Thermo Fisher Scientific Inc. (NYSE: TMO), the world leader in
serving science, today reported its financial results for the
fourth quarter and full year ended December 31, 2016.
Fourth Quarter and Full Year 2016 Highlights
- Fourth quarter revenue increased 6% to
$4.95 billion.
- Full year revenue grew 8% to $18.27
billion.
- Fourth quarter GAAP diluted earnings
per share (EPS) increased 6% to $1.59.Fourth quarter adjusted EPS
grew 14% to $2.41.
- Full year GAAP diluted EPS increased 3%
to $5.09.Full year adjusted EPS grew 12% to $8.27.
- Invested more than $750 million in
R&D in 2016, and launched significant new products, including Q
Exactive BioPharma mass spectrometry and Integrion chromatography
systems, TSX laboratory freezers, Ion Torrent cancer assays, and
new tests for drugs-of-abuse and autoimmune disease.
- Strengthened capabilities in Shanghai,
Seoul and Singapore during the year to build on industry-leading
presence in Asia-Pacific and emerging markets and continued to
deliver strong growth in the region, led by outstanding performance
in China.
- Deployed approximately $7 billion of
capital in 2016, with $5.5 billion spent on strategic acquisitions,
including FEI Company and Affymetrix, and $1.5 billion returned to
shareholders through a combination of stock buybacks and
dividends.
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.”
“I’m pleased to report that we achieved the goals we laid out
for 2016, and successfully executed our strategy to deliver another
excellent year,” said Marc N. Casper, president and chief executive
officer of Thermo Fisher Scientific.
“We effectively deployed the largest R&D budget in our
industry, and launched new high-impact products across all of our
technology platforms. In Asia-Pacific and emerging markets, we
leveraged our industry-leading scale to drive strong growth,
especially in China, where we’re capturing opportunities aligned
with the new five-year plan.
“We also continued to successfully execute our capital
deployment strategy to create value for our shareholders. I’m
really excited about our acquisition of FEI – the third largest in
our history – and look forward to the opportunities we have to
leverage these complementary technologies to drive growth.
“To sum it up, with a strong 2016 behind us, we’re positioned
for another great year ahead.”
Fourth Quarter 2016
As previously communicated, the company’s 2016 fiscal calendar
had four fewer selling days in the fourth quarter versus the fourth
quarter of 2015. Consequently, revenue and organic growth results
in the 2016 quarter were negatively affected by the fewer days, and
operating margin benefited due to fewer days of costs. Revenue for
the quarter grew 6% to $4.95 billion in 2016, versus $4.65 billion
in 2015. Organic revenue growth was essentially flat; acquisitions
increased revenue by 8% and currency translation reduced revenue by
1%.
GAAP Earnings Results
GAAP diluted EPS in the fourth quarter increased to $1.59,
versus $1.50 in the same quarter last year. GAAP operating income
for the fourth quarter of 2016 grew to $753 million, compared with
$690 million in the fourth quarter of 2015. GAAP operating margin
increased to 15.2%, compared with 14.8% in the fourth quarter of
2015.
Non-GAAP Earnings Results
Adjusted EPS in the fourth quarter of 2016 rose 14% to $2.41,
versus $2.12 in the fourth quarter of 2015. Adjusted operating
income for the fourth quarter of 2016 grew 14% compared with the
year-ago quarter. Adjusted operating margin expanded 160 basis
points to 24.8%, compared with 23.2% in the fourth quarter of
2015.
Full Year 2016
Revenue for the full year grew 8% to $18.27 billion in 2016,
versus $16.97 billion in 2015. Organic revenue growth was 4%;
acquisitions increased revenue by 4% and currency translation
reduced revenue by 1%.
GAAP Earnings Results
GAAP diluted EPS for the full year increased to $5.09, versus
$4.92 in 2015. GAAP operating income for 2016 grew to $2.45
billion, compared with $2.34 billion a year ago. GAAP operating
margin was 13.4% in 2016, compared with 13.8% in 2015. GAAP
operating results reflect acquisition-related charges in the 2016
period.
Non-GAAP Earnings Results
Adjusted EPS for the full year rose 12% to $8.27, versus $7.39
in 2015. Adjusted operating income for 2016 grew 10% compared with
2015, and adjusted operating margin expanded 60 basis points to
23.1%, compared with 22.5% a year ago.
Annual Guidance for 2017
The company will provide 2017 financial guidance on its earnings
conference call this morning at 8:30 a.m. Eastern time.
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.
Fourth quarter revenue results were negatively affected by the
four fewer selling days in 2016 and fourth quarter operating margin
benefited from fewer days of costs. Fourth quarter and full year
results were negatively affected by the impact of foreign currency
exchange rates. The impact of the fewer days in the fourth quarter
and foreign exchange affects each of the segments to varying
degrees.
Life Sciences Solutions Segment
In the fourth quarter of 2016, Life Sciences Solutions Segment
revenue grew 10% to $1.34 billion, compared with revenue of $1.21
billion in the fourth quarter of 2015. Segment adjusted operating
margin increased to 33.3%, versus 31.6% in the 2015 quarter.
For the full year 2016, Life Sciences Solutions Segment revenue
rose 12% to $4.98 billion, compared with revenue of $4.44 billion
in 2015. Segment adjusted operating margin increased to 30.4% in
2016, compared with 30.1% a year ago.
Analytical Instruments Segment
Analytical Instruments Segment revenue grew 32% to $1.22 billion
in the fourth quarter of 2016, compared with revenue of $925
million in the fourth quarter of 2015. Segment adjusted operating
margin increased to 24.5%, versus 22.1% in the 2015 quarter.
For the full year 2016, Analytical Instruments Segment revenue
rose 14% to $3.67 billion, compared with revenue of $3.21 billion
in 2015. Segment adjusted operating margin grew to 20.3%, versus
19.1% in 2015.
Specialty Diagnostics Segment
Specialty Diagnostics Segment revenue in the fourth quarter was
$834 million in 2016, compared with revenue of $865 million in the
fourth quarter of 2015. Segment adjusted operating margin increased
to 27.2%, versus 26.2% in the 2015 quarter.
For the full year 2016, Specialty Diagnostics Segment revenue
grew 3% to $3.34 billion, compared with revenue of $3.24 billion in
2015. Segment adjusted operating margin increased to 27.2%, versus
2015 results of 26.9%.
Laboratory Products and Services Segment
In the fourth quarter of 2016, Laboratory Products and Services
Segment revenue was $1.76 billion, compared with revenue of $1.82
billion in the fourth quarter of 2015. Segment adjusted operating
margin was 14.6%, versus 14.7% in the 2015 quarter.
For the full year 2016, Laboratory Products and Services Segment
revenue grew 6% to $7.03 billion, compared with revenue of $6.66
billion in 2015. Segment adjusted operating margin was 15.0% in
both periods.
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 regularity or predictability, tax provisions/benefits related
to the previous items, benefits from tax credit carryforwards, 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, net
of capital expenditures, and also excludes operating cash flows
from discontinued operations 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 5 to 20 years. In
2017, based on acquisitions closed through the end of 2016, our
adjusted EPS will exclude approximately $2.53 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,
benefits from tax credit carryforwards and the impact of
significant tax audits or events (such as the effect on deferred
tax balances of enacted changes in tax rates), 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, net
of capital expenditures, and also excludes operating cash flows
from discontinued operations 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, January 31, 2017, at 8:30 a.m. Eastern time. To listen, dial
(877) 201-0168 within the U.S. or (647) 788-4901 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, February 17, 2017.
About Thermo Fisher Scientific
Thermo Fisher Scientific Inc. (NYSE: TMO) is the world
leader in serving science, with revenues of $18
billion and more than 55,000 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
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; the effect of healthcare reform
legislation; 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 October 1,
2016, 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
(a)(b) Three Months Ended December 31, % of December 31, % of
(In millions except per share amounts) 2016 Revenues 2015 Revenues
Revenues $ 4,953.2 $ 4,652.5 Costs and
Operating Expenses: Cost of revenues (c) 2,546.6 51.4 % 2,439.9
52.4 % Selling, general and administrative expenses (d) 1,016.7
20.5 % 968.7 20.8 % Amortization of acquisition-related intangible
assets 376.4 7.6 % 326.0 7.0 % Research and development expenses
212.6 4.3 % 180.3 3.9 % Restructuring and other costs, net (e) 48.3
1.0 % 47.4 1.0 % 4,200.6 84.8 % 3,962.3
85.2 % Operating Income 752.6 15.2 % 690.2 14.8 % Interest
Income 14.0 8.7 Interest Expense (131.3 ) (103.0 ) Other Income
(Expense), Net (f) 16.6 (13.2 ) Income Before Income
Taxes 651.9 582.7 (Provision for) Benefit from Income Taxes (g)
(19.2 ) 23.6 Income from Continuing Operations 632.7
606.3 Loss from Discontinued Operations (3.2 ) (3.7 )
Net Income $ 629.5 12.7 % $ 602.6 13.0 %
Earnings per Share from Continuing Operations: Basic $ 1.60
$ 1.52 Diluted $ 1.59 $ 1.51 Earnings
per Share: Basic $ 1.60 $ 1.51 Diluted $ 1.59
$ 1.50 Weighted Average Shares: Basic 394.6
399.5 Diluted 397.0 402.4
Reconciliation of Adjusted Operating
Income and Adjusted Operating Margin
GAAP Operating Income (a) $ 752.6 15.2 % $ 690.2 14.8 % Cost of
Revenues Charges (c) 41.1 0.8 % 6.6 0.2 % Selling, General and
Administrative Charges, Net (d) 8.7 0.2 % 10.9 0.2 % Restructuring
and Other Costs, Net (e) 48.3 1.0 % 47.4 1.0 % Amortization of
Acquisition-related Intangible Assets 376.4 7.6 % 326.0
7.0 % Adjusted Operating Income (b) $ 1,227.1
24.8 % $ 1,081.1 23.2 %
Reconciliation of Adjusted
Net Income GAAP Net Income (a) $ 629.5 12.7 % $ 602.6 13.0 %
Cost of Revenues Charges (c) 41.1 0.8 % 6.6 0.2 % Selling, General
and Administrative Charges, Net (d) 8.7 0.2 % 10.9 0.2 %
Restructuring and Other Costs, Net (e) 48.3 1.0 % 47.4 1.0 %
Amortization of Acquisition-related Intangible Assets 376.4 7.6 %
326.0 7.0 % Other (Income) Expense, Net (f) (6.0 ) -0.1 % 6.3 0.1 %
Provision for Income Taxes (g) (144.7 ) -3.0 % (150.6 ) -3.2 %
Discontinued Operations, Net of Tax 3.2 0.1 % 3.7 0.0
% Adjusted Net Income (b) $ 956.5 19.3 % $ 852.9
18.3 %
Reconciliation of Adjusted Earnings per
Share GAAP EPS (a) $ 1.59 $ 1.50 Cost of Revenues Charges, Net
of Tax (c) 0.06 0.01 Selling, General and Administrative Charges,
Net of Tax (d) 0.01 0.02 Restructuring and Other Costs, Net of Tax
(e) 0.07 0.07 Amortization of Acquisition-related Intangible
Assets, Net of Tax 0.60 0.56 Other (Income) Expense, Net of Tax (f)
0.04 0.01 Provision for (Benefit from) Income Taxes (g) 0.03 (0.06
) Discontinued Operations, Net of Tax 0.01 0.01
Adjusted EPS (b) $ 2.41 $ 2.12
Reconciliation of Free Cash Flow GAAP Net Cash Provided by
Operating Activities (a) $ 1,205.9 $ 1,228.1 Net Cash (Provided by)
Used in Discontinued Operations (1.0 ) 0.7 Purchases of Property,
Plant and Equipment (133.5 ) (129.4 ) Proceeds from Sale of
Property, Plant and Equipment 3.2 10.6 Free
Cash Flow $ 1,074.6 $ 1,110.0
Segment Data Three Months Ended December 31, % of
December 31, % of (In millions) 2016 Revenues 2015
Revenues
Revenues Life Sciences Solutions $ 1,336.0
27.0 % $ 1,209.8 26.0 % Analytical Instruments 1,217.0 24.6 % 925.3
19.9 % Specialty Diagnostics 834.4 16.8 % 864.7 18.6 % Laboratory
Products and Services 1,757.0 35.5 % 1,816.6 39.0 % Eliminations
(191.2 ) -3.9 % (163.9 ) -3.5 % Consolidated Revenues $
4,953.2 100.0 % $ 4,652.5 100.0 %
Operating
Income and Operating Margin Life Sciences Solutions $ 445.0
33.3 % $ 382.0 31.6 % Analytical Instruments 298.5 24.5 % 205.0
22.1 % Specialty Diagnostics 227.4 27.2 % 226.7 26.2 % Laboratory
Products and Services 256.2 14.6 % 267.4 14.7 %
Subtotal Reportable Segments 1,227.1 24.8 % 1,081.1 23.2 %
Cost of Revenues Charges (c) (41.1 ) -0.8 % (6.6 ) -0.2 %
Selling, General and Administrative Charges, Net (d) (8.7 ) -0.2 %
(10.9 ) -0.2 % Restructuring and Other Costs, Net (e) (48.3 ) -1.0
% (47.4 ) -1.0 % Amortization of Acquisition-related Intangible
Assets (376.4 ) -7.6 % (326.0 ) -7.0 % GAAP Operating Income
(a) $ 752.6 15.2 % $ 690.2 14.8 %
(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, 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 2016 and 2015 include i) $36.3 and $6.2,
respectively, of charges for the sale of inventories revalued at
the date of acquisition; and ii) $0.1 and $0.4, respectively, of
accelerated depreciation on manufacturing assets to be abandoned
due to facility consolidations. Reported results in 2016 also
include a charge of $4.7 to conform the accounting policies of FEI
with the company's accounting policies.
(d) Reported results in 2016 and 2015 include i) $8.5 and $4.6,
respectively, of third-party transaction/integration costs
primarily related to recently completed acquisitions; and ii) $0.5
and $6.6, respectively, of accelerated depreciation on fixed assets
to be abandoned due to integration synergies. Reported results in
both 2016 and 2015 also include $0.3 of credits from contingent
acquisition consideration.
(e) Reported results in 2016 and 2015 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 2016
include $19.6 of charges for litigation, $1.5 of environmental
remediation costs and $1.4 of net gains on the sale of assets and
settlement of retirement plans. Reported results in 2015 include
$16.5 of charges for litigation at acquired businesses; $14.9 of
impairment of acquired technology in development and $1.7 of gains
on the sale of real estate.
(f) Reported results in 2016 and 2015 include i) losses of $2.8
and $5.8, respectively, on the early extinguishment of debt; ii)
$9.0 and $0.1, respectively, of net gains on investments; and iii)
$0.2 and $0.6, respectively, of amortization of acquisition-related
intangible assets of the company's equity-method investments.
(g) Reported provision for income taxes includes i) $157.9 and
$126.6 of incremental tax benefit in 2016 and 2015, respectively,
for the pre-tax reconciling items between GAAP and adjusted net
income; ii) $11.9 of incremental tax provision in 2016 due to the
net impact of tax audits; and iii) $1.3 and $(24.0) of incremental
tax provision (benefit) in 2016 and 2015, respectively, from
adjusting the company's deferred tax balances as a result of tax
rate changes.
Notes:
Consolidated depreciation expense is $97.4 and $98.5 in 2016 and
2015, respectively.
Consolidated equity compensation expense included in both
reported and adjusted results is $31.5 and $33.2 in 2016 and 2015,
respectively.
Consolidated Statement of Income
(a)(b) Year Ended December 31, % of December 31, % of (In
millions except per share amounts) 2016 Revenues 2015 Revenues
Revenues $ 18,274.1 $ 16,965.4 Costs and
Operating Expenses: Cost of revenues (c) 9,459.1 51.8 % 8,782.7
51.8 % Selling, general and administrative expenses (d) 4,043.8
22.1 % 3,724.1 22.0 % Amortization of acquisition-related
intangible assets 1,378.0 7.5 % 1,314.8 7.7 % Research and
development expenses 754.8 4.1 % 692.3 4.1 % Restructuring and
other costs, net (e) 189.2 1.0 % 115.3 0.7 % 15,824.9
86.6 % 14,629.2 86.2 % Operating Income
2,449.2 13.4 % 2,336.2 13.8 % Interest Income 48.4 30.6 Interest
Expense (469.6 ) (414.9 ) Other Expense, Net (f) (4.1 ) (15.5 )
Income Before Income Taxes 2,023.9 1,936.4 Benefit from
Income Taxes (g) 1.4 43.9 Income from
Continuing Operations 2,025.3 1,980.3 Loss from Discontinued
Operations, Net of Tax (3.5 ) (4.9 ) Net Income $ 2,021.8
11.1 % $ 1,975.4 11.6 % Earnings per Share
from Continuing Operations: Basic $ 5.13 $ 4.97
Diluted $ 5.10 $ 4.93 Earnings per Share:
Basic $ 5.12 $ 4.96 Diluted $ 5.09 $ 4.92
Weighted Average Shares: Basic 394.8 398.7
Diluted 397.4 401.9
Reconciliation of Adjusted Operating Income and Adjusted
Operating Margin GAAP Operating Income (a) $ 2,449.2 13.4 % $
2,336.2 13.8 % Cost of Revenues Charges (c) 101.5 0.6 % 9.1 0.0 %
Selling, General and Administrative Charges, Net (d) 103.9 0.6 %
46.3 0.3 % Restructuring and Other Costs, Net (e) 189.2 1.0 % 115.3
0.7 % Amortization of Acquisition-related Intangible Assets 1,378.0
7.5 % 1,314.8 7.7 % Adjusted Operating Income
(b) $ 4,221.8 23.1 % $ 3,821.7 22.5 %
Reconciliation of Adjusted Net Income GAAP Net Income (a) $
2,021.8 11.1 % $ 1,975.4 11.6 % Cost of Revenues Charges (c) 101.5
0.6 % 9.1 0.0 % Selling, General and Administrative Charges, Net
(d) 103.9 0.6 % 46.3 0.3 % Restructuring and Other Costs, Net (e)
189.2 1.0 % 115.3 0.7 % Amortization of Acquisition-related
Intangible Assets 1,378.0 7.5 % 1,314.8 7.7 % Other Expense, Net
(f) 20.6 0.1 % 21.5 0.2 % Provision for Income Taxes (g) (529.9 )
-2.9 % (515.8 ) -3.0 % Discontinued Operations, Net of Tax 3.5
0.0 % 4.9 0.0 % Adjusted Net Income (b) $
3,288.6 18.0 % $ 2,971.5 17.5 %
Reconciliation of Adjusted Earnings per Share GAAP EPS (a) $
5.09 $ 4.92 Cost of Revenues Charges, Net of Tax (c) 0.16 0.01
Selling, General and Administrative Charges, Net of Tax (d) 0.18
0.05 Restructuring and Other Costs, Net of Tax (e) 0.30 0.19
Amortization of Acquisition-related Intangible Assets, Net of Tax
2.41 2.27 Other Expense, Net of Tax (f) 0.09 0.03 Provision for
(Benefit from) Income Taxes (g) 0.03 (0.09 ) Discontinued
Operations, Net of Tax 0.01 0.01 Adjusted EPS
(b) $ 8.27 $ 7.39
Reconciliation of Free
Cash Flow GAAP Net Cash Provided by Operating Activities (a) $
3,156.3 $ 2,816.9 Net Cash Used in Discontinued Operations 2.0 8.7
Purchases of Property, Plant and Equipment (444.4 ) (422.9 )
Proceeds from Sale of Property, Plant and Equipment 26.3
18.1 Free Cash Flow $ 2,740.2 $ 2,420.8
Segment Data Year Ended December 31, %
of December 31, % of (In millions) 2016 Revenues 2015
Revenues
Revenues Life Sciences Solutions $ 4,978.1
27.2 % $ 4,439.4 26.2 % Analytical Instruments 3,668.2 20.1 %
3,208.2 18.9 % Specialty Diagnostics 3,339.2 18.3 % 3,243.9 19.1 %
Laboratory Products and Services 7,030.0 38.5 % 6,661.5 39.3 %
Eliminations (741.4 ) -4.1 % (587.6 ) -3.5 % Consolidated
Revenues $ 18,274.1 100.0 % $ 16,965.4 100.0 %
Operating Income and Operating Margin Life Sciences
Solutions $ 1,514.7 30.4 % $ 1,336.9 30.1 % Analytical Instruments
745.2 20.3 % 612.8 19.1 % Specialty Diagnostics 909.8 27.2 % 872.9
26.9 % Laboratory Products and Services 1,052.1 15.0 % 999.1
15.0 % Subtotal Reportable Segments 4,221.8 23.1 %
3,821.7 22.5 % Cost of Revenues Charges (c) (101.5 ) -0.6 %
(9.1 ) 0.0 % Selling, General and Administrative Charges, Net (d)
(103.9 ) -0.6 % (46.3 ) -0.3 % Restructuring and Other Costs, Net
(e) (189.2 ) -1.0 % (115.3 ) -0.7 % Amortization of
Acquisition-related Intangible Assets (1,378.0 ) -7.5 % (1,314.8 )
-7.7 % GAAP Operating Income (a) $ 2,449.2 13.4 % $
2,336.2 13.8 %
(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, 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 2016 and 2015 include i) $75.0 and $6.9,
respectively, of charges for the sale of inventories revalued at
the date of acquisition and ii) $1.8 and $2.2, respectively, of
accelerated depreciation on manufacturing assets to be abandoned
due to facility consolidations. Reported results in 2016 include
charges of $24.7 to conform the accounting policies of FEI and
Affymetrix with the company's accounting policies.
(d) Reported results in 2016 and 2015 include i) $71.6 and
$12.2, respectively, of third-party transaction/integration costs
primarily related to recently completed acquisitions; ii) charges
of $17.2 and $19.4, respectively, associated with product liability
litigation; iii) $8.8 and $17.5, respectively, of accelerated
depreciation on fixed assets to be abandoned due to integration
synergies; and iv) $2.2 and $2.8, respectively, of credits from
contingent acquisition consideration. Reported results in 2016 also
include a charge of $8.5 to conform the accounting policies of FEI
with the company's accounting policies.
(e) Reported results in 2016 and 2015 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 2016
include $8.3 of environmental remediation costs, $24.0 of net
charges for litigation and $6.4 of net gains on sales of assets and
settlement of retirement plans. Reported results in 2015 include
gains of $11.2 on the sale of product lines and real estate,
charges of $20.0 for litigation at an acquired business, $14.9 of
impairment of acquired technology in development, and $5.0 of cash
compensation contractually due to employees of an acquired business
on the date of acquisition.
(f) Reported results in 2016 and 2015 include $1.8 and $2.2,
respectively, of amortization of acquisition-related intangible
assets of the company's equity-method investments. Reported results
in 2016 include $22.0 of charges related to the amortization of
fees paid to obtain bridge financing commitments for the
acquisition of FEI and $9.3 of losses on the early extinguishment
of debt, offset in part by $12.5 of gains on the sale of
investments. Reported results in 2015 include $7.5 of costs
associated with entering into interest rate swap arrangements and
losses of $11.9 on the early extinguishment of debt.
(g) Reported provision for income taxes includes i) $543.3 and
$478.3 of incremental tax benefit in 2016 and 2015, respectively,
for the pre-tax reconciling items between GAAP and adjusted net
income; ii) $11.9 of incremental tax provision in 2016 due to the
net impact of tax audits; and ii) $1.5 and $(37.5) of incremental
tax provision (benefit) in 2016 and 2015, respectively, from
adjusting the company's deferred tax balances as a result of tax
rate changes.
Notes:
Consolidated depreciation expense is $380.0 and $373.4 in 2016
and 2015, respectively.
Consolidated equity compensation expense included in both
reported and adjusted results is $133.5 and $125.0 in 2016 and
2015, respectively.
Condensed Consolidated Balance Sheet
December 31, December 31, (In millions) 2016 2015
Assets Current Assets: Cash and cash equivalents $ 786.2 $
452.1 Accounts receivable, net 3,048.5 2,544.9 Inventories 2,213.3
1,991.7 Other current assets 905.6 752.5 Total
current assets 6,953.6 5,741.2 Property, Plant and
Equipment, Net 2,577.8 2,448.8 Acquisition-related
Intangible Assets 13,969.0 12,758.3 Other Assets
1,008.5 1,058.4 Goodwill 21,327.8 18,827.6
Total Assets $ 45,836.7 $ 40,834.3
Liabilities and Shareholders' Equity Current Liabilities:
Short-term obligations and current maturities of long-term
obligations $ 1,255.5 $ 1,051.8 Other current liabilities 3,525.5
3,094.5 Total current liabilities 4,781.0
4,146.3 Other Long-term Liabilities 4,144.0 3,917.6
Long-term Obligations 15,372.4 11,420.2 Total
Shareholders' Equity 21,539.3 21,350.2 Total
Liabilities and Shareholders' Equity $ 45,836.7 $ 40,834.3
Condensed Consolidated Statement of Cash
Flows Year Ended December 31, December 31, (In millions)
2016 2015
Operating Activities Net income $ 2,021.8 $
1,975.4 Loss from discontinued operations 3.5 4.9
Income from continuing operations 2,025.3 1,980.3
Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation and amortization 1,758.0 1,688.2
Change in deferred income taxes (598.2 ) (524.8 ) Net gains on sale
of businesses —
(7.6
) Other non-cash expenses, net 221.8 126.4 Changes in assets and
liabilities, excluding the effects of acquisitions and dispositions
(248.6 ) (436.9 ) Net cash provided by continuing operations
3,158.3 2,825.6 Net cash used in discontinued operations (2.0 )
(8.7 ) Net cash provided by operating activities 3,156.3
2,816.9
Investing Activities
Acquisitions, net of cash acquired (5,188.4 ) (694.6 ) Purchases of
property, plant and equipment (444.4 ) (422.9 ) Proceeds from sale
of property, plant and equipment 26.3 18.1 Other investing
activities, net 74.4 12.0 Net cash used in
investing activities (5,532.1 ) (1,087.4 )
Financing
Activities Net proceeds from issuance of debt 7,604.0 1,798.0
Repayment of debt (4,334.2 ) (3,780.2 ) Increase in commercial
paper, net 904.1 49.5 Purchases of company common stock (1,250.0 )
(500.0 ) Dividends paid (238.4 ) (240.6 ) Net proceeds from
issuance of company common stock under employee stock plans 135.3
124.0 Tax benefits from stock-based compensation awards 53.5 64.1
Other financing activities, net (13.7 ) (6.1 ) Net cash
provided by (used in) financing activities 2,860.6 (2,491.3
) Exchange Rate Effect on Cash (150.7 ) (129.6 )
Increase (Decrease) in Cash and Cash Equivalents 334.1 (891.4 )
Cash and Cash Equivalents at Beginning of Period 452.1
1,343.5 Cash and Cash Equivalents at End of Period $
786.2 $ 452.1 Free Cash Flow (a) $
2,740.2 $ 2,420.8
(a) Free cash flow is net cash provided by operating activities
of continuing operations less net purchases of property, plant and
equipment.
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version on businesswire.com: http://www.businesswire.com/news/home/20170131005173/en/
Thermo Fisher Scientific Inc.Media Contact Information:Karen
Kirkwood, 781-622-1306Email:
karen.kirkwood@thermofisher.comWebsite:
www.thermofisher.comorInvestor Contact Information:Ken Apicerno,
781-622-1294ken.apicerno@thermofisher.com
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