News
Exhibit 99.1
FOR IMMEDIATE RELEASE | ||
Media Contact Information: Karen Kirkwood | Investor Contact Information: Ken Apicerno | |
| Phone: 781-622-1306 | Phone: 781-622-1294 | |
| E-mail: karen.kirkwood@thermofisher.com | E-mail: ken.apicerno@thermofisher.com | |
| Website: www.thermofisher.com |
Thermo Fisher Scientific Reports Third Quarter 2014 Results
WALTHAM, Mass. (October 22, 2014) – Thermo Fisher Scientific Inc. (NYSE: TMO), the world leader in serving science, today reported its financial results for the third quarter ended September 27, 2014.
Third Quarter Highlights
| · | Grew adjusted earnings per share (EPS) by 32% to $1.71. |
| · | Increased revenue by 31% to $4.17 billion. |
| · | Expanded adjusted operating margin by 250 basis points to 21.9%. |
| · | Generated free cash flow of $0.59 billion in the quarter and $1.42 billion year to date. |
| · | Achieved a breakthrough in ultrahigh performance liquid chromatography (UHPLC) with the launch of the Thermo Scientific Vanquish system, which provides both accuracy and speed in a single platform for food safety, industrial and biopharma applications. |
| · | Showcased expanded capabilities for clinical customers at AACC (American Association for Clinical Chemistry), including specialty diagnostics as well as analytical instruments and software now listed with the FDA as Class 1 medical devices for clinical use. |
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’re pleased to extend our long track record of consistently delivering strong adjusted EPS growth,” said Marc N. Casper, president and chief executive officer of Thermo Fisher Scientific. “We leveraged our solid top-line results and our culture of operational discipline to achieve excellent performance on the bottom line. I’m also pleased to report that the Life Technologies integration is going very well, and it was another great quarter for innovation across our technology platforms.
“We launched a number of new products during the quarter to strengthen our leadership position in the key markets we serve. Among the highlights was our new Vanquish UHPLC system and columns, a potential game-changer for customers in applied markets who need to analyze high volumes of samples. At AACC, we showcased our expanded offering for customers in clinical laboratories, including allergy and autoimmunity tests, a range of immunosuppressant assays and, especially notable, the new Prelude MD HPLC, Endura MD mass spectrometer and ClinQuan MD software for clinical use. We’re also successfully executing our strategy to expand the markets for our next-generation sequencing technologies with the launch of our Ion PGM Dx system and reagents for clinical use in the U.S. and Europe.”
Third Quarter 2014
For the third quarter of 2014, adjusted EPS grew 32% to $1.71, versus $1.30 in the third quarter of 2013. Revenue for the quarter grew 31% to $4.17 billion in 2014, versus $3.19 billion in 2013. Organic revenue grew 4%, with acquisitions, net of divestitures, increasing revenue by 27% and currency translation having a negligible effect. Adjusted operating income for the third quarter of 2014 increased 48% compared with the year-ago period, and adjusted operating margin expanded to 21.9%, compared with 19.4% in the third quarter of 2013.
GAAP diluted EPS for the third quarter of 2014 was $1.17 versus $0.86 in the same quarter last year. GAAP operating income for the third quarter of 2014 was $640 million, compared with $392 million in 2013. GAAP operating margin increased to 15.3%, compared with 12.3% in the third quarter of 2013. GAAP results reflect a gain from the sale of Cole-Parmer in the 2014 quarter.
Annual Guidance for 2014
Casper added, “Our strong financial performance over the past nine months keeps us on track to achieve our 2014 adjusted EPS goal for the year.”
Thermo Fisher is updating its 2014 revenue guidance primarily to reflect the unfavorable change in foreign currency exchange rates and now expects revenue to be from $16.74 to $16.82 billion versus its previous guidance of $16.86 to $16.98 billion, for year-over-year growth of 28%. The company is maintaining the midpoint of its adjusted EPS guidance and tightening the range to $6.87 to $6.95 from the $6.85 to $6.97 previously announced, resulting in 27% to 28% adjusted EPS growth over 2013.
The 2014 guidance does not include any future acquisitions or divestitures and is based on current foreign exchange rates. In addition, the adjusted EPS estimate excludes amortization expense for acquisition-related intangible assets and certain other items detailed later in this press release under the heading “Use of Non-GAAP Financial Measures.”
Segment Results
Management uses adjusted operating results to monitor and evaluate performance of the company’s four business segments, as highlighted below.
Life Sciences Solutions Segment
In the third quarter of 2014, Life Sciences Solutions Segment revenue was $1.07 billion, compared with revenue of $167 million in the third quarter of 2013, reflecting the inclusion of the Life Technologies acquisition for the full quarter. Segment adjusted operating income in the 2014 quarter was $306 million versus $39 million in the year-ago quarter, and adjusted operating margin was 28.6%, versus 23.3% in 2013.
Analytical Instruments Segment
Analytical Instruments Segment revenue increased 3% to $786 million in the third quarter of 2014, compared with revenue of $765 million in the third quarter of 2013. Segment adjusted operating income increased 5% in the third quarter of 2014, and adjusted operating margin grew to 17.5%, versus 17.1% in the 2013 quarter.
Specialty Diagnostics Segment
Specialty Diagnostics Segment revenue in the third quarter increased 7% to $812 million in 2014, compared with revenue of $759 million in the third quarter of 2013. Segment adjusted operating income rose 10% in the third quarter of 2014, and adjusted operating margin increased to 27.6%, versus 26.9% in the 2013 quarter.
Laboratory Products and Services Segment
In the third quarter of 2014, Laboratory Products and Services Segment revenue increased 2% to $1.63 billion, compared with revenue of $1.59 billion in the third quarter of 2013. Segment adjusted operating income grew 1% in the third quarter of 2014, and adjusted operating margin was 15.1%, versus 15.4% in the 2013 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 restructuring and other costs/income and amortization of acquisition-related intangible assets. Adjusted EPS also excludes certain other gains and losses, tax provisions/benefits related to the previous items, benefits from tax credit carryforwards, the impact of significant tax audits or events and discontinued operations. We exclude the above items because they are outside of our normal operations and/or, in certain cases, are difficult to forecast accurately for future periods. We also use a non-GAAP measure, free cash flow, which excludes operating cash flows from discontinued operations and deducts net capital expenditures. 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. A significant portion of the purchase price for acquisitions may be allocated to intangible assets that have lives of 5 to 20 years. Our adjusted EPS estimate for 2014 excludes approximately $2.23 per share of expense for the amortization of acquisition-related intangible assets for acquisitions completed through the end of the third quarter of 2014. 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 one-time effect on deferred tax balances of enacted changes in tax rates), which are either isolated or cannot be expected to occur again with any regularity or predictability and that we believe are not indicative of our normal operating gains and losses. 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’s earnings guidance, however, is only provided on an adjusted basis. It is not feasible to provide GAAP EPS guidance because the items excluded, other than the amortization expense, are difficult to predict and estimate and are primarily dependent on future events, such as acquisitions and decisions concerning the location and timing of facility consolidations.
Conference Call
Thermo Fisher Scientific will hold its earnings conference call today, October 22, 2014, 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, November 21, 2014.
About Thermo Fisher Scientific
Thermo Fisher Scientific Inc. (NYSE: TMO) is the world leader in serving science, with revenues of $17 billion and 50,000 employees in 50 countries. 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 four premier brands – Thermo Scientific, Life Technologies, 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.
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 the Life Technologies acquisition may not materialize as expected; and the company being unable to successfully implement integration strategies or to achieve expected synergies and operating efficiencies within the expected time frames or at all. 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 28, 2014, 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.
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| Consolidated Statement of Income (unaudited) (a)(b) | Three Months Ended | |||||||||||||||
| September 27, | % of | September 28, | % of | |||||||||||||
| (In millions except per share amounts) | 2014 | Revenues | 2013 | Revenues | ||||||||||||
| Revenues | $ | 4,171.4 | $ | 3,191.8 | ||||||||||||
| Costs and Operating Expenses: | ||||||||||||||||
| Cost of revenues (c) | 2,127.0 | 51.0% | 1,788.2 | 56.0% | ||||||||||||
| Selling, general and administrative expenses (d) | 976.6 | 23.4% | 713.2 | 22.3% | ||||||||||||
| Amortization of acquisition-related intangible assets | 362.9 | 8.7% | 191.0 | 6.0% | ||||||||||||
| Research and development expenses | 175.2 | 4.2% | 95.9 | 3.0% | ||||||||||||
| Restructuring and other costs (income), net (e) | (110.6 | ) | -2.7% | 11.4 | 0.4% | |||||||||||
| 3,531.1 | 84.7% | 2,799.7 | 87.7% | |||||||||||||
| Operating Income | 640.3 | 15.3% | 392.1 | 12.3% | ||||||||||||
| Interest Income | 10.5 | 7.1 | ||||||||||||||
| Interest Expense | (116.8 | ) | (64.3 | ) | ||||||||||||
| Other Income (Expense), Net (f) | 5.2 | (15.9 | ) | |||||||||||||
| Income Before Income Taxes | 539.2 | 319.0 | ||||||||||||||
| Provision for Income Taxes (g) | (69.3 | ) | (1.3 | ) | ||||||||||||
| Income from Continuing Operations | 469.9 | 317.7 | ||||||||||||||
| Gain (Loss) from Discontinued Operations, Net of Tax | 1.7 | (0.1 | ) | |||||||||||||
| Net Income | $ | 471.6 | 11.3% | $ | 317.6 | 10.0% | ||||||||||
| Earnings per Share from Continuing Operations: | ||||||||||||||||
| Basic | $ | 1.17 | $ | .88 | ||||||||||||
| Diluted | $ | 1.16 | $ | .86 | ||||||||||||
| Earnings per Share: | ||||||||||||||||
| Basic | $ | 1.18 | $ | .88 | ||||||||||||
| Diluted | $ | 1.17 | $ | .86 | ||||||||||||
| Weighted Average Shares: | ||||||||||||||||
| Basic | 399.9 | 361.2 | ||||||||||||||
| Diluted | 403.7 | 367.3 | ||||||||||||||
| Reconciliation of Adjusted Operating Income and Adjusted Operating Margin | ||||||||||||||||
| GAAP Operating Income (a) | $ | 640.3 | 15.3% | $ | 392.1 | 12.3% | ||||||||||
| Cost of Revenues Charges (c) | 2.1 | 0.1% | 0.9 | 0.0% | ||||||||||||
| Selling, General and Administrative Costs, Net (d) | 20.3 | 0.5% | 24.0 | 0.7% | ||||||||||||
| Restructuring and Other Costs (Income), Net (e) | (110.6 | ) | -2.7% | 11.4 | 0.4% | |||||||||||
| Amortization of Acquisition-related Intangible Assets | 362.9 | 8.7% | 191.0 | 6.0% | ||||||||||||
| Adjusted Operating Income (b) | $ | 915.0 | 21.9% | $ | 619.4 | 19.4% | ||||||||||
| Reconciliation of Adjusted Net Income | ||||||||||||||||
| GAAP Net Income (a) | $ | 471.6 | 11.3% | $ | 317.6 | 10.0% | ||||||||||
| Cost of Revenues Charges (c) | 2.1 | 0.1% | 0.9 | 0.0% | ||||||||||||
| Selling, General and Administrative Costs, Net (d) | 20.3 | 0.5% | 24.0 | 0.7% | ||||||||||||
| Restructuring and Other Costs (Income), Net (e) | (110.6 | ) | -2.7% | 11.4 | 0.4% | |||||||||||
| Amortization of Acquisition-related Intangible Assets | 362.9 | 8.7% | 191.0 | 6.0% | ||||||||||||
| Other (Income) Expense, Net (f) | (3.6 | ) | -0.1% | 17.2 | 0.5% | |||||||||||
| Provision for Income Taxes (g) | (50.7 | ) | -1.2% | (85.2 | ) | -2.7% | ||||||||||
| Discontinued Operations, Net of Tax | (1.7 | ) | -0.1% | 0.1 | 0.0% | |||||||||||
| Adjusted Net Income (b) | $ | 690.3 | 16.5% | $ | 477.0 | 14.9% | ||||||||||
| Reconciliation of Adjusted Earnings per Share | ||||||||||||||||
| GAAP EPS (a) | $ | 1.17 | $ | 0.86 | ||||||||||||
| Cost of Revenues Charges, Net of Tax (c) | (0.04 | ) | — | |||||||||||||
| Selling, General and Administrative Costs, Net of Tax (d) | 0.02 | 0.05 | ||||||||||||||
| Restructuring and Other Costs (Income), Net of Tax (e) | — | 0.02 | ||||||||||||||
| Amortization of Acquisition-related Intangible Assets, Net of Tax | 0.57 | 0.35 | ||||||||||||||
| Other (Income) Expense, Net of Tax (f) | (0.01 | ) | 0.03 | |||||||||||||
| Provision for Income Taxes (g) | — | (0.01 | ) | |||||||||||||
| Discontinued Operations, Net of Tax | — | — | ||||||||||||||
| Adjusted EPS (b) | $ | 1.71 | $ | 1.30 | ||||||||||||
| Reconciliation of Free Cash Flow | ||||||||||||||||
| GAAP Net Cash Provided by Operating Activities (a) | $ | 676.0 | $ | 505.5 | ||||||||||||
| Net Cash Used in Discontinued Operations | 1.6 | 1.6 | ||||||||||||||
| Purchases of Property, Plant and Equipment | (90.7 | ) | (56.3 | ) | ||||||||||||
| Proceeds from Sale of Property, Plant and Equipment | 7.0 | 12.3 | ||||||||||||||
| Free Cash Flow (h) | $ | 593.9 | $ | 463.1 | ||||||||||||
| Segment Data | Three Months Ended | |||||||||||||||
| September 27, | % of | September 28, | % of | |||||||||||||
| (In millions) | 2014 | Revenues | 2013 | Revenues | ||||||||||||
| Revenues | ||||||||||||||||
| Life Sciences Solutions | $ | 1,071.9 | 25.7% | $ | 167.2 | 5.2% | ||||||||||
| Analytical Instruments | 786.5 | 18.9% | 765.4 | 24.0% | ||||||||||||
| Specialty Diagnostics | 811.8 | 19.5% | 759.3 | 23.8% | ||||||||||||
| Laboratory Products and Services | 1,628.7 | 39.0% | 1,594.7 | 50.0% | ||||||||||||
| Eliminations | (127.5 | ) | -3.1% | (94.8 | ) | -3.0% | ||||||||||
| Consolidated Revenues | $ | 4,171.4 | 100.0% | $ | 3,191.8 | 100.0% | ||||||||||
| Operating Income and Operating Margin | ||||||||||||||||
| Life Sciences Solutions | $ | 306.3 | 28.6% | $ | 38.9 | 23.3% | ||||||||||
| Analytical Instruments | 137.8 | 17.5% | 131.0 | 17.1% | ||||||||||||
| Specialty Diagnostics | 224.3 | 27.6% | 204.2 | 26.9% | ||||||||||||
| Laboratory Products and Services | 246.6 | 15.1% | 245.3 | 15.4% | ||||||||||||
| Subtotal Reportable Segments | 915.0 | 21.9% | 619.4 | 19.4% | ||||||||||||
| Cost of Revenues Charges (c) | (2.1 | ) | -0.1% | (0.9 | ) | 0.0% | ||||||||||
| Selling, General and Administrative Costs, Net (d) | (20.3 | ) | -0.5% | (24.0 | ) | -0.7% | ||||||||||
| Restructuring and Other (Costs) Income, Net (e) | 110.6 | 2.7% | (11.4 | ) | -0.4% | |||||||||||
| Amortization of Acquisition-related Intangible Assets | (362.9 | ) | -8.7% | (191.0 | ) | -6.0% | ||||||||||
| GAAP Operating Income (a) | $ | 640.3 | 15.3% | $ | 392.1 | 12.3% | ||||||||||
| (a) | "GAAP" (reported) results were determined in accordance with U.S. generally accepted accounting principles (GAAP). With the completion of the Life Technologies acquisition, we have established a new reporting segment, Life Sciences Solutions, and the Biosciences businesses have been transferred from the Analytical Instruments segment to the Life Sciences Solutions and Laboratory Products and Services segments. Prior period segment information has been reclassified to reflect these transfers. |
| (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 regularity or predictability (see note (f) for details); the tax consequences of the preceding items and certain other tax items (see note (g) for details); and results of discontinued operations. |
| (c) | Reported results in 2014 include $0.8 of charges for the sale of inventories revalued at the date of acquisition. Reported results in 2014 and 2013 include $1.3 and $0.9, respectively, of accelerated depreciation on manufacturing assets to be abandoned due to facility consolidations. |
| (d) | Reported results in 2014 and 2013 include i) $10.7 and $15.8, respectively, of third-party transaction/integration costs related to the acquisition of Life Technologies; ii) charges of $5.2 and $8.3, respectively, associated with product liability litigation; and iii) a $4.4 charge and $0.1 net credit, respectively, for changes in estimates of contingent consideration for acquisitions. |
| (e) | Reported results in 2014 and 2013 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 and, in 2014, $132.6 of net gain on the sale of the Cole-Parmer business. |
| (f) | Reported results in 2014 and 2013 include $0.5 and $0.5, respectively, of amortization of acquisition-related intangible assets of the company's equity investments. Reported results in 2014 include a $4.1 gain on an equity investment. Reported results in 2013 also include $20.0 of charges related to amortization of fees paid to obtain bridge financing commitments related to the Life Technologies acquisition, offset in part by a $3.3 gain from the sale of an equity investment. |
| (g) | Reported provision for income taxes includes i) $50.6 and $82.0 of incremental tax benefit in 2014 and 2013, respectively, for the pre-tax reconciling items between GAAP and adjusted net income; and ii) in 2014 and 2013, $0.1 and $3.2, respectively, of incremental tax benefit from adjusting the company's deferred tax balances as a result of tax rate changes. |
| (h) | Free cash flow in 2014 and 2013 was reduced by $22.3 and $21.9, respectively, of cash outlays related to the acquisition of Life Technologies including severance obligations, third-party transaction/integration costs and in 2013, fees to obtain bridge financing commitments. |
| Notes: |
| Consolidated depreciation expense is $92.8 and $59.4 in 2014 and 2013, respectively. | |
| Consolidated equity compensation expense included in both reported and adjusted results is $30.6 and $22.9 in 2014 and 2013, respectively. | |
Certain pre-acquisition equity awards of Life Technologies were converted to rights to receive future cash payments over the remaining vesting period. In addition to the equity compensation expense noted above, reported and adjusted results in 2014 include $9.2 million of expense for such cash payments. |
| Consolidated Statement of Income (unaudited) (a)(b) | Nine Months Ended | |||||||||||||||
| September 27, | % of | September 28, | % of | |||||||||||||
| (In millions except per share amounts) | 2014 | Revenues | 2013 | Revenues | ||||||||||||
| Revenues | $ | 12,396.8 | $ | 9,623.4 | ||||||||||||
| Costs and Operating Expenses: | ||||||||||||||||
| Cost of revenues (c) | 6,679.8 | 53.9% | 5,408.2 | 56.2% | ||||||||||||
| Selling, general and administrative expenses (d) | 2,984.0 | 24.1% | 2,141.2 | 22.2% | ||||||||||||
| Amortization of acquisition-related intangible assets | 992.4 | 8.0% | 574.2 | 6.0% | ||||||||||||
| Research and development expenses | 508.6 | 4.1% | 290.8 | 3.0% | ||||||||||||
| Restructuring and other costs (income), net (e) | (631.9 | ) | -5.1% | 54.4 | 0.6% | |||||||||||
| 10,532.9 | 85.0% | 8,468.8 | 88.0% | |||||||||||||
| Operating Income | 1,863.9 | 15.0% | 1,154.6 | 12.0% | ||||||||||||
| Interest Income | 38.4 | 21.4 | ||||||||||||||
| Interest Expense | (363.7 | ) | (193.1 | ) | ||||||||||||
| Other Income (Expense), Net (f) | 11.5 | (41.0 | ) | |||||||||||||
| Income Before Income Taxes | 1,550.1 | 941.9 | ||||||||||||||
| Provision for Income Taxes (g) | (258.6 | ) | (5.8 | ) | ||||||||||||
| Income from Continuing Operations | 1,291.5 | 936.1 | ||||||||||||||
| Gain (Loss) from Discontinued Operations, Net of Tax | 1.7 | (0.7 | ) | |||||||||||||
| Loss on Disposal of Discontinued Operations, Net of Tax | — | (4.2 | ) | |||||||||||||
| Net Income | $ | 1,293.2 | 10.4% | $ | 931.2 | 9.7% | ||||||||||
| Earnings per Share from Continuing Operations: | ||||||||||||||||
| Basic | $ | 3.25 | $ | 2.60 | ||||||||||||
| Diluted | $ | 3.21 | $ | 2.57 | ||||||||||||
| Earnings per Share: | ||||||||||||||||
| Basic | $ | 3.25 | $ | 2.59 | ||||||||||||
| Diluted | $ | 3.22 | $ | 2.56 | ||||||||||||
| Weighted Average Shares: | ||||||||||||||||
| Basic | 397.5 | 359.8 | ||||||||||||||
| Diluted | 401.7 | 364.1 | ||||||||||||||
| Reconciliation of Adjusted Operating Income and Adjusted Operating Margin | ||||||||||||||||
| GAAP Operating Income (a) | $ | 1,863.9 | 15.0% | $ | 1,154.6 | 12.0% | ||||||||||
| Cost of Revenues Charges (c) | 326.7 | 2.6% | 27.2 | 0.3% | ||||||||||||
| Selling, General and Administrative Costs, Net (d) | 118.0 | 1.0% | 47.9 | 0.4% | ||||||||||||
| Restructuring and Other Costs (Income), Net (e) | (631.9 | ) | -5.1% | 54.4 | 0.6% | |||||||||||
| Amortization of Acquisition-related Intangible Assets | 992.4 | 8.0% | 574.2 | 6.0% | ||||||||||||
| Adjusted Operating Income (b) | $ | 2,669.1 | 21.5% | $ | 1,858.3 | 19.3% | ||||||||||
| Reconciliation of Adjusted Net Income | ||||||||||||||||
| GAAP Net Income (a) | $ | 1,293.2 | 10.4% | $ | 931.2 | 9.7% | ||||||||||
| Cost of Revenues Charges (c) | 326.7 | 2.6% | 27.2 | 0.3% | ||||||||||||
| Selling, General and Administrative Costs, Net (d) | 118.0 | 1.0% | 47.9 | 0.4% | ||||||||||||
| Restructuring and Other Costs (Income), Net (e) | (631.9 | ) | -5.1% | 54.4 | 0.6% | |||||||||||
| Amortization of Acquisition-related Intangible Assets | 992.4 | 8.0% | 574.2 | 6.0% | ||||||||||||
| Other (Income) Expense, Net (f) | (6.8 | ) | -0.1% | 46.4 | 0.5% | |||||||||||
| Provision for Income Taxes (g) | (93.7 | ) | -0.7% | (234.8 | ) | -2.4% | ||||||||||
| Discontinued Operations, Net of Tax | (1.7 | ) | 0.0% | 4.9 | 0.0% | |||||||||||
| Adjusted Net Income (b) | $ | 1,996.2 | 16.1% | $ | 1,451.4 | 15.1% | ||||||||||
| Reconciliation of Adjusted Earnings per Share | ||||||||||||||||
| GAAP EPS (a) | $ | 3.22 | $ | 2.56 | ||||||||||||
| Cost of Revenues Charges, Net of Tax (c) | 0.59 | 0.05 | ||||||||||||||
| Selling, General and Administrative Costs, Net of Tax (d) | 0.21 | 0.10 | ||||||||||||||
| Restructuring and Other Costs (Income), Net of Tax (e) | (0.81 | ) | 0.11 | |||||||||||||
| Amortization of Acquisition-related Intangible Assets, Net of Tax | 1.80 | 1.10 | ||||||||||||||
| Other (Income) Expense, Net of Tax (f) | (0.01 | ) | 0.07 | |||||||||||||
| Provision for Income Taxes (g) | (0.03 | ) | (0.01 | ) | ||||||||||||
| Discontinued Operations, Net of Tax | — | 0.01 | ||||||||||||||
| Adjusted EPS (b) | $ | 4.97 | $ | 3.99 | ||||||||||||
| Reconciliation of Free Cash Flow | ||||||||||||||||
| GAAP Net Cash Provided by Operating Activities (a) | $ | 1,665.9 | $ | 1,282.2 | ||||||||||||
| Net Cash Used in Discontinued Operations | 3.5 | 3.3 | ||||||||||||||
| Purchases of Property, Plant and Equipment | (270.9 | ) | (187.9 | ) | ||||||||||||
| Proceeds from Sale of Property, Plant and Equipment | 19.7 | 15.9 | ||||||||||||||
| Free Cash Flow (h) | $ | 1,418.2 | $ | 1,113.5 | ||||||||||||
| Segment Data | Nine Months Ended | |||||||||||||||
| September 27, | % of | September 28, | % of | |||||||||||||
| (In millions) | 2014 | Revenues | 2013 | Revenues | ||||||||||||
| Revenues | ||||||||||||||||
| Life Sciences Solutions | $ | 3,010.5 | 24.3% | $ | 520.8 | 5.4% | ||||||||||
| Analytical Instruments | 2,349.8 | 19.0% | 2,266.5 | 23.6% | ||||||||||||
| Specialty Diagnostics | 2,480.6 | 20.0% | 2,358.5 | 24.5% | ||||||||||||
| Laboratory Products and Services | 4,918.6 | 39.7% | 4,746.0 | 49.3% | ||||||||||||
| Eliminations | (362.7 | ) | -3.0% | (268.4 | ) | -2.8% | ||||||||||
| Consolidated Revenues | $ | 12,396.8 | 100.0% | $ | 9,623.4 | 100.0% | ||||||||||
| Operating Income and Operating Margin | ||||||||||||||||
| Life Sciences Solutions | $ | 850.0 | 28.2% | $ | 123.4 | 23.7% | ||||||||||
| Analytical Instruments | 399.1 | 17.0% | 376.8 | 16.6% | ||||||||||||
| Specialty Diagnostics | 681.7 | 27.5% | 643.4 | 27.3% | ||||||||||||
| Laboratory Products and Services | 738.3 | 15.0% | 714.7 | 15.1% | ||||||||||||
| Subtotal Reportable Segments | 2,669.1 | 21.5% | 1,858.3 | 19.3% | ||||||||||||
| Cost of Revenues Charges (c) | (326.7 | ) | -2.6% | (27.2 | ) | -0.3% | ||||||||||
| Selling, General and Administrative Costs, Net (d) | (118.0 | ) | -1.0% | (47.9 | ) | -0.4% | ||||||||||
| Restructuring and Other (Costs) Income, Net (e) | 631.9 | 5.1% | (54.4 | ) | -0.6% | |||||||||||
| Amortization of Acquisition-related Intangible Assets | (992.4 | ) | -8.0% | (574.2 | ) | -6.0% | ||||||||||
| GAAP Operating Income (a) | $ | 1,863.9 | 15.0% | $ | 1,154.6 | 12.0% | ||||||||||
| (a) | "GAAP" (reported) results were determined in accordance with U.S. generally accepted accounting principles (GAAP). With the completion of the Life Technologies acquisition, we have established a new reporting segment, Life Sciences Solutions, and the Biosciences businesses have been transferred from the Analytical Instruments segment to the Life Sciences Solutions and Laboratory Products and Services segments. Prior period segment information has been reclassified to reflect these transfers. |
| (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 regularity or predictability (see note (f) for details); the tax consequences of the preceding items and certain other tax items (see note (g) for details); and results of discontinued operations. |
| (c) | Reported results in 2014 and 2013 include $303.1 and $23.9, respectively, of charges for the sale of inventories revalued at the date of acquisition and $2.2 and $3.3, respectively, of accelerated depreciation on manufacturing assets to be abandoned due to facility consolidations. Reported results in 2014 also include a charge of $21.4 to conform the accounting policies of Life Technologies with the company's accounting policies. |
| (d) | Reported results in 2014 and 2013 include i) $88.6 and $26.1, respectively, of third-party transaction/integration costs related to the acquisition of Life Technologies; ii) charges of $5.2 and $8.3, respectively, associated with product liability litigation; and iii) charges of $8.0 and $13.5, respectively, for changes in estimates of contingent consideration for acquisitions. Reported results in 2014 also include a charge of $16.2 to conform the accounting policies of Life Technologies with the company's accounting policies. |
| (e) | Reported results in 2014 include gains of $894.4 on the sale of businesses, principally the sera and media, gene modulation and magnetic beads businesses and the Cole-Parmer business, and a charge of $91.7 for cash compensation to monetize certain equity awards held by Life Technologies employees at the date of acquisition. Reported results in 2014 and 2013 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. |
| (f) | Reported results in 2014 and 2013 include $1.6 and $1.8, respectively, of amortization of acquisition-related intangible assets of the company's equity investments. Reported results in 2014 also include net gains of $9.4 from available-for-sale and equity investments, offset in part by $1.0 of charges related to amortization of fees paid to obtain financing commitments related to the Life Technologies acquisition. Reported results in 2013 also include $60.5 of charges related to amortization of fees paid to obtain bridge financing commitments related to the Life Technologies acquisition, offset in part by $10.5 of realized gains on available-for-sale investments irrevocably contributed to the company's UK pension plans and $5.4 of gains from sales of equity investments. |
| (g) | Reported provision for income taxes includes i) $83.0 and $229.8 of incremental tax benefit in 2014 and 2013, respectively, for the pre-tax reconciling items between GAAP and adjusted net income; and ii) in 2014 and 2013, $10.7 and $5.0, respectively, of incremental tax benefit from adjusting the company's deferred tax balances as a result of tax rate changes. |
| (h) | Free cash flow in 2014 and 2013 was reduced by $308.8 and $79.5, respectively, of cash outlays related to the acquisition of Life Technologies including monetizing certain equity awards, severance obligations, third-party transaction/integration costs and, in 2013, fees to obtain bridge financing commitments. |
| Notes: |
| Consolidated depreciation expense is $263.7 and $176.4 in 2014 and 2013, respectively. | |
| Consolidated equity compensation expense included in both reported and adjusted results is $86.6 and $66.6 in 2014 and 2013, respectively. | |
Certain pre-acquisition equity awards of Life Technologies were converted to rights to receive future cash payments over the remaining vesting period. In addition to the equity compensation expense noted above, reported and adjusted results in 2014 include $26.3 million of expense for such cash payments. |
| Condensed Consolidated Balance Sheet (unaudited) | ||||||||
| September 27, | December 31, | |||||||
| (In millions) | 2014 | 2013 | ||||||
| Assets | ||||||||
| Current Assets: | ||||||||
| Cash and cash equivalents | $ | 534.3 | $ | 5,826.0 | ||||
| Short-term investments | 9.3 | 4.5 | ||||||
| Accounts receivable, net | 2,507.1 | 1,942.3 | ||||||
| Inventories | 1,913.7 | 1,494.5 | ||||||
| Other current assets | 755.5 | 613.4 | ||||||
| Total current assets | 5,719.9 | 9,880.7 | ||||||
| Property, Plant and Equipment, Net | 2,406.1 | 1,767.4 | ||||||
| Acquisition-related Intangible Assets | 14,698.3 | 7,071.3 | ||||||
| Other Assets | 819.7 | 640.7 | ||||||
| Goodwill | 19,046.8 | 12,503.3 | ||||||
| Total Assets | $ | 42,690.8 | $ | 31,863.4 | ||||
| Liabilities and Shareholders' Equity | ||||||||
| Current Liabilities: | ||||||||
| Short-term obligations and current maturities of long-term obligations | $ | 3,088.5 | $ | 987.7 | ||||
| Other current liabilities | 3,133.6 | 2,138.3 | ||||||
| Total current liabilities | 6,222.1 | 3,126.0 | ||||||
| Other Long-term Liabilities | 4,569.5 | 2,381.7 | ||||||
| Long-term Obligations | 11,388.6 | 9,499.6 | ||||||
| Total Shareholders' Equity | 20,510.6 | 16,856.1 | ||||||
| Total Liabilities and Shareholders' Equity | $ | 42,690.8 | $ | 31,863.4 | ||||
| Condensed Consolidated Statement of Cash Flows (unaudited) | Nine Months Ended | |||||||
| September 27, | September 28, | |||||||
| (In millions) | 2014 | 2013 | ||||||
| Operating Activities | ||||||||
| Net income | $ | 1,293.2 | $ | 931.2 | ||||
| (Gain) loss from discontinued operations | (1.7 | ) | 0.7 | |||||
| Loss on disposal of discontinued operations | — | 4.2 | ||||||
| Income from continuing operations | 1,291.5 | 936.1 | ||||||
| Adjustments to reconcile income from continuing operations to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | 1,256.1 | 750.6 | ||||||
| Change in deferred income taxes | (583.8 | ) | (204.5 | ) | ||||
| Net gains on sale of businesses | (894.4 | ) | — | |||||
| Other non-cash expenses, net | 356.4 | 67.7 | ||||||
| Changes in assets and liabilities, excluding the effects of acquisitions and dispositions | 243.6 | (264.4 | ) | |||||
| Net cash provided by continuing operations | 1,669.4 | 1,285.5 | ||||||
| Net cash used in discontinued operations | (3.5 | ) | (3.3 | ) | ||||
| Net cash provided by operating activities | 1,665.9 | 1,282.2 | ||||||
| Investing Activities | ||||||||
| Acquisitions, net of cash acquired | (13,056.1 | ) | (5.5 | ) | ||||
| Purchases of property, plant and equipment | (270.9 | ) | (187.9 | ) | ||||
| Proceeds from sale of property, plant and equipment | 19.7 | 15.9 | ||||||
| Proceeds from sale of businesses, net of cash divested | 1,520.0 | — | ||||||
| Other investing activities, net | 130.6 | (15.8 | ) | |||||
| Net cash used in investing activities | (11,656.7 | ) | (193.3 | ) | ||||
| Financing Activities | ||||||||
| Net proceeds from issuance of debt | 4,999.6 | (3.9 | ) | |||||
| Increase in commercial paper, net | 212.2 | — | ||||||
| Repayment of long-term obligations | (3,430.3 | ) | (0.9 | ) | ||||
| Decrease in short-term notes payable | (28.2 | ) | (0.7 | ) | ||||
| Purchases of company common stock | — | (89.8 | ) | |||||
| Dividends paid | (174.8 | ) | (162.0 | ) | ||||
| Net proceeds from issuance of company common stock | 2,942.0 | — | ||||||
| Net proceeds from issuance of company common stock under employee stock plans | 132.7 | 204.9 | ||||||
| Tax benefits from stock-based compensation awards | 61.1 | 39.8 | ||||||
| Other financing activities, net | (7.5 | ) | (0.9 | ) | ||||
| Net cash provided by (used in) financing activities | 4,706.8 | (13.5 | ) | |||||
| Exchange Rate Effect on Cash | (7.7 | ) | (35.4 | ) | ||||
| (Decrease) Increase in Cash and Cash Equivalents | (5,291.7 | ) | 1,040.0 | |||||
| Cash and Cash Equivalents at Beginning of Period | 5,826.0 | 805.6 | ||||||
| Cash and Cash Equivalents at End of Period | $ | 534.3 | $ | 1,845.6 | ||||
| Free Cash Flow (a)(b) | $ | 1,418.2 | $ | 1,113.5 | ||||
| (a) | Free cash flow is net cash provided by operating activities of continuing operations less net purchases of property, plant and equipment. |
| (b) | Free cash flow in 2014 and 2013 was reduced by $308.8 and $79.5, respectively, of cash outlays related to the acquisition of Life Technologies including monetizing certain equity awards, severance obligations, third-party transaction/integration costs and, in 2013, fees to obtain bridge financing commitments. |