What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-08-05 compared with 2022-05-06 · 160 added, 114 removed, 241 unchanged (53% of the section changed)

30 unchanged sentences

Thermo Fisher Scientific Inc.

enables customers to make the world healthier, cleaner and safer by helping them accelerate life sciences research, solve complex analytical challenges, improve patient health through diagnostics and the development and manufacture of life-changing therapies, and increase laboratory productivity.

enables customers to make the world healthier, cleaner and safer by helping them accelerate life sciences research, solve complex analytical challenges, increase laboratory productivity, and improve patient health through diagnostics and the development and manufacture of life-changing therapies.

Markets served include pharmaceutical and biotech, academic and government, industrial and applied, as well as healthcare and diagnostics.

1 unchanged sentence

Life Sciences Solutions, Analytical Instruments, Specialty Diagnostics and Laboratory Products and Biopharma Services.

Financial Highlights - First Quarter 2022 Compared with First Quarter 2021

Three months ended

April 2, April 3,

(Dollars in millions except per share amounts) 2022 2021 Change

THERMO FISHER SCIENTIFIC INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

Overview (continued)

Financial Highlights

Three months ended Six months ended

July 2, July 3, July 2, July 3,

(Dollars in millions except per share amounts) 2022 2021 Change 2022 2021 Change

$ 10,970 $ 9,273 18 % $ 22,788 $ 19,179 19 %

GAAP operating income 2,001 2,163 (7) % 4,822 5,212 (7) %

GAAP operating income margin 23.9 % 30.8 % (6.9) pt

GAAP operating income margin 18.2 % 23.3 % (5.1) pt 21.2 % 27.2 % (6.0) pt

Adjusted operating income (non-GAAP measure)

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Adjusted operating income margin (non-GAAP measure)

29.2 % 35.4 % (6.2) pt

23.7 % 29.0 % (5.3) pt 26.6 % 32.3 % (5.7) pt

GAAP diluted earnings per share attributable to Thermo Fisher Scientific Inc.

2 unchanged sentences

5.51 5.60 (2) % 12.76 12.81 — %

THERMO FISHER SCIENTIFIC INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

Overview (continued)

Organic Revenue Growth

Three months ended

April 2, 2022

Three months ended Six months ended

July 2, 2022 July 2, 2022

Revenue growth 18 % 19 %

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While these positive impacts are expected to continue through 2022, the duration and extent of future revenues from such sales are uncertain and dependent primarily on customer testing as well as therapy and vaccine demand.

Sales of products related to COVID-19 testing were $1.68 billion and $2.45 billion in the first quarter of 2022 and 2021, respectively.

During the first quarter of 2022 demand from biotech and pharma customers was very strong, driven by our unique value proposition and trusted partner status.

We saw growth in the academic and government market due to a positive funding environment.

The industrial and applied market was particularly strong, led by robust demand from semiconductor and materials sciences customers.

Sales of products related to COVID-19 testing were $0.63 billion and $1.42 billion in the second quarter of 2022 and 2021, respectively, and $2.31 billion and $3.87 billion in the first six months of 2022 and 2021, respectively.

During the second quarter and first six months of 2022, demand from biotech and pharma customers was very strong, driven by our unique value proposition and trusted partner status.

We saw growth in the academic and government market as we remain well positioned to meet customer needs.

The industrial and applied market was strong, led by robust demand from semiconductor and materials sciences customers.

The diagnostics and healthcare market declined due to decreased demand for COVID-19 testing products.

During the first quarter of 2022, sales growth was strong in the Asia Pacific region, particularly China, modest in North America, and flat in Europe.

During the second quarter and first six months of 2022, sales growth was strong in the Asia Pacific region, particularly China, and in North America.

Sales declined in Europe during the second quarter and first six months of 2022 due to lower COVID-19 testing demand.

The company continues to execute its proven growth strategy which consists of three pillars:

• A commitment to high-impact innovation,

• Scale in high-growth and emerging markets, and

• A unique value proposition to our customers.

GAAP operating income margin and adjusted operating income margin decreased in the first quarter of 2022 due primarily to the expected impact of incorporating recent acquisitions, lower COVID-19 testing volumes, and strategic growth investments.

This was partially offset by strong pricing realization and productivity improvements to address inflation.

GAAP operating income margin was also impacted by higher amortization expense as a result of 2021 acquisitions.

• Developing high-impact, innovative new products,

• Leveraging our scale in high-growth and emerging markets, and

• Delivering a unique value proposition to our customers.

GAAP operating income margin and adjusted operating income margin decreased in the second quarter and first six months of 2022 due primarily to the expected impact of incorporating recent acquisitions, lower COVID-19 testing volumes, and strategic growth investments.

This was partially offset by strong pricing realization across all segments to address higher inflation.

GAAP operating income margin in 2022 was also impacted by higher amortization expense as a result of 2021 acquisitions.

In the second quarter of 2021, GAAP operating income margin was impacted by an impairment of acquired technology.

THERMO FISHER SCIENTIFIC INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

Overview (continued)

The company’s references to strategic growth 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.

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Notable Recent Acquisitions

On January 15, 2021, the company acquired, within the Laboratory Products and Biopharma Services segment, the Belgium-based European viral vector manufacturing business of Groupe Novasep SAS for $830 million in net cash consideration.

The European viral vector manufacturing business provides manufacturing services for vaccines and therapies to biotechnology companies and large biopharma customers.

The acquisition expands the segment’s capabilities for cell and gene vaccines and therapies.

On February 25, 2021, the company acquired, within the Life Sciences Solutions segment, Mesa Biotech, Inc., a U.S.-based molecular diagnostic company, for $407 million in net cash consideration and contingent consideration with an initial fair value of $65 million due upon the completion of certain milestones.

On February 25, 2021, the company acquired, within the Life Sciences Solutions segment, Mesa Biotech, Inc., a U.S.-based molecular diagnostic company, for $0.41 billion in net cash consideration and contingent consideration with an initial fair value of $0.06 billion due upon the completion of certain milestones.

Mesa Biotech has developed and commercialized a PCR based rapid point-of-care testing platform available for detecting infectious diseases including COVID-19.

The acquisition enables the company to accelerate the availability of reliable and accurate advanced molecular diagnostics at the point of care.

THERMO FISHER SCIENTIFIC INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

Overview (continued)

On September 30, 2021, the company assumed operating responsibility, within the Laboratory Products and Biopharma Services segment, of a new state-of-the-art biologics manufacturing facility in Lengnau, Switzerland from CSL Limited to perform pharma services for CSL with capacity to serve other customers as well.

The company expects to make fixed lease payments aggregating to $555 million (excluding renewals) from 2021 to 2041, with additional amounts dependent on the extent of revenues from customers of the facility other than CSL.

On December 8, 2021, the company acquired, within the Laboratory Products and Biopharma Services segment, PPD, Inc., a U.S.-based global provider of clinical research services to the pharma and biotech industry, for $15.99 billion in net cash consideration and $43 million of equity awards exchanged.

The company expects to make fixed lease payments aggregating to $0.56 billion (excluding renewals) from 2021 to 2041, with additional amounts dependent on the extent of revenues from customers of the facility other than CSL.

The addition of PPD’s clinical research services enhances our offering to biotech and pharma customers by enabling them to accelerate innovation and increase their productivity within the drug development process.

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Accordingly, the following segment data are reported on this basis.

Three months ended

April 2, April 3,

Three months ended Six months ended

July 2, July 3, July 2, July 3,

(Dollars in millions) 2022 2021 2022 2021

2 unchanged sentences

Analytical Instruments

1,607 1,481 3,125 2,868

Specialty Diagnostics

1,101 1,235 2,583 2,850

Laboratory Products and Biopharma Services

5,537 3,583 10,979 7,180

(567) (583) (1,422) (1,479)

Consolidated revenues

$ 10,970 $ 9,273 $ 22,788 $ 19,179

THERMO FISHER SCIENTIFIC INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

Results of Operations (continued)

Life Sciences Solutions

Three months ended Organic* (non-GAAP measure)

(Dollars in millions) April 2,

2022 April 3,

(Dollars in millions) July 2,

Change Currency

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Segment income margin 40.3 % 48.3 % -8.0 pt

* Results may not sum due to rounding

The decrease in organic revenues in the first quarter of 2022 was primarily due to lower revenue in the genetic sciences business, driven by lower demand for testing to diagnose COVID-19, largely offset by strong growth in bioproduction and biosciences products.

The decrease in segment income margin resulted primarily from sales mix and strategic growth investments, offset in part by productivity improvements.

The decrease in organic revenues in the second quarter of 2022 was primarily due to lower revenue in the genetic sciences business, driven by moderation in testing demand to diagnose COVID-19, partially offset by strong growth in the bioproduction business.

The decrease in segment income margin resulted primarily from unfavorable business mix and strategic growth investments, partially offset by productivity improvements.

Six months ended Organic* (non-GAAP measure)

(Dollars in millions) July 2,

Change Currency

Translation Acquisitions/ Divestitures

Revenues $ 7,523 $ 7,760 (3) % (2) % 2 % (3) %

Segment income $ 3,503 $ 3,997 (12) %

Segment income margin 46.6 % 51.5 % -4.9 pt

The decrease in organic revenues in the first six months of 2022 was driven by a combination of moderation in testing demand to diagnose COVID-19 with lower sales of genetic sciences products, largely offset by strong demand in the bioproduction and biosciences businesses.

The decrease in segment income margin resulted primarily from business mix and strategic growth investments, partially offset by productivity improvements.

Analytical Instruments

Three months ended Organic* (non-GAAP measure)

(Dollars in millions) April 2,

2022 April 3,

(Dollars in millions) July 2,

Change Currency

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Segment income margin 21.4 % 18.9 % 2.5 pt

* Results may not sum due to rounding

The increase in organic revenues in the second quarter of 2022 was due to increased demand in the electron microscopy and chromatography and mass spectrometry businesses.

The increase in segment income margin resulted primarily from strong volume pull through and productivity improvements, offset in part by strategic growth investments.

Six months ended Organic* (non-GAAP measure)

(Dollars in millions) July 2,

Change Currency

Translation Acquisitions/ Divestitures

Revenues $ 3,125 $ 2,868 9 % (3) % — % 12 %

Segment income 645 552 17 %

Segment income margin 20.6 % 19.3 % 1.3 pt

The increase in organic revenues in the first six months of 2022 was due to increased demand in the electron microscopy and chromatography and mass spectrometry businesses.

The increase in segment income margin resulted primarily from strong volume pull through, productivity improvements and business mix, offset in part by strategic growth investments.

THERMO FISHER SCIENTIFIC INC.

2 unchanged sentences

Results of Operations (continued)

The increase in organic revenues in the first quarter of 2022 was due to increased demand across all of the segment’s primary businesses, with particular strength in electron microscopy instruments and, to a lesser extent, chromatography and mass spectrometry.

The increase in segment income margin resulted primarily from profit on higher sales and, to a lesser extent, sales mix, offset by strategic growth investments.

Specialty Diagnostics

Three months ended Organic* (non-GAAP measure)

(Dollars in millions) April 2,

2022 April 3,

(Dollars in millions) July 2,

Change Currency

3 unchanged sentences

Segment income margin 22.1 % 19.9 % 2.2 pt

* Results may not sum due to rounding

The decrease in organic revenues in the first quarter of 2022 was due to decreased demand, primarily driven by products addressing treatment of COVID-19, partially offset by growth in the healthcare markets channel, transplant diagnostics and clinical diagnostics businesses.

The decrease in segment income margin was primarily due to sales mix and, to a lesser extent, strategic growth investments, partially offset by productivity improvements.

The decrease in organic revenues in the second quarter of 2022 was due to decreased demand, primarily driven by products addressing diagnosis of COVID-19, partially offset by growth in the immunodiagnostics and microbiology businesses, as well as our healthcare market channel.

The impact of lower COVID-19 testing volume on segment income margin was more than offset by strong productivity improvements and positive business mix.

Six months ended Organic* (non-GAAP measure)

(Dollars in millions) July 2,

Change Currency

Translation Acquisitions/ Divestitures

Revenues $ 2,583 $ 2,850 (9) % (2) % — % (7) %

Segment income 596 673 (11) %

Segment income margin 23.1 % 23.6 % -0.5 pt

The decrease in organic revenues in the first six months of 2022 was due to decreased demand, primarily driven by products addressing diagnosis of COVID-19, partially offset by growth in the immunodiagnostics and transplant diagnostics businesses.

The decrease in segment income margin was primarily due to lower COVID-19 testing volume, largely offset by productivity improvements.

Laboratory Products and Biopharma Services

Three months ended Organic* (non-GAAP measure)

(Dollars in millions) April 2,

2022 April 3,

(Dollars in millions) July 2,

Change Currency

3 unchanged sentences

Segment income margin 12.5 % 12.4 % 0.1 pt

The increase in organic revenues in the second quarter of 2022 was primarily due to higher sales across each of the segment’s businesses, with particular strength in the research and safety market channel and pharma services business and, to a lesser extent, the laboratory products business.

The acquisition of PPD, the company’s clinical research business, contributed $1.72 billion of revenue during the second quarter.

The increase in segment income margin was primarily due to strong productivity and the benefit of recent acquisitions, largely offset by strategic growth investments and unfavorable business mix.

Six months ended Organic* (non-GAAP measure)

(Dollars in millions) July 2,

Change Currency

Translation Acquisitions/ Divestitures

Revenues $ 10,979 $ 7,180 53 % (3) % 48 % 8 %

Segment income 1,311 977 34 %

Segment income margin 11.9 % 13.6 % -1.7 pt

The increase in organic revenues in the first six months of 2022 was primarily due to higher sales across each of the segment’s businesses, with particular strength in the research and safety market channel and pharma services business and, to a lesser extent, the laboratory products business.

The acquisition of PPD, the company’s clinical research business, contributed $3.38 billion of revenue during the first six months of 2022.

The decrease in segment income margin was primarily due to business mix and strategic growth investments, offset in part by the benefit of recent acquisitions.

* Results may not sum due to rounding

The increase in organic revenues in the first quarter of 2022 was primarily due to higher sales in the research and safety market channel and, to a lesser extent, laboratory product business.

The acquisition of PPD, the company’s clinical research business, contributed $1.66 billion of revenue during the first quarter.

The decrease in segment income margin was primarily due to strategic growth investments and sales mix, partially offset by profit on higher sales.

THERMO FISHER SCIENTIFIC INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

Results of Operations (continued)

Non-operating Items

Three months ended

April 2, April 3,

Three months ended Six months ended

July 2, July 3, July 2, July 3,

(Dollars in millions) 2022 2021 2022 2021

Net interest expense

$ 112 $ 111 $ 230 $ 224

GAAP other income/(expense) 28 (3) (135) (186)

3 unchanged sentences

13.0 % 14.0 % 13.6 % 15.1 %

Net interest expense (interest expense less interest income) increased due primarily to the increase in debt to finance the acquisition of PPD and for general corporate purposes, offset in part by lower average interest rates.

See additional discussion under the caption “Liquidity and Capital Resources” below.

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 2022 also includes $141 million of net losses on investments and $26 million of losses on the early extinguishment of debt (Note 7).

GAAP other income/(expense) in 2021 also includes $197 million of losses on the early extinguishment of debt.

The company’s GAAP and adjusted tax rates decreased in 2022 compared to 2021 primarily due to the benefits of our tax planning initiatives, including the release of the valuation allowance in a jurisdiction where the deferred tax assets are now expected to be realized.

GAAP other income/(expense) in the second quarter and first six months of 2022 includes $18 million of net gains and $123 million of net losses on investments, respectively.

In the first six months of 2022 and 2021 GAAP other income/(expense) also includes $26 million and $197 million, respectively, of losses on the early extinguishment of debt (Note 7).

The company’s GAAP and adjusted tax rates decreased in 2022 compared to 2021 primarily due to releases of valuation allowances of $88 million and $175 million for the three and six months ended July 2, 2022, respectively, in jurisdictions where the deferred tax assets are now expected to be realized.

The company’s 2022 GAAP tax rate was also impacted by changes in tax rates and higher amortization expense as a result of 2021 acquisitions.

THERMO FISHER SCIENTIFIC INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

Results of Operations (continued)

In the second quarter of 2021 the company recorded a $162 million income tax benefit on an intra-entity transfer of fixed assets.

The effective tax rates in both 2022 and 2021 were also affected by relatively significant earnings in lower tax jurisdictions.

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The company deploys its capital primarily via mergers and acquisitions and secondarily via share buybacks and dividends.

April 2, December 31,

July 2, December 31,

(In millions) 2022 2021

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using non-taxable returns of capital as well as dividends where the related U.S.

dividend received deduction or foreign tax credit equals any tax cost arising from the dividends.

dividend received deduction or foreign tax credit equals any tax

THERMO FISHER SCIENTIFIC INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

Liquidity and Capital Resources (continued)

cost arising from the dividends.

As a result of using such means of transferring cash to the U.S., the company does not expect any material adverse liquidity effects from its significant non-U.S.

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The company believes that its existing cash and cash equivalents and its future cash flow from operations together with available borrowing capacity under its revolving credit agreement will be sufficient to meet the cash requirements of its existing businesses for the foreseeable future, including at least the next 24 months.

As of April 2, 2022, the company’s short-term debt totaled $1.87 billion.

As of July 2, 2022, the company’s short-term debt totaled $1.01 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 April 2, 2022, no borrowings were outstanding under the company’s revolving credit facility, although available capacity was reduced by approximately $4 million as a result of outstanding letters of credit.

THERMO FISHER SCIENTIFIC INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

Liquidity and Capital Resources (continued)

Three months ended

April 2, April 3,

As of July 2, 2022, no borrowings were outstanding under the company’s revolving credit facility, although available capacity was reduced by immaterial outstanding letters of credit.

Six months ended

July 2, July 3,

(In millions) 2022 2021

7 unchanged sentences

Operating Activities

During the first three months of 2022, cash provided by income was offset in part by investments in working capital.

An increase in inventories used cash of $499 million, primarily to support growth in sales.

Changes in other assets and other liabilities used cash of $358 million primarily due to the timing of payments for compensation.

Cash payments for income taxes were $303 million during the first three months of 2022.

During the first three months of 2021, cash provided by income was offset in part by investments in working capital.

A decrease in accounts receivable provided $149 million of cash.

An increase in inventories used cash of $352 million, primarily to support growth in sales.

During the first six months of 2022, cash provided by income was offset in part by investments in working capital.

An increase in inventories used cash of $0.87 billion, primarily to support growth in sales.

Changes in other assets and other liabilities used cash of $0.74 billion primarily due to the timing of payments for compensation.

Cash payments for income taxes were $542 million during the first three months of 2021.

Cash payments for income taxes were $0.83 billion during the first six months of 2022.

During the first six months of 2021, cash provided by income was offset in part by investments in working capital.

A decrease in accounts receivable provided $0.25 billion of cash.

An increase in inventories used cash of $0.62 billion, primarily to support growth in sales.

Changes in other assets and other liabilities used cash of $1.06 billion primarily due to the timing of payments for compensation and income taxes.

Cash payments for income taxes were $1.27 billion during the first six months of 2021.

Investing Activities

During the first three months of 2022, acquisitions used cash of $40 million.

The company’s investing activities also included the purchase of $640 million of property, plant and equipment for capacity and capability investments.

During the first three months of 2021, acquisitions used cash of $1.34 billion.

The company’s investing activities also included the purchase of $628 million of property, plant and equipment for capacity and capability investments.

During the first six months of 2022, acquisitions used cash of $0.04 billion.

The company’s investing activities also included the purchase of $1.15 billion of property, plant and equipment for capacity and capability investments.

During the first six months of 2021, acquisitions used cash of $1.43 billion.

The company’s investing activities also included the purchase of $1.17 billion of property, plant and equipment for capacity and capability investments.

Financing Activities

During the first three months of 2022, repayment of senior notes and net commercial paper activity used cash of $375 million and $633 million, respectively.

The company’s financing activities also included the repurchase of $2.00 billion of the company’s common stock (3.3 million shares) and the payment of $103 million in cash dividends.

During the first six months of 2022, repayment of senior notes and net commercial paper activity used cash of $0.38 billion and $2.46 billion, respectively.

The company’s financing activities also included the repurchase of $2.00 billion of the company’s common stock (3.3 million shares) and the payment of $0.22 billion in cash dividends.

On September 23, 2021, the Board of Directors authorized the repurchase of up to $3.00 billion of the company’s common stock.

At May 6, 2022, authorization remained for $1.00 billion of future repurchases of the company’s common stock.

During the first three months of 2021 repayment of senior notes used cash of $2.80 billion.

The company’s financing activities also included the repurchase of $2.00 billion of the company’s common stock (4.1 million shares) and the payment of $87 million in cash dividends.

The company’s commitments for purchases of property, plant and equipment, contractual obligations and other commercial commitments did not change materially between December 31, 2021 and April 2, 2022.

At August 5, 2022, authorization remained for $1.00 billion of future repurchases of the company’s common stock.

During the first six months of 2021 repayment of senior notes used cash of $2.80 billion.

The company’s financing activities also included the repurchase of $2.00 billion of the company’s common stock (4.1 million shares) and the payment of $0.19 billion in cash dividends.

The company expects that for all of 2022, expenditures for property, plant and equipment, net of disposals, will be between $2.5 and $2.7 billion.

THERMO FISHER SCIENTIFIC INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

Non-GAAP Measures

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To calculate these measures we exclude, as applicable:

THERMO FISHER SCIENTIFIC INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

Non-GAAP Measures (continued)

• 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.

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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 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 changes), the latter of which we exclude because they are outside of our normal operations and difficult to forecast accurately for future periods.

• The 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.

3 unchanged sentences

Reconciliations of such non-GAAP financial measures to the most directly comparable GAAP financial measures are set forth within the “Overview” and “Results of Operations” sections and below.

Three months ended

April 2, April 3,

THERMO FISHER SCIENTIFIC INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

Non-GAAP Measures (Continued)

Three months ended Six months ended

July 2, July 3, July 2, July 3,

(Dollars in millions except per share amounts) 2022 2021 2022 2021

4 unchanged sentences

Selling, general and administrative expenses adjustments (b)

(28) (42) (21) (26)

Restructuring and other costs (c)

24 119 26 133

Amortization of acquisition-related intangible assets 600 449 1,209 872

9 unchanged sentences

23.7 % 29.0 % 26.6 % 32.3 %

THERMO FISHER SCIENTIFIC INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

Non-GAAP Measures (continued)

Three months ended

April 2, April 3,

(Dollars in millions except per share amounts) 2022 2021

Reconciliation of adjusted other income/(expense)

2 unchanged sentences

Adjusted other income/(expense) (non-GAAP measure)

$ 10 $ 5 $ 14 $ 19

Reconciliation of adjusted tax rate

21 unchanged sentences

$ 1,034 $ 1,687 $ 2,598 $ 3,042

(a) Adjusted results in 2022 and 2021 exclude charges for the sale of inventories revalued at the date of acquisition.

(b) Adjusted results in 2022 and 2021 exclude certain third-party expenses, principally transaction/integration costs related to recent acquisitions and charges/credits for changes in estimates of contingent acquisition consideration.

(c) Adjusted results in 2022 and 2021 exclude restructuring and other costs consisting principally of severance, abandoned facility and other expenses of headcount reductions within several businesses and real estate consolidations.

Adjusted results in 2021 also exclude $13 million of charges for compensation due to employees at recently acquired businesses at the date of acquisition.

(d) Adjusted results in 2022 and 2021 exclude net gains/losses on investments and losses on the early extinguishment of debt.

(e) Adjusted provision for income taxes in 2022 and 2021 excludes incremental tax impacts for the pre-tax reconciling items and incremental tax impacts as a result of tax rate changes.

THERMO FISHER SCIENTIFIC INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

Non-GAAP Measures (Continued)

(a) Adjusted results exclude charges for the sale of inventories revalued at the date of acquisition.

(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.

(c) Adjusted results exclude restructuring and other costs consisting principally of severance, abandoned facility and other expenses of headcount reductions within several businesses and real estate consolidations.

Adjusted results in Q1 2021 and Q2 2021 also exclude $13 million of charges for compensation due to employees at recently acquired businesses at the date of acquisition and $110 million of charges for impairment of acquired technology, respectively.

(d) Adjusted results exclude net gains/losses on investments and losses on the early extinguishment of debt.

Adjusted results in Q2 2021 also exclude amortization of bridge loan commitment fees related to a pending acquisition.

(e) Adjusted provision for income taxes in 2022 and 2021 excludes incremental tax impacts for the pre-tax reconciling items and incremental tax impacts as a result of tax rate/law changes.

Critical Accounting Policies and Estimates

Management’s Discussion and Analysis and Note 1 to the Consolidated Financial Statements of the company’s Annual Report on Form 10-K for 2021 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 2022.

There have been no significant changes in the company’s critical accounting policies during the first six months of 2022.

Recent Accounting Pronouncements

A description of recently issued accounting standards is included under the heading “ Recent Accounting Pronouncements ” in Note 1.

THERMO FISHER SCIENTIFIC INC.

Quantitative and Qualitative Disclosures About Market Risk

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis