Thermo Fisher Scientific Reports Third Quarter 2018 Results

WALTHAM, Mass., Oct. 24, 2018 /PRNewswire/ -- Thermo Fisher Scientific Inc. (NYSE: TMO), the world leader in serving science, today reported its financial results for the third quarter ended September 29, 2018.

Third Quarter 2018 Highlights

    --  Grew revenue 16% to $5.92 billion.
    --  Increased GAAP diluted earnings per share (EPS) 31% to $1.75.
    --  Increased adjusted EPS 13% to $2.62.
    --  Launched a number of new instruments for life sciences and specialty
        diagnostics, highlighted by the Invitrogen EVOS M5000 cell imaging
        system, Thermo Scientific Phenom Pharos benchtop scanning electron
        microscope, Thermo Scientific ISQ EM mass spectrometer, and the Phadia
        200 allergy and autoimmune system in Europe.
    --  Began major expansion of biologics production facility in St. Louis to
        meet increasing demand for contract development and manufacturing
        services in North America.
    --  Announced agreement to acquire Advanced Bioprocessing business from
        Becton Dickinson, which will add complementary cell culture products
        that expand our bioproduction offering to help customers increase yield
        during production of biologic drugs.

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."

"We were pleased to build on our momentum with another quarter of outstanding revenue and earnings growth," said Marc N. Casper, president and chief executive officer of Thermo Fisher Scientific. "Our team is effectively leveraging our unique customer value proposition and executing well to capitalize on the strength of our global end markets.

"Consistent with our growth strategy, we continued to strengthen our innovation leadership by launching high-impact products across life sciences, clinical and applied markets. Our increasing scale in Asia-Pacific and emerging markets remains a key competitive advantage, and we delivered strong performance in the region, led by China. Last, our pending acquisition of Advanced Bioprocessing will enhance our customer value proposition by adding complementary capabilities to meet increasing demand for biologics."

Casper added, "With three strong quarters behind us, we're in a great position to deliver an outstanding year."

Third Quarter 2018

Revenue for the quarter grew 16% to $5.92 billion in 2018, versus $5.12 billion in 2017. Organic revenue growth was 10%; acquisitions increased revenue by 7% and currency translation decreased revenue by 1%.

GAAP Earnings Results

GAAP diluted EPS in the third quarter increased 31% to $1.75, versus $1.34 in the same quarter last year. GAAP operating income for the third quarter of 2018 grew to $0.91 billion, compared with $0.63 billion in the third quarter of 2017. GAAP operating margin increased to 15.4%, compared with 12.4% in the third quarter of 2017.

Non-GAAP Earnings Results

Adjusted EPS in the third quarter of 2018 increased 13% to $2.62, versus $2.31 in the third quarter of 2017. Adjusted operating income for the third quarter of 2018 grew 12% compared with the year-ago quarter. Adjusted operating margin was 22.1%, compared with 22.9% in the third quarter of 2017.

2018 Guidance Update

Thermo Fisher is raising its 2018 revenue and earnings guidance primarily to reflect strong operational performance, partially offset by less favorable foreign exchange. The company is raising its revenue guidance to a new range of $23.99 to $24.09 billion versus its previous guidance of $23.68 to $23.86 billion, for 15% growth over 2017. The company is also raising its adjusted EPS guidance to a new range of $11.00 to $11.06, versus its previous guidance of $10.89 to $11.01, for 16 to 17% 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

In the third quarter of 2018, Life Sciences Solutions Segment revenue grew 9% to $1.50 billion, compared with revenue of $1.38 billion in the third quarter of 2017. Segment adjusted operating margin increased to 32.9%, versus 32.7% in the 2017 quarter.

Analytical Instruments Segment

Analytical Instruments Segment revenue grew 12% to $1.33 billion in the third quarter of 2018, compared with revenue of $1.19 billion in the third quarter of 2017. Segment adjusted operating margin increased to 22.0%, versus 21.6% in the 2017 quarter.

Specialty Diagnostics Segment

Specialty Diagnostics Segment revenue grew 6% to $0.89 billion in the third quarter of 2018, compared with revenue of $0.84 billion in the third quarter of 2017. Segment adjusted operating margin was 25.0%, versus 25.9% in the 2017 quarter.

Laboratory Products and Services Segment

Laboratory Products and Services Segment results reflect the acquisition of Patheon in late August 2017. In the third quarter of 2018, segment revenue grew 28% to $2.47 billion, compared with revenue of $1.93 billion in the third quarter of 2017. Segment adjusted operating margin was 12.1%, versus 12.6% in the 2017 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, the impact of significant tax audits or events and the results of 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 is operating cash flow from continuing operations, less 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 3 to 20 years. In 2018, based on acquisitions closed through the end of the third quarter of 2018, our adjusted EPS will exclude approximately $3.30 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 or the estimated initial impacts of U.S. tax reform legislation), 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, the early retirement of debt and discontinued operations.

We also report free cash flow, which is operating cash flow from continuing operations, less 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'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 and cash flows included in this press release 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 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's results computed in accordance with GAAP.

Conference Call

Thermo Fisher Scientific will hold its earnings conference call today, October 24, 2018, at 8:30 a.m. Eastern time. To listen, dial (844) 579-6824 within the U.S. or (763) 488-9145 outside the U.S. 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, November 2, 2018.

About Thermo Fisher Scientific

Thermo Fisher Scientific Inc. (NYSE: TMO) is the world leader in serving science, with revenues of more than $20 billion and approximately 70,000 employees globally. Our mission is to enable our customers to make the world healthier, cleaner and safer. We help our customers accelerate life sciences research, solve complex analytical challenges, improve patient diagnostics, deliver medicines to market and increase laboratory productivity. Through our premier brands - Thermo Scientific, Applied Biosystems, Invitrogen, Fisher Scientific and Unity Lab Services - we offer an unmatched combination of innovative technologies, purchasing convenience and comprehensive support. 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 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 exchange rate fluctuations on international operations; use and protection of intellectual property; the effect of changes in governmental regulations; and the effect of laws and regulations governing government contracts, as well as the possibility that expected benefits related to recent or pending acquisitions 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 Quarterly Report on Form 10-Q for the quarter ended June 30, 2018, which is 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.


                   Consolidated Statement of
                    Income (unaudited)
                    (a)(b)


                                                                      
       Three Months Ended


                                             September 29,               % of                September 30,         % of


        (In millions except per
         share amounts)                               2018              Revenues                       2017        Revenues

    ---




       Revenues                                           $
       5,920                                                       $
       5,116



        Costs and Operating
         Expenses:


        Cost of revenues (c)                         3,181                              53.7                          2,685                       52.5
                                                                                          %                                                       %


        Selling, general and
         administrative expenses                                                          %                                                       %
         (d)                                         1,183                              20.0                          1,126                       22.0


        Amortization of
         acquisition-related                                                              %                                                       %
         intangible assets                             431                               7.3                            405                        7.9


        Research and development                       240                               4.1                            217                        4.2
         expenses                                                                         %                                                       %


        Restructuring and other                       (27)                             -0.5                             49                        1.0
         (income) costs, net (e)                                                          %                                                       %


                                                     5,008                              84.6                          4,482                       87.6
                                                                                          %                                                       %




       Operating Income                               912                              15.4                            634                       12.4
                                                                                          %                                                       %



       Interest Income                                 41                                                      25



       Interest Expense                             (162)                                                  (157)


        Other Income (Expense),
         Net (f)                                        19                                                    (22)



        Income Before Income
         Taxes                                         810                                                     480


        (Provision for) Benefit
         from Income Taxes (g)                       (101)                                                     54




       Net Income                                           $
       709                                  12.0                              $
       534      10.4
                                                                                                         %                                             %





        Earnings per Share:



       Basic                                               $
       1.76                                                        $
       1.35




       Diluted                                             $
       1.75                                                        $
       1.34



        Weighted Average Shares:



       Basic                                          402                                                     396




       Diluted                                        406                                                     400







                   Reconciliation of
                    Adjusted Operating
                    Income and Adjusted
                    Operating Margin


        GAAP Operating Income (a)                            $
       912                                  15.4                              $
       634      12.4
                                                                                                         %                                             %


        Cost of Revenues
         (Credits) Charges, Net                                                           %                                                       %
         (c)                                           (1)                              0.0                             45                        0.9


        Selling, General and
         Administrative (Credits)                                                         %                                                       %
         Charges, Net (d)                              (4)                             -0.1                             37                        0.7


        Restructuring and Other                       (27)                             -0.5                             49                        1.0
         (Income) Costs, Net (e)                                                          %                                                       %


        Amortization of
         Acquisition-related                                                              %                                                       %
         Intangible Assets                             431                               7.3                            405                        7.9


        Adjusted Operating Income                          $
       1,311                                  22.1                            $
       1,170      22.9
         (b)                                                                                             %                                             %





                   Reconciliation of
                    Adjusted Net Income


        GAAP Net Income (a)                                  $
       709                                                         $
       534


        Cost of Revenues
         (Credits) Charges, Net
         (c)                                           (1)                                                     45


        Selling, General and
         Administrative (Credits)
         Charges, Net (d)                              (4)                                                     37


        Restructuring and Other
         (Income) Costs, Net (e)                      (27)                                                     49


        Amortization of
         Acquisition-related
         Intangible Assets                             431                                                     405


        Other (Income) Expense,
         Net (f)                                       (5)                                                     30


        Benefit from Income Taxes
         (g)                                          (37)                                                  (176)


        Adjusted Net Income (b)                            $
       1,066                                                         $
       924





                   Reconciliation of
                    Adjusted Earnings per
                    Share



       GAAP EPS (a)                                        $
       1.75                                                        $
       1.34


        Cost of Revenues Charges,
         Net of Tax (c)                                                                                      0.07


        Selling, General and
         Administrative (Credits)
         Charges, Net of Tax (d)                    (0.01)                                                   0.07


        Restructuring and Other
         (Income) Costs, Net of
         Tax (e)                                    (0.06)                                                   0.07


        Amortization of
         Acquisition-related
         Intangible Assets, Net
         of Tax                                       0.82                                                    0.70


        Other (Income) Expense,
         Net of Tax (f)                             (0.01)                                                   0.05


        Provision for Income
         Taxes (g)                                    0.13                                                    0.01



       Adjusted EPS (b)                                    $
       2.62                                                        $
       2.31





                   Reconciliation of Free
                    Cash Flow


        GAAP Net Cash Provided by
         Operating Activities (a)                          $
       1,220                                                         $
       929


        Net Cash Used in
         Discontinued Operations                                                                                1


        Purchases of Property,
         Plant and Equipment                         (173)                                                  (112)


        Proceeds from Sale of
         Property, Plant and
         Equipment                                       3                                                       2



       Free Cash Flow                                     $
       1,050                                                         $
       820


                     Segment Data                                  
       Three Months Ended


                                          September 29,               % of                September 30,  % of



       (In millions)                              2018              Revenues                       2017 Revenues

    ---



                     Revenues


        Life Sciences Solutions                         $
       1,504                                  25.4          $
       1,382         27.0
                                                                                                      %                              %


        Analytical Instruments                    1,333                              22.5                   1,189              23.2
                                                                                       %                                       %


        Specialty Diagnostics                       894                              15.1                     844              16.5
                                                                                       %                                       %


        Laboratory Products and                   2,470                              41.7                   1,933              37.8
         Services                                                                      %                                       %



       Eliminations                              (281)                             -4.7                   (232)             -4.5
                                                                                       %                                       %


        Consolidated Revenues                           $
       5,920                                 100.0          $
       5,116        100.0

                                                                                                      %                              %





                     Operating Income and
                      Operating Margin


        Life Sciences Solutions                           $
       495                                  32.9            $
       452         32.7
                                                                                                      %                              %


        Analytical Instruments                      294                              22.0                     257              21.6
                                                                                       %                                       %


        Specialty Diagnostics                       223                              25.0                     218              25.9
                                                                                       %                                       %


        Laboratory Products and                     299                              12.1                     243              12.6
         Services                                                                      %                                       %


        Subtotal Reportable                       1,311                              22.1                   1,170              22.9
         Segments                                                                      %                                       %




        Cost of Revenues Credits                      1                               0.0                    (45)             -0.9
         (Charges), Net (c)                                                            %                                       %


        Selling, General and
         Administrative Credits                                                        %                                       %
         (Charges), Net (d)                           4                               0.1                    (37)             -0.7


        Restructuring and Other                      27                               0.5                    (49)             -1.0
         Income (Costs), Net (e)                                                       %                                       %


        Amortization of
         Acquisition-related                                                           %                                       %
         Intangible Assets                        (431)                             -7.3                   (405)             -7.9


        GAAP Operating Income (a)                         $
       912                                  15.4            $
       634         12.4
                                                                                                      %                              %



      (a)                                           "GAAP" (reported)
                                                     results were
                                                     determined in
                                                     accordance with
                                                     U.S. generally
                                                     accepted accounting
                                                     principles (GAAP).
                                                     The results for
                                                     2017 have been
                                                     restated for the
                                                     immaterial impacts
                                                     of adopting new
                                                     guidance on pension
                                                     accounting.




      (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, net
                                                     (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
                                                     2018 and 2017
                                                     include i) $2 and
                                                     $16, respectively,
                                                     of charges for the
                                                     sale of inventories
                                                     revalued at the
                                                     date of acquisition
                                                     and ii) $(3) and
                                                     $27, respectively,
                                                     of
                                                     (credits)/charges
                                                     to conform the
                                                     accounting policies
                                                     of recently
                                                     acquired businesses
                                                     with the company's
                                                     accounting
                                                     policies. Reported
                                                     results in 2017
                                                     also include $2 of
                                                     accelerated
                                                     depreciation on
                                                     fixed assets to be
                                                     abandoned due to
                                                     facility
                                                     consolidations.




      (d)                                           Reported results in
                                                     2018 and 2017
                                                     include i) $10 and
                                                     $38, respectively,
                                                     of certain third-
                                                     party expenses,
                                                     principally
                                                     transaction/
                                                     integration costs
                                                     related to recently
                                                     completed
                                                     acquisitions and
                                                     ii) $11 and $8,
                                                     respectively, of
                                                     income associated
                                                     with product
                                                     liability
                                                     litigation.
                                                     Reported results in
                                                     2018 also include
                                                     $3 of credits from
                                                     changes in
                                                     estimates of
                                                     contingent
                                                     acquisition
                                                     consideration.
                                                     Reported results in
                                                     2017 also include
                                                     $6 of charges to
                                                     conform the
                                                     accounting policies
                                                     of recently
                                                     acquired businesses
                                                     with the company's
                                                     accounting policies
                                                     and $1 of
                                                     accelerated
                                                     depreciation on
                                                     fixed assets to be
                                                     abandoned due to
                                                     integration
                                                     synergies.




      (e)                                           Reported results in
                                                     2018 and 2017
                                                     include
                                                     restructuring and
                                                     other costs, net,
                                                     consisting
                                                     principally of
                                                     severance,
                                                     abandoned facility
                                                     and other expenses
                                                     of headcount
                                                     reductions within
                                                     several businesses
                                                     and real estate
                                                     consolidations.
                                                     Reported results in
                                                     2018 include $52 of
                                                     credits from
                                                     litigation and $1
                                                     of hurricane
                                                     response costs.
                                                     Reported results in
                                                     2017 include $15 of
                                                     net charges for
                                                     litigation and $6
                                                     of compensation due
                                                     at an acquired
                                                     business on the
                                                     date of
                                                     acquisition.




      (f)                                           Reported results in
                                                     2018 include $6 of
                                                     net gains from
                                                     investments and $1
                                                     of net charges for
                                                     the settlement/
                                                     curtailment of
                                                     pension plans.
                                                     Reported results in
                                                     2017 include a $29
                                                     charge related to
                                                     fees paid to obtain
                                                     bridge financing
                                                     commitments for the
                                                     acquisition of
                                                     Patheon and $1 of
                                                     losses on
                                                     investments.




      (g)                                           Reported provision
                                                     for income taxes
                                                     includes i) $89 and
                                                     $179 of incremental
                                                     tax benefit in 2018
                                                     and 2017,
                                                     respectively, for
                                                     the pre-tax
                                                     reconciling items
                                                     between GAAP and
                                                     adjusted net
                                                     income; ii) $5 and
                                                     $3 in 2018 and
                                                     2017, respectively,
                                                     of incremental tax
                                                     provision from
                                                     adjusting the
                                                     company's non-U.S.
                                                     deferred tax
                                                     balances as a
                                                     result of tax rate
                                                     changes and iii) in
                                                     2018, $47 of
                                                     incremental tax
                                                     provision to adjust
                                                     the estimated
                                                     initial impacts of
                                                     U.S. tax reform
                                                     legislation
                                                     recorded in 2017.





     Notes:


      Consolidated depreciation expense is $132 and
       $112 in 2018 and 2017, respectively.


                     Consolidated Statement of
                      Income (unaudited)
                      (a)(b)


                                                                         
       Nine Months Ended


                                               September 29,                % of                September 30,         % of


        (In millions except per
         share amounts)                                 2018               Revenues                       2017        Revenues

    ---




       Revenues                                             $
       17,851                                                       $
       14,871



        Costs and Operating
         Expenses:


        Cost of revenues (c)                           9,536                               53.4                          7,709                      51.8

                                                                                             %                                                      %


        Selling, general and                           3,613                               20.2                          3,257                      21.9
         administrative expenses
         (d)                                                                                 %                                                      %


        Amortization of                                1,316                                7.4                          1,153                       7.8
         acquisition-related
         intangible assets                                                                   %                                                      %


        Research and development                         716                                4.0                            654                       4.4
         expenses
                                                                                             %                                                      %


        Restructuring and other                           35                                0.2                             95                       0.6
         costs, net (e)
                                                                                             %                                                      %


                                                      15,216                               85.2                         12,868                      86.5

                                                                                             %                                                      %



        Operating Income                               2,635                               14.8                          2,003                      13.5

                                                                                             %                                                      %


        Interest Income                                   92                                                       61


        Interest Expense                               (495)                                                   (426)


        Other Income (Expense),
         Net (f)                                          18                                                     (29)


        Income Before Income
         Taxes                                         2,250                                                    1,609


        (Provision for) Benefit
         from Income Taxes (g)                         (210)                                                      89


        Income from Continuing
         Operations                                    2,040                                                    1,698


        Loss from Discontinued
         Operations, Net of Tax                                                                                  (1)



       Net Income                                            $
       2,040                                  11.4                             $
     1,697      11.4

                                                                                                            %                                            %





        Earnings per Share from
         Continuing Operations:



       Basic                                                  $
       5.07                                                         $
       4.33




       Diluted                                                $
       5.03                                                         $
       4.29



        Earnings per Share:



       Basic                                                  $
       5.07                                                         $
       4.32




       Diluted                                                $
       5.03                                                         $
       4.29



        Weighted Average Shares:



       Basic                                            402                                                      392




       Diluted                                          406                                                      396







                     Reconciliation of
                      Adjusted Operating
                      Income and Adjusted
                      Operating Margin


        GAAP Operating Income (a)                             $
       2,635                                  14.8                             $
     2,003      13.5

                                                                                                            %                                            %


        Cost of Revenues Charges                           7                                0.0                             77                       0.5
         (c)
                                                                                             %                                                      %


        Selling, General and                               7                                0.0                             75                       0.5
         Administrative Charges,
         Net (d)                                                                             %                                                      %


        Restructuring and Other                           35                                0.2                             95                       0.6
         Costs, Net (e)
                                                                                             %                                                      %


        Amortization of                                1,316                                7.4                          1,153                       7.8
         Acquisition-related
         Intangible Assets                                                                   %                                                      %


        Adjusted Operating Income                             $
       4,000                                  22.4                             $
     3,403      22.9
         (b)
                                                                                                            %                                            %





                     Reconciliation of
                      Adjusted Net Income


        GAAP Net Income (a)                                   $
       2,040                                                        $
       1,697


        Cost of Revenues Charges
         (c)                                               7                                                       77


        Selling, General and
         Administrative Charges,
         Net (d)                                           7                                                       75


        Restructuring and Other
         Costs, Net (e)                                   35                                                       95


        Amortization of
         Acquisition-related
         Intangible Assets                             1,316                                                    1,153


        Other Expense, Net (f)                             4                                                       30


        Benefit from Income Taxes
         (g)                                           (215)                                                   (481)


        Discontinued Operations,
         Net of Tax                                                                                                1


        Adjusted Net Income (b)                               $
       3,194                                                        $
       2,647





                     Reconciliation of
                      Adjusted Earnings per
                      Share



       GAAP EPS (a)                                           $
       5.03                                                         $
       4.29


        Cost of Revenues Charges,
         Net of Tax (c)                                 0.01                                                     0.13


        Selling, General and
         Administrative Charges,
         Net of Tax (d)                                 0.01                                                     0.13


        Restructuring and Other
         Costs, Net of Tax (e)                          0.07                                                     0.16


        Amortization of
         Acquisition-related
         Intangible Assets, Net
         of Tax                                         2.54                                                     2.08


        Other Expense, Net of Tax
         (f)                                            0.01                                                     0.05


        Provision for (Benefit
         from) Income Taxes (g)                         0.20                                                   (0.15)


        Discontinued Operations,
         Net of Tax


        Adjusted EPS (b)                                       $
       7.87                                                         $
       6.69





                     Reconciliation of Free
                      Cash Flow


        GAAP Net Cash Provided by
         Operating Activities (a)                             $
       2,742                                                        $
       2,139


        Net Cash Used in
         Discontinued Operations                                                                                   2


        Purchases of Property,
         Plant and Equipment                           (474)                                                   (293)


        Proceeds from Sale of
         Property, Plant and
         Equipment                                         6                                                        4




       Free Cash Flow                                        $
       2,274                                                        $
       1,852


                     Segment Data                                  
       Nine Months Ended


                                          September 29,               % of                September 30,  % of



       (In millions)                              2018              Revenues                       2017 Revenues

    ---



                     Revenues


        Life Sciences Solutions                          $
      4,572                                  25.6           $
      4,150         27.9
                                                                                                      %                              %


        Analytical Instruments                    3,901                              21.9                   3,407              22.9
                                                                                       %                                       %


        Specialty Diagnostics                     2,773                              15.5                   2,572              17.3
                                                                                       %                                       %


        Laboratory Products and                   7,433                              41.6                   5,424              36.5
         Services                                                                      %                                       %



       Eliminations                              (828)                             -4.6                   (682)             -4.6
                                                                                       %                                       %



        Consolidated Revenues                           $
      17,851                                 100.0          $
      14,871        100.0

                                                                                                      %                              %





                     Operating Income and
                      Operating Margin


        Life Sciences Solutions                          $
      1,534                                  33.5           $
      1,333         32.1
                                                                                                      %                              %


        Analytical Instruments                      831                              21.3                     681              20.0
                                                                                       %                                       %


        Specialty Diagnostics                       719                              25.9                     685              26.7
                                                                                       %                                       %


        Laboratory Products and                     916                              12.3                     704              13.0
         Services                                                                      %                                       %


        Subtotal Reportable                       4,000                              22.4                   3,403              22.9
         Segments                                                                      %                                       %




        Cost of Revenues Charges                    (7)                              0.0                    (77)             -0.5
         (c)                                                                           %                                       %


        Selling, General and
         Administrative Charges,                                                       %                                       %
         Net (d)                                    (7)                              0.0                    (75)             -0.5


        Restructuring and Other                    (35)                             -0.2                    (95)             -0.6
         Costs, Net (e)                                                                %                                       %


        Amortization of
         Acquisition-related                                                           %                                       %
         Intangible Assets                      (1,316)                             -7.4                 (1,153)             -7.8


        GAAP Operating Income (a)                        $
      2,635                                  14.8           $
      2,003         13.5
                                                                                                      %                              %



      (a)                                           "GAAP" (reported)
                                                     results were
                                                     determined in
                                                     accordance with
                                                     U.S. generally
                                                     accepted accounting
                                                     principles (GAAP).
                                                     The results for
                                                     2017 have been
                                                     restated for the
                                                     immaterial impacts
                                                     of adopting new
                                                     guidance on pension
                                                     accounting.




      (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, net
                                                     (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
                                                     2018 and 2017
                                                     include i) $10 and
                                                     $47, respectively,
                                                     of charges for the
                                                     sale of inventories
                                                     revalued at the
                                                     date of acquisition
                                                     and ii) $(3) and
                                                     $27, respectively,
                                                     of
                                                     (credits)/charges
                                                     to conform the
                                                     accounting policies
                                                     of recently
                                                     acquired businesses
                                                     with the company's
                                                     accounting
                                                     policies. Reported
                                                     results in 2017
                                                     also include $3 of
                                                     accelerated
                                                     depreciation on
                                                     manufacturing
                                                     assets to be
                                                     abandoned due to
                                                     facility
                                                     consolidations.




      (d)                                           Reported results in
                                                     2018 and 2017
                                                     include i) $22 and
                                                     $50, respectively,
                                                     of certain third-
                                                     party expenses,
                                                     principally
                                                     transaction/
                                                     integration costs
                                                     related to recently
                                                     completed
                                                     acquisitions; ii)
                                                     $11 and $8,
                                                     respectively, of
                                                     income associated
                                                     with product
                                                     liability
                                                     litigation and iii)
                                                     $(4) and $25,
                                                     respectively, of
                                                     (credits)/charges
                                                     from changes in
                                                     estimates of
                                                     contingent
                                                     acquisition
                                                     consideration.
                                                     Reported results in
                                                     2017 also include
                                                     $6 of charges to
                                                     conform the
                                                     accounting policies
                                                     of recently
                                                     acquired businesses
                                                     with the company's
                                                     accounting policies
                                                     and $2 of
                                                     accelerated
                                                     depreciation on
                                                     fixed assets to be
                                                     abandoned due to
                                                     integration
                                                     synergies.




      (e)                                           Reported results in
                                                     2018 and 2017
                                                     include
                                                     restructuring and
                                                     other costs, net,
                                                     consisting
                                                     principally of
                                                     severance,
                                                     abandoned facility
                                                     and other expenses
                                                     of headcount
                                                     reductions within
                                                     several businesses
                                                     and real estate
                                                     consolidations.
                                                     Reported results in
                                                     2018 include $46 of
                                                     net credits from
                                                     litigation and $5
                                                     of hurricane
                                                     response costs.
                                                     Reported results in
                                                     2017 include $18 of
                                                     net charges for
                                                     litigation, $6 of
                                                     compensation due at
                                                     an acquired
                                                     business on the
                                                     date of acquisition
                                                     and $2 of charges
                                                     for the settlement
                                                     of retirement
                                                     plans.




      (f)                                           Reported results in
                                                     2018 include $2 of
                                                     net gains from
                                                     investments, $3 of
                                                     losses on the early
                                                     extinguishment of
                                                     debt and $3 of net
                                                     charges for the
                                                     settlement/
                                                     curtailment of
                                                     pension plans.
                                                     Reported results in
                                                     2017 include $4 of
                                                     losses on the early
                                                     extinguishment of
                                                     debt and a $32
                                                     charge related to
                                                     fees paid to obtain
                                                     bridge financing
                                                     commitments for the
                                                     acquisition of
                                                     Patheon, offset in
                                                     part by $6 of net
                                                     gains from
                                                     investments.




      (g)                                           Reported provision
                                                     for income taxes
                                                     includes i) $297
                                                     and $422 of
                                                     incremental tax
                                                     benefit in 2018 and
                                                     2017, respectively,
                                                     for the pre-tax
                                                     reconciling items
                                                     between GAAP and
                                                     adjusted net
                                                     income; ii) $(14)
                                                     and $60 of
                                                     incremental tax
                                                     (provision) benefit
                                                     in 2018 and 2017,
                                                     respectively, from
                                                     adjusting the
                                                     company's non-U.S.
                                                     deferred tax
                                                     balances as a
                                                     result of tax rate
                                                     changes, iii) in
                                                     2018, $68 of
                                                     incremental tax
                                                     provision to adjust
                                                     the estimated
                                                     initial impacts of
                                                     U.S. tax reform
                                                     legislation
                                                     recorded in 2017
                                                     and iv) in 2017, $1
                                                     of incremental tax
                                                     provision in 2017
                                                     due to audit
                                                     settlements.





     Notes:


      Consolidated depreciation expense is $393 and
       $306 in 2018 and 2017, respectively.


                     Condensed Consolidated Balance
                      Sheet (unaudited)




                                                      September 29,                       December 31,



       (In millions)                                          2018                                 2017

    ---




       
                Assets



       Current Assets:


        Cash and cash equivalents                                    $
              1,098                             $
        1,335


        Accounts receivable, net                              3,852                                         3,879



       Inventories                                           2,982                                         2,971



       Other current assets                                  1,634                                         1,236



       Total current assets                                  9,566                                         9,421



        Property, Plant and Equipment,
         Net                                                  3,978                                         4,047


        Acquisition-related Intangible
         Assets                                              15,219                                        16,684



       Other Assets                                          1,173                                         1,227



       Goodwill                                             25,142                                        25,290



       Total Assets                                                $
              55,078                            $
        56,669







                     Liabilities and Shareholders'
                      Equity



       Current Liabilities:


        Short-term obligations and
         current maturities of long-
         term obligations                                            $
              1,014                             $
        2,135


        Other current liabilities                             4,182                                         4,913


        Total current liabilities                             5,196                                         7,048



        Other Long-term Liabilities                           5,232                                         5,335



       Long-term Obligations                                17,760                                        18,873


        Total Shareholders' Equity                           26,890                                        25,413


        Total Liabilities and
         Shareholders' Equity                                       $
              55,078                            $
        56,669





                     Condensed Consolidated Statement
                      of Cash Flows (unaudited)




                                                               
            Nine Months Ended


                                                      September 29,                       September 30,



       (In millions)                                          2018                                 2017

    ---



                     Operating Activities



       Net income                                                   $
              2,040                             $
        1,697


        Loss from discontinued
         operations                                                                                            1


        Income from continuing
         operations                                           2,040                                         1,698




        Adjustments to reconcile net
         income to net cash provided by
         operating activities:


        Depreciation and amortization                         1,709                                         1,459


        Change in deferred income taxes                       (317)                                        (484)


        Other non-cash expenses, net                            214                                           230


        Changes in assets and
         liabilities, excluding the
         effects of acquisitions and
         dispositions                                         (904)                                        (762)


        Net cash provided by continuing
         operations                                           2,742                                         2,141


        Net cash used in discontinued
         operations                                                                                          (2)


        Net cash provided by operating
         activities                                           2,742                                         2,139





                     Investing Activities


        Acquisitions, net of cash
         acquired                                              (59)                                      (7,160)


        Purchases of property, plant and
         equipment                                            (474)                                        (293)


        Proceeds from sale of property,
         plant and equipment                                      6                                             4


        Other investing activities, net                         (5)                                            3


        Net cash used in investing
         activities                                           (532)                                      (7,446)





                     Financing Activities


        Net proceeds from issuance of
         debt                                                   690                                         6,459



       Repayment of debt                                   (2,048)                                      (2,552)


        Net proceeds from issuance of
         commercial paper                                     3,378                                         6,030


        Repayment of commercial paper                       (3,842)                                      (5,809)


        Purchases of company common
         stock                                                (250)                                        (750)



       Dividends paid                                        (198)                                        (177)


        Net proceeds from issuance of
         company common stock                                                                              1,690


        Net proceeds from issuance of
         company common stock under
         employee stock plans                                    97                                           108


        Other financing activities, net                        (51)                                          (1)


        Net cash (used in) provided by
         financing activities                               (2,224)                                        4,998





        Exchange Rate Effect on Cash                          (236)                                          256



        Decrease in Cash, Cash
         Equivalents and Restricted Cash                      (250)                                         (53)


        Cash, Cash Equivalents and
         Restricted Cash at Beginning of
         Period                                               1,361                                           811



        Cash, Cash Equivalents and
         Restricted Cash at End of
         Period                                                      $
              1,111                               $
        758








       Free Cash Flow (a)                                           $
              2,274                             $
        1,852



               (a) Free cash flow is net
                cash provided by operating
                activities of continuing
                operations less net
                purchases of property, plant
                and equipment.

Media Contact Information:
Karen Kirkwood
Phone: 781-622-1306
E-mail: karen.kirkwood@thermofisher.com
Website: www.thermofisher.com

Investor Contact Information:
Ken Apicerno
Phone: 781-622-1294
E-mail: ken.apicerno@thermofisher.com

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SOURCE Thermo Fisher Scientific