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Thermo Fisher Scientific Inc. (NYSE: TMO), the world leader in serving science, today reported its financial results for the third quarter ended September 30, 2023.
Third Quarter 2023 Highlights
- Third quarter revenue was $10.57 billion, 1% lower versus the same quarter last year. Core organic revenue growth was 1%.
- Third quarter GAAP diluted earnings per share (EPS) was $4.42, 17% higher versus the same quarter last year, driven by 160 basis points of operating margin expansion.
- Third quarter adjusted EPS was $5.69, 12% higher versus the same quarter last year, driven by 200 basis points of adjusted operating margin expansion.
- The impact of the macroeconomic conditions that the industry has experienced through the year increased in the third quarter. Our PPI Business System and strong execution by our global team enabled the company to deliver strong financial performance for the quarter.
- Advanced our proven growth strategy, launching a range of high-impact, innovative new products, including the groundbreaking EXENT ® Solution in Europe, an offering from our protein diagnostics business, to help diagnose and monitor patients with blood protein abnormalities related to multiple myeloma and other disorders; the Gibco™ CTS™ Detachable Dynabeads™ , our next-generation platform of cell therapy reagents that enables process flexibility, scalability and higher drug efficacy for cell therapy manufacturers; and the Thermo Scientific™ Fill Finish Solution™ , to improve the efficiency of the sterile fill-finish process, a great example of innovation for drug manufacturing.
- Shortly after the quarter ended, announced an agreement to acquire Olink Holding AB (publ) ("Olink") (Nasdaq: OLK) for a net purchase price of approximately $3.1 billion. Olink is a provider of differentiated next-generation proteomic solutions that enable our customers to meaningfully accelerate discovery and scientific breakthroughs and is highly complementary to our leading mass spectrometry and life sciences offerings.
- Building on our environmental, social and governance (ESG) priorities, we are collaborating with the National Minority Quality Forum (NMQF) to make clinical research more accessible to historically underserved communities. The collaboration supports biopharmaceutical and biotech customers' desire to increase diversity in clinical trials by enrolling and retaining patients who more fully reflect real-world populations.
"While market conditions further weakened during the third quarter, I'm very pleased with our team's execution which enabled our company to deliver both excellent margin expansion and adjusted EPS growth," said Marc Casper, chairman, president and chief executive officer of Thermo Fisher Scientific. "Our experienced management team is leveraging our PPI Business System to effectively manage through the current dynamic environment. We also continue to invest for the future and a great example of this is our recently announced agreement to acquire Olink."
Casper added, "We are incredibly focused on delivering differentiated short-term performance while enhancing our long-term competitive position."
Third Quarter 2023
Revenue for the quarter declined 1% to $10.57 billion in 2023, versus $10.68 billion in 2022. Organic revenue was 3% lower, Core organic revenue growth was 1%, and COVID-19 testing revenue was $0.05 billion.
GAAP Earnings Results
GAAP diluted EPS in the third quarter of 2023 was $4.42, versus $3.79 in the same quarter last year. GAAP operating income for the third quarter of 2023 was $1.86 billion, compared with $1.71 billion in the year-ago quarter. GAAP operating margin was 17.6%, compared with 16.0% in the third quarter of 2022.
Non-GAAP Earnings Results
Adjusted EPS in the third quarter of 2023 was $5.69, versus $5.08 in the third quarter of 2022. Adjusted operating income for the third quarter of 2023 was $2.56 billion, compared with $2.37 billion in the year-ago quarter. Adjusted operating margin was 24.2%, compared with 22.2% in the third quarter of 2022.
Annual Guidance for 2023
Given the current macroeconomic environment, Thermo Fisher is revising revenue and adjusted EPS guidance for the full year. The company now expects 2023 revenue to be $42.7 billion, with Core organic revenue growth of 1%, and adjusted EPS of $21.50.
Use of Non-GAAP Financial Measures
Adjusted EPS, adjusted net income, adjusted operating income, adjusted operating margin, free cash flow, organic revenue growth and Core organic revenue growth are non-GAAP measures that exclude certain items detailed after the tables that accompany this press release, under the heading "Supplemental Information Regarding Non-GAAP Financial Measures." The reconciliations of GAAP to non-GAAP financial measures are provided in the tables that accompany this press release.
Conference Call
During the call, the company will discuss its financial performance, as well as future expectations. To listen, call (833) 470-1428 within the U.S. or (404) 975-4839 outside the U.S. The access code is 385381. You may also listen to the call live on the "Investors" section of our website, www.thermofisher.com . The earnings press release and related information can also be found in that section of our website under the heading "Financials". A replay of the call will be available under "News, Events & Presentations" through Friday, November 10, 2023.
About Thermo Fisher Scientific
Thermo Fisher Scientific Inc. is the world leader in serving science, with annual revenue over $40 billion. Our Mission is to enable our customers to make the world healthier, cleaner and safer. Whether our customers are accelerating life sciences research, solving complex analytical challenges, increasing productivity in their laboratories, improving patient health through diagnostics or the development and manufacture of life-changing therapies, we are here to support them. Our global team delivers an unrivaled combination of innovative technologies, purchasing convenience and pharmaceutical services through our industry-leading brands, including Thermo Scientific, Applied Biosystems, Invitrogen, Fisher Scientific, Unity Lab Services, Patheon and PPD. 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 COVID-19 pandemic; the need to develop new products and adapt to significant technological change; implementation of strategies for improving growth; general economic conditions and related uncertainties; dependence on customers' capital spending policies and government funding policies; the effect of economic and political conditions and exchange rate fluctuations on international operations; use and protection of intellectual property; the effect of changes in governmental regulations; any natural disaster, public health crisis or other catastrophic event; and the effect of laws and regulations governing government contracts, as well as the possibility that expected benefits related to recent or pending acquisitions, including our pending acquisition of Olink, may not materialize as expected. Additional important factors that could cause actual results to differ materially from those indicated by such forward-looking statements are set forth in our most recent annual report on Form 10-K and subsequent quarterly reports on Form 10-Q, which are on file with the SEC and available in the "Investors" section of our website under the heading "SEC Filings." While we may elect to update forward-looking statements at some point in the future, we specifically disclaim any obligation to do so, even if estimates change and, therefore, you should not rely on these forward-looking statements as representing our views as of any date subsequent to today.
Additional Information and Where to Find It
The tender offer for all of the outstanding Olink common shares and all of the American Depositary Shares has not yet commenced. This press release is neither an offer to purchase nor a solicitation of an offer to sell any shares of Olink or any other securities, nor is it a substitute for the tender offer materials that Thermo Fisher or its acquisition subsidiary will file with the SEC. The terms and conditions of the tender offer will be published in, and the offer to purchase common shares and American Depositary Shares of Olink will be made only pursuant to, the offer document and related offer materials prepared by Thermo Fisher and its acquisition subsidiary and filed with the SEC in a tender offer statement on Schedule TO at the time the tender offer is commenced. Olink intends to file a solicitation/recommendation statement on Schedule 14D-9 with the SEC with respect to the tender offer. Olink's shareholders are strongly advised to read these tender offer materials carefully and in their entirety when they become available, as they may be amended from time to time, because they will contain important information about such tender offer that Olink's shareholders should consider prior to making any decisions with respect to such tender offer. Once filed, the tender offer materials may be obtained free of charge at the SEC's website at www.sec.gov or at Olink's website at investors.olink.com/investor-relations or at Thermo Fisher's website at www.thermofisher.com or by contacting Thermo Fisher's investor relations department at 781-622-1111.
Condensed Consolidated Statements of Income (unaudited) | ||||||||||||||
Three months ended | ||||||||||||||
September 30, | % of | October 1, | % of | |||||||||||
(Dollars in millions except per share amounts) | 2023 | Revenues | 2022 | Revenues | ||||||||||
Revenues | $ | 10,574 | $ | 10,677 | ||||||||||
Costs and operating expenses: | ||||||||||||||
Cost of revenues (a) | 6,145 | 58.1 | % | 6,246 | 58.5 | % | ||||||||
Selling, general and administrative expenses (b) | 1,578 | 14.9 | % | 1,743 | 16.3 | % | ||||||||
Amortization of acquisition-related intangible assets | 584 | 5.6 | % | 594 | 5.6 | % | ||||||||
Research and development expenses | 319 | 3.0 | % | 351 | 3.3 | % | ||||||||
Restructuring and other costs (c) | 84 | 0.8 | % | 33 | 0.3 | % | ||||||||
Total costs and operating expenses | 8,710 | 82.4 | % | 8,967 | 84.0 | % | ||||||||
Operating income | 1,864 | 17.6 | % | 1,710 | 16.0 | % | ||||||||
Interest income | 246 | 68 | ||||||||||||
Interest expense | (359 | ) | (173 | ) | ||||||||||
Other income/(expense) (d) | 14 | (4 | ) | |||||||||||
Income before income taxes | 1,765 | 1,601 | ||||||||||||
Provision for income taxes (e) | (53 | ) | (31 | ) | ||||||||||
Equity in earnings/(losses) of unconsolidated entities | (17 | ) | (72 | ) | ||||||||||
Net income | 1,695 | 1,498 | ||||||||||||
Less: net income/(losses) attributable to noncontrolling interests and redeemable noncontrolling interest | (20 | ) | 3 | |||||||||||
Net income attributable to Thermo Fisher Scientific Inc. | $ | 1,715 | 16.2 | % | $ | 1,495 | 14.0 | % | ||||||
Earnings per share attributable to Thermo Fisher Scientific Inc.: | ||||||||||||||
Basic | $ | 4.44 | $ | 3.82 | ||||||||||
Diluted | $ | 4.42 | $ | 3.79 | ||||||||||
Weighted average shares: | ||||||||||||||
Basic | 386 | 392 | ||||||||||||
Diluted | 388 | 395 | ||||||||||||
Reconciliation of adjusted operating income and adjusted operating margin | ||||||||||||||
GAAP operating income | $ | 1,864 | 17.6 | % | $ | 1,710 | 16.0 | % | ||||||
Cost of revenues adjustments (a) | 14 | 0.1 | % | 22 | 0.2 | % | ||||||||
Selling, general and administrative expenses adjustments (b) | 14 | 0.1 | % | 11 | 0.1 | % | ||||||||
Restructuring and other costs (c) | 84 | 0.8 | % | 33 | 0.3 | % | ||||||||
Amortization of acquisition-related intangible assets | 584 | 5.6 | % | 594 | 5.6 | % | ||||||||
Adjusted operating income (non-GAAP measure) | $ | 2,560 | 24.2 | % | $ | 2,370 | 22.2 | % | ||||||
Reconciliation of adjusted net income | ||||||||||||||
GAAP net income attributable to Thermo Fisher Scientific Inc. | $ | 1,715 | $ | 1,495 | ||||||||||
Cost of revenues adjustments (a) | 14 | 22 | ||||||||||||
Selling, general and administrative expenses adjustments (b) | 14 | 11 | ||||||||||||
Restructuring and other costs (c) | 84 | 33 | ||||||||||||
Amortization of acquisition-related intangible assets | 584 | 594 | ||||||||||||
Other income/expense adjustments (d) | (9 | ) | 14 | |||||||||||
Provision for income taxes adjustments (e) | (192 | ) | (238 | ) | ||||||||||
Equity in earnings/losses of unconsolidated entities | 17 | 72 | ||||||||||||
Noncontrolling interests adjustments (f) | (19 | ) | — | |||||||||||
Adjusted net income (non-GAAP measure) | $ | 2,208 | $ | 2,003 | ||||||||||
Reconciliation of adjusted earnings per share | ||||||||||||||
GAAP diluted EPS attributable to Thermo Fisher Scientific Inc. | $ | 4.42 | $ | 3.79 | ||||||||||
Cost of revenues adjustments (a) | 0.04 | 0.06 | ||||||||||||
Selling, general and administrative expenses adjustments (b) | 0.03 | 0.03 | ||||||||||||
Restructuring and other costs (c) | 0.22 | 0.08 | ||||||||||||
Amortization of acquisition-related intangible assets | 1.50 | 1.50 | ||||||||||||
Other income/expense adjustments (d) | (0.02 | ) | 0.04 | |||||||||||
Provision for income taxes adjustments (e) | (0.49 | ) | (0.60 | ) | ||||||||||
Equity in earnings/losses of unconsolidated entities | 0.04 | 0.18 | ||||||||||||
Noncontrolling interests adjustments (f) | (0.05 | ) | 0.00 | |||||||||||
Adjusted EPS (non-GAAP measure) | $ | 5.69 | $ | 5.08 | ||||||||||
Reconciliation of free cash flow | ||||||||||||||
GAAP net cash provided by operating activities | $ | 2,414 | $ | 1,937 | ||||||||||
Purchases of property, plant and equipment | (332 | ) | (547 | ) | ||||||||||
Proceeds from sale of property, plant and equipment | 66 | 4 | ||||||||||||
Free cash flow (non-GAAP measure) | $ | 2,148 | $ | 1,394 | ||||||||||
Business Segment Information | Three months ended | |||||||||||||
September 30, | % of | October 1, | % of | |||||||||||
(Dollars in millions) | 2023 | Revenues | 2022 | Revenues | ||||||||||
Revenues | ||||||||||||||
Life Sciences Solutions | $ | 2,433 | 23.0 | % | $ | 2,962 | 27.7 | % | ||||||
Analytical Instruments | 1,754 | 16.6 | % | 1,621 | 15.2 | % | ||||||||
Specialty Diagnostics | 1,083 | 10.2 | % | 1,065 | 10.0 | % | ||||||||
Laboratory Products and Biopharma Services | 5,728 | 54.2 | % | 5,585 | 52.3 | % | ||||||||
Eliminations | (424 | ) | -4.0 | % | (556 | ) | -5.2 | % | ||||||
Consolidated revenues | $ | 10,574 | 100.0 | % | $ | 10,677 | 100.0 | % | ||||||
Segment income and segment income margin | ||||||||||||||
Life Sciences Solutions | $ | 872 | 35.9 | % | $ | 1,039 | 35.1 | % | ||||||
Analytical Instruments | 468 | 26.7 | % | 386 | 23.8 | % | ||||||||
Specialty Diagnostics | 283 | 26.1 | % | 220 | 20.6 | % | ||||||||
Laboratory Products and Biopharma Services | 937 | 16.4 | % | 725 | 13.0 | % | ||||||||
Subtotal reportable segments | 2,560 | 24.2 | % | 2,370 | 22.2 | % | ||||||||
Cost of revenues adjustments (a) | (14 | ) | -0.1 | % | (22 | ) | -0.2 | % | ||||||
Selling, general and administrative expenses adjustments (b) | (14 | ) | -0.1 | % | (11 | ) | -0.1 | % | ||||||
Restructuring and other costs (c) | (84 | ) | -0.8 | % | (33 | ) | -0.3 | % | ||||||
Amortization of acquisition-related intangible assets | (584 | ) | -5.6 | % | (594 | ) | -5.6 | % | ||||||
Consolidated GAAP operating income | $ | 1,864 | 17.6 | % | $ | 1,710 | 16.0 | % | ||||||
| (a) Adjusted results in 2023 exclude charges for the sale of inventory revalued at the date of acquisition. Adjusted results in 2023 also exclude $5 of accelerated depreciation on manufacturing assets to be abandoned due to facility consolidations. Adjusted results in 2022 exclude charges for inventory write-downs associated with large-scale abandonment of product lines. |
(b) Adjusted results in 2023 and 2022 exclude certain third-party expenses, principally transaction/integration costs related to recent acquisitions, charges/credits for changes in estimates of contingent acquisition consideration, and charges associated with product liability litigation. |
(c) Adjusted results in 2023 and 2022 exclude restructuring and other costs consisting principally of severance, impairments of long-lived assets, abandoned facility, and other expenses of headcount reductions and real estate consolidations. Adjusted results in 2023 also exclude $5 of net gains on the sale of real estate. |
(d) Adjusted results in 2023 and 2022 exclude net gains/losses on investments. |
(e) Adjusted provision for income taxes in 2023 and 2022 excludes incremental tax impacts for the reconciling items between GAAP and adjusted net income, incremental tax impacts as a result of tax rate/law changes, and the tax impacts from audit settlements (including a $658 benefit from an audit settlement in 2022). Adjusted results in 2022 also exclude a $423 charge for the impact of deferred tax realizability assessments as a result of audit settlements. |
(f) Adjusted results exclude the incremental impacts for the reconciling items between GAAP and adjusted net income attributable to noncontrolling interests. |
Note: |
Consolidated depreciation expense is $269 and $244 in 2023 and 2022, respectively. |
Organic and Core organic revenue growth | Three months ended | ||
September 30, 2023 | |||
Revenue growth | -1 | % | |
Acquisitions | 1 | % | |
Currency translation | 1 | % | |
Organic revenue growth (non-GAAP measure) * | -3 | % | |
COVID-19 testing revenue | -4 | % | |
Core organic revenue growth (non-GAAP measure) * | 1 | % | |
* Results may not sum due to rounding. | |||
Note: | |||
For more information related to non-GAAP financial measures, refer to the section titled "Supplemental Information Regarding Non-GAAP Financial Measures" of this release. | |||
Condensed Consolidated Statements of Income (unaudited) | ||||||||||||||
Nine months ended | ||||||||||||||
September 30, | % of | October 1, | % of | |||||||||||
(Dollars in millions except per share amounts) | 2023 | Revenues | 2022 | Revenues | ||||||||||
Revenues | $ | 31,971 | $ | 33,465 | ||||||||||
Costs and operating expenses: | ||||||||||||||
Cost of revenues (a) | 18,905 | 59.1 | % | 18,700 | 55.9 | % | ||||||||
Selling, general and administrative expenses (b) | 4,897 | 15.3 | % | 5,291 | 15.8 | % | ||||||||
Amortization of acquisition-related intangible assets | 1,775 | 5.5 | % | 1,803 | 5.4 | % | ||||||||
Research and development expenses | 1,010 | 3.2 | % | 1,080 | 3.2 | % | ||||||||
Restructuring and other costs (c) | 379 | 1.2 | % | 59 | 0.2 | % | ||||||||
Total costs and operating expenses | 26,966 | 84.3 | % | 26,933 | 80.5 | % | ||||||||
Operating income | 5,005 | 15.7 | % | 6,532 | 19.5 | % | ||||||||
Interest income | 570 | 122 | ||||||||||||
Interest expense | (985 | ) | (457 | ) | ||||||||||
Other income/(expense) (d) | (32 | ) | (139 | ) | ||||||||||
Income before income taxes | 4,558 | 6,058 | ||||||||||||
Provision for income taxes (e) | (151 | ) | (530 | ) | ||||||||||
Equity in earnings/(losses) of unconsolidated entities | (58 | ) | (142 | ) | ||||||||||
Net income | 4,349 | 5,386 | ||||||||||||
Less: net income/(losses) attributable to noncontrolling interests and redeemable noncontrolling interest | (16 | ) | 12 | |||||||||||
Net income attributable to Thermo Fisher Scientific Inc. | $ | 4,365 | 13.7 | % | $ | 5,374 | 16.1 | % | ||||||
Earnings per share attributable to Thermo Fisher Scientific Inc.: | ||||||||||||||
Basic | $ | 11.31 | $ | 13.72 | ||||||||||
Diluted | $ | 11.25 | $ | 13.62 | ||||||||||
Weighted average shares: | ||||||||||||||
Basic | 386 | 392 | ||||||||||||
Diluted | 388 | 395 | ||||||||||||
Reconciliation of adjusted operating income and adjusted operating margin | ||||||||||||||
GAAP operating income | $ | 5,005 | 15.7 | % | $ | 6,532 | 19.5 | % | ||||||
Cost of revenues adjustments (a) | 73 | 0.2 | % | 41 | 0.1 | % | ||||||||
Selling, general and administrative expenses adjustments (b) | 28 | 0.1 | % | (10 | ) | 0.0 | % | |||||||
Restructuring and other costs (c) | 379 | 1.2 | % | 59 | 0.2 | % | ||||||||
Amortization of acquisition-related intangible assets | 1,775 | 5.5 | % | 1,803 | 5.4 | % | ||||||||
Adjusted operating income (non-GAAP measure) | $ | 7,260 | 22.7 | % | $ | 8,425 | 25.2 | % | ||||||
Reconciliation of adjusted net income | ||||||||||||||
GAAP net income attributable to Thermo Fisher Scientific Inc. | $ | 4,365 | $ | 5,374 | ||||||||||
Cost of revenues adjustments (a) | 73 | 41 | ||||||||||||
Selling, general and administrative expenses adjustments (b) | 28 | (10 | ) | |||||||||||
Restructuring and other costs (c) | 379 | 59 | ||||||||||||
Amortization of acquisition-related intangible assets | 1,775 | 1,803 | ||||||||||||
Other income/expense adjustments (d) | 36 | 163 | ||||||||||||
Provision for income taxes adjustments (e) | (534 | ) | (534 | ) | ||||||||||
Equity in earnings/losses of unconsolidated entities | 58 | 142 | ||||||||||||
Noncontrolling interests adjustments (f) | (19 | ) | — | |||||||||||
Adjusted net income (non-GAAP measure) | $ | 6,161 | $ | 7,038 | ||||||||||
Reconciliation of adjusted earnings per share | ||||||||||||||
GAAP diluted EPS attributable to Thermo Fisher Scientific Inc. | $ | 11.25 | $ | 13.62 | ||||||||||
Cost of revenues adjustments (a) | 0.19 | 0.11 | ||||||||||||
Selling, general and administrative expenses adjustments (b) | 0.07 | (0.02 | ) | |||||||||||
Restructuring and other costs (c) | 0.98 | 0.15 | ||||||||||||
Amortization of acquisition-related intangible assets | 4.57 | 4.56 | ||||||||||||
Other income/expense adjustments (d) | 0.09 | 0.41 | ||||||||||||
Provision for income taxes adjustments (e) | (1.38 | ) | (1.35 | ) | ||||||||||
Equity in earnings/losses of unconsolidated entities | 0.15 | 0.36 | ||||||||||||
Noncontrolling interests adjustments (f) | (0.05 | ) | 0.00 | |||||||||||
Adjusted EPS (non-GAAP measure) | $ | 15.87 | $ | 17.84 | ||||||||||
Reconciliation of free cash flow | ||||||||||||||
GAAP net cash provided by operating activities | $ | 4,683 | $ | 5,667 | ||||||||||
Purchases of property, plant and equipment | (1,074 | ) | (1,693 | ) | ||||||||||
Proceeds from sale of property, plant and equipment | 76 | 18 | ||||||||||||
Free cash flow (non-GAAP measure) | $ | 3,685 | $ | 3,992 | ||||||||||
| Business Segment Information | Nine months ended | |||||||||||||
September 30, | % of | October 1, | % of | |||||||||||
(Dollars in millions) | 2023 | Revenues | 2022 | Revenues | ||||||||||
Revenues | ||||||||||||||
Life Sciences Solutions | $ | 7,508 | 23.5 | % | $ | 10,485 | 31.3 | % | ||||||
Analytical Instruments | 5,226 | 16.3 | % | 4,746 | 14.2 | % | ||||||||
Specialty Diagnostics | 3,300 | 10.3 | % | 3,648 | 10.9 | % | ||||||||
Laboratory Products and Biopharma Services | 17,322 | 54.2 | % | 16,564 | 49.5 | % | ||||||||
Eliminations | (1,385 | ) | -4.3 | % | (1,978 | ) | -5.9 | % | ||||||
Consolidated revenues | $ | 31,971 | 100.0 | % | $ | 33,465 | 100.0 | % | ||||||
Segment income and segment income margin | ||||||||||||||
Life Sciences Solutions | $ | 2,525 | 33.6 | % | $ | 4,542 | 43.3 | % | ||||||
Analytical Instruments | 1,321 | 25.3 | % | 1,031 | 21.7 | % | ||||||||
Specialty Diagnostics | 860 | 26.1 | % | 816 | 22.4 | % | ||||||||
Laboratory Products and Biopharma Services | 2,554 | 14.7 | % | 2,036 | 12.3 | % | ||||||||
Subtotal reportable segments | 7,260 | 22.7 | % | 8,425 | 25.2 | % | ||||||||
Cost of revenues adjustments (a) | (73 | ) | -0.2 | % | (41 | ) | -0.1 | % | ||||||
Selling, general and administrative expenses adjustments (b) | (28 | ) | -0.1 | % | 10 | 0.0 | % | |||||||
Restructuring and other costs (c) | (379 | ) | -1.2 | % | (59 | ) | -0.2 | % | ||||||
Amortization of acquisition-related intangible assets | (1,775 | ) | -5.5 | % | (1,803 | ) | -5.4 | % | ||||||
Consolidated GAAP operating income | $ | 5,005 | 15.7 | % | $ | 6,532 | 19.5 | % | ||||||
(a) Adjusted results in 2023 and in 2022 exclude charges for the sale of inventories revalued at the date of acquisition and charges for inventory write-downs associated with large-scale abandonment of product lines. Adjusted results in 2023 also exclude $10 of accelerated depreciation on manufacturing assets to be abandoned due to facility consolidations. |
(b) Adjusted results in 2023 and 2022 exclude certain third-party expenses, principally transaction/integration costs related to recent acquisitions, charges/credits for changes in estimates of contingent acquisition consideration, and charges associated with product liability litigation. |
(c) Adjusted results in 2023 and 2022 exclude restructuring and other costs consisting principally of severance, impairments of long-lived assets, abandoned facility and other expenses of headcount reductions and real estate consolidations. Adjusted results in 2023 also exclude $26 of contract termination costs associated with facility closures, $18 of net charges for pre-acquisition litigation and other matters, and $8 of net gains on the sale of real estate. |
(d) Adjusted results in 2023 and 2022 exclude net gains/losses on investments. Adjusted results in 2022 also exclude $26 of losses on the early extinguishment of debt. |
(e) Adjusted provision for income taxes in 2023 and 2022 excludes incremental tax impacts for the reconciling items between GAAP and adjusted net income, incremental tax impacts as a result of tax rate/law changes and the tax impacts from audit settlements (including a $658 benefit from an audit settlement in 2022). Adjusted results in 2022 also exclude a $423 charge for the impact of deferred tax realizability assessments as a result of audit settlements. |
(f) Adjusted results exclude the incremental impacts for the reconciling items between GAAP and adjusted net income attributable to noncontrolling interests. |
Notes: |
Consolidated depreciation expense is $792 and $730 in 2023 and 2022, respectively. |
For more information related to non-GAAP financial measures, refer to the section titled "Supplemental Information Regarding Non-GAAP Financial Measures" of this release. |
| Condensed Consolidated Balance Sheets (unaudited) | ||||||||
September 30, | December 31, | |||||||
(In millions) | 2023 | 2022 | ||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 6,151 | $ | 8,524 | ||||
Accounts receivable, net | 8,370 | 8,115 | ||||||
Inventories | 5,404 | 5,634 | ||||||
Other current assets | 3,167 | 2,956 | ||||||
Total current assets | 23,092 | 25,229 | ||||||
Property, plant and equipment, net | 9,167 | 9,280 | ||||||
Acquisition-related intangible assets, net | 17,091 | 17,442 | ||||||
Other assets | 4,124 | 4,007 | ||||||
Goodwill | 43,583 | 41,196 | ||||||
Total assets | $ | 97,057 | $ | 97,154 | ||||
Liabilities, redeemable noncontrolling interest and equity | ||||||||
Current liabilities: | ||||||||
Short-term obligations and current maturities of long-term obligations | $ | 4,795 | $ | 5,579 | ||||
Other current liabilities | 9,363 | 11,431 | ||||||
Total current liabilities | 14,158 | 17,010 | ||||||
Other long-term liabilities | 6,946 | 7,087 | ||||||
Long-term obligations | 30,489 | 28,909 | ||||||
Redeemable noncontrolling interest | 118 | 116 | ||||||
Total equity | 45,346 | 44,032 | ||||||
Total liabilities, redeemable noncontrolling interest and equity | $ | 97,057 | $ | 97,154 | ||||
Condensed Consolidated Statements of Cash Flows (unaudited) | ||||||||
Nine months ended | ||||||||
September 30, | October 1, | |||||||
(In millions) | 2023 | 2022 | ||||||
Operating activities | ||||||||
Net income | $ | 4,349 | $ | 5,386 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 2,567 | 2,533 | ||||||
Change in deferred income taxes | (631 | ) | (862 | ) | ||||
Other non-cash expenses, net | 658 | 701 | ||||||
Changes in assets and liabilities, excluding the effects of acquisitions | (2,260 | ) | (2,091 | ) | ||||
Net cash provided by operating activities | 4,683 | 5,667 | ||||||
Investing activities | ||||||||
Acquisitions, net of cash acquired | (3,660 | ) | (39 | ) | ||||
Purchases of property, plant and equipment | (1,074 | ) | (1,693 | ) | ||||
Proceeds from sale of property, plant and equipment | 76 | 18 | ||||||
Other investing activities, net | (108 | ) | 80 | |||||
Net cash used in investing activities | (4,766 | ) | (1,634 | ) | ||||
Financing activities | ||||||||
Net proceeds from issuance of debt | 3,466 | — | ||||||
Repayment of debt | (2,000 | ) | (375 | ) | ||||
Net proceeds from issuance of commercial paper | 1,620 | 1,231 | ||||||
Repayment of commercial paper | (1,935 | ) | (3,690 | ) | ||||
Purchases of company common stock | (3,000 | ) | (2,000 | ) | ||||
Dividends paid | (387 | ) | (338 | ) | ||||
Other financing activities, net | 42 | (29 | ) | |||||
Net cash used in financing activities | (2,194 | ) | (5,201 | ) | ||||
Exchange rate effect on cash | (92 | ) | (389 | ) | ||||
Decrease in cash, cash equivalents and restricted cash | (2,369 | ) | (1,557 | ) | ||||
Cash, cash equivalents and restricted cash at beginning of period | 8,537 | 4,491 | ||||||
Cash, cash equivalents and restricted cash at end of period | $ | 6,168 | $ | 2,934 | ||||
Free cash flow (non-GAAP measure) | $ | 3,685 | $ | 3,992 | ||||
Note: |
For more information related to non-GAAP financial measures, refer to the section titled "Supplemental Information Regarding Non-GAAP Financial Measures" of this release. |
Supplemental Information Regarding 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 such as organic revenue growth, which is reported revenue growth, excluding the impacts of revenues from acquired businesses and the effects of currency translation. We also report Core organic revenue growth, which is reported revenue growth, excluding the impacts of COVID-19 testing revenue, and excluding the impacts of acquisitions and currency translation. We report these measures because Thermo Fisher management believes that in order to understand the company's short-term and long-term financial trends, investors may wish to consider the impact of acquisitions, foreign currency translation and/or COVID-19 testing on revenues. Thermo Fisher management uses these measures to forecast and evaluate the operational performance of the company as well as to compare revenues of current periods to prior periods.
We report adjusted operating income, adjusted operating income margin, adjusted net income, and adjusted EPS. We believe that the use of these non-GAAP financial measures, in addition to GAAP financial 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 core operating performance, especially when comparing such results to previous periods, forecasts, 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. To calculate these measures we exclude, as applicable:
- Certain acquisition-related costs, including charges for the sale of inventories revalued at the date of acquisition, significant transaction/acquisition-related costs, including changes in estimates of contingent acquisition-related consideration, and other costs associated with obtaining short-term financing commitments for pending/recent acquisitions. We exclude these costs because we do not believe they are indicative of our normal operating costs.
- Costs/income associated with restructuring activities and large-scale abandonments of product lines, such as reducing overhead and consolidating facilities. We exclude these costs because we believe that the costs related to restructuring activities are not indicative of our normal operating costs.
- Equity in earnings/losses of unconsolidated entities; impairments of long-lived assets; and certain other gains and losses that are either isolated or cannot be expected to occur again with any predictability, including gains/losses on investments, the sale of businesses, product lines, and real estate, significant litigation-related matters, curtailments/settlements of pension plans, and the early retirement of debt. We exclude these items because they are outside of our normal operations and/or, in certain cases, are difficult to forecast accurately for future periods.
- The expense associated with the amortization of acquisition-related intangible assets because a significant portion of the purchase price for acquisitions may be allocated to intangible assets that have lives of up to 20 years. 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.
- The noncontrolling interest and tax impacts of the above items and the impact of significant tax audits or events (such as changes in deferred taxes from enacted tax rate/law changes), the latter of which we exclude because they are outside of our normal operations and difficult to forecast accurately for future periods.
We report free cash flow, which is operating cash flow excluding net capital expenditures, to provide a view of the continuing operations' ability to generate cash for use in acquisitions and other investing and financing activities. The company also uses this measure as an indication of the strength of the company. Free cash flow is not a measure of cash available for discretionary expenditures since we have certain non-discretionary obligations such as debt service that are not deducted from the measure.
Thermo Fisher Scientific does not provide GAAP financial measures on a forward-looking basis because we are unable to predict with reasonable certainty and without unreasonable effort items such as the timing and amount of future restructuring actions and acquisition-related charges as well as gains or losses from sales of real estate and businesses, the early retirement of debt and the outcome of legal proceedings. The timing and amount of these items are uncertain and could be material to Thermo Fisher Scientific's results computed in accordance with GAAP.
The non-GAAP financial measures of Thermo Fisher Scientific's results of operations and cash flows included in this press release are not meant to be considered superior to or a substitute for Thermo Fisher Scientific's results of operations prepared in accordance with GAAP. Reconciliations of such non-GAAP financial measures to the most directly comparable GAAP financial measures are set forth in the tables above.
View source version on businesswire.com: https://www.businesswire.com/news/home/20231025874073/en/
Media Contact Information:
Sandy Pound
Thermo Fisher Scientific
Phone: 781-622-1223
E-mail: sandy.pound@thermofisher.com
Investor Contact Information:
Rafael Tejada
Thermo Fisher Scientific
Phone: 781-622-1356
E-mail: rafael.tejada@thermofisher.com
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