8-K
THERMO FISHER SCIENTIFIC INC. (TMO)
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 28, 2021
THERMO FISHER SCIENTIFIC INC.
(Exact name of Registrant as specified in its Charter)
| Delaware | 1-8002 | 04-2209186 |
|---|---|---|
| (State of incorporation) | (Commission File Number) | (I.R.S. Employer Identification Number) |
168 Third Avenue
Waltham, Massachusetts 02451
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (781) 622-1000
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:Title of each classTrading Symbol(s)Name of each exchange on which registeredCommon Stock, $1.00 par valueTMONew York Stock Exchange0.750% Notes due 2024TMO 24ANew York Stock Exchange0.125% Notes due 2025TMO 25BNew York Stock Exchange2.000% Notes due 2025TMO 25New York Stock Exchange1.400% Notes due 2026TMO 26ANew York Stock Exchange1.450% Notes due 2027TMO 27New York Stock Exchange1.750% Notes due 2027TMO 27BNew York Stock Exchange0.500% Notes due 2028TMO 28ANew York Stock Exchange1.375% Notes due 2028TMO 28New York Stock Exchange1.950% Notes due 2029TMO 29New York Stock Exchange0.875% Notes due 2031TMO 31New York Stock Exchange2.375% Notes due 2032TMO 32New York Stock Exchange2.875% Notes due 2037TMO 37New York Stock Exchange1.500% Notes due 2039TMO 39New York Stock Exchange1.875% Notes due 2049TMO 49New York Stock Exchange
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 or Rule 12b-2 of the Securities Exchange Act of 1934. ☐ Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
THERMO FISHER SCIENTIFIC INC.
Item 2.02 Results of Operations and Financial Condition
On July 28, 2021, the Registrant announced its financial results for the fiscal quarter ended July 3, 2021. The full text of the press release issued in connection with the announcement is attached as Exhibit 99.1 to this Form 8-K and incorporated herein by reference.
The information contained in Item 2.02 of this Form 8-K (including Exhibit 99.1) shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934 (the "Exchange Act") or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, except as expressly set forth by specific reference in such a filing.
Item 9.01 Financial Statements and Exhibits
(d) Exhibits
The following Exhibit relating to Item 2.02 shall be deemed “furnished,” and not “filed”:
99.1 Press Release dated July 28, 2021
104 Cover Page Interactive Data File (embedded within the Inline XBRL document).
Cautionary Statement Regarding Forward-Looking Statements
This Current Report on Form 8-K 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 duration and severity of the COVID-19 pandemic; 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 economic and political conditions and exchange rate fluctuations on international operations; use and protection of intellectual property; the effect of changes in governmental regulations; any natural disaster, public health crisis or other catastrophic event; and the effect of laws and regulations governing government contracts, as well as the possibility that expected benefits related to recent or pending acquisitions, including our pending acquisition of PPD, Inc., 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 most recent annual report on Form 10-K and subsequent quarterly report on Form 10-Q, which are 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.
THERMO FISHER SCIENTIFIC INC.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| THERMO FISHER SCIENTIFIC INC. | |||
|---|---|---|---|
| Date: | July 28, 2021 | By: | /s/ Joseph R. Holmes |
| Joseph R. Holmes | |||
| Vice President and Chief Accounting Officer |
3
Document
Exhibit 99.1
| FOR IMMEDIATE RELEASE | |
|---|---|
| Media Contact Information:<br>Sandy Pound | Investor Contact Information:<br>Rafael Tejada |
| Phone: 781-622-1223 | Phone: 781-622-1356 |
| E-mail: sandy.pound@thermofisher.com | E-mail: rafael.tejada@thermofisher.com |
Thermo Fisher Scientific Reports Second Quarter 2021 Results
WALTHAM, Mass. (July 28, 2021) – Thermo Fisher Scientific Inc. (NYSE: TMO), the world leader in serving science, today reported its financial results for the second quarter ended July 3, 2021.
Second Quarter 2021 Highlights
•Second quarter revenue increased 34% to $9.27 billion.
•Second quarter GAAP diluted earnings per share (EPS) increased 59% to $4.61.
•Second quarter adjusted EPS increased 44% to $5.60.
•Launched a range of new products including the Thermo Scientific Orbitrap IQ-X Tribrid Mass Spectrometer to advance complex small molecule research, and the Thermo Scientific Helios 5EXL Wafer DualBeam scanning electron microscope to support the development of increasingly smaller and more complex semiconductors. To advance cell analysis research, the Invitrogen Bigfoot Spectral Sorter and the Invitrogen Attune CytPix Flow Cytometer were also launched in the quarter.
•Announced collaborations with leading academic medical centers including the Mayo Clinic to accelerate the development and adoption of more precise and personalized diagnostics for blood-based cancers; a new clinical and commercial cGMP cell therapy manufacturing facility at University of California, San Francisco, to advance innovation in cell and gene therapy; and at the University of California, Davis, a research collaboration to support the rapid scale-up of large cohort studies and clinical research in metabolomics.
•Continued to expand both our capacity and capabilities to better serve our customers. In the quarter, we brought additional capacity online to support vaccine and therapy production globally and expanded the production of laboratory plastics in North America and Europe. Shortly after the quarter closed, we opened a new plasmid DNA facility in Carlsbad, California to meet rapidly growing demand for plasmid DNA-based therapies and mRNA-based vaccines.
•Building on our environmental sustainability initiatives, we committed to reach net-zero carbon emissions by 2050.
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.”
“Our team delivered an incredibly strong second quarter, building on our excellent start to the year. The strength of our base business reflects our proven growth strategy, and we continue to enable the societal response to the pandemic, which allowed us to deliver exceptional performance in revenue, earnings and free cash flow for the quarter,” said Marc N. Casper, chairman, president and chief executive officer of Thermo Fisher Scientific. “We extended our leading innovation track record, and our ongoing investments in talent, capabilities and infrastructure are positioning our company for an even brighter future.”
Casper added, “We’re in a great position at the halfway point of the year and on track to deliver an outstanding 2021.”
Second Quarter 2021
Revenue for the quarter grew 34% to $9.27 billion in 2021, versus $6.92 billion in 2020. Organic revenue growth was 28%; acquisitions increased revenue by 2% and currency translation increased revenue by 5%1. Organic revenue growth from the base business was 27%. COVID-19 response revenue was $1.9 billion.
GAAP Earnings Results
GAAP diluted EPS in the second quarter of 2021 increased 59% to $4.61, versus $2.90 in the same quarter last year. GAAP operating income for the second quarter of 2021 was $2.16 billion, compared with $1.39 billion in the year-ago quarter. GAAP operating margin was 23.3%, compared with 20.1% in the second quarter of 2020.
Non-GAAP Earnings Results
Adjusted EPS in the second quarter of 2021 increased 44% to $5.60, versus $3.89 in the second quarter of 2020. Adjusted operating income for the second quarter of 2021 grew 44% compared with the year-ago quarter. Adjusted operating margin was 29.0%, compared with 27.0% in the second quarter of 2020.
2021 Guidance Update
Thermo Fisher is raising its 2021 revenue and earnings guidance. The company is raising its revenue guidance by $300 million to $35.90 billion; this would result in 11% revenue growth over 2020. The company is raising its adjusted EPS guidance by $0.10 to $22.07, which would represent 13% 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
Life Sciences Solutions Segment revenue grew 37% to $3.56 billion in the second quarter of 2021, compared with revenue of $2.60 billion in the second quarter of 2020. Segment adjusted operating margin was 48.3%, versus 47.4% in the 2020 quarter.
1 The components of revenue growth do not sum due to rounding
Analytical Instruments Segment
Analytical Instruments Segment revenue grew 41% to $1.48 billion in the second quarter of 2021, compared with revenue of $1.05 billion in the second quarter of 2020. Segment adjusted operating margin was 18.9%, versus 12.9% in the 2020 quarter.
Specialty Diagnostics Segment
Specialty Diagnostics Segment revenue grew 25% to $1.24 billion in the second quarter of 2021, compared with revenue of $0.99 billion in the second quarter of 2020. Segment adjusted operating margin was 19.9%, versus 21.6% in the 2020 quarter.
Laboratory Products and Services Segment
Laboratory Products and Services Segment revenue grew 29% to $3.58 billion in the second quarter of 2021, compared with revenue of $2.79 billion in the second quarter of 2020. Segment adjusted operating margin was 12.4%, versus 10.1% in the 2020 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 predictability, tax provisions/benefits related to the previous items, and the impact of significant tax audits or events. 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, excluding net capital expenditures 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 up to 20 years. Based on acquisitions closed through the end of the second quarter of 2021, adjusted EPS will exclude approximately $3.40 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, the impact of significant tax audits or events (such as changes in deferred taxes from enacted tax rate changes), 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 and the early retirement of debt.
We also report free cash flow, which is operating cash flow, excluding net capital expenditures to provide a view of the continuing operations’ ability to generate cash for use in acquisitions and other investing and financing activities.
Thermo Fisher Scientific’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 Scientific’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 Scientific’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 Scientific 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 Scientific’s results computed in accordance with GAAP.
Conference Call
Thermo Fisher Scientific will hold its earnings conference call today, July 28, 2021, at 8:30 a.m. Eastern time. To listen, dial (833) 714-0931 within the U.S. or (778) 560-2662 outside the U.S. The conference ID is 6292118. 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, August 13, 2021.
About Thermo Fisher Scientific
Thermo Fisher Scientific Inc. is the world leader in serving science, with annual revenue exceeding $30 billion. Our Mission is to enable our customers to make the world healthier, cleaner and safer. Whether our customers are accelerating life sciences research, solving complex analytical challenges, improving patient diagnostics and therapies or increasing productivity in their laboratories, we are here to support them. Our global team of more than 80,000 colleagues delivers an unrivaled combination of innovative technologies, purchasing convenience and pharmaceutical services through our industry-leading brands, including Thermo Scientific, Applied Biosystems, Invitrogen, Fisher Scientific, Unity Lab Services and Patheon. 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 duration and severity of the COVID-19 pandemic; 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 economic and political conditions and exchange rate fluctuations on international operations; use and protection of intellectual property; the effect of changes in governmental regulations; any natural disaster, public health crisis or other catastrophic event; and the effect of laws and regulations governing government contracts, as well as the possibility that expected benefits related to recent or pending acquisitions, including our pending acquisition of PPD, Inc., 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 most recent annual report on Form 10-K and subsequent quarterly report on Form 10-Q, which are 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.
| Condensed Consolidated Statement of Income (unaudited) (a)(b) | ||||||||
|---|---|---|---|---|---|---|---|---|
| Three Months Ended | ||||||||
| July 3, | % of | June 27, | % of | |||||
| (In millions except per share amounts) | 2021 | Revenues | 2020 | Revenues | ||||
| Revenues | $ | 9,273 | $ | 6,917 | ||||
| Costs and Operating Expenses: | ||||||||
| Cost of revenues (c) | 4,585 | 49.4 | % | 3,416 | 49.4 | % | ||
| Selling, general and administrative expenses (d) | 1,614 | 17.4 | % | 1,417 | 20.5 | % | ||
| Amortization of acquisition-related intangible assets | 449 | 4.8 | % | 417 | 6.1 | % | ||
| Research and development expenses | 343 | 3.7 | % | 264 | 3.8 | % | ||
| Restructuring and other costs (e) | 119 | 1.3 | % | 12 | 0.2 | % | ||
| 7,110 | 76.7 | % | 5,526 | 79.9 | % | |||
| Operating Income | 2,163 | 23.3 | % | 1,391 | 20.1 | % | ||
| Interest Income | 11 | 8 | ||||||
| Interest Expense | (122) | (137) | ||||||
| Other Expense (f) | (5) | (9) | ||||||
| Income Before Income Taxes | 2,047 | 1,253 | ||||||
| Provision for Income Taxes (g) | (219) | (97) | ||||||
| Net Income | $ | 1,828 | 19.7 | % | $ | 1,156 | 16.7 | % |
| Earnings per Share: | ||||||||
| Basic | $ | 4.65 | $ | 2.92 | ||||
| Diluted | $ | 4.61 | $ | 2.90 | ||||
| Weighted Average Shares: | ||||||||
| Basic | 393 | 395 | ||||||
| Diluted | 396 | 398 | ||||||
| Reconciliation of Adjusted Operating Income and Adjusted Operating Margin | ||||||||
| GAAP Operating Income (a) | $ | 2,163 | 23.3 | % | $ | 1,391 | 20.1 | % |
| Cost of Revenues Charges (c) | — | 0.0 | % | 2 | 0.0 | % | ||
| Selling, General and Administrative (Credits) Charges (d) | (42) | -0.4 | % | 42 | 0.6 | % | ||
| Restructuring and Other Costs (e) | 119 | 1.3 | % | 12 | 0.2 | % | ||
| Amortization of Acquisition-related Intangible Assets | 449 | 4.8 | % | 417 | 6.1 | % | ||
| Adjusted Operating Income (b) | $ | 2,689 | 29.0 | % | $ | 1,864 | 27.0 | % |
| Reconciliation of Adjusted Net Income | ||||||||
| GAAP Net Income (a) | $ | 1,828 | $ | 1,156 | ||||
| Cost of Revenues Charges (c) | — | 2 | ||||||
| Selling, General and Administrative (Credits) Charges (d) | (42) | 42 | ||||||
| Restructuring and Other Costs (e) | 119 | 12 | ||||||
| Amortization of Acquisition-related Intangible Assets | 449 | 417 | ||||||
| Other Expense (f) | 8 | 25 | ||||||
| Benefit from Income Taxes (g) | (142) | (104) | ||||||
| Adjusted Net Income (b) | $ | 2,220 | $ | 1,550 | ||||
| Reconciliation of Adjusted Earnings per Share | ||||||||
| GAAP Diluted EPS (a) | $ | 4.61 | $ | 2.90 | ||||
| Cost of Revenues Charges, Net of Tax (c) | 0.00 | 0.00 | ||||||
| Selling, General and Administrative (Credits) Charges, Net of Tax (d) | (0.11) | 0.08 | ||||||
| Restructuring and Other Costs, Net of Tax (e) | 0.23 | 0.03 | ||||||
| Amortization of Acquisition-related Intangible Assets, Net of Tax | 0.88 | 0.85 | ||||||
| Other Expense, Net of Tax (f) | 0.01 | 0.05 | ||||||
| Benefit from Income Taxes (g) | (0.02) | (0.02) | ||||||
| Adjusted EPS (b) | $ | 5.60 | $ | 3.89 | ||||
| Reconciliation of Free Cash Flow | ||||||||
| GAAP Net Cash Provided by Operating Activities (a) | $ | 2,227 | $ | 1,886 | ||||
| Purchases of Property, Plant and Equipment | (540) | (269) | ||||||
| Proceeds from Sale of Property, Plant and Equipment | — | 2 | ||||||
| Free Cash Flow | $ | 1,687 | $ | 1,619 | ||||
| Segment Data | ||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | |
| % of | June 27, | % of | ||||||
| (In millions) | Revenues | 2020 | Revenues | |||||
| Revenues | ||||||||
| Life Sciences Solutions | 3,557 | 38.4 | % | $ | 2,602 | 37.6 | % | |
| Analytical Instruments | 16.0 | % | 1,051 | 15.2 | % | |||
| Specialty Diagnostics | 13.3 | % | 988 | 14.3 | % | |||
| Laboratory Products and Services | 38.6 | % | 2,787 | 40.3 | % | |||
| Eliminations | -6.3 | % | (511) | -7.4 | % | |||
| Consolidated Revenues | 9,273 | 100.0 | % | $ | 6,917 | 100.0 | % | |
| Operating Income and Operating Margin | ||||||||
| Life Sciences Solutions | 1,718 | 48.3 | % | $ | 1,234 | 47.4 | % | |
| Analytical Instruments | 18.9 | % | 135 | 12.9 | % | |||
| Specialty Diagnostics | 19.9 | % | 214 | 21.6 | % | |||
| Laboratory Products and Services | 12.4 | % | 281 | 10.1 | % | |||
| Subtotal Reportable Segments | 29.0 | % | 1,864 | 27.0 | % | |||
| Cost of Revenues Charges (c) | 0.0 | % | (2) | 0.0 | % | |||
| Selling, General and Administrative Credits (Charges) (d) | 0.4 | % | (42) | -0.6 | % | |||
| Restructuring and Other Costs (e) | -1.3 | % | (12) | -0.2 | % | |||
| Amortization of Acquisition-related Intangible Assets | -4.8 | % | (417) | -6.1 | % | |||
| GAAP Operating Income (a) | 2,163 | 23.3 | % | $ | 1,391 | 20.1 | % | |
| (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 (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 2020 include accelerated depreciation on manufacturing assets to be abandoned due to facility consolidations. | ||||||||
| (d) Reported results in 2021 and 2020 include certain third-party expenses, principally transaction/integration costs related to recent/terminated acquisitions. Reported results in 2021 also include 60 of credits for changes in estimates of contingent acquisition consideration. | ||||||||
| (e) Reported results in 2021 and 2020 include restructuring and other costs consisting principally of severance, abandoned facility and other expenses of headcount reductions within several businesses and real estate consolidations. Reported results in 2021 also include 110 of charges for impairment of acquired technology. | ||||||||
| (f) Reported results in 2021 include 6 of amortization of bridge loan commitments fees related to a pending acquisition and 2 of losses on investments. Reported results in 2020 include 27 of costs for a subsequently terminated acquisition, primarily for amortization of bridge loan commitments fees and entering hedging contracts, offset in part by 2 of gains from investments. | ||||||||
| (g) Reported provision for income taxes in 2021 and 2020 includes incremental tax benefit for the pre-tax reconciling items between GAAP and adjusted net income. Reported results in 2021 also include 8 of incremental tax benefit from adjusting the company's non-U.S. deferred tax balances as a result of tax rate changes. Reported results in 2020 also include 2 of incremental tax benefit from audit settlements. | ||||||||
| Notes: | ||||||||
| Consolidated depreciation expense is 211 and 157 in 2021 and 2020, respectively. |
All values are in US Dollars.
| Base Business Organic Revenue Growth | ||||||||
|---|---|---|---|---|---|---|---|---|
| Three Months Ended | ||||||||
| July 3, | ||||||||
| 2021 | ||||||||
| Revenue Growth | 34 | % | ||||||
| COVID-19 Response Revenue (a) | 2 | % | ||||||
| Base Business Revenue Growth | 32 | % | ||||||
| Acquisitions | 0 | % | ||||||
| Currency Translation | 5 | % | ||||||
| Base Business Organic Revenue Growth | 27 | % | ||||||
| (a) COVID-19 response revenue includes effects of COVID-19 response revenues from acquired businesses and foreign currency translation. | ||||||||
| Condensed Consolidated Statement of Income (unaudited) (a)(b) | ||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Six Months Ended | ||||||||
| July 3, | % of | June 27, | % of | |||||
| (In millions except per share amounts) | 2021 | Revenues | 2020 | Revenues | ||||
| Revenues | $ | 19,179 | $ | 13,147 | ||||
| Costs and Operating Expenses: | ||||||||
| Cost of revenues (c) | 9,142 | 47.7 | % | 6,781 | 51.6 | % | ||
| Selling, general and administrative expenses (d) | 3,157 | 16.5 | % | 2,668 | 20.3 | % | ||
| Amortization of acquisition-related intangible assets | 872 | 4.5 | % | 842 | 6.4 | % | ||
| Research and development expenses | 663 | 3.5 | % | 509 | 3.9 | % | ||
| Restructuring and other costs (e) | 133 | 0.7 | % | 50 | 0.4 | % | ||
| 13,967 | 72.8 | % | 10,850 | 82.5 | % | |||
| Operating Income | 5,212 | 27.2 | % | 2,297 | 17.5 | % | ||
| Interest Income | 23 | 44 | ||||||
| Interest Expense | (247) | (263) | ||||||
| Other (Expense) Income (f) | (188) | 3 | ||||||
| Income Before Income Taxes | 4,800 | 2,081 | ||||||
| Provision for Income Taxes (g) | (635) | (137) | ||||||
| Net Income | $ | 4,165 | 21.7 | % | $ | 1,944 | 14.8 | % |
| Earnings per Share: | ||||||||
| Basic | $ | 10.58 | $ | 4.91 | ||||
| Diluted | $ | 10.50 | $ | 4.87 | ||||
| Weighted Average Shares: | ||||||||
| Basic | 394 | 396 | ||||||
| Diluted | 397 | 399 | ||||||
| Reconciliation of Adjusted Operating Income and Adjusted Operating Margin | ||||||||
| GAAP Operating Income (a) | $ | 5,212 | 27.2 | % | $ | 2,297 | 17.5 | % |
| Cost of Revenues Charges (c) | 8 | 0.0 | % | 4 | 0.0 | % | ||
| Selling, General and Administrative (Credits) Charges (d) | (26) | -0.1 | % | 48 | 0.4 | % | ||
| Restructuring and Other Costs (e) | 133 | 0.7 | % | 50 | 0.4 | % | ||
| Amortization of Acquisition-related Intangible Assets | 872 | 4.5 | % | 842 | 6.4 | % | ||
| Adjusted Operating Income (b) | $ | 6,199 | 32.3 | % | $ | 3,241 | 24.7 | % |
| Reconciliation of Adjusted Net Income | ||||||||
| GAAP Net Income (a) | $ | 4,165 | $ | 1,944 | ||||
| Cost of Revenues Charges (c) | 8 | 4 | ||||||
| Selling, General and Administrative (Credits) Charges (d) | (26) | 48 | ||||||
| Restructuring and Other Costs (e) | 133 | 50 | ||||||
| Amortization of Acquisition-related Intangible Assets | 872 | 842 | ||||||
| Other Expense (f) | 205 | 39 | ||||||
| Benefit from Income Taxes (g) | (272) | (202) | ||||||
| Adjusted Net Income (b) | $ | 5,085 | $ | 2,725 | ||||
| Reconciliation of Adjusted Earnings per Share | ||||||||
| GAAP Diluted EPS (a) | $ | 10.50 | $ | 4.87 | ||||
| Cost of Revenues Charges, Net of Tax (c) | 0.01 | 0.01 | ||||||
| Selling, General and Administrative (Credits) Charges, Net of Tax (d) | (0.09) | 0.10 | ||||||
| Restructuring and Other Costs, Net of Tax (e) | 0.26 | 0.10 | ||||||
| Amortization of Acquisition-related Intangible Assets, Net of Tax | 1.72 | 1.67 | ||||||
| Other Expense, Net of Tax (f) | 0.44 | 0.07 | ||||||
| (Benefit from) Provision for Income Taxes (g) | (0.03) | 0.01 | ||||||
| Adjusted EPS (b) | $ | 12.81 | $ | 6.83 | ||||
| Reconciliation of Free Cash Flow | ||||||||
| GAAP Net Cash Provided by Operating Activities (a) | $ | 4,205 | $ | 2,242 | ||||
| Purchases of Property, Plant and Equipment | (1,168) | (522) | ||||||
| Proceeds from Sale of Property, Plant and Equipment | 5 | 6 | ||||||
| Free Cash Flow | $ | 3,042 | $ | 1,726 | ||||
| Segment Data | ||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | |
| % of | June 27, | % of | ||||||
| (In millions) | Revenues | 2020 | Revenues | |||||
| Revenues | ||||||||
| Life Sciences Solutions | 7,760 | 40.5 | % | $ | 4,376 | 33.3 | % | |
| Analytical Instruments | 15.0 | % | 2,152 | 16.4 | % | |||
| Specialty Diagnostics | 14.9 | % | 1,946 | 14.8 | % | |||
| Laboratory Products and Services | 37.4 | % | 5,517 | 42.0 | % | |||
| Eliminations | -7.8 | % | (844) | -6.5 | % | |||
| Consolidated Revenues | 19,179 | 100.0 | % | $ | 13,147 | 100.0 | % | |
| Operating Income and Operating Margin | ||||||||
| Life Sciences Solutions | 3,997 | 51.5 | % | $ | 1,909 | 43.6 | % | |
| Analytical Instruments | 19.3 | % | 306 | 14.2 | % | |||
| Specialty Diagnostics | 23.6 | % | 450 | 23.1 | % | |||
| Laboratory Products and Services | 13.6 | % | 576 | 10.4 | % | |||
| Subtotal Reportable Segments | 32.3 | % | 3,241 | 24.7 | % | |||
| Cost of Revenues Charges (c) | 0.0 | % | (4) | 0.0 | % | |||
| Selling, General and Administrative Credits (Charges) (d) | 0.1 | % | (48) | -0.4 | % | |||
| Restructuring and Other Costs (e) | -0.7 | % | (50) | -0.4 | % | |||
| Amortization of Acquisition-related Intangible Assets | -4.5 | % | (842) | -6.4 | % | |||
| GAAP Operating Income (a) | 5,212 | 27.2 | % | $ | 2,297 | 17.5 | % | |
| (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 (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 2021 include charges for the sale of inventories revalued at the date of acquisition. Reported results in 2020 include 2 of charges to conform the accounting policies of a recently acquired business with the company's accounting policies and 2 of accelerated depreciation on manufacturing assets to be abandoned due to facility consolidations. | ||||||||
| (d) Reported results in 2021 and 2020 include certain third-party expenses, principally transaction/integration costs related to recent/terminated acquisitions. Reported results in 2021 also include 58 of credits for changes in estimates of contingent acquisition consideration. | ||||||||
| (e) Reported results in 2021 and 2020 include restructuring and other costs consisting principally of severance, abandoned facility and other expenses of headcount reductions within several businesses and real estate consolidations. Reported results in 2021 also include 110 of charges for impairment of acquired technology and 13 of charges for compensation contractually due to employees of acquired businesses at the date of acquisition. | ||||||||
| (f) Reported results in 2021 include 197 of losses on the early extinguishment of debt, 6 of amortization of bridge loan commitments fees related to a pending acquisition and 2 of losses on investments. Reported results in 2020 include 44 of costs for a subsequently terminated acquisition, primarily for entering hedging contracts and amortization of bridge loan commitments fees; and 1 of net charges for the settlement/curtailment of pension plans, offset in part by 6 of gains from investments. | ||||||||
| (g) Reported provision for income taxes in 2021 and 2020 includes incremental tax benefit for the pre-tax reconciling items between GAAP and adjusted net income and 12 and (6) of incremental tax benefit (provision), respectively, from adjusting the company's non-U.S. deferred tax balances as a result of tax rate changes. Reported results in 2020 also include 2 of incremental tax benefit from audit settlements. | ||||||||
| Notes: | ||||||||
| Consolidated depreciation expense is 409 and 306 in 2021 and 2020, respectively. |
All values are in US Dollars.
| Condensed Consolidated Balance Sheet (unaudited) | ||||
|---|---|---|---|---|
| July 3, | December 31, | |||
| (In millions) | 2021 | 2020 | ||
| Assets | ||||
| Current Assets: | ||||
| Cash and cash equivalents | $ | 7,023 | $ | 10,325 |
| Accounts receivable, net | 5,476 | 5,741 | ||
| Inventories | 4,625 | 4,029 | ||
| Other current assets | 2,136 | 1,862 | ||
| Total current assets | 19,260 | 21,957 | ||
| Property, Plant and Equipment, Net | 6,560 | 5,912 | ||
| Acquisition-related Intangible Assets, Net | 12,390 | 12,685 | ||
| Other Assets | 2,584 | 2,457 | ||
| Goodwill | 26,904 | 26,041 | ||
| Total Assets | $ | 67,698 | $ | 69,052 |
| Liabilities and Shareholders' Equity | ||||
| Current Liabilities: | ||||
| Short-term obligations and current maturities of long-term obligations | $ | 4 | $ | 2,628 |
| Other current liabilities | 6,921 | 7,676 | ||
| Total current liabilities | 6,925 | 10,304 | ||
| Other Long-term Liabilities | 5,146 | 5,134 | ||
| Long-term Obligations | 18,773 | 19,107 | ||
| Total Shareholders' Equity | 36,854 | 34,507 | ||
| Total Liabilities and Shareholders' Equity | $ | 67,698 | $ | 69,052 |
| Condensed Consolidated Statement of Cash Flows (unaudited) | ||||
| --- | --- | --- | --- | --- |
| Six Months Ended | ||||
| July 3, | June 27, | |||
| (In millions) | 2021 | 2020 | ||
| Operating Activities | ||||
| Net income | $ | 4,165 | $ | 1,944 |
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||
| Depreciation and amortization | 1,281 | 1,148 | ||
| Change in deferred income taxes | (307) | (318) | ||
| Other non-cash expenses, net | 513 | 202 | ||
| Changes in assets and liabilities, excluding the effects of acquisitions and disposition | (1,447) | (734) | ||
| Net cash provided by operating activities | 4,205 | 2,242 | ||
| Investing Activities | ||||
| Acquisitions, net of cash acquired | (1,425) | (3) | ||
| Purchases of property, plant and equipment | (1,168) | (522) | ||
| Proceeds from sale of property, plant and equipment | 5 | 6 | ||
| Other investing activities, net | (36) | — | ||
| Net cash used in investing activities | (2,624) | (519) | ||
| Financing Activities | ||||
| Net proceeds from issuance of debt | — | 3,464 | ||
| Repayment of debt | (2,805) | (2) | ||
| Net proceeds from issuance of commercial paper | — | 383 | ||
| Repayment of commercial paper | — | (387) | ||
| Purchases of company common stock | (2,000) | (1,500) | ||
| Dividends paid | (190) | (163) | ||
| Net proceeds from issuance of company common stock under employee stock plans | 72 | 125 | ||
| Other financing activities, net | (3) | (121) | ||
| Net cash (used in) provided by financing activities | (4,926) | 1,799 | ||
| Exchange Rate Effect on Cash | 44 | (107) | ||
| (Decrease) Increase in Cash, Cash Equivalents and Restricted Cash | (3,301) | 3,415 | ||
| Cash, Cash Equivalents and Restricted Cash at Beginning of Period | 10,336 | 2,422 | ||
| Cash, Cash Equivalents and Restricted Cash at End of Period | $ | 7,035 | $ | 5,837 |
| Free Cash Flow (a) | $ | 3,042 | $ | 1,726 |
| (a) Free cash flow is net cash provided by operating activities less net purchases of property, plant and equipment. |