Thermo Fisher Scientific Inc. (NYSE: TMO), the world leader in serving science, today reported financial results for the third quarter ended October 2, 2010.
“At this point in the year, we are positioned well to achieve our 2010 goals. Looking forward, we remain confident that we will continue our track record of creating shareholder value through strong operating and financial performance, as well as disciplined capital deployment.”
- Adjusted earnings per share (EPS) grew 15% to a third quarter record of $0.90, versus $0.78 in the 2009 quarter.
- Revenues grew 6% to $2.68 billion, compared with $2.53 billion in the 2009 quarter. Acquisitions contributed 3% to the growth, and the unfavorable effect of currency translation lowered revenues by 1%.
- Adjusted operating income increased 8% over the year-ago quarter.
- Adjusted operating margin increased 30 basis points to 17.6%, compared with 17.3% in the year-ago quarter.
- Completed previously announced acquisition of Fermentas for $260 million.
- Repurchased 10.1 million shares for $475 million in the quarter.
Adjusted EPS, adjusted operating income, adjusted operating margin and free cash flow are non-GAAP measures that exclude certain items detailed later in this press release under the heading "Use of Non-GAAP Financial Measures."
GAAP diluted EPS was $0.66 in the third quarter of 2010, versus $0.53 in the year-ago period. GAAP operating income for the third quarter was $319 million, compared with $276 million in the 2009 quarter, and GAAP operating margin was 11.9%, compared with 10.9% in 2009.
"We are pleased to report excellent financial results for the third quarter," said Marc N. Casper, president and chief executive officer of Thermo Fisher Scientific. "We delivered record EPS performance, driven by strong growth in instruments and equipment as well as continued strength in our clinical diagnostics and biosciences businesses.
"We continue to grow the company through a combination of ongoing investment in innovation, expansion in emerging markets and complementary acquisitions. In the quarter, we introduced a workflow for immunosuppressant drug analysis that includes our recently launched test kits and automated sample-handling platform. Also, our previously announced acquisition of Fermentas significantly strengthens our offerings for genomics workflows and PCR-based testing."
Casper added, "At this point in the year, we are positioned well to achieve our 2010 goals. Looking forward, we remain confident that we will continue our track record of creating shareholder value through strong operating and financial performance, as well as disciplined capital deployment."
Thermo Fisher announced that it is raising its 2010 adjusted EPS guidance to a new range of $3.47 to $3.53, which would result in 14% to 16% EPS growth over 2009. The company is also raising its 2010 revenue guidance to a new range of $10.72 billion to $10.80 billion, for 6% to 7% revenue growth year to year.
The company's previously announced guidance for 2010 was $3.40 to $3.50 of adjusted EPS and $10.60 billion to $10.75 billion in revenues. The 2010 guidance does not include any future acquisitions or divestitures and is based on current foreign exchange rates. In addition, the adjusted EPS estimate excludes amortization expense for acquisition-related intangible assets and certain other items detailed later in this press release under the heading "Use of Non-GAAP Financial Measures."
Management uses adjusted operating results to monitor and evaluate performance of the company's business segments.
Analytical Technologies Segment
Revenues in the Analytical Technologies Segment increased 14% in the third quarter of 2010 to $1.16 billion, compared with 2009 revenues of $1.02 billion. Segment adjusted operating income increased 23% in the third quarter of 2010, and adjusted operating margin increased to 21.5%, versus 2009 results of 19.9%.
Laboratory Products and Services Segment
In the Laboratory Products and Services Segment, revenues grew 1% in the third quarter of 2010 to $1.65 billion, compared with 2009 revenues of $1.63 billion. Adjusted operating income for the segment decreased 6% in the third quarter of 2010, and adjusted operating margin decreased to 13.4%, versus 2009 results of 14.4%.
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.