Thermo Fisher Scientific Inc. (NYSE: TMO), the world leader in
serving science, today reported its financial results for the
second quarter of 2016, ended July 2, 2016.
Second Quarter 2016 Highlights
- Revenue increased 6% to $4.54
billion.
- GAAP diluted earnings per share (EPS)
increased 2% to $1.30.Adjusted EPS grew 10% to $2.03.
- Strengthened leadership in analytical
instruments by launching a suite of software and Cloud-based
solutions for research and applied markets, and introducing new
products to accelerate drug discovery, including our flagship Q
Exactive BioPharma mass spectrometer.
- Delivered strong performance in
emerging markets, led by China, South Korea and India.
- Announced agreement to acquire FEI
Company for $4.2 billion, adding leading electron microscopy
technologies to significantly increase capabilities for structural
biology applications and create new growth opportunities in
attractive materials science markets.
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 to announce another quarter of strong financial
results,” said Marc N. Casper, president and chief executive
officer of Thermo Fisher Scientific. “Our team executed well in the
second quarter, contributing to an outstanding first half.
“We continued to build on our leadership position by executing
our proven growth strategy. During the quarter, we launched new
products that raise the bar on performance and productivity,
delivered strong growth in emerging markets and enhanced our unique
customer value proposition. We’re continuing to effectively deploy
capital to strengthen our competitive position and drive growth.
We’re excited about our pending acquisition of FEI, which will add
leading capabilities in electron microscopy that complement our
analytical instruments portfolio. We plan to leverage our industry
leadership to expand the use of these technologies in life sciences
and applied markets, creating significant value for our customers
and our shareholders.
“In summary, we’re in a great position at the halfway point of
the year and on track to deliver an excellent 2016.”
Second Quarter 2016
For the second quarter of 2016, revenue grew 6% to $4.54
billion, versus $4.27 billion in the second quarter of 2015.
Organic revenue growth was 4%; acquisitions increased revenue by 3%
and currency translation decreased revenue slightly.
GAAP Earnings Results
GAAP diluted EPS increased to $1.30, versus $1.27 in the same
quarter last year. GAAP operating income for the second quarter of
2016 increased 7% to $638 million, compared with $596 million in
the second quarter of 2015. GAAP operating margin was 14.1%,
compared with 14.0% in the second quarter of 2015.
Non-GAAP Earnings Results
Adjusted EPS in the second quarter of 2016 grew 10% to $2.03,
versus $1.84 in the second quarter of 2015. Adjusted operating
income for the second quarter of 2016 increased 9% compared with
the year-ago quarter. Adjusted operating margin was 22.8%, compared
with 22.3% in the second quarter of 2015.
2016 Guidance Update
Thermo Fisher is updating its revenue and adjusted EPS guidance
for 2016 to reflect strong operating performance in the first half
of the year, as well as a more unfavorable foreign exchange
environment. The company now expects revenue to be in the range of
$17.84 to $18.00 billion versus its guidance of $17.86 to $18.04
billion announced on April 28, 2016. This would continue to result
in 5 to 6% revenue growth over the previous year. The company is
raising its adjusted EPS guidance to a new range of $8.07 to $8.20
versus $8.05 to $8.19, for 9 to 11% growth year over year as
previously announced.
Segment Results
Management uses adjusted operating results to monitor and
evaluate performance of the company’s four business segments, as
highlighted below. Since these results are used for this purpose,
they are also considered to be prepared in accordance with
GAAP.
Life Sciences Solutions Segment
In the second quarter of 2016, Life Sciences Solutions Segment
revenue grew 13% to $1.28 billion, compared with revenue of $1.13
billion in the second quarter of 2015. Segment operating margin was
28.9% versus 28.6% in 2015.
Analytical Instruments Segment
Analytical Instruments Segment revenue increased 2% to $794
million in the second quarter of 2016, compared with revenue of
$777 million in the second quarter of 2015. Segment operating
margin was 18.3% versus 18.0% in the 2015 quarter.
Specialty Diagnostics Segment
Specialty Diagnostics Segment revenue in the second quarter
increased 4% to $851 million in 2016, compared with revenue of $817
million in the second quarter of 2015. Segment operating margin was
27.9% versus 27.8% in the 2015 quarter.
Laboratory Products and Services Segment
In the second quarter of 2016, Laboratory Products and Services
Segment revenue grew 6% to $1.80 billion, compared with revenue of
$1.69 billion in the second quarter of 2015. Segment operating
margin was 15.5% versus 15.4% 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 second
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 effect on deferred
tax balances of enacted changes in tax rates), which are either
isolated or cannot be expected to occur again with any
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, July 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, August 26, 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 Quarterly Report on Form 10-Q for the quarter ended April 2,
2016, 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 July 2, % of June 27, % of
(In millions except per share amounts) 2016 Revenues 2015 Revenues
Revenues $ 4,535.2 $ 4,270.9 Costs and
Operating Expenses: Cost of revenues (c) 2,349.4 51.8 % 2,222.0
52.0 % Selling, general and administrative expenses (d) 992.4 21.9
% 928.3 21.7 % Amortization of acquisition-related intangible
assets 338.0 7.4 % 329.8 7.7 % Research and development expenses
182.4 4.0 % 174.6 4.1 % Restructuring and other costs, net (e) 35.4
0.8 % 20.4 0.5 % 3,897.6 85.9 % 3,675.1
86.0 % Operating Income 637.6 14.1 % 595.8 14.0 % Interest
Income 13.2 7.7 Interest Expense (118.8 ) (102.9 ) Other (Expense)
Income, Net (f) (10.9 ) 3.0 Income Before Income
Taxes 521.1 503.6 (Provision for) Benefit from Income Taxes (g)
(4.3 ) 8.0 Income from Continuing Operations 516.8
511.6 Loss from Discontinued Operations (0.2 ) —
Net Income $ 516.6 11.4 % $ 511.6 12.0 %
Earnings per Share from Continuing Operations: Basic $ 1.31
$ 1.28 Diluted $ 1.30 $ 1.27
Earnings per Share: Basic $ 1.31 $ 1.28 Diluted $
1.30 $ 1.27 Weighted Average Shares: Basic
393.9 398.4 Diluted 396.7 401.5
Reconciliation of Adjusted Operating Income and Adjusted
Operating Margin GAAP Operating Income (a) $ 637.6 14.1 % $
595.8 14.0 % Cost of Revenues Charges (c) 17.4 0.4 % 1.1 0.0 %
Selling, General and Administrative Charges, Net (d) 3.8 0.1 % 3.2
0.1 % Restructuring and Other Costs, Net (e) 35.4 0.8 % 20.4 0.5 %
Amortization of Acquisition-related Intangible Assets 338.0
7.4 % 329.8 7.7 % Adjusted Operating Income (b) $
1,032.2 22.8 % $ 950.3 22.3 %
Reconciliation of Adjusted Net Income GAAP Net Income (a) $
516.6 11.4 % $ 511.6 12.0 % Cost of Revenues Charges (c) 17.4 0.4 %
1.1 0.0 % Selling, General and Administrative Charges, Net (d) 3.8
0.1 % 3.2 0.1 % Restructuring and Other Costs, Net (e) 35.4 0.8 %
20.4 0.5 % Amortization of Acquisition-related Intangible Assets
338.0 7.4 % 329.8 7.7 % Other Expense, Net (f) 16.8 0.4 % 0.6 0.0 %
Provision for Income Taxes (g) (121.7 ) -2.7 % (128.2 ) -3.0 %
Discontinued Operations, Net of Tax 0.2 0.0 % — 0.0 %
Adjusted Net Income (b) $ 806.5 17.8 % $ 738.5
17.3 %
Reconciliation of Adjusted Earnings per Share
GAAP EPS (a) $ 1.30 $ 1.27 Cost of Revenues Charges, Net of Tax (c)
0.03 — Selling, General and Administrative Charges, Net of Tax (d)
0.01 0.01 Restructuring and Other Costs, Net of Tax (e) 0.06 0.03
Amortization of Acquisition-related Intangible Assets, Net of Tax
0.60 0.57 Other Expense, Net of Tax (f) 0.03 — Provision for Income
Taxes (g) — (0.04 ) Discontinued Operations, Net of Tax — —
Adjusted EPS (b) $ 2.03 $ 1.84
Reconciliation of Free Cash Flow GAAP Net Cash Provided by
Operating Activities (a) $ 889.5 $ 764.9 Net Cash Used in
Discontinued Operations 0.4 2.2 Purchases of Property, Plant and
Equipment (114.8 ) (95.3 ) Proceeds from Sale of Property, Plant
and Equipment 15.7 5.6 Free Cash Flow $ 790.8
$ 677.4
Segment Data Three
Months Ended July 2, % of June 27, % of (In
millions) 2016 Revenues 2015 Revenues
Revenues Life
Sciences Solutions $ 1,277.6 28.2 % $ 1,129.3 26.4 % Analytical
Instruments 793.9 17.5 % 777.0 18.2 % Specialty Diagnostics 851.3
18.8 % 817.1 19.1 % Laboratory Products and Services 1,802.2 39.7 %
1,693.3 39.6 % Eliminations (189.8 ) -4.2 % (145.8 ) -3.3 %
Consolidated Revenues $ 4,535.2 100.0 % $ 4,270.9
100.0 %
Operating Income and Operating Margin Life
Sciences Solutions $ 369.6 28.9 % $ 323.5 28.6 % Analytical
Instruments 144.9 18.3 % 139.6 18.0 % Specialty Diagnostics 237.9
27.9 % 227.2 27.8 % Laboratory Products and Services 279.8
15.5 % 260.0 15.4 % Subtotal Reportable Segments
1,032.2 22.8 % 950.3 22.3 % Cost of Revenues Charges (c)
(17.4 ) -0.4 % (1.1 ) 0.0 % Selling, General and Administrative
Charges, Net (d) (3.8 ) -0.1 % (3.2 ) -0.1 % Restructuring and
Other Costs, Net (e) (35.4 ) -0.8 % (20.4 ) -0.5 % Amortization of
Acquisition-related Intangible Assets (338.0 ) -7.4 % (329.8 ) -7.7
% GAAP Operating Income (a) $ 637.6 14.1 % $ 595.8
14.0 %
(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 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) $16.2 and $0.2,
respectively, of charges for the sale of inventories revalued at
the date of acquisition and ii) $1.7 and $0.9, respectively, of
accelerated depreciation on manufacturing assets to be abandoned
due to facility consolidations. Reported results in 2016 include
other credits of $0.5.
(d) Reported results in 2016 and 2015 include i) $3.1 and $1.4,
respectively, of third-party transaction/integration costs
primarily related to recently completed acquisitions and the
pending acquisition of FEI; and ii) $2.5 and $1.8, respectively, of
accelerated depreciation on fixed assets to be abandoned due to
integration synergies. Reported results in 2016 also include $1.8
of credits from contingent acquisition consideration.
(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 $7.8 of charges for litigation at acquired businesses, $6.8
of environmental remediation costs and $2.1 of gains on sales of
real estate and settlement of a retirement plan. 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.
(f) Reported results in 2016 and 2015 include $0.6 and $0.6,
respectively, of amortization of acquisition-related intangible
assets of the company's equity-method investments. Reported results
in 2016 include $10.0 of charges related to the amortization of
fees paid to obtain bridge financing commitments for the pending
acquisition of FEI and $6.2 of losses on the early extinguishment
of debt.
(g) Reported provision for income taxes includes i) $121.5 and
$113.1 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, $0.2 and $15.1, respectively, of
incremental tax benefit from adjusting the company's deferred tax
balances as a result of tax rate changes.
Notes:
Consolidated depreciation expense is $97.1
and $89.9 in 2016 and 2015, respectively.
Consolidated equity compensation expense
included in both reported and adjusted results is $33.7 and $31.1
in 2016 and 2015, respectively.
Consolidated Statement of Income
(unaudited) (a)(b) Six Months Ended July 2, % of June 27, % of
(In millions except per share amounts) 2016 Revenues 2015 Revenues
Revenues $ 8,830.0 $ 8,189.7 Costs and
Operating Expenses: Cost of revenues (c) 4,585.3 51.9 % 4,210.6
51.4 % Selling, general and administrative expenses (d) 1,984.3
22.5 % 1,844.3 22.5 % Amortization of acquisition-related
intangible assets 660.0 7.5 % 658.9 8.1 % Research and development
expenses 358.9 4.1 % 340.4 4.2 % Restructuring and other costs, net
(e) 86.0 1.0 % 52.4 0.7 % 7,674.5 86.9 %
7,106.6 86.8 % Operating Income 1,155.5 13.1 %
1,083.1 13.2 % Interest Income 24.0 14.7 Interest Expense (225.0 )
(211.3 ) Other Expense, Net (f) (10.4 ) (0.9 ) Income Before
Income Taxes 944.1 885.6 (Provision for) Benefit from Income Taxes
(g) (25.0 ) 11.1 Income from Continuing Operations
919.1 896.7 Loss from Discontinued Operations, Net of Tax
(0.3 ) — Net Income $ 918.8 10.4 % $ 896.7
10.9 % Earnings per Share from Continuing Operations:
Basic $ 2.33 $ 2.25 Diluted $ 2.31 $ 2.23
Earnings per Share: Basic $ 2.33 $ 2.25
Diluted $ 2.31 $ 2.23 Weighted Average Shares:
Basic 394.9 398.1 Diluted 397.7 401.5
Reconciliation of Adjusted Operating Income and
Adjusted Operating Margin GAAP Operating Income (a) $ 1,155.5
13.1 % $ 1,083.1 13.2 % Cost of Revenues Charges (c) 28.0 0.3 % 1.7
0.0 % Selling, General and Administrative Charges, Net (d) 32.7 0.3
% 10.8 0.1 % Restructuring and Other Costs, Net (e) 86.0 1.0 % 52.4
0.7 % Amortization of Acquisition-related Intangible Assets 660.0
7.5 % 658.9 8.1 % Adjusted Operating Income
(b) $ 1,962.2 22.2 % $ 1,806.9 22.1 %
Reconciliation of Adjusted Net Income GAAP Net Income (a) $
918.8 10.4 % $ 896.7 10.9 % Cost of Revenues Charges (c) 28.0 0.3 %
1.7 0.0 % Selling, General and Administrative Charges, Net (d) 32.7
0.3 % 10.8 0.1 % Restructuring and Other Costs, Net (e) 86.0 1.0 %
52.4 0.7 % Amortization of Acquisition-related Intangible Assets
660.0 7.5 % 658.9 8.1 % Other Expense, Net (f) 15.5 0.2 % 11.6 0.1
% Provision for Income Taxes (g) (217.7 ) -2.4 % (238.0 ) -2.9 %
Discontinued Operations, Net of Tax 0.3 0.0 % — 0.0 %
Adjusted Net Income (b) $ 1,523.6 17.3 % $ 1,394.1
17.0 %
Reconciliation of Adjusted Earnings per
Share GAAP EPS (a) $ 2.31 $ 2.23 Cost of Revenues Charges, Net
of Tax (c) 0.05 — Selling, General and Administrative Charges, Net
of Tax (d) 0.06 0.02 Restructuring and Other Costs, Net of Tax (e)
0.15 0.09 Amortization of Acquisition-related Intangible Assets,
Net of Tax 1.21 1.15 Other Expense, Net of Tax (f) 0.03 0.02
Provision for Income Taxes (g) 0.02 (0.04 ) Discontinued
Operations, Net of Tax — — Adjusted EPS (b) $
3.83 $ 3.47
Reconciliation of Free Cash
Flow GAAP Net Cash Provided by Operating Activities (a) $
1,178.6 $ 844.9 Net Cash Used in Discontinued Operations 1.9 4.3
Purchases of Property, Plant and Equipment (229.9 ) (192.5 )
Proceeds from Sale of Property, Plant and Equipment 21.7 6.2
Free Cash Flow $ 972.3 $ 662.9
Segment Data Six Months Ended July 2, % of
June 27, % of (In millions) 2016 Revenues 2015
Revenues
Revenues Life Sciences Solutions $ 2,410.6
27.3 % $ 2,149.2 26.2 % Analytical Instruments 1,553.2 17.6 %
1,504.4 18.4 % Specialty Diagnostics 1,705.9 19.3 % 1,602.3 19.6 %
Laboratory Products and Services 3,526.8 39.9 % 3,206.7 39.2 %
Eliminations (366.5 ) -4.1 % (272.9 ) -3.4 % Consolidated
Revenues $ 8,830.0 100.0 % $ 8,189.7 100.0 %
Operating Income and Operating Margin Life Sciences
Solutions $ 699.6 29.0 % $ 622.2 29.0 % Analytical Instruments
256.6 16.5 % 261.3 17.4 % Specialty Diagnostics 468.0 27.4 % 441.3
27.5 % Laboratory Products and Services 538.0 15.3 % 482.1
15.0 % Subtotal Reportable Segments 1,962.2 22.2 %
1,806.9 22.1 % Cost of Revenues Charges (c) (28.0 ) -0.3 %
(1.7 ) 0.0 % Selling, General and Administrative Charges, Net (d)
(32.7 ) -0.3 % (10.8 ) -0.1 % Restructuring and Other Costs, Net
(e) (86.0 ) -1.0 % (52.4 ) -0.7 % Amortization of
Acquisition-related Intangible Assets (660.0 ) -7.5 % (658.9 ) -8.1
% GAAP Operating Income (a) $ 1,155.5 13.1 % $
1,083.1 13.2 %
(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 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) $22.4 and $0.7,
respectively, of charges for the sale of inventories revalued at
the date of acquisition and ii) $1.7 and $1.0, respectively, of
accelerated depreciation on manufacturing assets to be abandoned
due to facility consolidations. Reported results in 2016 include a
charge of $3.9 to conform the accounting policies of Affymetrix
with the company's accounting policies.
(d) Reported results in 2016 and 2015 include i) $26.7 and $7.5,
respectively, of third-party transaction/integration costs
primarily related to recently completed acquisitions and the
pending acquisition of FEI; ii) $7.9 and $3.8, respectively, of
accelerated depreciation on fixed assets to be abandoned due to
integration synergies; and iii) $1.9 and $0.5, respectively, of
credits from contingent acquisition consideration.
(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 $6.8 of environmental remediation costs, $5.5 of net gains
on litigation at acquired businesses and $5.0 of gains on sales of
real estate and settlement of a retirement plan. 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.
(f) Reported results in 2016 and 2015 include $1.1 and $1.1,
respectively, of amortization of acquisition-related intangible
assets of the company's equity-method investments. Reported results
in 2016 include $10.0 of charges related to the amortization of
fees paid to obtain bridge financing commitments for the pending
acquisition of FEI and $6.2 of losses on the early extinguishment
of debt, offset in part by $1.8 of gains on the sale of
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) $226.5 and
$223.6 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, $8.8 and $(14.4), respectively,
of incremental tax provision (benefit) from adjusting the company's
deferred tax balances as a result of tax rate changes.
Notes:
Consolidated depreciation expense is $191.2
and $177.1 in 2016 and 2015, respectively.
Consolidated equity compensation expense
included in both reported and adjusted results is $67.1 and $59.3
in 2016 and 2015, respectively.
Condensed Consolidated Balance Sheet
(unaudited) July 2, December 31, (In millions) 2016 2015
Assets Current Assets: Cash and cash equivalents $
663.1 $ 452.1 Accounts receivable, net 2,709.1 2,544.9 Inventories
2,086.3 1,991.7 Other current assets 872.5 752.5
Total current assets 6,331.0 5,741.2 Property, Plant
and Equipment, Net 2,451.6 2,448.8
Acquisition-related Intangible Assets 12,842.2 12,758.3
Other Assets 1,081.8 1,058.4 Goodwill 19,546.8
18,827.6 Total Assets $ 42,253.4 $ 40,834.3
Liabilities and Shareholders' Equity Current
Liabilities: Short-term obligations and current maturities of
long-term obligations $ 2,515.9 $ 1,051.8 Other current liabilities
3,012.3 3,094.5 Total current liabilities 5,528.2
4,146.3 Other Long-term Liabilities 3,829.4
3,917.6 Long-term Obligations 11,631.9 11,420.2
Total Shareholders' Equity 21,263.9 21,350.2
Total Liabilities and Shareholders' Equity $ 42,253.4 $
40,834.3
Condensed Consolidated Statement
of Cash Flows (unaudited) Six Months Ended July 2, June
27, (In millions) 2016 2015
Operating Activities Net
income $ 918.8 $ 896.7 Loss from discontinued operations 0.3
— Income from continuing operations 919.1 896.7
Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation and amortization 851.2 836.0
Change in deferred income taxes (304.5 ) (218.0 ) Net gains on sale
of businesses — (7.6 ) Other non-cash expenses, net 71.0 35.1
Changes in assets and liabilities, excluding the effects of
acquisitions and dispositions (356.3 ) (693.0 ) Net cash
provided by continuing operations 1,180.5 849.2 Net cash used in
discontinued operations (1.9 ) (4.3 ) Net cash provided by
operating activities 1,178.6 844.9
Investing Activities Acquisitions, net of cash acquired
(1,033.1 ) (298.6 ) Purchases of property, plant and equipment
(229.9 ) (192.5 ) Proceeds from sale of property, plant and
equipment 21.7 6.2 Other investing activities, net (6.7 ) 15.6
Net cash used in investing activities (1,248.0 )
(469.3 )
Financing Activities Net proceeds from
issuance of debt 1,985.6 — Repayment of debt (1,632.4 ) (1,554.7 )
Increase in commercial paper, net 936.1 1,121.5 Purchases of
company common stock (1,000.0 ) (500.0 ) Dividends paid (119.4 )
(120.5 ) Net proceeds from issuance of company common stock under
employee stock plans 97.9 81.7 Tax benefits from stock-based
compensation awards 44.6 49.0 Other financing activities, net (13.6
) (6.3 ) Net cash provided by (used in) financing activities
298.8 (929.3 ) Exchange Rate Effect on Cash (18.4 )
(21.4 ) Increase (Decrease) in Cash and Cash Equivalents
211.0 (575.1 ) Cash and Cash Equivalents at Beginning of Period
452.1 1,343.5 Cash and Cash Equivalents at End
of Period $ 663.1 $ 768.4 Free Cash
Flow (a) $ 972.3 $ 662.9
(a) Free cash flow is net cash provided by operating activities
of continuing operations less net purchases of property, plant and
equipment.
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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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