TMO Thermo Fisher Scientific, Inc.

Management Discussion

• Sales in the first quarter of 2019 were $6.13 billion, an increase of $272 million from the first quarter of 2018. Sales increased $31 million due to acquisitions. The unfavorable effects of currency translation resulted in a decrease in revenues of $180 million in 2019. Aside from the effects of acquisitions/divestitures and currency translation, revenues increased $421 million (7%) primarily due to increased demand in the quarter compared to the 2018 quarter. Sales to customers in each of the company's primary end markets grew. Sales growth was strong in each of the company's primary geographic areas, particularly Asia.
• In the first quarter of 2019, total company operating income and operating income margin were $920 million and 15.0%, respectively, compared with $786 million and 13.4%, respectively, in 2018. The increase in operating income was primarily due to profit on higher sales and, to a lesser extent, productivity improvements, net of inflationary cost increases, and lower restructuring and other costs, net. These increases were offset in part by strategic growth investments, unfavorable foreign currency exchange and unfavorable sales mix.
• In the first quarter of 2019, the company recorded restructuring and other costs, net, of $28 million, including $6 million of charges to cost of revenues for the sale of inventories revalued at the date of acquisition. The company recorded $11 million of charges to selling, general and administrative expenses for third-party transaction costs related to recently announced acquisitions and divestiture. The company also recorded $11 million of restructuring and other costs, net, primarily for employee severance and abandoned facilities costs associated with the closure and consolidation of facilities in the U.S. and Europe. See Note 14 for restructuring charges expected in future periods.