PR Newswire | Feb 1, 2021 06:01AM EST

02/01 05:00 CST

Thermo Fisher Scientific Reports Fourth Quarter and Full Year 2020 Results WALTHAM, Mass., Feb. 1, 2021

WALTHAM, Mass., Feb. 1, 2021 /PRNewswire/ -- Thermo Fisher Scientific Inc. (NYSE: TMO), the world leader in serving science, today reported its financial results for the fourth quarter and full year ended December 31, 2020.

Fourth Quarter and Full Year 2020 Highlights

* Fourth quarter revenue grew 54% to $10.55 billion. * Fourth quarter GAAP diluted earnings per share (EPS) increased 151% to $6.24. * Fourth quarter adjusted EPS increased 100% to $7.09. * Full year revenue grew 26% to $32.22 billion. * Full year GAAP diluted EPS increased 74% to $15.96. * Full year adjusted EPS increased 58% to $19.55. * Led the industry in supporting our customers and enabling the societal response to the pandemic, delivering exceptional results while significantly strengthening the long-term growth trajectory of the company. * Achieved very strong growth in the fourth quarter, generating $3.2 billion of COVID-19 response revenue and accelerating growth momentum in the base business. * Delivered an extraordinary year of high-impact innovation, establishing leadership in COVID-19 testing - highlighted by the Applied Biosystems TaqPath COVID-19 Combo Kit and Amplitude Solution for high-throughput PCR-based testing - while continuing to strengthen our leading offerings in electron microscopy, mass spectrometry, biosciences and bioproduction. During the quarter, we launched the Thermo Scientific Tundra cryo-transmission electron microscope to further democratize this ground-breaking technology. * Continued to build on our industry-leading scale in high-growth and emerging markets during the year, adding single-use bioproduction manufacturing in Suzhou, China, and opening new commercial centers to support our materials science customers in China and South Korea. In the quarter, we announced the formation of a joint venture to establish a biological drug development and manufacturing facility in Hangzhou, China.

* Significantly increased capital expenditures during the year, investing $1.5 billion to support near- and long-term growth opportunities across our businesses. In the quarter, we announced plans to manufacture plasmid DNA for cell and gene therapies in Carlsbad, California, and to expand our bioproduction cell culture media site in Grand Island, New York. * Advanced our environmental, social and governance priorities, highlighted by commitments to our Foundation for Science, which supports STEM education in underserved communities, and the Just Project, to help enable the safe return of students and faculty at historically black colleges and universities. * Continued to successfully execute our capital deployment strategy, returning $1.8 billion of capital to shareholders in 2020 through stock buybacks and dividends. We also entered into a strategic partnership with CSL to expand our biologics capacity and acquired Phitonex to enhance our flow cytometry offering for cell analysis. Shortly after year end, we acquired Novasep's European viral vector business and agreed to acquire Mesa Biotech to enhance our PCR-based diagnostics offering with rapid point-of-care testing.

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."

"Our team executed extremely well and operated with speed at scale to help our customers and governments around the world respond to the pandemic and continue to advance their important work," said Marc N. Casper, chairman, president and chief executive officer of Thermo Fisher Scientific. "I am proud that we delivered the strongest year of performance in our company's history. From a financial perspective, we generated exceptional growth in revenue, earnings and free cash flow for the quarter and the year."

Casper added, "Our performance in 2020 showcased our proven strategy in action, our commitment to our customers' success and our ability to lead in a changing environment. We are continuing to significantly invest in talent, capabilities and infrastructure to build on the value we've created and ensure an even brighter future."

Fourth Quarter 2020

Revenue for the quarter grew 54% to $10.55 billion in 2020, versus $6.83 billion in 2019. Organic revenue growth was 51% and currency translation increased revenue by 3%.

GAAP Earnings Results

GAAP diluted EPS in the fourth quarter of 2020 increased 151% to $6.24, versus $2.49 in the same quarter last year. GAAP operating income for the fourth quarter of 2020 grew to $3.07 billion, compared with $1.23 billion in the year-ago quarter. GAAP operating margin increased to 29.1%, compared with 18.0% in the fourth quarter of 2019.

Non-GAAP Earnings Results

Adjusted EPS in the fourth quarter of 2020 increased 100% to $7.09, versus $3.55 in the fourth quarter of 2019. Adjusted operating income for the fourth quarter of 2020 grew 107% compared with the year-ago quarter. Adjusted operating margin increased to 33.3%, compared with 24.9% in the fourth quarter of 2019.

Full Year 2020

Revenue for the full year grew 26% to $32.22 billion in 2020, versus $25.54 billion in 2019. Organic revenue growth was 25% and currency translation increased revenue by 1%.

GAAP Earnings Results

GAAP diluted EPS for the full year increased 74% to $15.96, versus $9.17 in 2019. GAAP operating income for 2020 grew to $7.79 billion, compared with $4.59 billion a year ago. GAAP operating margin increased to 24.2% in 2020, compared with 18.0% in 2019.

Non-GAAP Earnings Results

Adjusted EPS for the full year rose 58% to $19.55, versus $12.35 in 2019. Adjusted operating income for 2020 grew 60% compared with 2019, and adjusted operating margin increased to 29.7%, compared with 23.4% a year ago.

Annual Guidance for 2021

The company will provide 2021 financial guidance during its earnings conference call this morning at 8:30 a.m. Eastern time.

Segment Results

Management uses adjusted operating results to monitor and evaluate performance of the company's four business segments, as highlighted below. Since these results are used for this purpose, they are also considered to be prepared in accordance with GAAP.

Life Sciences Solutions Segment

In the fourth quarter of 2020, Life Sciences Solutions Segment revenue grew 138% to $4.37 billion, compared with revenue of $1.84 billion in the fourth quarter of 2019. Segment adjusted operating margin increased to 53.1%, versus 37.5% in the 2019 quarter.

For the full year 2020, Life Sciences Solutions Segment revenue grew 77% to $12.17 billion, compared with revenue of $6.86 billion in 2019. Segment adjusted operating margin increased to 50.2% in 2020, compared with 35.7% a year ago.

Analytical Instruments Segment

Analytical Instruments Segment revenue grew 8% to $1.64 billion in the fourth quarter of 2020, compared with revenue of $1.52 billion in the fourth quarter of 2019. Segment adjusted operating margin was 20.2%, versus 26.0% in the 2019 quarter.

For the full year 2020, Analytical Instruments Segment revenue was $5.12 billion, compared with revenue of $5.52 billion in 2019. Segment adjusted operating margin was 15.8%, versus 23.1% in 2019.

Specialty Diagnostics Segment

Specialty Diagnostics Segment revenue grew 109% to $1.97 billion in the fourth quarter of 2020, compared with revenue of $0.94 billion in the fourth quarter of 2019. Segment adjusted operating margin was 26.4%, versus 23.7% in the 2019 quarter.

For the full year 2020, Specialty Diagnostics Segment revenue grew 44% to $5.34 billion, compared with revenue of $3.72 billion in 2019. Segment adjusted operating margin was 25.6%, versus 2019 results of 25.0%.

Laboratory Products and Services Segment

In the fourth quarter of 2020, Laboratory Products and Services Segment revenue grew 28% to $3.62 billion, compared with revenue of $2.83 billion in the fourth quarter of 2019. Segment adjusted operating margin was 9.4%, versus 13.8% in the 2019 quarter.

For the full year 2020, Laboratory Products and Services Segment revenue grew 16% to $12.24 billion, compared with revenue of $10.60 billion in 2019. Segment adjusted operating margin was 10.4%, versus 2019 results of 12.5%.

Use of Non-GAAP Financial Measures

In addition to the financial measures prepared in accordance with generally accepted accounting principles (GAAP), we use certain non-GAAP financial measures, including adjusted EPS, adjusted operating income and adjusted operating margin, which exclude certain acquisition-related costs, such as charges for the sale of inventories revalued at the date of acquisition and significant transaction costs; restructuring and other costs/income; and amortization of acquisition-related intangible assets. Adjusted EPS also excludes certain other gains and losses that are either isolated or cannot be expected to occur again with any predictability, tax provisions/benefits related to the previous items, the impact of significant tax audits or events. We exclude the above items because they are outside of our normal operations and/or, in certain cases, are difficult to forecast accurately for future periods. We also use a non-GAAP measure, free cash flow, which is operating cash flow, 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. We believe that the use of non-GAAP measures helps investors to gain a better understanding of our core operating results and future prospects, consistent with how management measures and forecasts the company's performance, especially when comparing such results to previous periods or forecasts.

For example:

We exclude costs and tax effects associated with restructuring activities, such as reducing overhead and consolidating facilities. We believe that the costs related to these restructuring activities are not indicative of our normal operating costs.

We exclude certain acquisition-related costs, including charges for the sale of inventories revalued at the date of acquisition and significant transaction costs. We exclude these costs because we do not believe they are indicative of our normal operating costs.

We exclude the expense and tax effects associated with the amortization of acquisition-related intangible assets because a significant portion of the purchase price for acquisitions may be allocated to intangible assets that have lives of 3 to 20 years. Based on acquisitions closed through the end of the fourth quarter of 2020, adjusted EPS for the full year 2021 will exclude approximately $3.12 of expense for the amortization of acquisition-related intangible assets. Exclusion of the amortization expense allows comparisons of operating results that are consistent over time for both our newly acquired and long-held businesses and with both acquisitive and non-acquisitive peer companies.

We also exclude certain gains/losses and related tax effects, the impact of significant tax audits or events (such as changes in deferred taxes from enacted tax rate changes or the estimated initial impacts of U.S. tax reform legislation), which are either isolated or cannot be expected to occur again with any predictability and that we believe are not indicative of our normal operating gains and losses. For example, we exclude gains/losses from items such as the sale of a business or real estate, gains or losses on significant litigation-related matters, gains on curtailments of pension plans, the early retirement of debt and discontinued operations.

We also report free cash flow, which is operating cash flow, 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.

Thermo Fisher's management uses these non-GAAP measures, in addition to GAAP financial measures, as the basis for measuring the company's core operating performance and comparing such performance to that of prior periods and to the performance of our competitors. Such measures are also used by management in their financial and operating decision-making and for compensation purposes.

The non-GAAP financial measures of Thermo Fisher's results of operations and cash flows included in this press release are not meant to be considered superior to or a substitute for Thermo Fisher's results of operations prepared in accordance with GAAP. Reconciliations of such non-GAAP financial measures to the most directly comparable GAAP financial measures are set forth in the accompanying tables. Thermo Fisher does not provide GAAP financial measures on a forward-looking basis because we are unable to predict with reasonable certainty, and without unreasonable effort, items such as the timing and amount of future restructuring actions and acquisition-related charges as well as gains or losses from sales of real estate and businesses, the early retirement of debt and the outcome of legal proceedings. The timing and amount of these items are uncertain and could be material to Thermo Fisher's results computed in accordance with GAAP.

Conference Call

Thermo Fisher Scientific will hold its earnings conference call today, February 1, at 8:30 a.m. Eastern time. To listen, dial (877) 273-7122 within the U.S. or (778) 560-2662 outside the U.S. The conference ID is 9253945. You may also listen to the call live on our website, www.thermofisher.com, by clicking on "Investors." You will find this press release, including the accompanying reconciliation of non-GAAP financial measures and related information, in that section of our website under "Financial Results." An audio archive of the call will be available under "Webcasts and Presentations" through Friday, February 12, 2021.

About Thermo Fisher Scientific

Thermo Fisher Scientific Inc. is the world leader in serving science, with annual revenue exceeding $30 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, improving patient diagnostics and therapies or increasing productivity in their laboratories, we are here to support them. Our global team of more than 80,000 colleagues 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 and Patheon. 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 duration and severity of 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; and the effect of laws and regulations governing government contracts, as well as the possibility that expected benefits related to recent or pending acquisitions may not materialize as expected. Additional important factors that could cause actual results to differ materially from those indicated by such forward-looking statements are set forth in our 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.

Media Contact Information: Sandy PoundPhone: 781-622-1223 E-mail: sandy.pound@thermofisher.comWebsite: www.thermofisher.com

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

Consolidated Statement of Income (a)(b)

Three Months Ended

December 31,% of December 31,% of

(In millions except per share2020 Revenues2019 Revenuesamounts)



Revenues $10,550 $6,829

Costs and Operating Expenses:

Cost of revenues (c) 4,867 46.1 % 3,670 53.7 %

Selling, general and 1,793 17.0 % 1,208 17.7 % administrative expenses (d)

Amortization of acquisition-related 411 3.9 % 428 6.3 % intangible assets

Research and development 376 3.6 % 262 3.8 % expenses

Restructuring and other 32 0.3 % 29 0.5 % costs, net (e)

7,479 70.9 % 5,597 82.0 %

Operating Income 3,071 29.1 % 1,232 18.0 %

Interest Income 12 45

Interest Expense (146) (142)

Other Expense, Net (f) (45) (97)

Income Before Income Taxes 2,892 1,038

Provision for Income Taxes (394) (36) (g)

Net Income $2,498 23.7 % $1,002 14.7 %



Earnings per Share:

Basic $6.30 $2.51

Diluted $6.24 $2.49

Weighted Average Shares:

Basic 397 399

Diluted 400 402





Reconciliation of Adjusted Operating Income and Adjusted Operating Margin

GAAP Operating Income (a) $3,071 29.1 % $1,232 18.0 %

Cost of Revenues Charges, Net1 0.0 % 1 0.0 % (c)

Selling, General and Administrative (Credits) (3) 0.0 % 8 0.1 % Charges, Net (d)

Restructuring and Other 32 0.3 % 29 0.5 % Costs, Net (e)

Amortization of Acquisition-related 411 3.9 % 428 6.3 % Intangible Assets

Adjusted Operating Income (b)$3,512 33.3 % $1,698 24.9 %



Reconciliation of Adjusted Net Income

GAAP Net Income (a) $2,498 $1,002

Cost of Revenues Charges, Net1 1 (c)

Selling, General and Administrative (Credits) (3) 8 Charges, Net (d)

Restructuring and Other 32 29 Costs, Net (e)

Amortization of Acquisition-related 411 428 Intangible Assets

Other Expense, Net (f) 42 113

Benefit from Income Taxes (g)(146) (153)

Adjusted Net Income (b) $2,835 $1,428



Reconciliation of Adjusted Earnings per Share

GAAP EPS (a) $6.24 $2.49

Cost of Revenues Charges, Net0.00 0.00 of Tax (c)

Selling, General and Administrative (Credits) 0.00 0.02 Charges, Net of Tax (d)

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

Amortization of Acquisition-related 0.75 0.82 Intangible Assets, Net of Tax

Other Expense, Net of Tax (f)0.08 0.21

Benefit from Income Taxes (g)(0.04) (0.05)

Adjusted EPS (b) $7.09 $3.55



Reconciliation of Free Cash Flow

GAAP Net Cash Provided by $3,339 $1,913 Operating Activities (a)

Purchases of Property, Plant (586) (289) and Equipment

Proceeds from Sale of 1 18 Property, Plant and Equipment

Free Cash Flow $2,754 $1,642







Segment Data Three Months Ended

December 31,% of December 31,% of

(In millions) 2020 Revenues2019 Revenues



Revenues

Life Sciences Solutions $4,368 41.4 % $1,838 26.9 %

Analytical Instruments 1,636 15.5 % 1,518 22.2 %

Specialty Diagnostics 1,967 18.6 % 939 13.8 %

Laboratory Products and 3,616 34.3 % 2,834 41.5 % Services

Eliminations (1,037) -9.8 % (300) -4.4 %

Consolidated Revenues $10,550 100.0% $6,829 100.0%



Operating Income and Operating Margin

Life Sciences Solutions $2,321 53.1 % $690 37.5 %

Analytical Instruments 331 20.2 % 394 26.0 %

Specialty Diagnostics 520 26.4 % 223 23.7 %

Laboratory Products and 340 9.4 % 391 13.8 % Services

Subtotal Reportable Segments 3,512 33.3 % 1,698 24.9 %



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

Selling, General and Administrative Credits 3 0.0 % (8) -0.1 % (Charges), Net (d)

Restructuring and Other (32) -0.3 % (29) -0.5 % Costs, Net (e)

Amortization of Acquisition-related (411) -3.9 % (428) -6.3 % Intangible Assets

GAAP Operating Income (a) $3,071 29.1 % $1,232 18.0 %



(a) "GAAP" (reported) results were determined in accordance with U.S. generally accepted accounting principles (GAAP).

(b) Adjusted results are non-GAAP measures and, for income measures, exclude certain charges to cost of revenues (see note (c) for details); certain credits/charges to selling, general and administrative expenses (see note (d) for details); amortization of acquisition-related intangibleassets; restructuring and other costs, net (see note (e) for details); certain other gains or losses that are either isolated or cannot be expected to occur again with any predictability (see note (f) for details); and the tax consequences of the preceding items and certain other tax items (see note (g) for details).

(c) Reported results in 2020 include $1 of accelerated depreciation on manufacturing assets to be abandoned due to facility consolidations. Reported results in 2019 include $1 of charges to conform the accounting policies of recently acquired businesses with the company's accounting policies.

(d) Reported results in 2020 and 2019 include $(4) and $8, respectively, of certain third-party (credits) expenses, principally transaction/ integration costs related to recent/terminated acquisitions. Reported results in 2020 also include $1 of credits from changes in estimates of contingent acquisition consideration and $2 of charges associated with product liability litigation.

(e) Reported results in 2020 and 2019 include restructuring and other costs, net, consisting principally of severance, abandoned facility and other expenses of headcount reductions within several businesses and real estate consolidations. Reported results in 2020 include $22 of charges forthe write-off of acquired technology. Reported results in 2019 include $4 of charges for a post-closing adjustment to the gain on sale of the Anatomical Pathology business and $4 of charges for pre-acquisition litigation-related matters.

(f) Reported results in 2020 include $42 of charges related to terminated interest rate swaps and $2 of net charges for the settlement/curtailment of pension plans, offset in part by $2 of gains from investments. Reportedresults in 2019 include $142 of losses on the early extinguishment of debtand $2 of net charges for the settlement/curtailment of pension plans, offset in part by $31 of net gains from investments.

(g) Reported provision for income taxes includes i) $130 and $144 of incremental tax benefit in 2020 and 2019, respectively, for the pre-tax reconciling items between GAAP and adjusted net income; ii) $(9) and $9 ofincremental tax (provision) benefit in 2020 and 2019, respectively, from adjusting the company's non-U.S. deferred tax balances as a result of tax rate changes; and iii) $25 of incremental tax benefit in 2020 from audit settlements.

Notes:

Consolidated depreciation expense is $191 and $148 in 2020 and 2019, respectively.

Consolidated Statement of Income (a)(b)

Year Ended

December 31,% of December 31,% of

(In millions except per share2020 Revenues2019 Revenuesamounts)



Revenues $32,218 $25,542

Costs and Operating Expenses:

Cost of revenues (c) 15,713 48.8 %13,715 53.7 %

Selling, general and 5,764 17.9 %4,930 19.3 %administrative expenses (d)

Amortization of acquisition-related 1,667 5.2 %1,713 6.7 %intangible assets

Research and development 1,181 3.7 %1,003 3.9 %expenses

Restructuring and other costs99 0.3 %(413) -1.6 %(income), net (e)

24,424 75.8 %20,948 82.0 %

Operating Income 7,794 24.2 %4,594 18.0 %

Interest Income 65 224

Interest Expense (553) (676)

Other Expense, Net (f) (81) (72)

Income Before Income Taxes 7,225 4,070

Provision for Income Taxes (850) (374) (g)

Net Income $6,375 19.8 %$3,696 14.5 %



Earnings per Share:

Basic $16.09 $9.24

Diluted $15.96 $9.17

Weighted Average Shares:

Basic 396 400

Diluted 399 403





Reconciliation of Adjusted Operating Income and Adjusted Operating Margin

GAAP Operating Income (a) $7,794 24.2 %$4,594 18.0 %

Cost of Revenues Charges (c) 6 0.0 %17 0.1 %

Selling, General and Administrative (Credits) (10) 0.0 %62 0.2 %Charges, Net (d)

Restructuring and Other Costs99 0.3 %(413) -1.6 %(Income), Net (e)

Amortization of Acquisition-related 1,667 5.2 %1,713 6.7 %Intangible Assets

Adjusted Operating Income (b)$9,556 29.7 %$5,973 23.4 %



Reconciliation of Adjusted Net Income

GAAP Net Income (a) $6,375 $3,696

Cost of Revenues Charges (c) 6 17

Selling, General and Administrative (Credits) (10) 62 Charges, Net (d)

Restructuring and Other Costs99 (413) (Income), Net (e)

Amortization of Acquisition-related 1,667 1,713 Intangible Assets

Other Expense, Net (f) 121 144

Benefit from Income Taxes (g)(448) (244)

Adjusted Net Income (b) $7,810 $4,975



Reconciliation of Adjusted Earnings per Share

GAAP EPS (a) $15.96 $9.17

Cost of Revenues Charges, Net0.01 0.03 of Tax (c)

Selling, General and Administrative (Credits) (0.02) 0.12 Charges, Net of Tax (d)

Restructuring and Other Costs0.19 (0.56) (Income), Net of Tax (e)

Amortization of Acquisition-related 3.24 3.30 Intangible Assets, Net of Tax

Other Expense, Net of Tax (f)0.23 0.27

(Benefit from) Provision for (0.06) 0.02 Income Taxes (g)

Adjusted EPS (b) $19.55 $12.35



Reconciliation of Free Cash Flow

GAAP Net Cash Provided by $8,289 $4,973 Operating Activities (a)

Purchases of Property, Plant (1,474) (926) and Equipment

Proceeds from Sale of 8 36 Property, Plant and Equipment

Free Cash Flow $6,823 $4,083

Segment Data Year Ended

December 31,% of December 31,% of

(In millions) 2020 Revenues2019 Revenues



Revenues

Life Sciences Solutions $12,168 37.8 % $6,856 26.8 %

Analytical Instruments 5,124 15.9 % 5,522 21.6 %

Specialty Diagnostics 5,343 16.6 % 3,718 14.6 %

Laboratory Products and 12,245 38.0 % 10,599 41.5 % Services

Eliminations (2,662) -8.3 % (1,153) -4.5 %

Consolidated Revenues $32,218 100.0% $25,542 100.0%



Operating Income and Operating Margin

Life Sciences Solutions $6,109 50.2 % $2,446 35.7 %

Analytical Instruments 808 15.8 % 1,273 23.1 %

Specialty Diagnostics 1,368 25.6 % 930 25.0 %

Laboratory Products and 1,271 10.4 % 1,324 12.5 % Services

Subtotal Reportable Segments 9,556 29.7 % 5,973 23.4 %



Cost of Revenues Charges (c) (6) 0.0 % (17) -0.1 %

Selling, General and Administrative Credits 10 0.0 % (62) -0.2 % (Charges), Net (d)

Restructuring and Other (99) -0.3 % 413 1.6 % (Costs) Income, Net (e)

Amortization of Acquisition-related (1,667) -5.2 % (1,713) -6.7 % Intangible Assets

GAAP Operating Income (a) $7,794 24.2 % $4,594 18.0 %



(a) "GAAP" (reported) results were determined in accordance with U.S. generally accepted accounting principles (GAAP).

(b) Adjusted results are non-GAAP measures and, for income measures, exclude certain charges to cost of revenues (see note (c) for details); certain credits/charges to selling, general and administrative expenses (see note (d) for details); amortization of acquisition-related intangibleassets; restructuring and other costs, net (see note (e) for details); certain other gains or losses that are either isolated or cannot be expected to occur again with any predictability (see note (f) for details); and the tax consequences of the preceding items and certain other tax items (see note (g) for details).

(c) Reported results in 2020 and 2019 include $2 and $1, respectively, of charges to conform the accounting policies of a recently acquired businesses with the company's accounting policies. Reported results in 2020 also include $4 of accelerated depreciation on manufacturing assets to be abandoned due to facility consolidations. Reported results in 2019 include $16 of charges for the sale of inventories revalued at the date ofacquisition.

(d) Reported results in 2020 and 2019 include i) $(6) and $62, respectively, of certain third-party (credits) expenses, principally transaction/integration costs (including reimbursement thereof) related torecent/terminated acquisitions and a divestiture; ii) $9 and $3, respectively, of credits from changes in estimates of contingent acquisition consideration; and iii) $5 and $(1), respectively, of charges (income) associated with product liability litigation. Reported results in2019 also include $4 of accelerated depreciation on fixed assets to be abandoned due to integration synergies and facility consolidations.

(e) Reported results in 2020 and 2019 include restructuring and other costs, net, consisting principally of severance, abandoned facility and other expenses of headcount reductions within several businesses and real estate consolidations. Reported results in 2020 include $32 of charges forthe write-off of acquired technology. Reported results in 2019 include $482 of gain principally on sale of the Anatomical Pathology business, $6 of charges for impairment of acquired technology in development and $4 of charges for pre-acquisition litigation-related matters.

(f) Reported results in 2020 include $81 of costs for the terminated Qiagen acquisition, primarily for amortization of bridge loan commitments fees and entering hedging contracts, $42 of charges related to terminated interest rate swaps, and $8 of net charges for the settlement/curtailment of pension plans, offset in part by $10 of gains from investments. Reported results in 2019 include $184 of losses on the early extinguishment of debt and $4 of net charges for the settlement/ curtailment of pension plans offset in part by $44 of gains from investments.

(g) Reported provision for income taxes includes i) $425 and $253 of incremental tax benefit in 2020 and 2019, respectively, for the pre-tax reconciling items between GAAP and adjusted net income; ii) $4 and $7 of incremental tax provision in 2020 and 2019, respectively, from adjusting the company's non-U.S. deferred tax balances as a result of tax rate changes; iii) $27 of incremental tax benefit in 2020 from audit settlements; and iv) $2 of incremental tax provision in 2019, to adjust the impacts of U.S. tax reform legislation based on new guidance/ regulations issued during the period.

Notes:

Consolidated depreciation expense is $658 and $564 in 2020 and 2019, respectively.

Condensed Consolidated Balance Sheet



December 31,December 31,

(In millions) 2020 2019



Assets

Current Assets:

Cash and cash equivalents $10,325 $2,399

Accounts receivable, net 5,741 4,349

Inventories 4,029 3,370

Other current assets 1,862 1,775

Total current assets 21,957 11,893

Property, Plant and Equipment, Net 5,912 4,749

Acquisition-related Intangible Assets 12,685 14,014

Other Assets 2,457 2,011

Goodwill 26,041 25,714

Total Assets $69,052 $58,381





Liabilities and Shareholders' Equity

Current Liabilities:

Short-term obligations and current maturities of $2,628 $676 long-term obligations

Other current liabilities 7,676 5,521

Total current liabilities 10,304 6,197

Other Long-term Liabilities 5,134 5,433

Long-term Obligations 19,107 17,076

Total Shareholders' Equity 34,507 29,675

Total Liabilities and Shareholders' Equity $69,052 $58,381





Condensed Consolidated Statement of Cash Flows



Year Ended

December 31,December 31,

(In millions) 2020 2019



Operating Activities

Net income $6,375 $3,696



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

Depreciation and amortization 2,325 2,277

Change in deferred income taxes (552) (302)

Gain on sales of businesses - (482)

Other non-cash expenses, net 536 449

Changes in assets and liabilities, excluding the (395) (665) effects of acquisitions and disposition

Net cash provided by operating activities 8,289 4,973



Investing Activities

Acquisitions, net of cash acquired (38) (1,843)

Purchases of property, plant and equipment (1,474) (926)

Proceeds from sale of property, plant and 8 36 equipment

Proceeds from sale of business, net of cash - 1,128 divested

Other investing activities, net (6) 118

Net cash used in investing activities (1,510) (1,487)



Financing Activities

Net proceeds from issuance of debt 3,464 5,638

Repayment of debt (713) (6,360)

Net proceeds from issuance of commercial paper 383 2,781

Repayment of commercial paper (387) (3,464)

Purchases of company common stock (1,500) (1,500)

Dividends paid (337) (297)

Net proceeds from issuance of company common 196 153 stock under employee stock plans

Other financing activities, net (147) (69)

Net cash provided by (used in) financing 959 (3,118) activities



Exchange Rate Effect on Cash 176 (63)

Increase in Cash, Cash Equivalents and Restricted7,914 305 Cash

Cash, Cash Equivalents and Restricted Cash at 2,422 2,117 Beginning of Period

Cash, Cash Equivalents and Restricted Cash at End$10,336 $2,422 of Period





Free Cash Flow (a) $6,823 $4,083



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

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SOURCE Thermo Fisher Scientific