Raises Full-year Revenue and Earnings
Guidance
Thermo Fisher Scientific Inc. (NYSE: TMO), the world leader in
serving science, today reported its financial results for the
second quarter of 2015, ended June 27, 2015.
Second Quarter 2015 Highlights
- Grew adjusted earnings per share (EPS)
by 7% to $1.84.
- Delivered revenue of $4.27
billion.
- Expanded adjusted operating margin by
90 basis points to 22.3%.
- Launched a number of new products,
including the Orbitrap Fusion Lumos Tribrid mass spectrometer for
proteomics, Q Exactive GC-MS/MS for research and applied markets,
and the cloud-enabled QuantStudio 3 and 5 real-time PCR systems for
genomics applications.
- Increased presence in emerging markets
by opening a Customer Experience Center in Dubai to serve growing
life sciences, healthcare and food safety markets across the Middle
East.
- Expanded bioproduction capabilities in
the U.K. with a state-of-the-art facility for manufacturing dry
powder media to capitalize on increasing global demand for
biotherapeutics and vaccines.
- Announced agreement to acquire Alfa
Aesar for approximately $400 million to enhance offering of
laboratory chemicals, solvents and reagents for research
applications; expect to complete transaction by year end.
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 that we delivered a very strong quarter,
which puts us in a great position at the halfway point of the
year,” said Marc N. Casper, president and chief executive officer
of Thermo Fisher Scientific. “We fully leveraged our depth of
capabilities to capture opportunities for growth and executed well
to achieve excellent top- and bottom-line results.
“We made great progress during the quarter in executing our
growth strategy. Among the highlights, we continued our strong
momentum in technology innovation with significant new products
that help our customers advance their work, from life sciences
research to applied markets. In emerging markets, we opened a new
demo center in Dubai to better serve our growing customer base in
the Middle East. We also continue to effectively deploy our
capital, announcing our agreement to acquire leading research
chemicals producer, Alfa Aesar, which will further strengthen our
unique customer value proposition.
“In summary, we delivered a solid first half, and we’re on track
to achieve our growth goals for the year.”
Second Quarter 2015
For the second quarter of 2015, adjusted EPS grew 7% to $1.84,
versus $1.72 in the second quarter of 2014. Revenue for the quarter
was $4.27 billion in 2015, versus $4.32 billion in 2014. Organic
revenue growth was 6%; divestitures, net of acquisitions, decreased
revenue by 1% and currency translation reduced revenue by 6%.
Adjusted operating income for the second quarter of 2015 increased
3% compared with the year-ago quarter, and adjusted operating
margin expanded to 22.3%, compared with 21.4% in the second quarter
of 2014.
GAAP diluted EPS in 2015 was $1.27, versus $.69 in the same
quarter last year. The 2014 period included charges associated with
the acquisition of Life Technologies. GAAP operating income for the
second quarter of 2015 was $596 million, compared with $348 million
in 2014. GAAP operating margin was 14.0%, compared with 8.1% in the
2014 quarter.
2015 Guidance Update
Thermo Fisher is raising its full-year 2015 revenue and adjusted
EPS guidance to reflect current foreign currency exchange rates and
strong operating performance. The company now expects revenue for
2015 to be in the range of $16.72 to $16.86 billion, versus its
previous guidance of $16.67 to $16.83 billion. Thermo Fisher is
also raising adjusted EPS guidance to a new range of $7.28 to $7.41
from the $7.25 to $7.40 previously announced, for 5% to 6% growth
over 2014.
The 2015 guidance does not include the acquisition of Alfa Aesar
or 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. Year-over-year results were negatively affected
by the impact of foreign currency exchange rates.
Life Sciences Solutions Segment
In the second quarter of 2015, Life Sciences Solutions Segment
revenue grew to $1.13 billion, compared with revenue of $1.10
billion in the second quarter of 2014. Segment adjusted operating
margin increased to 28.6%, compared with 27.1% in the 2014
quarter.
Analytical Instruments Segment
Analytical Instruments Segment revenue was $777 million in the
second quarter of 2015, compared with revenue of $793 million in
the second quarter of 2014. Segment adjusted operating margin
increased to 18.0%, versus 16.4% in the 2014 quarter.
Specialty Diagnostics Segment
In the second quarter of 2015, Specialty Diagnostics Segment
revenue was $817 million, compared with revenue of $855 million in
the second quarter of 2014. Segment adjusted operating margin was
27.8%, compared with 27.6% in the year-ago quarter.
Laboratory Products and Services Segment
Laboratory Products and Services Segment revenue was $1.69
billion in the second quarter of 2015, compared with revenue of
$1.70 billion in the 2014 quarter. Segment adjusted operating
margin was 15.4%, versus 15.2% in the 2014 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. In
2015, based on acquisitions closed through the end of the second
quarter, our adjusted EPS will exclude approximately $2.23 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, significant litigation-related matters, 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, July 22, 2015, 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, August 14, 2015.
About Thermo Fisher Scientific
Thermo Fisher Scientific Inc. (NYSE: TMO) is the world
leader in serving science, with revenues of $17
billion and approximately 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.
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. Additional important
factors that could cause actual results to differ materially from
those indicated by such forward-looking statements are set forth in
our Quarterly Report on Form 10-Q for the quarter ended March 28,
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 June 27, % of June 28, %
of (In millions except per share amounts) 2015
Revenues 2014 Revenues
Revenues $ 4,270.9 $ 4,321.9 Costs and Operating
Expenses: Cost of revenues (c) 2,222.0 52.0 % 2,361.0 54.6 %
Selling, general and administrative expenses (d) 928.3 21.7 %
1,024.6 23.7 % Amortization of acquisition-related intangible
assets 329.8 7.7 % 343.6 8.0 % Research and development expenses
174.6 4.1 % 183.7 4.3 % Restructuring and other costs, net (e)
20.4 0.5 % 60.9 1.4 % 3,675.1
86.0 % 3,973.8 91.9 % Operating Income
595.8 14.0 % 348.1 8.1 % Interest Income 7.7 16.0 Interest Expense
(102.9 ) (129.1 ) Other Income, Net (f) 3.0
1.5 Income Before Income Taxes 503.6 236.5 Benefit
from Income Taxes (g) 8.0 42.0
Net Income $ 511.6 12.0 % $ 278.5 6.4 %
Earnings per Share: Basic $ 1.28 $ .70 Diluted
$ 1.27 $ .69 Weighted Average Shares:
Basic 398.4 399.4 Diluted 401.5
403.1
Reconciliation of
Adjusted Operating Income and Adjusted Operating Margin GAAP
Operating Income (a) $ 595.8 14.0 % $ 348.1 8.1 % Cost of Revenues
Charges (c) 1.1 0.0 % 156.1 3.6 % Selling, General and
Administrative Costs, Net (d) 3.2 0.1 % 14.9 0.3 % Restructuring
and Other Costs, Net (e) 20.4 0.5 % 60.9 1.4 % Amortization of
Acquisition-related Intangible Assets 329.8 7.7 %
343.6 8.0 % Adjusted Operating Income (b) $
950.3 22.3 % $ 923.6 21.4 %
Reconciliation
of Adjusted Net Income GAAP Net Income (a) $ 511.6 12.0 % $
278.5 6.4 % Cost of Revenues Charges (c) 1.1 0.0 % 156.1 3.6 %
Selling, General and Administrative Costs, Net (d) 3.2 0.1 % 14.9
0.3 % Restructuring and Other Costs, Net (e) 20.4 0.5 % 60.9 1.4 %
Amortization of Acquisition-related Intangible Assets 329.8 7.7 %
343.6 8.0 % Other Expense (Income), Net (f) 0.6 0.0 % (0.9 ) 0.0 %
Provision for Income Taxes (g) (128.2 ) -3.0 % (158.0
) -3.6 % Adjusted Net Income (b) $ 738.5 17.3 % $
695.1 16.1 %
Reconciliation of Adjusted Earnings
per Share GAAP EPS (a) $ 1.27 $ 0.69 Cost of Revenues Charges,
Net of Tax (c) - 0.29 Selling, General and Administrative Costs,
Net of Tax (d) 0.01 0.02 Restructuring and Other Costs, Net of Tax
(e) 0.03 0.09 Amortization of Acquisition-related Intangible
Assets, Net of Tax 0.57 0.64 Other Expense (Income), Net of Tax (f)
- - Provision for Income Taxes (g) (0.04 ) (0.01 )
Adjusted EPS (b) $ 1.84 $ 1.72
Reconciliation of Free Cash Flow GAAP Net Cash Provided by
Operating Activities (a) $ 764.9 $ 888.7 Net Cash Used in
Discontinued Operations 2.2 0.9 Purchases of Property, Plant and
Equipment (95.3 ) (75.5 ) Proceeds from Sale of Property, Plant and
Equipment 5.6 9.3 Free Cash Flow
(h) $ 677.4 $ 823.4
Segment Data Three
Months Ended June 27, % of June 28, % of (In millions)
2015 Revenues 2014
Revenues
Revenues Life Sciences Solutions $ 1,129.3
26.4 % $ 1,103.1 25.5 % Analytical Instruments 777.0 18.2 % 793.4
18.4 % Specialty Diagnostics 817.1 19.1 % 855.1 19.8 % Laboratory
Products and Services 1,693.3 39.6 % 1,699.4 39.3 % Eliminations
(145.8 ) -3.3 % (129.1 ) -3.0 % Consolidated
Revenues $ 4,270.9 100.0 % $ 4,321.9 100.0 %
Operating Income and Operating Margin Life Sciences
Solutions $ 323.5 28.6 % $ 299.1 27.1 % Analytical Instruments
139.6 18.0 % 130.4 16.4 % Specialty Diagnostics 227.2 27.8 % 236.4
27.6 % Laboratory Products and Services 260.0 15.4 %
257.7 15.2 % Subtotal Reportable Segments
950.3 22.3 % 923.6 21.4 % Cost of Revenues Charges (c) (1.1
) 0.0 % (156.1 ) -3.6 % Selling, General and Administrative Costs,
Net (d) (3.2 ) -0.1 % (14.9 ) -0.3 % Restructuring and Other Costs,
Net (e) (20.4 ) -0.5 % (60.9 ) -1.4 % Amortization of
Acquisition-related Intangible Assets (329.8 ) -7.7 %
(343.6 ) -8.0 % GAAP Operating Income (a) $ 595.8
14.0 % $ 348.1 8.1 %
(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 2015 and 2014 include i) $0.2 and
$154.7, respectively, of charges for the sale of inventories
revalued at the date of acquisition and ii) $0.9 and $1.4,
respectively, of accelerated depreciation on manufacturing assets
to be abandoned due to facility consolidations.
(d) Reported results in 2015 and 2014 include $1.4 and $11.3,
respectively, of third-party transaction/integration costs related
to recent acquisitions. Reported results in 2015 also include $1.8
of accelerated depreciation on information systems to be abandoned
due to integration synergies. Reported results in 2014 include
charges of $3.6 for revisions of estimated contingent consideration
for recent acquisitions.
(e) Reported results in 2015 and 2014 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 2015
include a gain of $7.6 on the sale of a product line and a charge
of $3.5 for settlement of litigation at an acquired business.
Reported results in 2014 include net gains of $3.3 on the sale of
businesses.
(f) Reported results in 2015 and 2014 include $0.6 and $0.6,
respectively, of amortization of acquisition-related intangible
assets of the company's equity-method investments. Reported results
in 2014 also include $1.5 of gains from the sale of
investments.
(g) Reported provision for income taxes includes i) $113.1 and
$152.6 of incremental tax benefit in 2015 and 2014, respectively,
for the pre-tax reconciling items between GAAP and adjusted net
income; and ii) in 2015 and 2014, $15.1 and $5.4, 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 2014 was reduced by $45.0 of cash outlays
related to the acquisition of Life Technologies including
monetizing certain equity awards, severance obligations and
third-party transaction/integration costs.
Notes:
Consolidated depreciation expense is $89.9 and $91.2 in 2015 and
2014, respectively.
Consolidated equity compensation expense included in both
reported and adjusted results is $31.1 and $30.8 in 2015 and 2014,
respectively.
Certain pre-acquisition equity awards of Life Technologies were
converted to rights to receive future cash payments over the
remaining vesting period. In addition to the equity compensation
expense noted above, reported and adjusted results in 2015 and 2014
include $5.5 and $10.0, respectively, of expense for such cash
payments.
Consolidated Statement of Income
(unaudited) (a)(b) Six Months Ended June 27, % of June 28, % of
(In millions except per share amounts) 2015
Revenues 2014 Revenues
Revenues $ 8,189.7 $ 8,225.4 Costs and Operating
Expenses: Cost of revenues (c) 4,210.6 51.4 % 4,552.8 55.4 %
Selling, general and administrative expenses (d) 1,844.3 22.5 %
2,007.4 24.4 % Amortization of acquisition-related intangible
assets 658.9 8.1 % 629.5 7.6 % Research and development expenses
340.4 4.2 % 333.4 4.1 % Restructuring and other costs (income), net
(e) 52.4 0.7 % (521.3 ) -6.3 % 7,106.6
86.8 % 7,001.8 85.1 % Operating Income
1,083.1 13.2 % 1,223.6 14.9 % Interest Income 14.7 27.9 Interest
Expense (211.3 ) (246.9 ) Other (Expense) Income, Net (f)
(0.9 ) 6.3 Income Before Income Taxes 885.6
1,010.9 Benefit from (Provision for) Income Taxes (g) 11.1
(189.3 ) Net Income $ 896.7 10.9 % $
821.6 10.0 % Earnings per Share: Basic $ 2.25
$ 2.07 Diluted $ 2.23 $ 2.05
Weighted Average Shares: Basic 398.1
396.3 Diluted 401.5 400.7
Reconciliation of Adjusted Operating Income and Adjusted
Operating Margin GAAP Operating Income (a) $ 1,083.1 13.2 % $
1,223.6 14.9 % Cost of Revenues Charges (c) 1.7 0.0 % 324.6 3.9 %
Selling, General and Administrative Costs, Net (d) 10.8 0.1 % 97.7
1.2 % Restructuring and Other Costs (Income), Net (e) 52.4 0.7 %
(521.3 ) -6.3 % Amortization of Acquisition-related Intangible
Assets 658.9 8.1 % 629.5 7.6 %
Adjusted Operating Income (b) $ 1,806.9 22.1 % $ 1,754.1
21.3 %
Reconciliation of Adjusted Net Income
GAAP Net Income (a) $ 896.7 10.9 % $ 821.6 10.0 % Cost of Revenues
Charges (c) 1.7 0.0 % 324.6 3.9 % Selling, General and
Administrative Costs, Net (d) 10.8 0.1 % 97.7 1.2 % Restructuring
and Other Costs (Income), Net (e) 52.4 0.7 % (521.3 ) -6.3 %
Amortization of Acquisition-related Intangible Assets 658.9 8.1 %
629.5 7.6 % Other Expense (Income), Net (f) 11.6 0.1 % (3.2 ) 0.0 %
Provision for Income Taxes (g) (238.0 ) -2.9 % (43.0
) -0.5 % Adjusted Net Income (b) $ 1,394.1 17.0 % $
1,305.9 15.9 %
Reconciliation of Adjusted Earnings
per Share GAAP EPS (a) $ 2.23 $ 2.05 Cost of Revenues Charges,
Net of Tax (c) - 0.63 Selling, General and Administrative Costs,
Net of Tax (d) 0.02 0.19 Restructuring and Other Costs (Income),
Net of Tax (e) 0.09 (0.82 ) Amortization of Acquisition-related
Intangible Assets, Net of Tax 1.15 1.24 Other Expense (Income), Net
of Tax (f) 0.02 - Provision for Income Taxes (g) (0.04 )
(0.03 ) Adjusted EPS (b) $ 3.47 $ 3.26
Reconciliation of Free Cash Flow GAAP Net Cash
Provided by Operating Activities (a) $ 844.9 $ 989.9 Net Cash Used
in Discontinued Operations 4.3 1.9 Purchases of Property, Plant and
Equipment (192.5 ) (180.2 ) Proceeds from Sale of Property, Plant
and Equipment 6.2 12.7 Free Cash
Flow (h) $ 662.9 $ 824.3
Segment Data
Six Months Ended June 27, % of June 28, % of (In millions)
2015 Revenues 2014
Revenues
Revenues Life Sciences Solutions $ 2,149.2
26.2 % $ 1,938.6 23.6 % Analytical Instruments 1,504.4 18.4 %
1,563.3 19.0 % Specialty Diagnostics 1,602.3 19.6 % 1,668.8 20.3 %
Laboratory Products and Services 3,206.7 39.2 % 3,289.9 40.0 %
Eliminations (272.9 ) -3.4 % (235.2 ) -2.9 %
Consolidated Revenues $ 8,189.7 100.0 % $ 8,225.4
100.0 %
Operating Income and Operating Margin Life
Sciences Solutions $ 622.2 29.0 % $ 543.7 28.0 % Analytical
Instruments 261.3 17.4 % 261.3 16.7 % Specialty Diagnostics 441.3
27.5 % 457.4 27.4 % Laboratory Products and Services 482.1
15.0 % 491.7 14.9 % Subtotal Reportable
Segments 1,806.9 22.1 % 1,754.1 21.3 % Cost of Revenues
Charges (c) (1.7 ) 0.0 % (324.6 ) -3.9 % Selling, General and
Administrative Costs, Net (d) (10.8 ) -0.1 % (97.7 ) -1.2 %
Restructuring and Other (Costs) Income, Net (e) (52.4 ) -0.7 %
521.3 6.3 % Amortization of Acquisition-related Intangible Assets
(658.9 ) -8.1 % (629.5 ) -7.6 % GAAP Operating
Income (a) $ 1,083.1 13.2 % $ 1,223.6 14.9 %
(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 2015 and 2014 include i) $0.7 and
$302.3, respectively, of charges for the sale of inventories
revalued at the date of acquisition and ii) $1.0 and $0.9,
respectively, of accelerated depreciation on manufacturing assets
to be abandoned due to facility consolidations. Reported results in
2014 also include a charge of $21.4 to conform the accounting
policies of Life Technologies with the company's accounting
policies.
(d) Reported results in 2015 and 2014 include i) $7.5 and $77.9,
respectively, of third-party transaction/integration costs
primarily related to the acquisitions of Life Technologies and in
2015, Alfa Aesar, and ii) $0.5 and $(3.6), respectively, of gains
(charges) for changes in estimates of contingent consideration for
acquisitions. Reported results in 2015 also include $3.8 of
accelerated depreciation on information systems to be abandoned due
to integration synergies. Reported results in 2014 also include a
charge of $16.2 to conform the accounting policies of Life
Technologies with the company's accounting policies.
(e) Reported results in 2015 and 2014 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 2015
include a gain of $7.6 on the sale of a product line, $5.0 of cash
compensation contractually due to employees of an acquired business
on the date of acquisition, a charge of $3.5 for settlement of
litigation at an acquired business and a $0.9 charge associated
with a previous sale of a business. Reported results in 2014
include gains of $761.8 on the sale of businesses, principally the
sera and media, gene modulation and magnetic beads businesses and a
charge of $91.7 for cash compensation to monetize certain equity
awards held by Life Technologies employees at the date of
acquisition.
(f) Reported results in 2015 and 2014 include $1.1 and $1.1,
respectively, of amortization of acquisition-related intangible
assets of the company's equity-method investments. Reported results
in 2015 also 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. Reported results in 2014 also include $5.3
of gains from investments, offset in part by $1.0 of charges
related to amortization of fees paid to obtain financing
commitments related to the Life Technologies acquisition.
(g) Reported provision for income taxes includes i) $223.6 and
$32.4 of incremental tax benefit in 2015 and 2014, respectively,
for the pre-tax reconciling items between GAAP and adjusted net
income; and ii) in 2015 and 2014, $14.4 and $10.6, 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 2014 was reduced by $286.5 of cash outlays
related to the acquisition of Life Technologies including
monetizing certain equity awards, severance obligations and
third-party transaction/integration costs.
Notes:
Consolidated depreciation expense is $177.1 and $170.9 in 2015
and 2014, respectively.
Consolidated equity compensation expense included in both
reported and adjusted results is $59.3 and $56.0 in 2015 and 2014,
respectively.
Certain pre-acquisition equity awards of Life Technologies were
converted to rights to receive future cash payments over the
remaining vesting period. In addition to the equity compensation
expense noted above, reported and adjusted results in 2015 and 2014
include $13.9 and $17.1, respectively, of expense for such cash
payments.
Condensed Consolidated Balance Sheet
(unaudited) June 27, December 31, (In millions)
2015 2014
Assets Current Assets:
Cash and cash equivalents $ 768.4 $ 1,343.5 Short-term investments
2.0 8.5 Accounts receivable, net 2,631.0 2,473.6 Inventories
1,962.3 1,859.5 Other current assets 872.9 854.7
Total current assets 6,236.6 6,539.8
Property, Plant and Equipment, Net 2,406.9 2,426.5
Acquisition-related Intangible Assets 13,383.7
14,110.1 Other Assets 940.3 933.1
Goodwill 18,806.9 18,842.6 Total Assets $
41,774.4 $ 42,852.1
Liabilities and Shareholders'
Equity Current Liabilities: Short-term obligations and current
maturities of long-term obligations $ 3,359.8 $ 2,212.4 Other
current liabilities 2,740.6 3,137.4 Total
current liabilities 6,100.4 5,349.8 Other
Long-term Liabilities 4,330.5 4,602.6
Long-term Obligations 10,663.7 12,351.6 Total
Shareholders' Equity 20,679.8 20,548.1 Total
Liabilities and Shareholders' Equity $ 41,774.4 $ 42,852.1
Condensed Consolidated Statement of Cash Flows
(unaudited) Six Months Ended June 27, June
28, (In millions) 2015 2014
Operating Activities Net income $ 896.7 $
821.6 Adjustments to reconcile net income to net cash
provided by operating activities: Depreciation and amortization
836.0 800.4 Change in deferred income taxes (218.0 ) (460.4 ) Net
gains on sale of businesses (7.6 ) (761.8 ) Other non-cash
expenses, net 35.1 329.8
Changes in assets and liabilities,
excluding the effects of acquisitions and dispositions
(693.0
) 262.2 Net cash provided by continuing
operations 849.2 991.8 Net cash used in discontinued operations
(4.3 ) (1.9 ) Net cash provided by operating
activities 844.9 989.9
Investing Activities Acquisitions, net of cash acquired
(298.6 ) (13,054.5 ) Purchases of property, plant and equipment
(192.5 ) (180.2 ) Proceeds from sale of property, plant and
equipment 6.2 12.7 Proceeds from sale of businesses, net of cash
divested - 1,048.7 Other investing activities, net 15.6
99.2 Net cash used in investing
activities (469.3 ) (12,074.1 )
Financing
Activities Net proceeds from issuance of debt - 4,999.6
Repayment of long-term obligations (1,554.7 ) (2,452.3 ) Increase
in commercial paper, net 1,121.5 305.6 Decrease in short-term notes
payable - (18.6 ) Purchases of company common stock (500.0 ) -
Dividends paid (120.5 ) (114.7 ) Net proceeds from issuance of
company common stock - 2,942.0 Net proceeds from issuance of
company common stock under employee stock plans 81.7 108.6 Tax
benefits from stock-based compensation awards 49.0 55.6 Other
financing activities, net (6.3 ) (4.9 ) Net
cash (used in) provided by financing activities (929.3 )
5,820.9 Exchange Rate Effect on Cash
(21.4 ) 22.2 Decrease in Cash and Cash
Equivalents (575.1 ) (5,241.1 ) Cash and Cash Equivalents at
Beginning of Period 1,343.5 5,826.0
Cash and Cash Equivalents at End of Period $ 768.4 $
584.9 Free Cash Flow (a)(b) $ 662.9 $ 824.3
(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 2014 was reduced by $286.5 of cash outlays
related to the acquisition of Life Technologies including
monetizing certain equity awards, severance obligations and
third-party transaction/integration costs.
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Thermo Fisher Scientific Inc.Media Contact Information:Karen
Kirkwood,
781-622-1306karen.kirkwood@thermofisher.comwww.thermofisher.comorInvestor
Contact Information:Ken Apicerno,
781-622-1294ken.apicerno@thermofisher.com
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