UBS Best of Americas Conference

Transcription

1 The world leader in serving science UBS Best of Americas Conference Marijn E. Dekkers President and Chief Executive Officer September 21, 2007

2 Safe Harbor / Non-GAAP Measures Various remarks that we may make in this presentation about the company s future expectations, plans and prospects constitute forward-looking statements for purposes of the safe harbor provisions under The Private Securities Litigation Reform Act of Actual results may differ materially from those indicated by such forward-looking statements as a result of various important factors, including those discussed in our Form 10-Q for the quarter ended June 30, 2007, under the caption Risk Factors, which is on file with the Securities and Exchange Commission and available in the Investors section of our Website under the heading SEC Filings. We also may make forward-looking statements about the benefits of the merger of Thermo Electron and Fisher Scientific, including statements about future financial and operating results, the new company's plans, objectives, expectations and intentions and other statements that are not historical facts. Important factors that could cause actual results to differ materially from those indicated by forward-looking statements include risks and uncertainties relating to: the risk that the businesses will not be integrated successfully; the risk that the cost savings and any other synergies from the transaction may not be fully realized or may take longer to realize than expected; disruption from the transaction making it more difficult to maintain relationships with customers, employees or suppliers; competition and its effect on pricing, spending, third-party relationships and revenues; the need to develop new products and adapt to significant technological change; implementation of strategies for improving internal growth; use and protection of intellectual property; dependence on customers' capital spending policies and government funding policies; realization of potential future savings from new productivity initiatives; general worldwide economic conditions and related uncertainties; the effect of changes in governmental regulations; the effect of exchange rate fluctuations on international operations; the effect of laws and regulations governing government contracts; the effect of competing with certain of our customers and suppliers; and the effect of rapid changes in the healthcare industry. 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 our estimates change and, therefore, you should not rely on these forward-looking statements as representing our views as of any date subsequent to today. During this presentation, we will be referring to certain financial measures not prepared in accordance with generally accepted accounting principles, or GAAP, including adjusted EPS, adjusted operating income and adjusted operating margin. Definitions of these non-gaap financial measures are included in our second quarter earnings press release issued July. For historical periods, a reconciliation of the non-gaap financial measures to the most directly comparable GAAP measures is available under the heading Webcasts and Presentations in the Investors section of our Website, All adjusted items in this presentation include pro forma stock option expense for periods through and including 2006 as if it had been required. 2

3 The World Leader in Serving Science We are the leading provider of analytical instruments, equipment, reagents and consumables, software and services for research, analysis, discovery and diagnostics. 3

4 The World Leader in Serving Science Scale Capabilities Brand Equity $9.5 billion in revenues 30,000 employees in 38 countries 350,000 customers 150 countries served Fortune 300 company Complete portfolio World-class technologies Commercial and service strength Two premier brands Mission To enable our customers to make the world healthier, cleaner and safer 4

5 Well-Positioned for Growth Balanced Mix Market Strength Global Reach Software & Service 16% Instrumentation 30% Consumables 54% Life Science 46% Healthcare 20% Industrial, Environmental & Safety 34% Europe 24% Asia, ROW 10% North America 66% Serving a $70 to $80 billion market Note: Based on pro forma 2006 revenues of $8.87 billion 5

6 Businesses Aligned to Best Serve Customers Analytical Technologies Segment Laboratory Products and Services Segment Innovative technologies geared toward the scientist and engineer Focused on providing integrated workflows 40% 60% Convenience aligned with purchasing processes Access to products and services for routine lab applications Unmatched combination of technology breadth and purchasing convenience 6

7 Thermo Fisher Inside the Laboratory Scientific Instruments Bioscience Reagents Laboratory Informatics and Automation Mass Spectrometry Elemental Analysis Molecular Spectroscopy Chromatography Life Science Research BioProcess Production Cellular Protein Pathways RNAi Technologies Laboratory Information Management System (LIMS) Asset Management Services Integrated Automation Solutions Unique set of leading technologies 7

8 Thermo Fisher Inside the Laboratory Essential Laboratory Equipment Liquid Handling Solutions Plastic and Glass Consumables Sample Preparation Separation Equipment Controlled Environment Manual, electronic and automated pipetting Complete range of microplates for all formats and assays General labware and products Cell structure and life science research products Clinical and environmental sample management supported by a broad offering of routine products and services 8

9 Scientists Demanding Better-Integrated Solutions Laboratory Services Consumables/Reagents Sample Preparation Sample Analysis Data Interpretation & Storage Automation Uniquely positioned to deliver integrated workflow solutions 9

10 Tremendous Access Through Customer Channels Over 300,000 customers 150 countries Over 600,000 products Leader for over 100 years Over 300,000 catalogs in circulation ~40% of orders via e-commerce Unique ability to reach a fragmented customer base 10

11 Health Concerns in the Headlines 11

12 Tackling Microbiology Challenges Growing Health Concerns Unmatched Capabilities Sample Preparation Sample Analysis Data Interpretation Diagnosing infectious diseases and detecting bacterial contamination Serving public health, clinical laboratories, food industry, environmental and pharma Enabling regulatory compliance, ingredient and finished product testing Global food safety and healthcare concerns driving new labs and growth: Imported food quality risks Infectious disease issues Unmatched product range from sample preparation through sample analysis and data interpretation Key products in culture media for growth and detection of micro-organisms in clinical, food and pharmaceutical samples Also rapid diagnostics, immunological tests, biochemical identification, and ELISA tests for screening 12

13 Microbiological Detection and Diagnosis Food Safety Infectious Disease Salmonella Typhimurium Enterobacter sakazakii Clostridium difficile Norovirus (winter vomiting bug) Causes severe food poisoning Pathogen detected in infant formula Bacteria claims many lives Contagious intestinal disease Thermo Fisher enables end to end microbiology 13

14 Product Safety Testing Solution Portable Handheld Elemental Analyzers Faster and enhanced detection for measuring elemental composition Markets: Metal & Alloy Analysis, Restriction of Hazardous Substances (RoHS) Compliance, Waste Electrical and Electronic Equipment (WEEE), Environmental Analysis, Mining and Archeology. Even analyzes toys and consumer goods Thermo Scientific Niton Portable XRF Analyzers Point and shoot analysis for a wide range of applications 14

15 1 st Half 2007 Financial Summary 1 st Half st Half 2006 YOY Chg ($ in millions, except EPS) Actual Pro Forma * Fav/(Unfav) Revenue $4,724 $4,285 10% Adjusted Gross Margin 40.7% 39.5% 1.2 pts. Adjusted SG&A % of Sales 21.7% 22.9% 1.2 pts. R&D % of Sales 2.5% 2.6% 0.1 pts. Adjusted Operating Income $780 $605 29% % of Sales 16.5% 14.1% 2.4 pts. Adjusted EPS $1.25 $ % Record revenues, adjusted EPS, and significant margin expansion 15 * 2006 Adjusted EPS is not on a pro forma basis

16 Balance Sheet Leverage ($ in millions) Q Total Cash & Equivalents Total Debt $ $691 2,664 $974 2,203 Net Cash (Debt) ($304) ($1,973) ($1,229) Shareholders Equity $2,793 $13,912 $14,532 Leverage Total Debt/Capitalization 18% 16% 13% Total Debt/Adjusted EBITDA* 1.5X 1.8X** 1.3X** Ample capacity to make additional cash acquisitions 16 * Adjusted EBITDA equals adjusted operating income excluding depreciation ** Based on pro forma trailing twelve months adjusted EBITDA

17 Annual Revenue Trend ($ in billions) $6.75 $ % CAGR $8.87 $ (PF) 2005(PF) 2006(PF) 2007(E) 7-8% forecasted growth in PF = Pro Forma E=Estimate

18 Annual Adjusted EPS Trend 28-30% CAGR $1.91 $ $1.18 $ (E) 31-34% forecasted adjusted EPS growth in E=Estimate

19 Summary Clear industry leadership Technology innovator Proven execution capability Strong financial track record The World Leader in Serving Science 19

20 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. For purposes of comparison, 2005 consolidated adjusted results reflect the pro forma effect of stock option expense as if it had been required in that period. 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 in connection with the Fisher merger and our Kendro acquisition. 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, accelerated vesting of our equitybased arrangements resulting from the change in control occurring at the date of the Fisher merger ($36.7 million) and Fisher merger-related professional fees. 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. Our adjusted EPS estimate for 2007 excludes approximately $.86 of expense for the amortization of acquisition-related intangible assets for acquisitions completed through the first quarter of 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, 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. We exclude gains/losses from the sale of our equity interests in Newport Corporation and Thoratec Corporation, as well as other items such as the sale of a business or real estate, the early retirement of debt and debt facilities and discontinued operations. (We sold our remaining shares of Newport and Thoratec during the second quarter of 2005.) 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 included in this presentation 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.

21 Thermo Fisher Scientific Reconciliation of GAAP to Adjusted P&L (In millions except EPS) Six Months Ended Q1-06 Q2-06 Q3-06 Q Q1-07 Q2-07 Q2-06 Q2-07 GAAP Operating Income Cost of Revenues Charges (a) Restructuring and Other Costs (Income), Net (b) Pro Forma Stock Option Compensation Expense (c) (17.8) (20.9) Equity Compensation Acceleration Charges (d) Amortization of Acquisition-related Intangible Assets Adjusted Operating Income GAAP Operating Income Margin 10.8% 10.0% 9.9% 10.1% 10.4% 1.6% 6.4% 8.2% 10.2% 10.0% 9.2% Cost of Revenues Charges (a) 0.2% 0.5% 0.0% 0.2% 0.3% 4.5% 2.0% 1.6% 0.5% 0.1% 1.0% Restructuring and Other Costs (Income), Net (b) 0.7% 0.6% 0.5% 0.7% 0.7% 1.9% 1.2% 0.3% 0.3% 0.6% 0.3% Pro Forma Stock Option Compensation Expense (c) -0.8% -0.8% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Equity Compensation Acceleration Charges (d) 0.0% 0.0% 0.0% 0.0% 0.0% 2.2% 1.0% 0.0% 0.0% 0.0% 0.0% Amortization of Acquisition-related Intangible Assets 1.0% 3.0% 3.8% 3.6% 3.6% 5.6% 4.5% 6.0% 6.0% 3.7% 6.0% Adjusted Operating Income Margin 11.9% 13.3% 14.2% 14.6% 15.0% 15.8% 15.1% 16.1% 17.0% 14.4% 16.5% GAAP Net Income Cost of Revenues Charges (a) Restructuring and Other Costs (Income), Net (b) Pro Forma Stock Option Compensation Expense (c) (17.8) (20.9) Equity Compensation Acceleration Charges (d) Amortization of Acquisition-related Intangible Assets Gain/Loss on Extinguishment of Debt Facilities Other Income, Net (e) (9.6) (27.6) Income Tax (Provision) Benefit (f) (36.2) (16.2) (8.0) (10.9) (11.0) (80.6) (110.5) (60.4) (58.5) (18.9) (118.9) Income from Discontinued Operations, Net of Tax (143.4) (24.9) (3.3) (0.4) (2.6) (0.1) 24.0 (2.2) 23.9 Adjusted Net Income CONTINUED ON NEXT PAGE

22 Thermo Fisher Scientific Reconciliation of GAAP to Adjusted P&L (In millions except EPS) Six Months Ended Q1-06 Q2-06 Q3-06 Q Q1-07 Q2-07 Q2-06 Q2-07 GAAP Diluted EPS Cost of Revenues Charges, Net of Tax (a) Restructuring and Other Costs (Income), Net of Tax (b) Pro Forma Stock Option Compensation Expense (c) (0.07) (0.08) Equity Compensation Acceleration Charges, Net of Tax (d) Amortization of Acquisition-related Intangible Assets, Net of Tax Gain/Loss on Extinguishment of Debt Facilities Other Income, Net (e) (0.04) (0.11) Income Tax (Provision) Benefit (f) (0.21) Income from Discontinued Operations, Net of Tax (0.86) (0.15) (0.02) (0.01) (0.01) 0.05 Adjusted Diluted EPS GAAP Gross Margin 45.4% 45.7% 45.5% 46.5% 35.6% 41.4% 37.6% 39.3% 45.6% 38.5% Cost of Revenues Charges (a) 0.5% 0.0% 0.2% 0.2% 4.5% 2.0% 1.6% 0.5% 0.1% 1.0% Amortization of Acquisition-related Intangible Assets 0.0% 0.0% 0.0% 0.0% 0.8% 0.3% 1.3% 1.2% 0.0% 1.2% Pro Forma Stock Option Compensation Expense (c) -0.1% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Equity Compensation Acceleration Charges (d) 0.0% 0.0% 0.0% 0.0% 0.2% 0.2% 0.0% 0.0% 0.0% 0.0% Adjusted Gross Margin 45.8% 45.7% 45.7% 46.7% 41.1% 43.9% 40.5% 41.0% 45.7% 40.7% GAAP SG&A as a % of Revenue 28.9% 29.6% 29.0% 30.1% 28.9% 29.3% 26.5% 26.3% 29.3% 26.4% Amortization of Acquisition-related Intangible Assets -2.9% -3.8% -3.6% -3.7% -4.7% -4.2% -4.6% -4.7% -3.7% -4.7% Pro Forma Stock Option Compensation Expense (c) 0.7% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Equity Compensation Acceleration Charges (d) 0.0% 0.0% 0.0% 0.0% -1.9% -0.8% 0.0% 0.0% 0.0% 0.0% Adjusted SG&A as a % of Revenue 26.7% 25.8% 25.4% 26.4% 22.3% 24.3% 21.9% 21.6% 25.6% 21.7% GAAP Tax Rate 30.6% 31.9% 28.9% 29.6% % 20.6% 16.2% 15.5% 30.3% 15.8% Tax Effect of Adjusted Items -0.5% -1.4% 1.7% 1.0% 274.4% 7.8% 8.8% 8.7% 0.2% 8.8% Adjusted Tax Rate 30.1% 30.5% 30.6% 30.6% 25.7% 28.4% 25.0% 24.2% 30.5% 24.6% (a) The excluded items from cost of revenues include inventory charges, principally for the sale of inventories revalued at the date of acquisition and accelerated depreciation on assets to be abandoned as a result of real estate consolidation. (b) Restructuring and other costs consist principally of severance and retention costs; abandoned facility and other expenses of real estate consolidation; gains and losses on the sale of businesses, product lines and property; writedowns of businesses held for sale; legal/advisory fees associated with a reorganization of the company's non-u.s. subsidiary structure; and, in Q4 2006, $15.2 of charges for in-process R&D associated with the Fisher merger. (c) For purposes of comparison, adjusted results for periods prior to 1/1/06 reflects the pro forma effect of stock option expense as if it had been required in that period. (d) Charges associated with the accelerated vesting of our equity-based arrangements resulting from the change in control occurring at the date of the Fisher merger have been excluded from adjusted results. (e) The excluded items from other income, net represent net gains from the sale of the company's equity interests in Thoratec Corporation and Newport Corporation in periods prior to Q and amortization of acquisition-related intangible assets of the company's equity investments in periods after Q (f) The excluded items from income tax benefit include the tax benefits/provisions related to the above excluded items, benefit from tax credit carryforwards and the impact of the resolution of significant tax audits.

23 Thermo Fisher Scientific Pro Forma Data (a) (In millions) Q1-06 Q2-06 Q3-06 Q Pro Forma Revenues Analytical Technologies 3, % % % % 1, % 3, % Laboratory Products and Services 4, % 1, % 1, % 1, % 1, % 5, % Eliminations (274.7) -3.4% (75.7) -3.6% (77.5) -3.5% (79.0) -3.5% (77.5) -3.3% (309.7) -3.5% Pro Forma Combined Revenues 6, % 8, % 2, % 2, % 2, % 2, % 8, % Pre-merger Fisher Scientific Results, Net of Eliminations (4,544.7) (5,441.9) (1,412.1) (1,475.2) (1,512.6) (678.9) (5,078.8) GAAP Consolidated Revenues 2, , , ,791.6 Margin Margin Margin Margin Margin Margin % Q1-06 % Q2-06 % Q3-06 % Q4-06 % 2006 % Pro Forma Operating Income and Operating Margin Analytical Technologies % % % % % % Laboratory Products and Services % % % % % % Other/Eliminations (0.4) (0.5) (0.4) (0.1) (0.1) (1.1) Pro Forma Adjusted Combined Operating Income % 1, % % % % % 1, % Pre-merger Fisher Scientific Results Included Above (455.5) (728.3) (183.4) (220.2) (236.1) (93.8) (733.5) Adjusted Operating Income % % % % % % % Cost of Revenues Charges (3.3) -0.2% (13.4) -0.5% % (1.3) -0.2% (2.0) -0.3% (74.4) -4.5% (77.7) -2.0% Restructuring and Other Costs, Net (15.8) -0.7% (16.9) -0.6% (3.6) -0.5% (4.8) -0.7% (5.2) -0.7% (32.1) -1.9% (45.7) -1.2% Pro Forma Stock Option Compensation Expense (b) % % % % % % % Equity Compensation Acceleration Charge (c) % % % % % (36.7) -2.2% (36.7) -1.0% Amortization of Acquisition-related Intangible Assets (22.9) -1.0% (77.6) -3.0% (25.6) -3.8% (25.6) -3.6% (26.4) -3.6% (93.2) -5.6% (170.8) -4.5% GAAP Operating Income % % % % % % % Pro Forma Equity Compensation Included in Pro Forma Adjusted Combined Operating Income above Depreciation included in Pro-Forma Adjusted Combined Operating Income above (a) Pro forma results combine the results of the company with the pre-merger results of Fisher Scientific International Inc. (b) For purposes of comparison, adjusted operating income for periods prior to 1/1/06 reflects the pro forma effect of stock option expense as if it had been required in that period. (c) Charges associated with the accelerated vesting of our equity-based arrangements resulting from the change in control occurring at the date of the Fisher merger have been excluded from adjusted operating

24 Thermo Fisher Scientific Balance Sheet (In millions) 12/31/ /31/2006 6/30/2007 Assets Current Assets: Cash and cash equivalents Short-term investments Accounts receivable, net , ,422.5 Inventories , ,183.2 Other current assets Total Current Assets 1, , ,007.1 Property, Plant and Equipment, Net , ,228.5 Acquisition-related Intangible Assets , ,208.0 Other Assets Goodwill 1, , , , , ,272.1 Liabilities and Shareholders' Equity Current Liabilities: Short-term obligations and current maturities of long-term obligations Other current liabilities , ,578.2 Total Current Liabilities , ,603.0 Other Long-term Liabilities , ,959.6 Long-term Obligations , ,177.7 Total Shareholders' Equity 2, , , , , ,272.1 Page 1 of 1