Thermo Fisher Scientific Inc. (TMO) filed Quarterly Report for the period ended 2009-09-26.
Thermo Fisher Scientific is the world leader in serving science enabling our customers to make the world healthier cleaner and safer. Serving customers through two premier brands Thermo Scientific and Fisher Scientific we help solve analytical challenges from routine testing to complex research and discovery. Thermo Scientific offers customers a complete range of high-end analytical instruments as well as laboratory equipment software services consumables and reagents to enable integrated laboratory workflow solutions. Fisher Scientific provides a complete portfolio of laboratory equipment chemicals supplies and services used in healthcare scientific research safety and education. Thermo Fisher Scientific Inc. has a market cap of $18.73 billion; its shares were traded at around $45.9 with a P/E ratio of 15.2 and P/S ratio of 1.8. Thermo Fisher Scientific Inc. had an annual average earning growth of 2.3% over the past 5 years.
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As of September 26, 2009, the company s outstanding debt totaled $2.02 billion, of which approximately $0.9 billion is convertible debt, at conversion prices ranging from $23.73 to $40.20 per share. As of September 26, 2009, $640 million of the convertible debt was currently convertible. Although the company s experience is that convertible debentures are not normally converted by investors until close to their maturity date, it is possible that debentures could be converted prior to their maturity date if, for example, a holder perceives the market for the debentures to be weaker than the market for the common stock. Upon an investor s election to convert, the company is required to pay the original principal portion of these debentures in cash, and the balance of the conversion value in either cash or stock, at the company's election. Should holders elect to convert, the company intends to draw on its revolving credit facility to fund any principal payments in excess of $67 million which has been classified as a current liability in the accompanying balance sheet. The facility is an unsecured revolving credit agreement expiring in 2012 with available capacity of $946 million at September 26, 2009.
In the third quarter of 2009, the company recorded restructuring and other costs, net, of $14 million, including $1 million of charges to cost of revenues related to accelerated depreciation on manufacturing assets to be abandoned due to facility consolidations and a net gain of $0.3 million in selling, general and administrative expenses primarily for settlement of certain pre-merger Fisher product liability-related matters, offset in part by transaction costs related to the acquisition of B.R.A.H.M.S. The company incurred $12 million of cash costs primarily for actions in response to the downturn in the economy and reduced revenues including severance to reduce headcount at several businesses and abandoned facility expenses at businesses that have been or are being consolidated. The company also incurred non-cash costs of $1 million, primarily for asset write-downs at abandoned facilities. In the third quarter of 2008, the company recorded restructuring and other costs, net, of $15 million, including $13 million of cash costs, primarily for severance to reduce headcount at several businesses and abandoned facilities expenses at businesses that have been consolidated, and recorded a $3 million charge for in-process research and development at an acquired business offset by net gains of $1 million on the sale of abandoned real estate and equipment.
Sales in the Analytical Technologies segment decreased $67 million to $1.02 billion in the third quarter of 2009. The unfavorable effects of currency translation resulted in a decrease of $20 million in 2009. Sales increased $1 million due to acquisitions, net of divestitures. In addition to the changes in revenue resulting from currency translation and acquisitions, net of divestitures, revenues decreased $48 million (4%) primarily due to lower demand offset in part by increased prices. Demand in industrial markets for environmental and process control instruments was particularly soft, which the company believes was primarily due to the global economic downturn. This weakness was offset in part by an increase in sales of specialty diagnostics and bioscience offerings which have been less severely affected by economic conditions.
Sales in the Laboratory Products and Services segment increased $21 million to $1.63 billion in the third quarter of 2009. The unfavorable effects of currency translation resulted in a decrease of $29 million in 2009. Sales increased $38 million due to acquisitions, principally Biolab. In addition to the changes in revenue resulting from currency translation and acquisitions, revenues increased $12 million (1%) primarily due to higher sales of consumables which have been less severely affected by economic conditions. The increase was offset in part by lower demand for laboratory equipment and reduced sales of products purchased from a supplier discussed below. The company believes the reduced demand for laboratory equipment was in part due to customers delaying purchases because of the global economic downturn.
In July 2008, the company and a supplier of its healthcare market channel extended an existing agreement for two years through 2010. Under the revised agreement, the company s revenues from the sale of products purchased from the supplier decreased $20 million, $16 million and $16 million in the first, second and third quarters, respectively, of 2009 and the company expects its sales volume of products purchased from the supplier to decrease by approximately $8 - $10 million in the fourth quarter of 2009 for a total annualized decrease in revenues of approximately $60 - $62 million from 2008.
The company reported other expense, net, of $29 million and $28 million in the third quarter of 2009 and 2008, respectively (Note 4). Other expense, net, includes interest income, interest expense, equity in earnings of unconsolidated subsidiaries and other items, net. Interest income decreased to $3 million in the third quarter of 2009 from $15 million in the same period last year primarily due to lower interest rates on invested cash. Interest expense decreased to $29 million in the third quarter of 2009 from $40 million in the third quarter of 2008 primarily as a result of a reduction in debt and lower interest rates on variable rate debt.
TMO is in the portfolios of John Griffin of Blue Ridge Capital, Robert Olstein of Olstein Financial Alert Fund, John Rogers of ARIEL CAPITAL MANAGEMENT LLC, Andreas Halvorsen of Viking Global Investors LP, Ron Baron of Baron Funds, Dodge & Cox, George Soros of Soros Fund Management LLC, Jean-Marie Eveillard of Arnhold & S. Bleichroeder Advisers, LLC.
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