2015 ANNUAL REPORT THERMO FISHER SCIENTIFIC INC. 2015 ANNUAL REPORT Thermo Fisher Scientific Inc. 81 Wyman Street, Waltham, MA 02451 USA thermofisher.com Management Team Marc N. Casper Daniel P. Shine Our mission is to enable our customers to President and Chief Executive Officer Senior Vice President and President, Analytical Instruments Alan J. Malus Andrew J. Thomson make the world healthier, cleaner and safer. Executive Vice President and President, Senior Vice President and President, Europe, Laboratory Products and Services Middle East and Africa Mark P. Stevenson Joseph C. Beery Thermo Fisher Scientific Inc. (NYSE: TMO) is the world leader in serving science, with revenue of Executive Vice President and President, Senior Vice President and Chief Information Officer Life Sciences Solutions $17 billion and more than 50,000 employees in 50 countries. We help our customers accelerate life Seth H. Hoogasian Peter M. Wilver Senior Vice President, General Counsel and Secretary sciences research, solve complex analytical challenges, improve patient diagnostics and increase Executive Vice President and Chief Administrative Officer laboratory productivity. Through our premier brands – Thermo Scientific, Applied Biosystems, Shiraz Ladiwala Stephen Williamson Invitrogen, Fisher Scientific and Unity Lab Services – we offer an unmatched combination of Senior Vice President, Strategy and Corporate Development Senior Vice President and Chief Financial Officer innovative technologies, purchasing convenience and comprehensive support. Susan G. Rice Patrick M. Durbin Senior Vice President, Human Resources Senior Vice President and President, Specialty Diagnostics Alex G. Stachtiaris Gregory J. Herrema Senior Vice President, Global Business Services Senior Vice President and President, Customer Channels Kenneth J. Apicerno Vice President, Investor Relations Syed A. Jafry Senior Vice President and President, Peter E. Hornstra Asia-Pacific and Emerging Markets Vice President and Chief Accounting Officer Thomas W. Loewald Senior Vice President and Chief Commercial Officer Karen A. Kirkwood Vice President, Corporate Communications Frederick M. Lowery Senior Vice President and President, Anthony H. Smith Laboratory Products Vice President, Tax and Treasury, and Treasurer Board of Directors Jim P. Manzi Judy C. Lewent Chairman of the Board; Chairman, Stonegate Capital Former Executive Vice President and Chief Financial Officer, 18% (private equity investments); Former Chairman, Merck & Co., Inc. (pharmaceuticals) Analytical Instruments 38% President and Chief Executive Officer, Lotus Development Laboratory Corporation (computer software) Thomas J. Lynch Products & Services Chairman and Chief Executive Officer, Marc N. Casper TE Connectivity Ltd. (electronics) President and Chief Executive Officer Complementary William G. Parrett $17B Nelson J. Chai Former Global Chief Executive Officer, Business Segments 19% Specialty Revenue Former President, CIT Group Inc. (bank holding company) Deloitte Touche Tohmatsu (accounting) Diagnostics C. Martin Harris Scott M. Sperling Chief Information Officer, Cleveland Clinic (healthcare) Co-President, Thomas H. Lee Partners, L.P. (leveraged buyouts) 25% Tyler Jacks Life Sciences Solutions David H. Koch Professor of Biology, Massachusetts Elaine S. Ullian Institute of Technology; Director, David H. Koch Institute Former President and Chief Executive Officer, for Integrative Cancer Research (research) Boston Medical Center (healthcare) Marc N. Casper President and Chief Executive Officer Dear Shareholder, Looking back on 2015, we had many highlights that demonstrate how we continue to strengthen Thermo Fisher Scientific’s position as the unrivaled leader in our industry. I will share several great examples in this letter, but what really stood out to me is this: no matter what our customers face in the macro-environment, they depend on us to help them achieve success. We create tremendous value for them by leveraging our unique scale and depth of capabilities. This differentiates our company in today’s highly competitive landscape and will remain our foundation for growth in the years to come. We begin every year by establishing a set of goals that our team, down to the individual colleague, is accountable for achieving. When we meet our annual objectives, we get another step closer to our Vision for 2020, and I’m pleased to tell you that we made significant progress in 2015. $7.39 $6.96 $5.42 $4.94 Adjusted EPS* Trend $4.16 (in dollars) * Adjusted earnings per share, adjusted operating margin and adjusted operating income are non-GAAP financial 1211 13 14 15 measures that exclude certain items. For a reconciliation of these non-GAAP financial measures to comparable GAAP measures, see accompanying consolidated statement of income on pages 6 and 7 of this annual report. 2015 Annual Report 1 To remind you, our Vision outlines our exception. We grew revenue to a At the same time, we leveraged our PPI goals for the decade. In essence, we are record $16.97 billion. Our adjusted Business System – including our global striving to: operating income increased 3 percent sourcing and operational efficiency to $3.82 billion, and we expanded initiatives – to drive the productivity that • Deliver consistent and strong our adjusted operating margin by helps to fund our growth. financial performance 60 basis points to 22.5 percent. We also • Meet the needs of our customers delivered $7.39 of adjusted earnings We achieve solid performance year by developing innovative tech- per share – a 6 percent increase after year by staying true to our growth nologies, leveraging our global year-over-year. In addition, we strategy and making sure that our presence and harnessing the power continued to reduce our debt following customers are at the center of every of our value proposition our acquisition of Life Technologies major decision we make. • Create an environment where our two years ago and achieved our target colleagues are inspired by what we leverage ratio sooner than we Enabling Customer Success do and involved in our success originally planned. Our Mission is to enable our customers • Achieve all the goals above to to make the world healthier, cleaner become recognized as one of the The economic environment certainly and safer. It defines our purpose as a world’s most admired companies didn’t make our job easy. The strength- company and inspires our colleagues ening of the U.S. dollar created a to take pride in what they do. We fulfill I will use these elements of our Vision significant headwind on both our top- our Mission by developing innovative to highlight accomplishments from 2015 and bottom-line performance, the global technologies, increasing our presence that remind me every day why I’m so industrial economy has not improved in Asia-Pacific and emerging markets, proud to lead Thermo Fisher Scientific. and certain emerging markets, such as and delivering our unique value I think they’ll give you a sense of our Russia and Brazil, have deteriorated. proposition. These are the elements of priorities as a company and what our growth strategy, and they enable our motivates us to not only achieve our This is the reality that all multinational customers’ success as well as our own. near-term goals, but also ensure an companies – including our customers – even brighter future. are facing. But those who step up Innovative Technologies and create value will have the advan- Year after year, we reinforce our Consistent Performance tage. Our team identified the right technology leadership by putting our We have a long track record of opportunities, delivered our value R&D dollars and expertise to work consistently delivering strong financial proposition to our customers and to have the greatest impact. We’re performance, and 2015 was no executed very well to achieve our goals. committed to innovation, and invested Attractive Revenue Profile 4% 25% 30% 13% Rest of World Diagnostics & Pharma & Services Healthcare 18% Biotech Asia-Pacific 25% Markets Instruments, Products 62% Regions Consumables Equipment & Software 20% 25% 53% Industrial Academic & 25% North & Applied Government Europe America 2 2015 Annual Report approximately $700 million in 2015 to advances comes the need to manage serving higher-growth Asia-Pacific and develop exciting new products that help vast amounts of data, and our new other emerging markets. our customers advance their work. QuantStudio 3 and 5 Real-Time PCR systems are now connected to the Thinking back on our achievements For example, we’re not only expanding Thermo Fisher Cloud. This capability in that region during the past year, our leading Thermo Scientific technol- allows clinical and applied researchers China really stood out. The country is ogies for life sciences researchers, anywhere in the world to access, undergoing a period of historic change, but increasingly adapting them for use analyze and share data within a single yet our team achieved strong double- in other applications. This year, we platform – a key enabler that will help to digit growth. Our strategy in China is marked the 10th anniversary of our redefine scientific collaboration. based on targeting market segments Orbitrap mass spectrometry platform by that align with our capabilities in launching the Orbitrap Fusion Lumos Our breadth of technologies gives us a biopharma, diagnostics, environmental Tribrid system for protein research. clear advantage in partnering with our monitoring and food safety. We then combined the power