Please note that the following presentation contains financial projections and other forward-looking statements that are specific to the date of the

Transcription

1 Please note that the following presentation contains financial projections and other forward-looking statements that are specific to the date of the presentation January 13, 2015 and should not be considered current after that date.

2 33 rd Annual J.P. Morgan Healthcare Conference Marc N. Casper President and Chief Executive Officer The World Leader in Serving Science January 13, 2015

3 Safe Harbor / Non-GAAP Measures Various remarks that we may make in this presentation about the company s future expectations, plans and prospects constitute forward-looking statements for purposes of the safe harbor provisions under The Private Securities Litigation Reform Act of Actual results may differ materially from those indicated by such forward-looking statements as a result of various important factors, including those discussed in our Form 10-Q for the quarter ended September 27, 2014, under the caption Risk Factors, which is on file with the Securities and Exchange Commission and available in the Investors section of our Website under the heading SEC Filings. Important factors that could cause actual results to differ materially from those indicated by forward-looking statements include risks and uncertainties relating to: the need to develop new products and adapt to significant technological change; implementation of strategies for improving internal growth; general economic conditions and related uncertainties; dependence on customers' capital spending policies and government funding policies; the effect of exchange rate fluctuations on international operations; the effect of healthcare reform legislation; use and protection of intellectual property; the effect of changes in governmental regulations; the effect of laws and regulations governing government contracts, as well as the possibility that expected benefits related to our acquisition of Life Technologies may not materialize as expected. While we may elect to update forward-looking statements at some point in the future, we specifically disclaim any obligation to do so, even if our estimates change and, therefore, you should not rely on these forward-looking statements as representing our views as of any date subsequent to today. During this presentation, we will be referring to certain financial measures not prepared in accordance with generally accepted accounting principles, or GAAP, including adjusted EPS and adjusted operating margin. Definitions of these non-gaap financial measures and, for historical periods, a reconciliation of the non-gaap financial measures to the most directly comparable GAAP measures is available under the heading GAAP/Non-GAAP Reconciliation & Financial Information in the Investors section of our website, All prior results have been adjusted to present the results of the Laboratory Workstations business as discontinued operations. 3

4 We Are The World Leader in Serving Science Global Scale 50,000 employees in 50 countries $17 billion in annual revenues Unparalleled commercial reach Unmatched Depth Leading innovative technologies Applications expertise Lab productivity partner Premier Brands 4

5 Everything We Do Starts with Our Customers We enable our customers to make the world healthier, cleaner and safer 5

6 Four Complementary Reporting Segments Chromatography and Mass Spectrometry Chemical Analysis Instruments Environmental and Process Instruments Clinical Assays Immunodiagnostics Microbiology Anatomical Pathology Transplant Diagnostics Healthcare Market Channel Analytical Instruments 18% Specialty Diagnostics 19% Life Sciences Solutions 26% Laboratory Products and Services 37% Research and Safety Market Channels Laboratory Products BioPharma Services Biosciences Genetic Sciences Bioproduction Pro forma revenues: $17.1B* 6 * Estimates based on unaudited LTM combined revenues of Thermo Fisher Scientific and Life Technologies through Q Percentages calculated are based on estimates for intercompany eliminations and other accounting policy adjustments.

7 Attractive Revenue Profile Balanced and diverse customer base Strong recurring revenue mix Growing presence in emerging markets Diagnostics Pharma & Healthcare & Biotech 25% 27% Industrial & Applied 22% Academic & Government 26% Instruments Equipment & Software 26% Services 13% Consumables 61% Asia- Pacific 18% Europe 28% ROW 4% North America 50% End Markets Products Geographies 7 Note: Percentage estimates based on unaudited LTM combined revenue of Thermo Fisher Scientific and Life Technologies through Q

8 2014 Goals (as presented on January 13, 2014) Integrate Life Technologies Deliver year one synergies and adjusted EPS accretion Revenue Launch high-impact new products throughout the year Continue to capitalize on our strength in emerging markets across our portfolio including Life Technologies Gain share by leveraging our unique customer value proposition Margin Continue to drive cost management through: utilization of global sourcing, expansion to low-cost regions, rationalization of facilities, and control of internal spend through PPI business system Capital Deployment Utilize free cash flow to repay debt Return of capital to shareholders via dividends ROIC Continue to drive returns from our acquisitions and investments 8

9 2014 Goals (as presented on January 13, 2014) Integrate Life Technologies Deliver year one synergies and adjusted EPS accretion Revenue Launch high-impact new products throughout the year Continue to capitalize on our strength in emerging markets across our portfolio including Life Technologies Gain share by leveraging our unique customer value proposition Margin Continue to drive cost management through: utilization of global sourcing, expansion to low-cost regions, rationalization of facilities, and control of internal spend through PPI business system Capital Deployment Utilize free cash flow to repay debt Return of capital to shareholders via dividends ROIC Continue to drive returns from our acquisitions and investments 9

10 Planning Pays Off Integration on Track With Upside Cost Synergies 2014 Guidance a/o 01/30/14 $85M Currently Tracking >$100M Revenue Synergies Planning Planning Complete Life Sciences Solutions Pro Forma Organic Revenue Growth Rate 2-3% ~3% YTD (a/o 9/30/14) Life Sciences Solutions well positioned for 2015 with good momentum and incremental revenue synergies 10

11 Achieving Life Technologies Synergy Targets Day 1 Synergies Year 3 Eliminate duplicate corporate structure Combine sourcing leverage Optimize shared services Manufacturing & supply chain management Total cost synergies $300M Leverage scale in emerging markets Grow share in corporate accounts Life Sciences Solutions Products into Fisher Channel Revenue EBITA (total revenue) synergies $50M($150M) Total synergies On track to deliver $350M in year three synergies $350M 11

12 2014 Goals (as presented on January 13, 2014) Integrate Life Technologies Deliver year one synergies and adjusted EPS accretion Revenue Launch high-impact new products throughout the year Continue to capitalize on our strength in emerging markets across our portfolio including Life Technologies Gain share by leveraging our unique customer value proposition Margin Continue to drive cost management through: utilization of global sourcing, expansion to low-cost regions, rationalization of facilities, and control of internal spend through PPI business system Capital Deployment Utilize free cash flow to repay debt Return of capital to shareholders via dividends ROIC Continue to drive returns from our acquisitions and investments 12

13 Innovation is in Our DNA RUO NXType Kit (human leukocyte antigen typing with NGS) Vanquish UHPLC (improves accuracy, speed and ease of use) TSQ 8000 Evo (triple quad MS) Q Exactive HF (high performance MS) Q-Exactive HF Mass Spectrometer Vanquish UHPLC ~$700M R&D Spend* Specialty Diagnostics Lab Products & Services Analytical Instruments QuantStudio 3D Life Sciences Solutions Sorvall WX+ ultracentrifuge (combines safety and ergonomics) Sorvall WX+ Ultracentrifuge CRISPR Products (gene editing) GlobalFiler PCR Amplification Kit (used in forensics) Ion Chef (sample prep for NGS) Ion Chef NGS Sample Prep Ion PGM DX (for IVD use in EU and Class II Medical Device in U.S.) QuantStudio 3D Rare Mutation Analysis Solution (cancer gene detection) 13 * 2014 estimate. Largest R&D expenditure in the Industry driving high-impact innovation

14 Leading the Convergence of Tools into Diagnostics Leveraging leadership positions in Transplant Diagnostics and Next-Generation Sequencing Introduced the RUO NXType Kit in 2014 Enables human leukocyte antigen (HLA) typing using Next-Gen Sequencing technology on the Ion PGM platform Establishes a new industry standard and creates growth opportunities in HLA Tissue typing RUO NXType Kit Leverages experience, technology, customer relationships, service and support capabilities, and HLA expertise of our Specialty Diagnostics and Genetics Sciences businesses Innovation driven by unparalleled portfolio of technologies 14

15 Expanding Share in Emerging Markets Built ~$1.25B business, second largest country by revenue for Thermo Fisher with 4,000 employees averaged 20%+ sales growth Strong presence in Life Sciences Solutions and Analytical Instruments Winning in key accounts Increased direct presence China 2014 temporary slowdown in government spending Remain well aligned with government priorities Leveraging China Experience into Additional High-Growth Markets Southeast Asia Korea Capturing opportunity in biosimilars drug market Capitalizing on growing government R&D budget Expanding commercial reach and direct presence 15

16 Industry-Leading Value Proposition Continuing to gain share of wallet with biopharma customers Gaining traction with industrial customers Beginning to capture revenue synergies Life Technologies acquisition brings enhanced capabilities World-class teams enabling customer productivity and innovation 16

17 2014 Goals (as presented on January 13, 2014) Integrate Life Technologies Deliver year one synergies and adjusted EPS accretion Revenue Launch high-impact new products throughout the year Continue to capitalize on our strength in emerging markets across our portfolio including Life Technologies Gain share by leveraging our unique customer value proposition Margin Continue to drive cost management through: utilization of global sourcing, expansion to low-cost regions, rationalization of facilities, and control of internal spend through PPI business system Capital Deployment Utilize free cash flow to repay debt Return of capital to shareholders via dividends ROIC Continue to drive returns from our acquisitions and investments 17

18 2014 Cost Savings Initiatives Global Sourcing 22% 27% Acquisition Synergies PPI Business System $380M of savings 30% 9% 12% Facility Rationalization and Restructuring Low-Cost-Region Manufacturing Exceeding annual savings target by ~$20M 18

19 2014 Goals (as presented on January 13, 2014) Integrate Life Technologies Deliver year one synergies and adjusted EPS accretion Revenue Launch high-impact new products throughout the year Continue to capitalize on our strength in emerging markets across our portfolio including Life Technologies Gain share by leveraging our unique customer value proposition Margin Continue to drive cost management through: utilization of global sourcing, expansion to low-cost regions, rationalization of facilities, and control of internal spend through PPI business system Capital Deployment Utilize free cash flow to repay debt Return of capital to shareholders via dividends ROIC Continue to drive returns from our acquisitions and investments 19

20 Generating Strong Free Cash Flow $1.41B $1.75B $2.2B* 2014 Growth Drivers Operating earnings growth Working capital management Tax planning (G) Free cash flow growth of 26% 20 (G) = Guidance. * Reduced by approximately $0.4B of Life Technologies acquisition and divesture-related cash flows including disbursements for monetizing equity awards, restructuring and transaction costs.

21 Exceeded Debt Repayment Expectations Leverage Ratio* Began aggressively paying down debt immediately after deal close 5.7X 4.6X 3.9X ~3.6X (F) Utilized strong cash flow and proceeds from divestitures to pay down ~$4B in acquisition-related debt In Q4, strengthened balance sheet with long-term fixed-rate debt Issued 630M 10-year note at 2.0% Q1'14 Q2'14 Q3'14 Q4'14 Issued $800M 7-year note at 3.3% On track to achieve target leverage ratio of 2.5x to 3.0x in Q3 15 Positioned now to focus on strategic M&A, share buybacks and dividends in early (F) = Forecast. * Leverage ratio is calculated as total gross debt to adjusted TTM EBITDA.

22 2014 Goals (as presented on January 13, 2014) Integrate Life Technologies Deliver year one synergies and adjusted EPS accretion Revenue Launch high-impact new products throughout the year Continue to capitalize on our strength in emerging markets across our portfolio including Life Technologies Gain share by leveraging our unique customer value proposition Margin Continue to drive cost management through: utilization of global sourcing, expansion to low-cost regions, rationalization of facilities, and control of internal spend through PPI business system Capital Deployment Utilize free cash flow to repay debt Return of capital to shareholders via dividends ROIC Continue to drive returns from our acquisitions and investments 22

23 ROIC is the Focus 9.2% 9.3% Adjusted ROIC* % 9.3% $15B investment in Life Technologies Q3'14 Offsetting acquisition investment dilution with strong returns on past investments and operating performance 23 * Adjusted return on invested capital is trailing 12 month adjusted net income excluding net interest expense, net of tax benefit therefrom, divided by trailing five quarters average invested capital.

24 2014 Goals (as presented on January 13, 2014) Integrate Life Technologies Deliver year one synergies and adjusted EPS accretion Revenue Launch high-impact new products throughout the year Continue to capitalize on our strength in emerging markets across our portfolio including Life Technologies Gain share by leveraging our unique customer value proposition Margin Continue to drive cost management through: utilization of global sourcing, expansion to low-cost regions, rationalization of facilities, and control of internal spend through PPI business system Capital Deployment Utilize free cash flow to repay debt Return of capital to shareholders via dividends ROIC Continue to drive returns from our acquisitions and investments Successfully executed the largest acquisition in our Industry s history, achieved key business goals and delivered solid returns 24

25 Resulting in a Year of Strong Financial Performance 2014 Full Year Guidance Initial Guidance (01/30/14) Organic Growth 3 to 4% 3 to 4% LSS Pro Forma Organic Growth 2 to 3% 2 to 3% Current Guidance (10/22/14) Total Revenue $16.63 to $16.83B $16.74 to $16.82B FX Impact on Standalone Revenue 0 bps (25) bps Adjusted Operating Margin Expansion +220 to 250 bps ~250 bps Adjusted EPS $6.70 to $6.90 $6.87 to $6.95 Return to Normal Capital Deployment H2 15 Early 2015 Consistently meeting or exceeding expectations 25

26 Consistency Creates Shareholder Value Organic Growth Technological Innovation Unique Customer Value Proposition Emerging Markets PPI Business System Productivity Margin Expansion Customer Allegiance Capital Deployment Strategic M&A Return of Capital Consistently Strong EPS Growth & Consistently strong Free Cash Flow 26

27 2015 Goals Capture Life Technologies Synergies Deliver year two cost synergies and begin to recognize revenue synergies Revenue Drive incremental growth by innovating at a rate faster than our competition Capitalize on our strength in emerging markets through leveraging commercial reach Seize opportunities in developed markets Enhance our unique customer value proposition by cross selling our total portfolio Margin Continue to drive cost management through: utilization of global sourcing, expansion to lowcost regions, rationalization of facilities, and leveraging our PPI business system Capital Deployment Conduct shareholder friendly capital deployment through strategic M&A, share buybacks and dividends Achieve targeted debt leverage ratio through debt pay down ROIC Continue to drive returns from our acquisitions and investments 27

28 Strong Balance Sheet and Great Free Cash Flow Built a Strong Balance Sheet $2.2B of short-term debt at effective interest rate of 1.8% $12.4B of long-term debt at effective interest rate of 3.1% 2015 Capital Deployment Plan Return Capital to Shareholders Continue to pay dividend (~$240M annually) Execute Q1 15 share repurchases ($500M) Engage in Attractive M&A Evaluate other strategic M&A that creates value for our customers, our business and our shareholders 28