THERMO FISHER SCIENTIFIC INC

Previous wording

A number of important factors could cause the results of the company to differ materially from those indicated by such forward-looking statements, including those detailed under the caption “Risk Factors” in the company’s Annual Report on Form 10-K for the year ended December 31, 2023 (which is on file with the SEC). 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 proposed acquisition of Olink, may not materialize as expected.

Current wording

A number of important factors could cause the results of the company to differ materially from those indicated by such forward-looking statements, including those detailed under the caption “Risk Factors” in the company’s Annual Report on Form 10-K for the year ended December 31, 2023 (which is on file with the SEC). 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 may not materialize as expected.

Previous wording

Since 2020, the Life Sciences Solutions and Specialty Diagnostics segments as well as the laboratory products business have supported COVID-19 diagnostic testing. Additionally, our pharma services business has provided our pharma and biotech customers with the services they needed to develop and produce vaccines and therapies globally. Since the company’s acquisition of PPD in December 2021, the clinical research business has continued to play a leading role in supporting the clinical trials for COVID-19 vaccines and therapies. These positive impacts are expected to continue at much lower levels in 2024 as customer testing as well as therapy and vaccine demand declines. Sales of products related to COVID-19 testing were $0.03 billion and $0.14 billion in the first quarter of 2024 and 2023, respectively.

Current wording

Since 2020, the Life Sciences Solutions and Specialty Diagnostics segments as well as the laboratory products business have supported COVID-19 diagnostic testing. Additionally, our pharma services business has provided our pharma and biotech customers with the services they needed to develop and produce vaccines and therapies globally. Since the company’s acquisition of PPD in December 2021, the clinical research business has continued to play a leading role in supporting the clinical trials for COVID-19 vaccines and therapies. These positive impacts are expected to continue at much lower levels in 2024 as customer testing as well as therapy and vaccine demand declines. Sales of products related to COVID-19 testing were $0.02 billion and $0.08 billion in the second quarter of 2024 and 2023, respectively, and $0.05 billion and $0.22 billion in the first six months of 2024 and 2023, respectively.

Previous wording

During the first quarter of 2024, revenues from pharma and biotech customers declined due to reduced demand for our products and services that support COVID-19 vaccines and therapies as well as a challenging macroeconomic environment and low economic activity in China, partially offset through strong commercial execution. Revenues in the academic and government as well as the industrial and applied markets declined due to strong shipments of analytical instruments to customers in these markets in the first quarter of 2023 as we fulfilled backlog that had been caused by pandemic-related supply chain disruptions. The diagnostics and healthcare market declined due to decreased demand for COVID-19 testing products. During the first quarter of 2024, sales growth in all major regions declined due to decreased demand for COVID-19 related products, as well as a challenging macroeconomic environment and low economic activity in China. Contributions to organic revenue during the first quarter of 2024 from the Specialty Diagnostics segment was more than offset by declines in the Life Sciences Solutions, Laboratory Products and Biopharma Services and Analytical Instruments segments.

Current wording

During the second quarter of 2024, revenues from pharma and biotech customers declined due to reduced demand for our products and services that support COVID-19 vaccines and therapies as well as a more muted macroeconomic environment, partially offset through strong commercial execution. Revenues in the academic and government as well as the industrial and applied markets grew due to demand for analytical instruments. The diagnostics and healthcare market declined due to decreased demand for COVID-19 testing products. During the second quarter of 2024, sales growth was strong in Asia-Pacific, including China. Sales in Europe grew slightly and in North America declined due to decreased demand for COVID-19 related products, as well as a challenging macroeconomic environment. Contributions to organic revenue during the second quarter of 2024 from the Analytical Instruments and Specialty Diagnostics segments were more than offset by declines in the Laboratory Products and Biopharma Services and Life Sciences Solutions segments.

Previous wording

GAAP operating income margin and adjusted operating income margin increased in the first quarter of 2024 due primarily to exceptionally strong productivity improvements, partially offset by unfavorable business mix and strategic investments. GAAP operating income margin in the first quarter of 2023 was also impacted by restructuring and other charges incurred for headcount reductions and facility consolidations in an effort to streamline operations.

Current wording

GAAP operating income margin and adjusted operating income margin increased in the first six months of 2024 due primarily to strong productivity improvements, partially offset by unfavorable business mix. GAAP operating income margin during the first six months of 2024 was also impacted by lower levels of restructuring and other charges incurred for headcount reductions and facility consolidations in an effort to streamline operations (Note 12).

Previous wording

The company’s references to strategic investments generally refer to targeted spending for enhancing commercial capabilities, including expansion of geographic sales reach and e-commerce platforms, marketing initiatives, expanded service and operational infrastructure, research and development projects and other expenditures to enhance the customer experience, as well as incentive compensation and recognition for employees. The company’s references throughout this discussion to productivity improvements generally refer to improved cost efficiencies from its Practical Process Improvement (PPI) business system including reduced costs resulting from implementing continuous improvement methodologies, global sourcing initiatives, a lower cost structure following restructuring actions including headcount reductions and consolidation of facilities, and low cost region manufacturing.

Current wording

The company’s references to strategic investments generally refer to targeted spending for enhancing commercial capabilities, including expansion of geographic sales reach and e-commerce platforms, marketing initiatives, expanded service and operational infrastructure, research and development projects and other expenditures to enhance the customer experience, as well as incentive compensation and recognition for employees. The company’s references throughout this discussion to productivity improvements generally refer to improved cost efficiencies from its Practical Process Improvement (PPI) business system to address inflation, including reduced costs resulting from implementing continuous improvement methodologies, global sourcing initiatives, a lower cost structure following restructuring actions including headcount reductions and consolidation of facilities, and low cost region manufacturing.

Previous wording

The decrease in organic revenues in the first quarter of 2024 was primarily due to moderation in COVID-19 related revenue, as well as lower levels of activity in the bioproduction business. The increase in segment income margin resulted primarily from exceptionally strong productivity improvements and strong pricing realization, partially offset by unfavorable volume pull-through.

Current wording

The decrease in organic revenues in the second quarter of 2024 was primarily due to moderation in COVID-19 related revenue, partially offset by growth in the biosciences business. The increase in segment income margin resulted primarily from exceptionally strong productivity improvements, partially offset by unfavorable volume pull-through.

Previous wording

The decrease in organic revenues in the first quarter of 2024 was primarily due to the impact of strong instrument shipments in the first quarter of 2023, largely offset by very strong growth in the electron microscopy business. The decrease in segment income margin resulted primarily from unfavorable business mix and strategic investments, partially offset by strong productivity improvements.

Current wording

The increase in organic revenues in the second quarter of 2024 was primarily due to very strong growth in the electron microscopy business, partially offset by declines in the other instrumentation businesses. The decrease in segment income margin resulted primarily from unfavorable business mix and strategic investments, partially offset by strong productivity improvements.

Previous wording

Organic revenues in the first quarter of 2024 were flat when compared to the first quarter of 2023, with strong underlying growth in the transplant diagnostics, immunodiagnostics, and healthcare market channel businesses, offset by decreased demand for products addressing diagnosis of COVID-19. The increase in segment income margin was due to favorable business mix and good productivity improvements, partially offset by strategic investments.

Current wording

The increase in organic revenues in the second quarter of 2024 was primarily driven by underlying growth in the transplant diagnostics and immunodiagnostics businesses, as well as in the healthcare market channel, largely offset by decreased demand for products addressing diagnosis of COVID-19. Segment income margin was flat in the second quarter of 2024 when compared to 2023 due to good productively improvements, offset by strategic investments.

Previous wording

The decrease in organic revenues in the first quarter of 2024 was primarily due to decreased demand in COVID-19 vaccines and therapies, partially offset by strong growth in the clinical research business. The decrease in segment income margin was primarily due to unfavorable business mix and strategic investments, partially offset by strong productivity improvements.

Current wording

The decrease in organic revenues in the second quarter of 2024 was primarily due to decreased demand in COVID-19 vaccines and therapies, partially offset by growth in the clinical research business. The decrease in segment income margin was primarily due to unfavorable business mix and strategic investments, partially offset by strong productivity improvements.

Previous wording

Net interest expense (interest expense less interest income) decreased due primarily to higher cash, and cash equivalents and short-term investments balances, as well as higher interest rates on these balances when compared to the first quarter of 2023. In the first quarter of 2024 and 2023, the company’s net interest expense was reduced by approximately $65 million and $17 million, respectively, as a result of its interest rate swap and cross-currency interest rate swap arrangements (Note 10).

Current wording

Net interest expense (interest expense less interest income) in the second quarter and first six months of 2024 decreased due primarily to higher cash, and cash equivalents and short-term investments balances, as well as higher interest rates on these balances when compared to the second quarter and first six months of 2023. The company’s net interest expense was reduced by approximately $67 million and $132 million in the second quarter and first six months of 2024, respectively, as a result of its interest rate swap and cross-currency interest rate swap arrangements. In the second quarter and first six months of 2023, the company’s net interest expense was reduced by approximately $16 million and $33 million, respectively, as a result of these arrangements (Note 10).

Previous wording

GAAP other income/(expense) and adjusted other income/(expense) includes currency transaction gains/losses on non-operating monetary assets and liabilities, and net periodic pension benefit cost/income, excluding the service cost component. GAAP other income/(expense) in the first quarter of 2024 and 2023 also includes $10 million and $(43) million, respectively, of net gains/(losses) on investments.

Current wording

GAAP other income/(expense) and adjusted other income/(expense) includes currency transaction gains/losses on non-operating monetary assets and liabilities, and net periodic pension benefit cost/income, excluding the service cost component. GAAP other income/(expense) in the first six months of 2024 and 2023 also includes $10 million and $(43) million, respectively, of net gains/(losses) on investments.

Previous wording

The company’s GAAP tax rate increased in the first quarter of 2024 compared to 2023 due to $176 million of expense, net, primarily for a provision associated with a tax audit recorded in the first quarter of 2024. The company’s 2024 and 2023 GAAP and adjusted tax rates were also impacted by $102 million and $144 million, respectively, of tax benefits resulting from capital losses generated as part of intra-entity transactions (Note 5).

Current wording

The company’s GAAP tax rate increased in the first six months of 2024 compared to 2023 primarily due to $176 million of expense, net, for a provision associated with a tax audit recorded in the first quarter of 2024. The company’s GAAP and adjusted tax rates in the first six months of 2024 were also impacted by a benefit of $183 million, primarily in jurisdictions where the deferred tax assets are now expected to be realized due to forecasted income. The company’s GAAP and adjusted tax rates in the first six months of 2023 were impacted by a tax benefit of $91 million, net of related tax expenses, from a foreign exchange loss on an intercompany debt refinancing transaction in the second quarter of 2023. The company’s GAAP and adjusted tax rates in the six-month periods ended June 29, 2024 and July 1, 2023 were also impacted by $102 million and $144 million, respectively, of tax benefits resulting from capital losses generated as part of intra-entity transactions (Note 5).

Previous wording

The effective tax rates in both 2024 and 2023 were also affected by relatively significant earnings in lower tax jurisdictions. Due primarily to the non-deductibility of intangible asset amortization for tax purposes, the company’s cash payments for income taxes are higher than its income tax expense for financial reporting purposes and are expected to total approximately $1.60 billion in 2024.

Current wording

The effective tax rates in both 2024 and 2023 were also affected by relatively significant earnings in lower tax jurisdictions. Due primarily to the non-deductibility of intangible asset amortization for tax purposes, the company’s cash payments for income taxes are higher than its income tax expense for financial reporting purposes and are expected to total approximately $1.65 billion in 2024.

Previous wording

The company expects its GAAP effective tax rate in 2024 will be between 9% and 11% based on currently forecasted rates of profitability in the countries in which the company conducts business and expected generation of foreign tax credits. The effective tax rate can vary significantly from period to period as a result of discrete income tax factors and events. The company expects its adjusted tax rate will be approximately 10.5% in 2024.

Current wording

The company expects its GAAP effective tax rate in 2024 will be between 9% and 11%. The effective tax rate can vary significantly from period to period as a result of discrete income tax factors and events. The company expects its adjusted tax rate will be approximately 10.5% in 2024.

Previous wording

As of March 30, 2024, the company’s short-term obligations and current maturities of long-term obligations totaled $4.45 billion. The company has a revolving credit facility with a bank group that provides up to $5.00 billion of unsecured multi-currency revolving credit (Note 7). If the company borrows under this facility, it intends to leave undrawn an amount equivalent to outstanding commercial paper to provide a source of funds in the event that commercial paper markets are not available. As of March 30, 2024, no borrowings were outstanding under the company’s revolving credit facility, although available capacity was reduced by immaterial outstanding letters of credit.

Current wording

As of June 29, 2024, the company’s short-term obligations and current maturities of long-term obligations totaled $5.12 billion. The company has a revolving credit facility with a bank group that provides up to $5.00 billion of unsecured multi-currency revolving credit (Note 7). If the company borrows under this facility, it intends to leave undrawn an amount equivalent to outstanding commercial paper to provide a source of funds in the event that commercial paper markets are not available. As of June 29, 2024, no borrowings were outstanding under the company’s revolving credit facility, although available capacity was reduced by immaterial outstanding letters of credit.

Previous wording

During the first three months of 2024, cash provided by income was offset in part by investments in working capital. Changes in other assets and other liabilities used cash of $0.57 billion primarily due to the timing of payments for compensation and income taxes. Cash payments for income taxes were $0.65 billion during the first three months of 2024.

Current wording

During the first six months of 2024, cash provided by income was offset in part by investments in working capital. Changes in other assets and other liabilities used cash of $0.57 billion primarily due to the timing of payments for compensation and income taxes. Cash payments for income taxes were $1.13 billion during the first six months of 2024.

Previous wording

During the first three months of 2023, cash provided by income was offset in part by investments in working capital. Changes in other assets and other liabilities used cash of $1.31 billion primarily due to the timing of payments for compensation and income taxes. Cash payments for income taxes were $0.57 billion during the first three months of 2023.

Current wording

During the first six months of 2023, cash provided by income was offset in part by investments in working capital. Changes in other assets and other liabilities used cash of $1.50 billion primarily due to the timing of payments for compensation and income taxes. A decrease in accounts payable used cash of $0.87 billion. Cash payments for income taxes were $0.78 billion during the first six months of 2023.

Previous wording

During the first three months of 2024, purchases of short-term investments used cash of $1.76 billion. The company’s investing activities also included purchases of $0.35 billion of property, plant and equipment for capacity and capability investments.

Current wording

During the first six months of 2024, purchases of short-term investments used cash of $1.78 billion. The company’s investing activities also included purchases of $0.65 billion of property, plant and equipment for capacity and capability investments.

Previous wording

During the first three months of 2023, the acquisition of The Binding Site Group used cash of $2.70 billion. The company’s investing activities also included purchases of $0.46 billion of property, plant and equipment for capacity and capability investments.

Current wording

During the first six months of 2023, acquisitions used cash of $2.75 billion. The company’s investing activities also included purchases of $0.74 billion of property, plant and equipment for capacity and capability investments.

Previous wording

During the first three months of 2024, issuance of debt provided $1.20 billion of cash. The company’s financing activities also included the repurchase of $3.00 billion of the company’s common stock (5.5 million shares) and the payment of $0.14 billion in cash dividends. On November 14, 2023, the Board of Directors announced that it replaced the existing authorization to repurchase the company’s common stock, of which $1.00 billion was remaining, with a new authorization to repurchase up to $4.00 billion of the company’s common stock. All of the shares of common stock repurchased by the company during the first quarter of 2024 were under this program. At May 3, 2024, authorization remained for $1.00 billion of future repurchases of the company’s common stock.

Current wording

During the first six months of 2024, issuance of debt provided $1.20 billion of cash. The company’s financing activities also included the repurchase of $3.00 billion of the company’s common stock (5.5 million shares) and the payment of $0.28 billion in cash dividends. On November 14, 2023, the Board of Directors announced that it replaced the existing authorization to repurchase the company’s common stock, of which $1.00 billion was remaining, with a new authorization to repurchase up to $4.00 billion of the company’s common stock. All of the shares of common stock repurchased by the company during the first quarter of 2024 were under this program. At August 2, 2024, authorization remained for $1.00 billion of future repurchases of the company’s common stock.

Previous wording

During the first three months of 2023, net commercial paper activity used cash of $0.50 billion. The company’s financing activities also included the repurchase of $3.00 billion of the company’s common stock (5.2 million shares) and the payment of $0.12 billion in cash dividends.

Current wording

During the first six months of 2023, repayment of senior notes used cash of $1.00 billion. The company’s financing activities also included the repurchase of $3.00 billion of the company’s common stock (5.2 million shares) and the payment of $0.25 billion in cash dividends.

Previous wording

The company’s commitments for purchases of property, plant and equipment, contractual obligations and other commercial commitments, including the agreement to acquire Olink (Note 2), did not change materially subsequent to March 30, 2024.

Current wording

The company’s commitments for purchases of property, plant and equipment, contractual obligations and other commercial commitments, did not change materially subsequent to December 31, 2023, except in connection with the completion of the Olink acquisition, which occurred on July 10, 2024 (Note 2).

Previous wording

(a) Adjusted results in 2024 and 2023 exclude charges for inventory write-downs associated with large-scale abandonment of product lines. Adjusted results in 2023 exclude $10 million of charges for the sale of inventory revalued at the date of acquisition.

Current wording

(a) Adjusted results exclude charges for inventory write-downs associated with large-scale abandonment of product lines and accelerated depreciation on fixed assets to be abandoned due to facility consolidations. Adjusted results in the second quarter and first six months of 2023 exclude $11 million and $21 million, respectively, of charges for the sale of inventory revalued at the date of acquisition.

Previous wording

(b) Adjusted results in 2024 and 2023 exclude certain third-party expenses, principally transaction/integration costs related to recent acquisitions, and charges/credits for changes in estimates of contingent acquisition consideration.

Current wording

(b) Adjusted results exclude certain third-party expenses, principally transaction/integration costs related to recent acquisitions, and charges/credits for changes in estimates of contingent acquisition consideration.

Previous wording

(c) Adjusted results in 2024 and 2023 exclude restructuring and other costs consisting principally of severance, impairments of long-lived assets, abandoned facilities, and other expenses of headcount reductions and real estate consolidations. Adjusted results in 2023 also exclude $18 million of net charges for pre-acquisition litigation and other matters.

Current wording

(c) Adjusted results exclude restructuring and other costs consisting principally of severance, impairments of long-lived assets, net charges for pre-acquisition litigation and other matters, abandoned facilities, and other expenses of headcount reductions and real estate consolidations. Adjusted results in the second quarter of 2023 also exclude $26 million of contract termination costs associated with facility closures.

Previous wording

(d) Adjusted results in 2024 and 2023 exclude net gains/losses on investments.

Current wording

(d) Adjusted results exclude net gains/losses on investments.

Previous wording

(e) Adjusted results in 2024 and 2023 exclude 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.

Current wording

(e) Adjusted results in exclude 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.

Previous wording

Management’s Discussion and Analysis and Note 1 to the Consolidated Financial Statements of the company’s Annual Report on Form 10-K for 2023 describe the significant accounting estimates and policies used in preparation of the consolidated financial statements. There have been no significant changes in the company’s critical accounting policies during the first three months of 2024.

Current wording

Management’s Discussion and Analysis and Note 1 to the Consolidated Financial Statements of the company’s Annual Report on Form 10-K for 2023 describe the significant accounting estimates and policies used in preparation of the consolidated financial statements. There have been no significant changes in the company’s critical accounting policies during the first six months of 2024.