 12.4% Cost of Revenues Charges (c) 10.6 0.2% 0.6 0.0%
Selling, General and Administrative Charges, Net (d) 28.9 0.7% 7.6
0.2% Restructuring and Other Costs, Net (e) 50.6 1.2% 32.0 0.9%
Amortization of Acquisition-related Intangible Assets 322.0
7.5% 329.1 8.4% Adjusted Operating Income (b) $ 930.0
21.7% $ 856.6 21.9%
Reconciliation of
Adjusted Net Income GAAP Net Income (a) $ 402.2 9.4% $ 385.1
9.8% Cost of Revenues Charges (c) 10.6 0.2% 0.6 0.0% Selling,
General and Administrative Charges, Net (d) 28.9 0.7% 7.6 0.2%
Restructuring and Other Costs, Net (e) 50.6 1.2% 32.0 0.9%
Amortization of Acquisition-related Intangible Assets 322.0 7.5%
329.1 8.4% Other (Income) Expense, Net (f) (1.3 ) -0.1% 11.0 0.2%
Provision for Income Taxes (g) (96.0 ) -2.2% (109.8 ) -2.8%
Discontinued Operations, Net of Tax 0.1 0.0% — 0.0%
Adjusted Net Income (b) $ 717.1 16.7% $ 655.6
16.7%
Reconciliation of Adjusted Earnings per Share
GAAP EPS (a) $ 1.01 $ 0.96 Cost of Revenues Charges, Net of Tax (c)
0.02 — Selling, General and Administrative Charges, Net of Tax (d)
0.06 0.01 Restructuring and Other Costs, Net of Tax (e) 0.09 0.05
Amortization of Acquisition-related Intangible Assets, Net of Tax
0.60 0.59 Other (Income) Expense, Net of Tax (f) — 0.02 Provision
for Income Taxes (g) 0.02 — Discontinued Operations, Net of Tax —
— Adjusted EPS (b) $ 1.80 $ 1.63
Reconciliation of Free Cash Flow GAAP Net Cash
Provided by Operating Activities (a) $ 289.1 $ 80.0 Net Cash Used
in Discontinued Operations 1.5 2.1 Purchases of Property, Plant and
Equipment (115.1 ) (97.2 ) Proceeds from Sale of Property, Plant
and Equipment 6.0 0.6 Free Cash Flow $ 181.5
$ (14.5 )
Segment Data Three Months Ended April 2, % of
March 28, % of (In millions) 2016 Revenues 2015 Revenues
Revenues Life Sciences Solutions $ 1,133.0 26.4% $ 1,019.9
26.0% Analytical Instruments 759.3 17.7% 727.4 18.6% Specialty
Diagnostics 854.6 19.9% 785.2 20.0% Laboratory Products and
Services 1,724.6 40.2% 1,513.4 38.6% Eliminations (176.7 ) -4.2%
(127.1 ) -3.2% Consolidated Revenues $ 4,294.8 100.0%
$ 3,918.8 100.0%
Operating Income and Operating
Margin Life Sciences Solutions $ 330.0 29.1% $ 298.7 29.3%
Analytical Instruments 111.7 14.7% 121.7 16.7% Specialty
Diagnostics 230.1 26.9% 214.1 27.3% Laboratory Products and
Services 258.2 15.0% 222.1 14.7% Subtotal
Reportable Segments 930.0 21.7% 856.6 21.9% Cost of Revenues
Charges (c) (10.6 ) -0.2% (0.6 ) 0.0% Selling, General and
Administrative Charges, Net (d) (28.9 ) -0.7% (7.6 ) -0.2%
Restructuring and Other Costs, Net (e) (50.6 ) -1.2% (32.0 ) -0.9%
Amortization of Acquisition-related Intangible Assets (322.0 )
-7.5% (329.1 ) -8.4% GAAP Operating Income (a) $ 517.9
12.1% $ 487.3 12.4%
(a) "GAAP" (reported) results were determined in accordance with
U.S. generally accepted accounting principles (GAAP).
(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); and the tax consequences of the preceding items and
certain other tax items (see note (g) for details).
(c) Reported results in 2016 and 2015 include i) $6.2 and $0.5,
respectively, of charges for the sale of inventories revalued at
the date of acquisition. Reported results in 2016 include a charge
of $4.4 to conform the accounting policies of Affymetrix with the
company's accounting policies. Reported results in 2015 include
$0.1 of accelerated depreciation on manufacturing assets to be
abandoned due to facility consolidations.
(d) Reported results in 2016 and 2015 include i) $23.6 and $6.1,
respectively, of third-party transaction/integration costs
primarily related to recently completed acquisitions; ii) $5.4 and
$2.0, respectively, of accelerated depreciation on fixed assets to
be abandoned due to integration synergies; and iii) $0.1 and $0.5,
respectively, of gains for changes in estimates of contingent
consideration for acquisitions.
(e) Reported results in 2016 and 2015 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. Reported results in 2016
include $13.3 of gains on settlement of litigation and $2.9 of
gains on sales of real estate. Reported results in 2015 include
$5.0 of cash compensation contractually due to employees of an
acquired business on the date of acquisition and a $0.9 charge
associated with a previous sale of a business.
(f) Reported results in 2016 and 2015 include $0.5 and $0.5,
respectively, of amortization of acquisition-related intangible
assets of the company's equity-method investments. Reported results
in 2016 include $1.8 of net gains from investments. Reported
results in 2015 include $7.5 of costs associated with entering into
interest rate swap arrangements and a loss of $3.0 on the early
extinguishment of debt.
(g) Reported provision for income taxes includes i) $105.0 and
$110.5 of incremental tax benefit in 2016 and 2015, respectively,
for the pre-tax reconciling items between GAAP and adjusted net
income; and ii) in 2016 and 2015, $9.0 and $0.7, respectively, of
incremental tax provision from adjusting the company's deferred tax
balances as a result of tax rate changes.
Notes:
Consolidated depreciation expense is $94.1
and $87.2 in 2016 and 2015, respectively.
Consolidated equity compensation expense
included in both reported and adjusted results is $33.4 and $28.2
in 2016 and 2015, respectively.
Condensed Consolidated Balance Sheet
(unaudited) April 2, December 31, (In millions) 2016
2015
Assets Current Assets: Cash and cash equivalents
$ 826.8 $ 452.1 Accounts receivable, net 2,668.3 2,544.9
Inventories 2,154.9 1,991.7 Other current assets 889.0 752.5
Total current assets 6,539.0 5,741.2 Property,
Plant and Equipment, Net 2,483.1 2,448.8
Acquisition-related Intangible Assets 13,237.8 12,758.3
Other Assets 1,060.3 1,058.4 Goodwill 19,632.5
18,827.6 Total Assets $ 42,952.7 $ 40,834.3
Liabilities and Shareholders' Equity Current
Liabilities: Short-term obligations and current maturities of
long-term obligations $ 3,383.0 $ 1,051.8 Other current liabilities
2,939.8 3,094.5 Total current liabilities 6,322.8
4,146.3 Other Long-term Liabilities 4,052.5
3,917.6 Long-term Obligations 11,653.0 11,420.2
Total Shareholders' Equity 20,924.4 21,350.2
Total Liabilities and Shareholders' Equity $ 42,952.7 $
40,834.3
Condensed
Consolidated Statement of Cash Flows (unaudited) Three
Months Ended April 2, March 28, (In millions) 2016 2015
Operating Activities Net income $ 402.2 $ 385.1 Loss from
discontinued operations 0.1 — Income from continuing
operations 402.3 385.1 Adjustments to reconcile net income
to net cash provided by operating activities: Depreciation and
amortization 416.1 416.3 Change in deferred income taxes (88.8 )
(102.4 ) Other non-cash expenses, net 26.6 5.3 Changes in assets
and liabilities, excluding the effects of acquisitions and
dispositions (465.6 ) (622.2 ) Net cash provided by
continuing operations 290.6 82.1 Net cash used in discontinued
operations (1.5 ) (2.1 ) Net cash provided by operating
activities 289.1 80.0
Investing
Activities Acquisitions, net of cash acquired (1,032.4 ) (298.6
) Purchases of property, plant and equipment (115.1 ) (97.2 )
Proceeds from sale of property, plant and equipment 6.0 0.6 Other
investing activities, net 2.2 0.9 Net cash
used in investing activities (1,139.3 ) (394.3 )
Financing Activities Net proceeds from issuance of debt
998.9 — Repayment of debt (1.4 ) (851.4 ) Increase in commercial
paper, net 1,174.0 1,218.9 Purchases of company common stock
(1,000.0 ) (500.0 ) Dividends paid (60.3 ) (60.8 ) Net proceeds
from issuance of company common stock under employee stock plans
50.0 60.0 Tax benefits from stock-based compensation awards 27.2
39.2 Other financing activities, net (0.4 ) (6.3 ) Net cash
provided by (used in) financing activities 1,188.0 (100.4 )
Exchange Rate Effect on Cash 36.9 (64.2 )
Increase (Decrease) in Cash and Cash Equivalents 374.7 (478.9 )
Cash and Cash Equivalents at Beginning of Period 452.1
1,343.5 Cash and Cash Equivalents at End of Period $
826.8 $ 864.6 Free Cash Flow (a) $
181.5 $ (14.5 )
(a) Free cash flow is net cash provided by operating activities
of continuing operations less net purchases of property, plant and
equipment.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160428005188/en/
Thermo Fisher Scientific Inc.Media Contact Information:Karen
Kirkwood, 781-622-1306E-mail:
karen.kirkwood@thermofisher.comorInvestor Contact Information:Ken
Apicerno,
781-622-1294ken.apicerno@thermofisher.comwww.thermofisher.com
Thermo Fisher Scientific (NYSE:TMO)
Historical Stock Chart
From May 2024 to Jun 2024
Thermo Fisher Scientific (NYSE:TMO)
Historical Stock Chart
From Jun 2023 to Jun 2024