THERMO FISHER SCIENTIFIC Forward-looking statements, within the meaning of Section 21E of the Securities Exchange Act of 1934 (the Exchange Act), are made throughout this Management's Discussion and Analysis of Financial Condition and Results of Operations. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements, including without limitation statements regarding: projections of revenues, expenses, earnings, margins, tax rates, tax provisions, cash flows, pension and benefit obligations and funding requirements, and our liquidity position; cost reductions, restructuring activities, new product and service developments, competitive strengths or market position, acquisitions or divestitures; growth, declines and other trends in markets we sell into; new or modified laws, regulations and accounting pronouncements; outstanding claims, legal proceedings, tax audits and assessments and other contingent liabilities; foreign currency exchange rates and fluctuations in those rates; general economic and capital markets conditions; the timing of any of the foregoing; assumptions underlying any of the foregoing; the expected impact of the COVID-19 pandemic on the company's business; and any other statements that address events or developments thatThermo Fisher intends or believes will or may occur in the future. Without limiting the foregoing, the words "believes," "anticipates," "plans," "expects," "seeks," "estimates," and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements are accompanied by such words. While the company may elect to update forward-looking statements in the future, it specifically disclaims any obligation to do so, even if the company's estimates change, and readers should not rely on those forward-looking statements as representing the company's views as of any date subsequent to the date of the filing of this report. A number of important factors could cause the results of the company to differ materially from those indicated by such forward-looking statements, including those detailed under the caption "Risk Factors" in the company's Annual Report on Form 10-K for the year endedDecember 31, 2021 (which is on file with theSEC ). 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; any natural disaster, public health crisis or other catastrophic event; and the effect of laws and regulations governing government contracts, as well as the possibility that expected benefits related to recent or pending acquisitions may not materialize as expected. The company refers to various amounts or measures not prepared in accordance with generally accepted accounting principles (non-GAAP measures). These non-GAAP measures are further described and reconciled to their most directly comparable amount or measure under the section " Non-GAAP Measures " later in this "Management's Discussion and Analysis of Financial Condition and Results of Operations" OverviewThermo 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. Markets served include pharmaceutical and biotech, academic and government, industrial and applied, as well as healthcare and diagnostics. The company's operations fall into four segments (Note 4): 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
Revenues $ 11,818 $ 9,906 19 %
GAAP operating income 2,821 3,049 (7) %
GAAP operating income margin 23.9 % 30.8 % (6.9) pt
Adjusted operating income (non-GAAP measure) 3,450 3,510 (2) %
Adjusted operating income margin (non-GAAP measure) 29.2 % 35.4 % (6.2) pt
GAAP diluted earnings per share attributable to
5.61 5.88 (5) %
Adjusted earnings per share (non-GAAP measure) 7.25 7.21 1 %
20
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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
Revenue growth 19 %
Impact of acquisitions 18 %
Impact of currency translation (2) %
Organic revenue growth* (non-GAAP measure) 3 %
* Results may not sum due to rounding
Since 2020, the Life Sciences Solutions andSpecialty Diagnostics segments as well as the laboratory products business have supported COVID-19 diagnostic testing, scaling and evolving their molecular diagnostics solutions and plastic consumables businesses to respond to the ongoing COVID-19 pandemic. The biosciences and bioproduction businesses have expanded their capacity to meet the needs of pharma and biotech customers as they have expanded their own production volumes to meet global vaccine manufacturing requirements. Additionally, our pharma services business has provided our pharma and biotech customers with the services they needed to develop and produce vaccines and therapies globally. 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. 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 theAsia Pacific region, particularlyChina , modest inNorth America , and flat inEurope . 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. 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. 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.
Notable Recent Acquisitions
OnJanuary 15, 2021 , the company acquired, within the Laboratory Products and Biopharma Services segment, theBelgium -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. OnFebruary 25, 2021 , the company acquired, within the Life Sciences Solutions segment,Mesa Biotech, Inc. , aU.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. 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. 21 --------------------------------------------------------------------------------THERMO FISHER SCIENTIFIC INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview (continued)
OnSeptember 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. OnDecember 8, 2021 , the company acquired, within the Laboratory Products and Biopharma Services segment,PPD, Inc. , aU.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 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. In 2020, PPD generated revenues of$4.68 billion . OnDecember 30, 2021 , the company acquired, within the Life Sciences Solutions segment,PeproTech, Inc. , aU.S. based developer and manufacturer of recombinant proteins, for$1.86 billion in net cash consideration.PeproTech provides bioscience reagents known as recombinant proteins, including cytokines and growth factors. The acquisition expands the segment's bioscience offerings.
Results of Operations
The company's management evaluates segment operating performance using operating
income before certain charges/credits as defined in Note 4 to the Consolidated
Financial Statements of the company's Annual Report on Form 10-K for 2021.
Accordingly, the following segment data are reported on this basis.
Three months ended
April 2, April 3,
(Dollars in millions) 2022 2021
Revenues
Life Sciences Solutions $ 4,231 $ 4,203
Analytical Instruments 1,518 1,387
Specialty Diagnostics 1,482 1,615
Laboratory Products and Biopharma Services 5,442 3,597
Eliminations (855) (896)
Consolidated revenues $ 11,818 $ 9,906
Life Sciences Solutions
Three months ended Organic*
April 2, April 3, Total Currency Acquisitions/ (non-GAAP
(Dollars in millions) 2022 2021 Change Translation Divestitures measure)
Revenues $ 4,231 $ 4,203 1 % (2) % 3 % (1) %
Segment income 2,176 2,279 (5) %
Segment income margin 51.4 % 54.2 % -2.8 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.
Analytical Instruments
Three months ended Organic*
April 2, April 3, Total Currency Acquisitions/ (non-GAAP
(Dollars in millions) 2022 2021 Change Translation Divestitures measure)
Revenues $ 1,518 $ 1,387 9 % (2) % - % 12 %
Segment income 301 272 10 %
Segment income margin 19.8 % 19.6 % 0.2 pt
* Results may not sum due to rounding
22
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THERMO FISHER SCIENTIFIC INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONSResults 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* April 2, April 3, Total Currency Acquisitions/ (non-GAAP (Dollars in millions) 2022 2021 Change Translation Divestitures measure) Revenues$ 1,482 $ 1,615 (8) % (1) % - % (7) % Segment income 353 428 (17) % Segment income margin 23.9 % 26.5 % -2.6 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.
Laboratory Products and Biopharma Services
Three months ended Organic*
April 2, April 3, Total Currency Acquisitions/ (non-GAAP
(Dollars in millions) 2022 2021 Change Translation Divestitures measure)
Revenues $ 5,442 $ 3,597 51 % (2) % 47 % 6 %
Segment income 620 531 17 %
Segment income margin 11.4 % 14.8 % -3.4 pt
* 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.
Non-operating Items
Three months ended
April 2, April 3,
(Dollars in millions) 2022 2021
Net interest expense $ 118 $ 113
GAAP other income/(expense) (163) (183)
Adjusted other income/(expense) (non-GAAP measure) 4 14
GAAP tax rate 11.9 % 15.1 %
Adjusted tax rate (non-GAAP measure) 14.1 % 16.0 %
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. The company's GAAP tax rate was also impacted by changes in tax rates and higher amortization expense as a result of 2021 acquisitions. 23
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THERMO FISHER SCIENTIFIC INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONSResults of Operations (continued)
The effective tax rates in both 2022 and 2021 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$1.35 billion in 2022. The company expects its GAAP effective tax rate in 2022 will be between 10% and 12% based on currently forecasted rates of profitability in the countries in which the company conducts business and expected generation of foreign tax credits. The effective tax rate can vary significantly from period to period as a result of discrete income tax factors and events. The company expects its adjusted tax rate will be between 13% and 13.5% in 2022. The company has operations and a taxable presence in approximately 70 countries outside theU.S. Some of these countries have lower tax rates than theU.S. The company's ability to obtain a benefit from lower tax rates outside theU.S. is dependent on its relative levels of income in countries outside theU.S. and on the statutory tax rates in those countries. Based on the dispersion of the company's non-U.S. 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.
Liquidity and Capital Resources
The company's proven growth strategy has enabled it to generate free cash flow
as well as access the capital markets. The company deploys its capital primarily
via mergers and acquisitions and secondarily via share buybacks and dividends.
April 2, December 31,
(In millions) 2022 2021
Cash and cash equivalents $ 2,752 $ 4,477
Total debt 33,255 34,870
Approximately half of the company's cash balances and cash flows from operations
are from outside the U.S. The company uses its non-U.S. cash for needs outside
of the U.S. including acquisitions, capacity expansion, and repayment of
third-party foreign debt by foreign subsidiaries. In addition, the company also
transfers cash to the U.S. 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. 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. cash balances for the
foreseeable future.
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 . 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.
24
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THERMO FISHER SCIENTIFIC INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONSLiquidity and Capital Resources (continued)
Three months ended
April 2, April 3,
(In millions) 2022 2021
Net cash provided by operating activities
(670) (1,998)
Net cash used in financing activities (3,145)
(4,850)
Free cash flow (non-GAAP measure) 1,564 1,355
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. Changes in other assets and other liabilities used cash of$1.20 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. 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.
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. OnSeptember 23, 2021 , the Board of Directors authorized the repurchase of up to$3.00 billion of the company's common stock. AtMay 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
Non-GAAP Measures
In addition to the financial measures prepared in accordance with generally accepted accounting principles (GAAP), we use certain non-GAAP financial measures such as organic revenue growth, which is reported revenue growth, excluding the impacts of revenues from acquired/divested businesses and the effects of currency translation. We report organic revenue growth becauseThermo Fisher management believes that in order to understand the company's short-term and long-term financial trends, investors may wish to consider the impact of acquisitions/divestitures and foreign currency translation on revenues.Thermo Fisher management uses organic revenue growth to forecast and evaluate the operational performance of the company as well as to compare revenues of current periods to prior periods. We report adjusted operating income, adjusted operating income margin, adjusted other income/(expense), adjusted tax rate, and adjusted EPS. We believe that the use of these non-GAAP financial measures, in addition to GAAP financial measures, helps investors to gain a better understanding of our core operating results and future prospects, consistent with how management measures and forecasts the company's core operating performance, especially when comparing such results to previous periods, forecasts, and to the performance of our competitors. Such measures are also used by management in their financial and operating decision-making and for compensation purposes. To calculate these measures we exclude, as applicable: 25 --------------------------------------------------------------------------------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. We exclude these costs because we do not believe they are indicative of our normal operating costs. •Costs/income associated with restructuring activities, such as reducing overhead and consolidating facilities. We exclude these costs because we believe that the costs related to restructuring activities are not indicative of our normal operating costs. •Equity in earnings/losses of unconsolidated entities; impairments of long-lived assets; and certain other gains and losses that are either isolated or cannot be expected to occur again with any predictability, including gains/losses on investments, the sale of businesses, product lines, and real estate, significant litigation-related matters, curtailments/settlements of pension plans, and the early retirement of debt. We exclude these items because they are outside of our normal operations and/or, in certain cases, are difficult to forecast accurately for future periods. •The expense associated with the amortization of acquisition-related intangible assets because a significant portion of the purchase price for acquisitions may be allocated to intangible assets that have lives of up to 20 years. Exclusion of the amortization expense allows comparisons of operating results that are consistent over time for both our newly acquired and long-held businesses and with both acquisitive and non-acquisitive peer companies. •The 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. We report free cash flow, which is operating cash flow excluding net capital expenditures, to provide a view of the continuing operations' ability to generate cash for use in acquisitions and other investing and financing activities. The company also uses this measure as an indication of the strength of the company. Free cash flow is not a measure of cash available for discretionary expenditures since we have certain non-discretionary obligations such as debt service that are not deducted from the measure. The non-GAAP financial measures ofThermo Fisher Scientific's results of operations and cash flows included in this Form 10-Q are not meant to be considered superior to or a substitute forThermo Fisher Scientific's results of operations prepared in accordance with GAAP. Reconciliations of such non-GAAP financial measures to the most directly comparable GAAP financial measures are set forth within the "Overview" and "Results of Operations" sections and below. Three months ended April 2, April 3, (Dollars in millions except per share amounts) 2022 2021 Reconciliation of adjusted operating income GAAP operating income$ 2,821 $ 3,049 Cost of revenues adjustments (a) 11 8 Selling, general and administrative expenses adjustments (b) 7 16 Restructuring and other costs (c) 2 14 Amortization of acquisition-related intangible assets 609 423 Adjusted operating income (non-GAAP measure)
Reconciliation of adjusted operating income margin GAAP operating income margin
23.9 % 30.8 %
Cost of revenues adjustments (a) 0.1 % 0.1 %
Selling, general and administrative expenses adjustments (b) 0.0 % 0.1 %
Restructuring and other costs (c) 0.0 % 0.1 %
Amortization of acquisition-related intangible assets 5.2 % 4.3 %
Adjusted operating income margin (non-GAAP measure) 29.2 % 35.4 %
26
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THERMO FISHER SCIENTIFIC INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONSNon-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)
GAAP other income/(expense) $ (163) $ (183)
Adjustments (d) 167 197
Adjusted other income/(expense) (non-GAAP measure) Reconciliation of adjusted tax rate GAAP tax rate 11.9 % 15.1 % Adjustments (e) 2.2 % 0.9 % Adjusted tax rate (non-GAAP measure) 14.1 % 16.0 %
Reconciliation of adjusted earnings per share
GAAP diluted earnings per share (EPS) attributable to
$ 5.61 $ 5.88 Cost of revenues adjustments (a) 0.03 0.02 Selling, general and administrative expenses adjustments (b) 0.02 0.04 Restructuring and other costs (c) 0.01 0.04 Amortization of acquisition-related intangible assets 1.54 1.06 Other income/expense adjustments (d) 0.42 0.50 Provision for income taxes adjustments (e) (0.43) (0.33) Equity in earnings/losses of unconsolidated entities 0.05 - Adjusted EPS (non-GAAP measure)
Reconciliation of free cash flow GAAP net cash provided by operating activities$ 2,202 $ 1,978 Purchases of property, plant and equipment (640) (628) Proceeds from sale of property, plant and equipment 2 5 Free cash flow (non-GAAP measure)
(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.
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.
Recent Accounting Pronouncements
A description of recently issued accounting standards is included under the heading "Recent Accounting Pronouncements" in Note 1.
27
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THERMO FISHER SCIENTIFIC INC. © Edgar Online, source
