What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-08-02 compared with 2024-05-03 · 135 added, 70 removed, 242 unchanged (46% of the section changed)

26 unchanged sentences

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.

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.

The company refers to various amounts or measures not prepared in accordance with generally accepted accounting principles (non-GAAP measures).

8 unchanged sentences

Consolidated Results

Three months ended

March 30, April 1,

(Dollars in millions except per share amounts) 2024 2023 Change

Three months ended Six months ended

June 29, July 1, June 29, July 1,

(Dollars in millions except per share amounts) 2024 2023 Change 2024 2023 Change

$ 10,541 $ 10,687 (1) % $ 20,886 $ 21,397 (2) %

GAAP operating income 1,820 1,578 15 % 3,483 3,141 11 %

GAAP operating income margin 16.1 % 14.6 % 1.5 pt

GAAP operating income margin 17.3 % 14.8 % 2.5 pt 16.7 % 14.7 % 2.0 pt

Adjusted operating income (non-GAAP measure)

1 unchanged sentence

Adjusted operating income margin (non-GAAP measure)

22.0 % 21.8 % 0.2 pt

22.3 % 22.2 % 0.1 pt 22.1 % 22.0 % 0.1 pt

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

4 unchanged sentences

Organic Revenue Growth

Three months ended

March 30, 2024

Three months ended Six months ended

June 29, 2024 June 29, 2024

Revenue growth (1) % (2) %

6 unchanged sentences

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.

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.

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.

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 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.

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.

During the first six months of 2024, all of our end markets were negatively impacted by a more muted macroeconomic environment and moderate economic activity in China.

Revenues from pharma and biotech and diagnostics and healthcare customers declined due to demand for COVID-19 related products and services.

Revenues in the academic and government as well as the industrial and applied markets were flat.

During the first six months of 2024, sales grew slightly in Asia-Pacific, including China.

Sales growth in Europe was flat and sales in North America declined due to decreased demand for COVID-19 related products.

Contributions to organic revenue during the first six months of 2024 from the Specialty Diagnostics and Analytical Instruments segments were more than offset by declines in the Life Sciences Solutions and Laboratory Products and Biopharma Services segments.

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

2 unchanged sentences

• Our unparalleled commercial engine.

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.

GAAP operating income margin and adjusted operating income margin increased in the second quarter of 2024 due primarily to strong productivity improvements, partially offset by unfavorable business mix.

GAAP operating income margin in the second quarter of 2024 was also impacted by net credits for changes in estimates of contingent acquisition consideration, lower levels of restructuring and other charges incurred for headcount reductions and facility consolidations in an effort to streamline operations (Note 12), and, to a lesser extent, lower amortization expense.

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).

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.

THERMO FISHER SCIENTIFIC INC.

global sourcing initiatives, a lower cost structure following restructuring actions including headcount reductions and consolidation of facilities, and low cost region manufacturing.

Notable Recent Acquisitions

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The acquisition expands the segment’s portfolio with the addition of highly complementary real-world evidence solutions to enhance decision-making as well as the time and cost of drug development.

THERMO FISHER SCIENTIFIC INC.

On July 10, 2024, the company acquired, within the Life Sciences Solutions segment, Olink Holding AB (publ), a Swedish-based provider of next-generation proteomics solutions.

The acquisition enhances the segment’s capabilities in the high-growth proteomics market with the addition of highly differentiated solutions.

It also complements the existing life sciences and mass spectrometry offerings, accelerating protein biomarker discovery and providing strong synergy opportunities.

Segment Results

1 unchanged sentence

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

Three months ended

March 30, April 1,

Three months ended Six months ended

June 29, July 1, June 29, July 1,

(Dollars in millions) 2024 2023 2024 2023

2 unchanged sentences

Analytical Instruments

1,782 1,749 3,469 3,472

Specialty Diagnostics

1,117 1,109 2,227 2,217

Laboratory Products and Biopharma Services

5,758 5,831 11,480 11,594

(470) (465) (930) (961)

Consolidated revenues

2 unchanged sentences

Three months ended Organic (non-GAAP measure)

(Dollars in millions) March 30,

2024 April 1,

(Dollars in millions) June 29,

Change Currency

3 unchanged sentences

Segment income margin 36.7 % 33.2 % 3.5 pt

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.

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.

Six months ended Organic (non-GAAP measure)

(Dollars in millions) June 29,

Change Currency

Translation Acquisitions/ Divestitures

Revenues $ 4,640 $ 5,075 (9) % (1) % 0 % (8) %

Segment income 1,705 1,653 3 %

Segment income margin 36.7 % 32.6 % 4.1 pt

The decrease in organic revenues in the first six months of 2024 was primarily due to moderation in COVID-19 related revenue.

The increase in segment income margin resulted primarily from exceptionally strong productivity improvements, partially offset by unfavorable volume pull-through.

THERMO FISHER SCIENTIFIC INC.

Analytical Instruments

Three months ended Organic (non-GAAP measure)

(Dollars in millions) March 30,

2024 April 1,

(Dollars in millions) June 29,

Change Currency

3 unchanged sentences

Segment income margin 24.6 % 24.7 % (0.1) pt

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 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.

Six months ended Organic (non-GAAP measure)

(Dollars in millions) June 29,

Change Currency

Translation Acquisitions/ Divestitures

Revenues $ 3,469 $ 3,472 0 % (1) % 0 % 1 %

Segment income 838 853 (2) %

Segment income margin 24.2 % 24.6 % (0.4) pt

The increase in organic revenues in the first six months 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.

Specialty Diagnostics

Three months ended Organic (non-GAAP measure)

(Dollars in millions) March 30,

2024 April 1,

(Dollars in millions) June 29,

Change Currency

3 unchanged sentences

Segment income margin 26.7 % 26.7 % 0.0 pt

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.

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.

Six months ended Organic (non-GAAP measure)

(Dollars in millions) June 29,

Change Currency

Translation Acquisitions/ Divestitures

Revenues $ 2,227 $ 2,217 0 % 0 % 0 % 1 %

Segment income 593 577 3 %

Segment income margin 26.6 % 26.0 % 0.6 pt

The increase in organic revenues in the first six months of 2024 was 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.

The increase in segment income margin was due to favorable business mix and productivity improvements, partially offset by strategic investments.

THERMO FISHER SCIENTIFIC INC.

1 unchanged sentence

Three months ended Organic (non-GAAP measure)

(Dollars in millions) March 30,

2024 April 1,

(Dollars in millions) June 29,

Change Currency

3 unchanged sentences

Segment income margin 12.9 % 14.1 % (1.2) pt

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 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.

Six months ended Organic (non-GAAP measure)

(Dollars in millions) June 29,

Change Currency

Translation Acquisitions/ Divestitures

Revenues $ 11,480 $ 11,594 (1) % 0 % 0 % (1) %

Segment income 1,489 1,617 (8) %

Segment income margin 13.0 % 14.0 % (1.0) pt

The decrease in organic revenues in the first six months 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, partially offset by productivity improvements.

Non-operating Items

Three months ended

March 30, April 1,

Three months ended Six months ended

June 29, July 1, June 29, July 1,

(Dollars and shares in millions) 2024 2023 2024 2023

Net interest expense

$ 59 $ 148 $ 143 $ 302

GAAP other income/(expense) 5 — 14 (46)

4 unchanged sentences

Weighted average diluted shares 383 388 383 388

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).

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).

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.

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).

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.

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).

THERMO FISHER SCIENTIFIC INC.

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.

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 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.

7 unchanged sentences

income tax provision among many countries, the company believes that a change in the statutory tax rate in any individual country is not likely to materially affect the company’s income tax provision or net income, aside from any resulting one-time adjustment to the company’s deferred tax balances to reflect a new rate.

Equity in earnings/losses of unconsolidated entities was impacted by an $88 million impairment of an equity method investment in the second quarter of 2024.

Weighted average diluted shares decreased in 2024 compared to 2023 due to share repurchases, net of option dilution.

2 unchanged sentences

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

THERMO FISHER SCIENTIFIC INC.

(In millions) March 30, 2024 December 31, 2023

(In millions) June 29, 2024 December 31, 2023

Cash and cash equivalents $ 7,073 $ 8,077

11 unchanged sentences

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 March 30, 2024, the company’s short-term obligations and current maturities of long-term obligations totaled $4.45 billion.

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 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.

Three months ended

(In millions) March 30, 2024 April 1, 2023

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.

Six months ended

(In millions) June 29, 2024 July 1, 2023

Net cash provided by operating activities

6 unchanged sentences

Operating Activities

During the first three months of 2024, cash provided by income was offset in part by investments in working capital.

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 $0.65 billion during the first three months of 2024.

During the first three months of 2023, cash provided by income was offset in part by investments in working capital.

Cash payments for income taxes were $1.13 billion during the first six months of 2024.

THERMO FISHER SCIENTIFIC INC.

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.

Cash payments for income taxes were $0.57 billion during the first three months of 2023.

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.

Investing Activities

During the first three months of 2024, purchases of short-term investments used cash of $1.76 billion.

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.

During the first three months of 2023, the acquisition of The Binding Site Group used cash of $2.70 billion.

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.

1 unchanged sentence

Financing Activities

During the first three months of 2024, issuance of debt provided $1.20 billion of cash.

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.

1 unchanged sentence

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.

THERMO FISHER SCIENTIFIC INC.

During the first three months of 2023, net commercial paper activity used cash of $0.50 billion.

At August 2, 2024, authorization remained for $1.00 billion of future repurchases of the company’s common stock.

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.

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.

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).

Non-GAAP Measures

14 unchanged sentences

We exclude these items because they are outside of our normal operations and/or, in certain cases, are difficult to forecast accurately for future periods.

THERMO FISHER SCIENTIFIC INC.

• The expense associated with the amortization of acquisition-related intangible assets because a significant portion of the purchase price for acquisitions may be allocated to intangible assets that have lives of up to 20 years.

6 unchanged sentences

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

THERMO FISHER SCIENTIFIC INC.

Three months ended

March 30, April 1,

Three months ended Six months ended

June 29, July 1, June 29, July 1,

(Dollars in millions except per share amounts) 2024 2023 2024 2023

4 unchanged sentences

Selling, general and administrative expenses adjustments (b)

(64) 6 (45) 14

Restructuring and other costs (c)

77 183 106 295

Amortization of acquisition-related intangible assets 513 585 1,065 1,191

13 unchanged sentences

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

$ 4 $ (1) $ 3 $ (1)

Reconciliation of adjusted tax rate

3 unchanged sentences

10.0 % 10.0 % 10.2 % 10.0 %

THERMO FISHER SCIENTIFIC INC.

Three months ended Six months ended

June 29, July 1, June 29, July 1,

(Dollars in millions except per share amounts) 2024 2023 2024 2023

Reconciliation of adjusted earnings per share

8 unchanged sentences

Equity in earnings/losses of unconsolidated entities 0.22 0.04 0.16 0.11

Noncontrolling interests adjustments (f) 0.00 0.00 0.00 0.00

Adjusted EPS (non-GAAP measure)

5 unchanged sentences

Free cash flow (non-GAAP measure)

(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.

(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.

(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.

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

(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.

THERMO FISHER SCIENTIFIC INC.

$ 1,674 $ 1,260 $ 2,583 $ 1,537

(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.

(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, 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.

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

(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.

(f) Adjusted results exclude the incremental impacts for the reconciling items between GAAP and adjusted net income attributable to noncontrolling interests.

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 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.

There have been no significant changes in the company’s critical accounting policies during the first six months of 2024.

Recent Accounting Pronouncements

3 unchanged sentences

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