Thermo Fisher Scientific Inc. (NYSE: TMO), the world leader in
serving science, today reported its financial results for the third
quarter of 2016, ended October 1, 2016.
Third Quarter 2016 Highlights
- Revenue increased 9% to $4.49
billion.
- GAAP diluted earnings per share (EPS)
increased 1% to $1.19.Adjusted EPS grew 13% to $2.03.
- Strengthened presence in clinical
markets by receiving FDA clearance to launch new DRI Hydrocodone
assay and two new EliA IgG thyroid tests as well as extend use of
BRAHMS PCT sepsis test to the emergency room.
- Increased capabilities to support
biopharma growth in Asia-Pacific markets with new clinical
packaging and supplies facility in Seoul, South Korea, and
expansion of cryogenic storage and logistics operations in Tokyo,
Japan.
- Completed acquisition of FEI Company,
adding leading electron microscopy products that strengthen
offerings for attractive structural biology and materials science
markets, and significantly enhance our customer value
proposition.
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 delivered another great quarter, with excellent earnings
growth on solid top-line results,” said Marc N. Casper, president
and chief executive officer of Thermo Fisher Scientific. “We drove
strong operational performance while successfully executing our
growth strategy to position Thermo Fisher for an even brighter
future.
“In the quarter, we strengthened our offering for clinical
customers by expanding our menu of tests for detecting sepsis,
opioids and thyroid disease, and launching new quality control
software to ensure the accuracy of results in the clinical
laboratory. In Asia-Pacific, we increased our biopharma services
capabilities in South Korea and Japan to support the growing number
of clinical trials and continue our strong growth momentum in the
region.
“We were also pleased to complete our acquisition of FEI earlier
than expected. We look forward to the new opportunities we have to
create value for our customers, including broadening the use of
FEI’s leading imaging technologies in the life science research
markets that we serve.”
Third Quarter 2016
For the third quarter of 2016, revenue grew 9% to $4.49 billion,
versus $4.12 billion in the third quarter of 2015. Organic revenue
growth was 4%; acquisitions increased revenue by 5% and currency
translation decreased revenue slightly.
GAAP Earnings Results
GAAP diluted EPS increased to $1.19, versus $1.18 in the same
quarter last year. GAAP operating income for the third quarter of
2016 was $541 million, compared with $563 million in the third
quarter of 2015. GAAP operating margin was 12.0%, compared with
13.7% in the third quarter of 2015. GAAP operating results reflect
acquisition-related charges in the 2016 period.
Non-GAAP Earnings Results
Adjusted EPS in the third quarter of 2016 grew 13% to $2.03,
versus $1.80 in the third quarter of 2015. Adjusted operating
income for the third quarter of 2016 increased 11% compared with
the year-ago quarter. Adjusted operating margin was 23.0%, compared
with 22.6% in the third quarter of 2015.
2016 Guidance Update
Thermo Fisher is raising its revenue and adjusted EPS guidance
for 2016 to reflect the addition of FEI, strong operational
performance in the first nine months and a more favorable foreign
exchange environment. The company now expects revenue to be in the
range of $18.25 to $18.39 billion versus its previous guidance of
$17.84 to $18.00 billion, which would result in revenue growth of
8% over 2015. The company is also raising its adjusted EPS guidance
to a new range of $8.19 to $8.30 versus the $8.07 to $8.20
previously announced, which now results in 11% to 12% growth year
over year.
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 third quarter of 2016, Life Sciences Solutions Segment
revenue grew 14% to $1.23 billion, compared with revenue of $1.08
billion in the third quarter of 2015. Segment operating margin was
30.1% versus 30.8% in 2015.
Analytical Instruments Segment
Analytical Instruments Segment revenue grew 15% to $0.90 billion
in the third quarter of 2016, compared with revenue of $0.78
billion in the third quarter of 2015. Segment operating margin was
21.2% versus 18.8% in the 2015 quarter.
Specialty Diagnostics Segment
Specialty Diagnostics Segment revenue in the third quarter
increased 3% to $0.80 billion in 2016, compared with revenue of
$0.78 billion in the third quarter of 2015. Segment operating
margin was 26.8% versus 26.4% in the 2015 quarter.
Laboratory Products and Services Segment
In the third quarter of 2016, Laboratory Products and Services
Segment revenue grew 7% to $1.75 billion, compared with revenue of
$1.64 billion in the third quarter of 2015. Segment operating
margin was 14.8% versus 15.2% 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 third
quarter, our adjusted EPS will exclude approximately $2.42 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 does not provide GAAP financial
measures on a forward-looking basis because we are unable to
predict with reasonable certainty and without unreasonable effort
items such as the timing and amount of future restructuring actions
and acquisition-related charges as well as gains or losses from
sales of real estate and businesses, the early retirement of debt
and the outcome of legal proceedings. The timing and amount of
these items are uncertain and could be material to Thermo Fisher’s
results computed in accordance with GAAP.
Conference Call
Thermo Fisher Scientific will hold its earnings conference call
today, October 27, 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, November 11, 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 July 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 October 1, % of September
26, % of (In millions except per share amounts) 2016 Revenues 2015
Revenues Revenues $ 4,490.9 $ 4,123.2 Costs
and Operating Expenses: Cost of revenues (c) 2,327.2 51.8 % 2,132.2
51.7 % Selling, general and administrative expenses (d) 1,042.8
23.2 % 911.1 22.1 % Amortization of acquisition-related intangible
assets 341.6 7.6 % 329.9 8.0 % Research and development expenses
183.3 4.1 % 171.6 4.2 % Restructuring and other costs, net (e) 54.9
1.3 % 15.5 0.3 % 3,949.8 88.0 % 3,560.3
86.3 % Operating Income 541.1 12.0 % 562.9 13.7 % Interest
Income 10.4 7.2 Interest Expense (113.3 ) (100.6 ) Other Expense,
Net (f) (10.3 ) (1.4 ) Income Before Income Taxes 427.9
468.1 Benefit from Income Taxes (g) 45.6 9.2
Income from Continuing Operations 473.5 477.3 Loss from
Discontinued Operations — (1.2 ) Net Income $ 473.5
10.5 % $ 476.1 11.5 % Earnings per Share from
Continuing Operations: Basic $ 1.20 $ 1.20 Diluted $
1.19 $ 1.19 Earnings per Share: Basic $ 1.20
$ 1.19 Diluted $ 1.19 $ 1.18
Weighted Average Shares: Basic 394.7 399.0 Diluted
397.4 402.0
Reconciliation of
Adjusted Operating Income and Adjusted Operating Margin GAAP
Operating Income (a) $ 541.1 12.0 % $ 562.9 13.7 % Cost of Revenues
Charges (c) 32.4 0.7 % 0.8 0.0 % Selling, General and
Administrative Charges, Net (d) 62.5 1.4 % 24.6 0.6 % Restructuring
and Other Costs, Net (e) 54.9 1.3 % 15.5 0.3 % Amortization of
Acquisition-related Intangible Assets 341.6 7.6 % 329.9
8.0 % Adjusted Operating Income (b) $ 1,032.5
23.0 % $ 933.7 22.6 %
Reconciliation of Adjusted
Net Income GAAP Net Income (a) $ 473.5 10.5 % $ 476.1 11.5 %
Cost of Revenues Charges (c) 32.4 0.7 % 0.8 0.0 % Selling, General
and Administrative Charges, Net (d) 62.5 1.4 % 24.6 0.6 %
Restructuring and Other Costs, Net (e) 54.9 1.3 % 15.5 0.3 %
Amortization of Acquisition-related Intangible Assets 341.6 7.6 %
329.9 8.0 % Other Expense, Net (f) 11.1 0.2 % 3.6 0.1 % Provision
for Income Taxes (g) (167.5 ) -3.7 % (127.2 ) -3.0 % Discontinued
Operations, Net of Tax — 0.0 % 1.2 0.1 %
Adjusted Net Income (b) $ 808.5 18.0 % $ 724.5 17.6 %
Reconciliation of Adjusted Earnings per Share GAAP
EPS (a) $ 1.19 $ 1.18 Cost of Revenues Charges, Net of Tax (c) 0.05
— Selling, General and Administrative Charges, Net of Tax (d) 0.11
0.02 Restructuring and Other Costs, Net of Tax (e) 0.09 0.03
Amortization of Acquisition-related Intangible Assets, Net of Tax
0.59 0.56 Other Expense, Net of Tax (f) 0.02 0.01 Provision for
Income Taxes (g) (0.02 ) — Discontinued Operations, Net of Tax —
— Adjusted EPS (b) $ 2.03 $ 1.80
Reconciliation of Free Cash Flow GAAP Net Cash
Provided by Operating Activities (a) $ 771.8 $ 743.9 Net Cash Used
in Discontinued Operations 1.1 3.7 Purchases of Property, Plant and
Equipment (81.0 ) (101.0 ) Proceeds from Sale of Property, Plant
and Equipment 1.4 1.3 Free Cash Flow $ 693.3
$ 647.9
Segment Data Three
Months Ended October 1, % of September 26, %
of (In millions) 2016 Revenues 2015 Revenues
Revenues
Life Sciences Solutions $ 1,231.5 27.4 % $ 1,080.4 26.2 %
Analytical Instruments 898.0 20.0 % 778.5 18.9 % Specialty
Diagnostics 798.9 17.8 % 776.9 18.8 % Laboratory Products and
Services 1,746.2 38.9 % 1,638.2 39.7 % Eliminations (183.7 ) -4.1 %
(150.8 ) -3.6 % Consolidated Revenues $ 4,490.9 100.0
% $ 4,123.2 100.0 %
Operating Income and Operating
Margin Life Sciences Solutions $ 370.1 30.1 % $ 332.7 30.8 %
Analytical Instruments 190.1 21.2 % 146.5 18.8 % Specialty
Diagnostics 214.4 26.8 % 204.9 26.4 % Laboratory Products and
Services 257.9 14.8 % 249.6 15.2 % Subtotal
Reportable Segments 1,032.5 23.0 % 933.7 22.6 % Cost of
Revenues Charges (c) (32.4 ) -0.7 % (0.8 ) 0.0 % Selling, General
and Administrative Charges, Net (d) (62.5 ) -1.4 % (24.6 ) -0.6 %
Restructuring and Other Costs, Net (e) (54.9 ) -1.3 % (15.5 ) -0.3
% Amortization of Acquisition-related Intangible Assets (341.6 )
-7.6 % (329.9 ) -8.0 % GAAP Operating Income (a) $ 541.1
12.0 % $ 562.9 13.7 %
(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 include $16.3 of charges for the
sale of inventories revalued at the date of acquisition and $16.1
of charges to conform the accounting policies of FEI with the
company's accounting policies. Reported results in 2015 include
$0.8 of accelerated depreciation on manufacturing assets to be
abandoned due to facility consolidations.
(d) Reported results in 2016 and 2015 include i) charges of
$17.2 and $19.4, respectively, associated with product liability
litigation; ii) $36.4 and $0.2, respectively, of third-party
transaction/integration costs primarily related to recently
completed acquisitions; and iii) $0.4 and $7.1, respectively, of
accelerated depreciation on fixed assets to be abandoned due to
integration synergies. Reported results in 2016 also include a
charge of $8.5 to conform the accounting policies of FEI with the
company's accounting policies. Reported results in 2015 also
include $2.1 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 $9.9 of net charges for litigation.
(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 $12.0 of charges related to the amortization of
fees paid to obtain bridge financing commitments for the
acquisition of FEI and $0.3 of losses on the early extinguishment
of debt, offset in part by a $1.7 gain on an investment. Reported
results in 2015 also include a loss of $3.1 on the early
extinguishment of debt.
(g) Reported provision for income taxes includes i) $158.9 and
$128.1 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, $8.6 and $(0.9), respectively, of
incremental tax benefit (provision) from adjusting the company's
deferred tax balances as a result of tax rate changes.
Notes:
Consolidated depreciation expense is $91.4
and $97.8 in 2016 and 2015, respectively.
Consolidated equity compensation expense
included in both reported and adjusted results is $34.9 and $32.5
in 2016 and 2015, respectively.
Consolidated Statement of Income
(unaudited) (a)(b) Nine Months Ended October 1, % of September
26, % of (In millions except per share amounts) 2016 Revenues 2015
Revenues Revenues $ 13,320.9 $ 12,312.9 Costs
and Operating Expenses: Cost of revenues (c) 6,912.5 51.9 % 6,342.8
51.5 % Selling, general and administrative expenses (d) 3,027.1
22.7 % 2,755.4 22.4 % Amortization of acquisition-related
intangible assets 1,001.6 7.5 % 988.8 8.0 % Research and
development expenses 542.2 4.1 % 512.0 4.2 % Restructuring and
other costs, net (e) 140.9 1.1 % 67.9 0.6 % 11,624.3
87.3 % 10,666.9 86.6 % Operating Income
1,696.6 12.7 % 1,646.0 13.4 % Interest Income 34.4 21.9 Interest
Expense (338.3 ) (311.9 ) Other Expense, Net (f) (20.7 ) (2.3 )
Income Before Income Taxes 1,372.0 1,353.7 Benefit from
Income Taxes (g) 20.6 20.3 Income from
Continuing Operations 1,392.6 1,374.0 Loss from Discontinued
Operations, Net of Tax (0.3 ) (1.2 ) Net Income $ 1,392.3
10.5 % $ 1,372.8 11.1 % Earnings per Share
from Continuing Operations: Basic $ 3.53 $ 3.45
Diluted $ 3.50 $ 3.42 Earnings per Share:
Basic $ 3.53 $ 3.45 Diluted $ 3.50 $ 3.42
Weighted Average Shares: Basic 394.8 398.4
Diluted 397.6 401.7
Reconciliation of Adjusted Operating Income and Adjusted
Operating Margin GAAP Operating Income (a) $ 1,696.6 12.7 % $
1,646.0 13.4 % Cost of Revenues Charges (c) 60.4 0.5 % 2.5 0.0 %
Selling, General and Administrative Charges, Net (d) 95.2 0.7 %
35.4 0.3 % Restructuring and Other Costs, Net (e) 140.9 1.1 % 67.9
0.6 % Amortization of Acquisition-related Intangible Assets 1,001.6
7.5 % 988.8 8.0 % Adjusted Operating Income
(b) $ 2,994.7 22.5 % $ 2,740.6 22.3 %
Reconciliation of Adjusted Net Income GAAP Net Income (a) $
1,392.3 10.5 % $ 1,372.8 11.1 % Cost of Revenues Charges (c) 60.4
0.5 % 2.5 0.0 % Selling, General and Administrative Charges, Net
(d) 95.2 0.7 % 35.4 0.3 % Restructuring and Other Costs, Net (e)
140.9 1.1 % 67.9 0.6 % Amortization of Acquisition-related
Intangible Assets 1,001.6 7.5 % 988.8 8.0 % Other Expense, Net (f)
26.6 0.2 % 15.2 0.1 % Provision for Income Taxes (g) (385.2 ) -3.0
% (365.2 ) -2.9 % Discontinued Operations, Net of Tax 0.3
0.0 % 1.2 0.0 % Adjusted Net Income (b) $ 2,332.1
17.5 % $ 2,118.6 17.2 %
Reconciliation of
Adjusted Earnings per Share GAAP EPS (a) $ 3.50 $ 3.42 Cost of
Revenues Charges, Net of Tax (c) 0.10 — Selling, General and
Administrative Charges, Net of Tax (d) 0.18 0.04 Restructuring and
Other Costs, Net of Tax (e) 0.24 0.11 Amortization of
Acquisition-related Intangible Assets, Net of Tax 1.81 1.71 Other
Expense, Net of Tax (f) 0.04 0.02 Provision for Income Taxes (g) —
(0.03 ) Discontinued Operations, Net of Tax — —
Adjusted EPS (b) $ 5.87 $ 5.27
Reconciliation of Free Cash Flow GAAP Net Cash Provided by
Operating Activities (a) $ 1,950.4 $ 1,588.8 Net Cash Used in
Discontinued Operations 3.0 8.0 Purchases of Property, Plant and
Equipment (310.9 ) (293.5 ) Proceeds from Sale of Property, Plant
and Equipment 23.1 7.5 Free Cash Flow $
1,665.6 $ 1,310.8
Segment Data
Nine Months Ended October 1, % of September 26,
% of (In millions) 2016 Revenues 2015 Revenues
Revenues Life Sciences Solutions $ 3,642.1 27.3 % $ 3,229.6
26.2 % Analytical Instruments 2,451.2 18.4 % 2,282.9 18.5 %
Specialty Diagnostics 2,504.8 18.8 % 2,379.2 19.3 % Laboratory
Products and Services 5,273.0 39.6 % 4,844.9 39.3 % Eliminations
(550.2 ) -4.1 % (423.7 ) -3.3 % Consolidated Revenues $
13,320.9 100.0 % $ 12,312.9 100.0 %
Operating Income and Operating Margin Life Sciences
Solutions $ 1,069.7 29.4 % $ 954.9 29.6 % Analytical Instruments
446.7 18.2 % 407.8 17.9 % Specialty Diagnostics 682.4 27.2 % 646.2
27.2 % Laboratory Products and Services 795.9 15.1 % 731.7
15.1 % Subtotal Reportable Segments 2,994.7 22.5 %
2,740.6 22.3 % Cost of Revenues Charges (c) (60.4 ) -0.5 %
(2.5 ) 0.0 % Selling, General and Administrative Charges, Net (d)
(95.2 ) -0.7 % (35.4 ) -0.3 % Restructuring and Other Costs, Net
(e) (140.9 ) -1.1 % (67.9 ) -0.6 % Amortization of
Acquisition-related Intangible Assets (1,001.6 ) -7.5 % (988.8 )
-8.0 % GAAP Operating Income (a) $ 1,696.6 12.7 % $
1,646.0 13.4 %
(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 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) $38.7 and $0.7,
respectively, of charges for the sale of inventories revalued at
the date of acquisition and ii) $1.7 and $1.8, respectively, of
accelerated depreciation on manufacturing assets to be abandoned
due to facility consolidations. Reported results in 2016 include
charges of $20.0 to conform the accounting policies of FEI and
Affymetrix with the company's accounting policies.
(d) Reported results in 2016 and 2015 include i) $63.1 and $7.7,
respectively, of third-party transaction/integration costs
primarily related to recently completed acquisitions; ii) charges
of $17.2 and $19.4, respectively, associated with product liability
litigation; iii) $8.3 and $10.9, respectively, of accelerated
depreciation on fixed assets to be abandoned due to integration
synergies; and iv) $1.9 and $2.6, respectively, of credits from
contingent acquisition consideration. Reported results in 2016 also
include a charge of $8.5 to conform the accounting policies of FEI
with the company's accounting policies.
(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, $4.4 of net
charges for litigation 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 $1.6 and $1.6,
respectively, of amortization of acquisition-related intangible
assets of the company's equity-method investments. Reported results
in 2016 include $22.0 of charges related to the amortization of
fees paid to obtain bridge financing commitments for the
acquisition of FEI and $6.5 of losses on the early extinguishment
of debt, offset in part by $3.5 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
losses of $6.1 on the early extinguishment of debt.
(g) Reported provision for income taxes includes i) $385.4 and
$351.7 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 $(13.5) 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 $282.6
and $274.9 in 2016 and 2015, respectively.
Consolidated equity compensation expense
included in both reported and adjusted results is $102.0 and $91.8
in 2016 and 2015, respectively.
Condensed Consolidated Balance Sheet
(unaudited) October 1, December 31, (In millions) 2016
2015
Assets Current Assets: Cash and cash equivalents
$ 1,970.0 $ 452.1 Accounts receivable, net 2,895.1 2,544.9
Inventories 2,390.9 1,991.7 Other current assets 948.4 752.5
Total current assets 8,204.4 5,741.2 Property,
Plant and Equipment, Net 2,599.3 2,448.8
Acquisition-related Intangible Assets 14,522.4 12,758.3
Other Assets 1,104.6 1,058.4 Goodwill 21,580.0
18,827.6 Total Assets $ 48,010.7 $ 40,834.3
Liabilities and Shareholders' Equity Current
Liabilities: Short-term obligations and current maturities of
long-term obligations $ 1,972.1 $ 1,051.8 Other current liabilities
3,287.8 3,094.5 Total current liabilities 5,259.9
4,146.3 Other Long-term Liabilities 4,151.8
3,917.6 Long-term Obligations 16,940.4 11,420.2
Total Shareholders' Equity 21,658.6 21,350.2
Total Liabilities and Shareholders' Equity $ 48,010.7 $
40,834.3
Condensed Consolidated Statement
of Cash Flows (unaudited) Nine Months Ended October 1,
September 26, (In millions) 2016 2015
Operating
Activities Net income $ 1,392.3 $ 1,372.8 Loss from
discontinued operations 0.3 1.2 Income from
continuing operations 1,392.6 1,374.0 Adjustments to
reconcile net income to net cash provided by operating activities:
Depreciation and amortization 1,284.2 1,263.7 Change in deferred
income taxes (514.8 ) (285.9 ) Net gains on sale of businesses —
(7.6 ) Other non-cash expenses, net 134.8 76.4 Changes in assets
and liabilities, excluding the effects of acquisitions and
dispositions (343.4 ) (823.8 ) Net cash provided by
continuing operations 1,953.4 1,596.8 Net cash used in discontinued
operations (3.0 ) (8.0 ) Net cash provided by operating
activities 1,950.4 1,588.8
Investing
Activities Acquisitions, net of cash acquired (5,153.0 ) (306.0
) Purchases of property, plant and equipment (310.9 ) (293.5 )
Proceeds from sale of property, plant and equipment 23.1 7.5 Other
investing activities, net (3.2 ) 16.0 Net cash used
in investing activities (5,444.0 ) (576.0 )
Financing
Activities Net proceeds from issuance of debt 7,605.8 542.8
Repayment of debt (2,307.1 ) (2,481.0 ) Increase in commercial
paper, net 768.8 725.5 Purchases of company common stock (1,000.0 )
(500.0 ) Dividends paid (179.2 ) (180.7 ) Net proceeds from
issuance of company common stock under employee stock plans 122.5
96.6 Tax benefits from stock-based compensation awards 54.9 55.6
Other financing activities, net (13.6 ) (5.9 ) Net cash
provided by (used in) financing activities 5,052.1 (1,747.1
) Exchange Rate Effect on Cash (40.6 ) (105.8 )
Increase (Decrease) in Cash and Cash Equivalents 1,517.9 (840.1 )
Cash and Cash Equivalents at Beginning of Period 452.1
1,343.5 Cash and Cash Equivalents at End of Period $
1,970.0 $ 503.4 Free Cash Flow (a) $
1,665.6 $ 1,310.8
(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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version on businesswire.com: http://www.businesswire.com/news/home/20161027005188/en/
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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