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Thermo Fisher Q1 Revenues Rise 4 Percent as Firm Notes Sequestration Impact

NEW YORK (GenomeWeb News) – Thermo Fisher Scientific's first-quarter revenues rose 4 percent year over year, the company reported today, beating Wall Street expectations on the top and bottom lines.

A little more than a week after the Waltham, Mass.-based firm announced its plans to buy Life Technologies for $13.6 billion, it said that revenues for the three months ended March 31 came in at $3.19 billion, up from $3.06 billion a year ago, surpassing the consensus Wall Street estimate of $3.17 billion.

Revenues were up 3 percent on an organic basis, while currency translation lowered revenues by 1 percent and acquisitions increased revenues by 3 percent, Thermo Fisher said.

By segment, Analytical Technologies was down a fraction of 1 percent to $977.8 million from $980.0 million a year ago. Specialty Diagnostics was up 10 percent to $805.6 million from $731.9 million, and Laboratory Products and Services rose 4 percent to $1.54 billion from $1.48 billion.

The US government sequestration started during the quarter and Thermo Fisher President and CEO Marc Casper said on a conference call following the release of the results that the company had already begun seeing its effects.

"We're obviously now living in a world of sequestration," which resulted in a "slight decline" in revenues during the quarter, Casper said, adding that cutbacks in funding continue to negatively impact the business, particularly in the capital equipment purchases but less so in consumables.

As sequestration wears on through the balance of the year, "we think … it will get more challenging because effectively we had only one month of sequestration in Q1," he said.

In reaction to the sequestration, Thermo Fisher implemented an additional $10 million in contingency cost actions during the first quarter. As a result the company now expects to see $75 million in total benefits in 2013 from its $100 million restructuring program implemented in 2011 and its $75 million program started last year, CFO Pete Wilver said on the call.

During the fourth quarter 2012 earnings conference call, Wilver had said that the company expected $65 million in 2013 benefits from the two restructuring programs.

Thermo Fisher turned in a profit of $336.2 million, or $.93 per share, for Q1 2013, compared to a profit of $277.3 million, or $.75 per share, a year ago. Adjusted EPS was $1.37, beating the average analyst estimate of $1.29.

The company increased its R&D spending to $98.2 million, up 7 percent from $91.7 million a year ago. Its SG&A costs were trimmed a fraction of 1 percent to $693.6 million from $695.6 million.

Thermo Fisher exited the first quarter with $1 billion in cash and cash equivalents and $4.2 million in short-term investments.

The firm said that it is suspending share buybacks, pending its purchase of Life Tech, which is expected to be completed in early 2014. The company expects to focus on repayment of debt in 2014 and through most of 2015, and share repurchases are anticipated to restart in late 2015, Wilver said.

The company spent $90 million during the first quarter to repurchase 1.3 million shares of its stock.

Thermo Fisher also gave new revenue guidance for FY 2013 in the $12.84 to $13.00 billion range, compared to a previous range of $12.80 to $13.00 billion. Adjusted EPS was lowered to a range of $5.27 to $5.39 from an earlier guidance of between $5.32 and $5.46 to reflect the suspension of share buybacks.

The guidance excludes the acquisition of Life Tech and the impact of related financing activities, Thermo Fisher said.

Company officials provided few updated details on the pending acquisition during the call. Next week Thermo Fisher will meet with Life Tech managers to start the integration process, Casper said.

In Wednesday morning trade on the New York Stock Exchange, shares of Thermo Fisher were up 1 percent at $81.48.

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