Consolidated Statement of Income  (a)(b)

Three Months Ended

December 31,

% of

December 31,

% of

(In millions except per share amounts)

2017

Revenues

2016

Revenues

Revenues

$

6,047

$

4,953

Costs and Operating Expenses:

Cost of revenues (c)

3,250

53.7

%

2,546

51.4

%

Selling, general and administrative expenses (d)

1,163

19.2

%

1,017

20.5

%

Amortization of acquisition-related intangible assets

441

7.3

%

376

7.6

%

Research and development expenses

233

3.9

%

213

4.3

%

Restructuring and other costs, net (e)

2

0.0

%

48

1.0

%

5,089

84.2

%

4,200

84.8

%

Operating Income

958

15.8

%

753

15.2

%

Interest Income

20

14

Interest Expense

(166)

(131)

Other Income, Net (f)

8

16

Income Before Income Taxes

820

652

Provision for Income Taxes (g)

(290)

(19)

Income from Continuing Operations

530

633

Loss from Discontinued Operations

(2)

(3)

Net Income

$

528

8.7

%

$

630

12.7

%

Earnings per Share from Continuing Operations:

Basic

$

1.32

$

1.60

Diluted

$

1.31

$

1.59

Earnings per Share:

Basic

$

1.32

$

1.60

Diluted

$

1.30

$

1.59

Weighted Average Shares:

Basic

401

395

Diluted

405

397

Reconciliation of Adjusted Operating Income and Adjusted Operating Margin

GAAP Operating Income (a)

$

958

15.8

%

$

753

15.2

%

Cost of Revenues Charges (c)

46

0.8

%

41

0.8

%

Selling, General and Administrative Charges, Net (d)

3

0.1

%

9

0.2

%

Restructuring and Other Costs, Net (e)

2

0.0

%

48

1.0

%

Amortization of Acquisition-related Intangible Assets

441

7.3

%

376

7.6

%

Adjusted Operating Income (b)

$

1,450

24.0

%

$

1,227

24.8

%

Reconciliation of Adjusted Net Income

GAAP Net Income (a)

$

528

$

630

Cost of Revenues Charges (c)

46

41

Selling, General and Administrative Charges, Net (d)

3

9

Restructuring and Other Costs, Net (e)

2

48

Amortization of Acquisition-related Intangible Assets

441

376

Other Income, Net (f)

(11)

(6)

Provision for (Benefit from) Income Taxes (g)

117

(145)

Discontinued Operations, Net of Tax

2

3

Adjusted Net Income (b)

$

1,128

$

956

Reconciliation of Adjusted Earnings per Share

GAAP EPS (a)

$

1.30

$

1.59

Cost of Revenues Charges, Net of Tax (c)

0.08

0.06

Selling, General and Administrative Charges, Net of Tax (d)

0.04

0.01

Restructuring and Other Costs, Net of Tax (e)

0.02

0.07

Amortization of Acquisition-related Intangible Assets, Net of Tax

0.77

0.60

Other Income, Net of Tax (f)

(0.02)

0.04

Provision for Income Taxes (g)

0.59

0.03

Discontinued Operations, Net of Tax

0.01

0.01

Adjusted EPS (b)

$

2.79

$

2.41

Reconciliation of Free Cash Flow

GAAP Net Cash Provided by Operating Activities (a)

$

1,866

$

1,205

Net Cash Provided by Discontinued Operations

(1)

(1)

Purchases of Property, Plant and Equipment

(215)

(133)

Proceeds from Sale of Property, Plant and Equipment

3

3

Free Cash Flow

$

1,653

$

1,074

Segment Data

Three Months Ended

December 31,

% of

December 31,

% of

(In millions)

2017

Revenues

2016

Revenues

Revenues

Life Sciences Solutions

$

1,578

26.1

%

$

1,419

28.6

%

Analytical Instruments

1,414

23.4

%

1,217

24.6

%

Specialty Diagnostics

914

15.1

%

834

16.8

%

Laboratory Products and Services

2,401

39.7

%

1,681

33.9

%

Eliminations

(260)

-4.3

%

(198)

-3.9

%

Consolidated Revenues

$

6,047

100.0

%

$

4,953

100.0

%

Operating Income and Operating Margin

Life Sciences Solutions

$

561

35.6

%

$

467

32.9

%

Analytical Instruments

346

24.5

%

298

24.5

%

Specialty Diagnostics

242

26.5

%

228

27.2

%

Laboratory Products and Services

301

12.5

%

234

14.0

%

Subtotal Reportable Segments

1,450

24.0

%

1,227

24.8

%

Cost of Revenues Charges (c)

(46)

-0.8

%

(41)

-0.8

%

Selling, General and Administrative Charges, Net (d)

(3)

-0.1

%

(9)

-0.2

%

Restructuring and Other Costs, Net (e)

(2)

0.0

%

(48)

-1.0

%

Amortization of Acquisition-related Intangible Assets

(441)

-7.3

%

(376)

-7.6

%

GAAP Operating Income (a)

$

958

15.8

%

$

753

15.2

%

(a)

"GAAP" (reported) results were determined in accordance with U.S. generally accepted accounting principles (GAAP).

(b)

(c)

Reported results in 2017 and 2016 include i) $40 and $36, respectively, of charges for the sale of inventories revalued at the date of acquisition and ii) $6 and $5, respectively, of charges to conform the accounting policies of recently acquired businesses with the company's accounting policies.

(d)

Reported results in 2017 and 2016 include $13 and $9, respectively, of third-party transaction/integration costs related to recently completed acquisitions. Reported results in 2017 also includes $10 of credits from changes in estimates of contingent acquisition consideration.

(e)

Reported results in 2017 and 2016 include restructuring and other costs, net, consisting principally of severance, abandoned facility and other expenses of headcount reductions within several businesses and real estate consolidations. Reported results in 2017 include $45 of net credits from litigation, $7 of hurricane response/impairment costs and $4 of net losses on the settlement/curtailment of retirement plans. Reported results in 2016 include $20 of charges for litigation, $2 of environmental remediation costs and $1 of net gains on the sale of assets and settlement of retirement plans.

(f)

Reported results in 2017 include a gain of $11 on an investment. Reported results in 2016 include $3 of losses on the early extinguishment of debt and $9 of net gains on investments.

(g)

Reported provision for income taxes includes i) $116 and $158 of incremental tax benefit in 2017 and 2016, respectively, for the pre-tax reconciling items between GAAP and adjusted net income; ii) $1 and $(1), in 2017 and 2016, respectively, of incremental tax benefit/(provision) from adjusting the company's non-U.S. deferred tax balances as a result of tax rate changes; and iii) $30 and $12 of incremental tax provision in 2017 and 2016, respectively, due to audit settlements. Reported provision in 2017 also includes a net provision of $204 from the effects of U.S. tax reform legislation, consisting primarily of the transition tax on deemed repatriated earnings of foreign subsidiaries, net of a benefit from adjusting the deferred tax balances for the U.S. rate reduction.

Notes:

Consolidated depreciation expense is $133 and $98 in 2017 and 2016, respectively.

Consolidated Statement of Income  (a)(b)

Year Ended

December 31,

% of

December 31,

% of

(In millions except per share amounts)

2017

Revenues

2016

Revenues

Revenues

$

20,918

$

18,274

Costs and Operating Expenses:

Cost of revenues (c)

10,961

52.4

%

9,459

51.8

%

Selling, general and administrative expenses (d)

4,410

21.1

%

4,044

22.1

%

Amortization of acquisition-related intangible assets

1,594

7.6

%

1,378

7.5

%

Research and development expenses

888

4.2

%

755

4.1

%

Restructuring and other costs, net (e)

97

0.4

%

189

1.0

%

17,950

85.8

%

15,825

86.6

%

Operating Income

2,968

14.2

%

2,449

13.4

%

Interest Income

81

48

Interest Expense

(592)

(469)

Other Expense, Net (f)

(28)

(4)

Income Before Income Taxes

2,429

2,024

(Provision for) Benefit from Income Taxes (g)

(201)

1

Income from Continuing Operations

2,228

2,025

Loss from Discontinued Operations, Net of Tax

(3)

(3)

Net Income

$

2,225

10.6

%

$

2,022

11.1

%

Earnings per Share from Continuing Operations:

Basic

$

5.65

$

5.13

Diluted

$

5.60

$

5.10

Earnings per Share:

Basic

$

5.64

$

5.12

Diluted

$

5.59

$

5.09

Weighted Average Shares:

Basic

395

395

Diluted

398

397

Reconciliation of Adjusted Operating Income and Adjusted Operating Margin

GAAP Operating Income (a)

$

2,968

14.2

%

$

2,449

13.4

%

Cost of Revenues Charges (c)

123

0.6

%

102

0.6

%

Selling, General and Administrative Charges, Net (d)

78

0.4

%

104

0.6

%

Restructuring and Other Costs, Net (e)

97

0.4

%

189

1.0

%

Amortization of Acquisition-related Intangible Assets

1,594

7.6

%

1,378

7.5

%

Adjusted Operating Income (b)

$

4,860

23.2

%

$

4,222

23.1

%

Reconciliation of Adjusted Net Income

GAAP Net Income (a)

$

2,225

$

2,022

Cost of Revenues Charges (c)

123

102

Selling, General and Administrative Charges, Net (d)

78

104

Restructuring and Other Costs, Net (e)

97

189

Amortization of Acquisition-related Intangible Assets

1,594

1,378

Other Expense, Net (f)

19

20

Benefit from Income Taxes (g)

(364)

(530)

Discontinued Operations, Net of Tax

3

3

Adjusted Net Income (b)

$

3,775

$

3,288

Reconciliation of Adjusted Earnings per Share

GAAP EPS (a)

$

5.59

$

5.09

Cost of Revenues Charges, Net of Tax (c)

0.21

0.16

Selling, General and Administrative Charges, Net of Tax (d)

0.17

0.18

Restructuring and Other Costs, Net of Tax (e)

0.18

0.30

Amortization of Acquisition-related Intangible Assets, Net of Tax

2.86

2.41

Other Expense, Net of Tax (f)

0.03

0.09

Provision for Income Taxes (g)

0.44

0.03

Discontinued Operations, Net of Tax

0.01

0.01

Adjusted EPS (b)

$

9.49

$

8.27

Reconciliation of Free Cash Flow

GAAP Net Cash Provided by Operating Activities (a)

$

4,005

$

3,258

Net Cash Used in Discontinued Operations

1

2

Purchases of Property, Plant and Equipment

(508)

(444)

Proceeds from Sale of Property, Plant and Equipment

7

26

Free Cash Flow

$

3,505

$

2,842

Segment Data

Year Ended

December 31,

% of

December 31,

% of

(In millions)

2017

Revenues

2016

Revenues

Revenues

Life Sciences Solutions

$

5,728

27.4

%

$

5,317

29.1

%

Analytical Instruments

4,821

23.0

%

3,668

20.1

%

Specialty Diagnostics

3,486

16.7

%

3,339

18.3

%

Laboratory Products and Services

7,825

37.4

%

6,724

36.8

%

Eliminations

(942)

-4.5

%

(774)

-4.3

%

Consolidated Revenues

$

20,918

100.0

%

$

18,274

100.0

%

Operating Income and Operating Margin

Life Sciences Solutions

$

1,896

33.1

%

$

1,596

30.0

%

Analytical Instruments

1,027

21.3

%

745

20.3

%

Specialty Diagnostics

930

26.7

%

910

27.2

%

Laboratory Products and Services

1,007

12.9

%

971

14.4

%

Subtotal Reportable Segments

4,860

23.2

%

4,222

23.1

%

Cost of Revenues Charges (c)

(123)

-0.6

%

(102)

-0.6

%

Selling, General and Administrative Charges, Net (d)

(78)

-0.4

%

(104)

-0.6

%

Restructuring and Other Costs, Net (e)

(97)

-0.4

%

(189)

-1.0

%

Amortization of Acquisition-related Intangible Assets

(1,594)

-7.6

%

(1,378)

-7.5

%

GAAP Operating Income (a)

$

2,968

14.2

%

$

2,449

13.4

%

(a)

"GAAP" (reported) results were determined in accordance with U.S. generally accepted accounting principles (GAAP).

(b)

Adjusted results are non-GAAP measures and, for income measures, exclude certain charges to cost of revenues (see note (c) for details); certain credits/charges to selling, general and administrative expenses (see note (d) for details); amortization of acquisition-related intangible assets; restructuring and other costs, net (see note (e) for details); certain other gains or losses that are either isolated or cannot be expected to occur again with any predictability (see note (f) for details); and the tax consequences of the preceding items and certain other tax items (see note (g) for details).

(c)

Reported results in 2017 and 2016 include i) $87 and $75, respectively, of charges for the sale of inventories revalued at the date of acquisition; ii) $33 and $25 of charges to conform the accounting policies of recently acquired businesses with the company's accounting policies; and iii) $3 and $2, respectively, of accelerated depreciation on manufacturing assets to be abandoned due to facility consolidations.

(d)

Reported results in 2017 and 2016 include i) $63 and $72, respectively, of third-party transaction/integration costs related to recently completed acquisitions; ii) $(8) and $17, respectively, of (income)/charges associated with product liability litigation; iii) $6 and $8, respectively, of charges to conform the accounting policies of recently acquired businesses with the company's accounting policies; iv) $15 and $(2), respectively, of charges/(credits) from changes in estimates of contingent acquisition consideration; and v) $2 and $9, respectively, of accelerated depreciation on fixed assets to be abandoned due to integration synergies.

(e)

Reported results in 2017 and 2016 include restructuring and other costs, net, consisting principally of severance, abandoned facility and other expenses of headcount reductions within several businesses and real estate consolidations. Reported results in 2017 include $27 of net credits from litigation, $6 of compensation due at an acquired business on the date of the acquisition, $7 of hurricane response/impairment costs, and $6 of net charges for the settlement/curtailment of retirement plans. Reported results in 2016 include $24 of net charges for litigation, $8 of environmental remediation costs and $6 of net gains on sales of real estate and settlement of retirement plans.

(f)

Reported results in 2017 include a $32 charge related to fees paid to obtain bridge financing commitments for the acquisition of Patheon and $4 of losses on the early extinguishment of debt, offset in part by $17 of net gains from investments. Reported results in 2016 include $22 of charges related to fees paid to obtain bridge financing commitments for the acquisition of FEI, $9 of losses on the early extinguishment of debt and $2 of amortization of acquisition-related intangible assets of the company's equity-method investments, offset in part by $13 of net gains from investments.

(g)

Reported provision for income taxes includes i) $538 and $543 of incremental tax benefit in 2017 and 2016, respectively, for the pre-tax reconciling items between GAAP and adjusted net income; ii) $61 and $(1) of incremental tax benefit (provision) in 2017 and 2016, respectively, from adjusting the company's non-U.S. deferred tax balances as a result of tax rate changes and iii) $31 and $12 of incremental tax provision in 2017 and 2016, respectively, due to audit settlements. Reported provision in 2017 also includes a net provision of $204 from the effects of U.S. tax reform legislation, consisting primarily of the transition tax on deemed repatriated earnings of foreign subsidiaries, net of a benefit from adjusting the deferred tax balances for the U.S. rate reduction.

Notes:

Consolidated depreciation expense is $439 and $380 in 2017 and 2016, respectively.

Condensed Consolidated Balance Sheet

December 31,

December 31,

(In millions)

2017

2016

Assets

Current Assets:

Cash and cash equivalents

$

1,335

$

786

Accounts receivable, net

3,879

3,049

Inventories

2,971

2,213

Other current assets

1,250

973

Total current assets

9,435

7,021

Property, Plant and Equipment, Net

4,047

2,578

Acquisition-related Intangible Assets

16,684

13,969

Other Assets

1,133

1,012

Goodwill

25,290

21,328

Total Assets

$

56,589

$

45,908

Liabilities and Shareholders' Equity

Current Liabilities:

Short-term obligations and current maturities of long-term obligations

$

2,135

$

1,255

Other current liabilities

4,861

3,611

Total current liabilities

6,996

4,866

Other Long-term Liabilities

5,307

4,130

Long-term Obligations

18,873

15,372

Total Shareholders' Equity

25,413

21,540

Total Liabilities and Shareholders' Equity

$

56,589

$

45,908

Condensed Consolidated Statement of Cash Flows

Year Ended

December 31,

December 31,

(In millions)

2017

2016

Operating Activities

Net income

$

2,225

$

2,022

Loss from discontinued operations

3

3

Income from continuing operations

2,228

2,025

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

2,033

1,758

Change in deferred income taxes

(1,089)

(620)

Other non-cash expenses, net

349

275

Changes in assets and liabilities, excluding the effects of acquisitions and dispositions

485

(178)

Net cash provided by continuing operations

4,006

3,260

Net cash used in discontinued operations

(1)

(2)

Net cash provided by operating activities

4,005

3,258

Investing Activities

Acquisitions, net of cash acquired

(7,226)

(5,178)

Purchases of property, plant and equipment

(508)

(444)

Proceeds from sale of property, plant and equipment

7

26

Other investing activities, net

(2)

76

Net cash used in investing activities

(7,729)

(5,520)

Financing Activities

Net proceeds from issuance of debt

6,459

7,604

Repayment of debt

(3,299)

(4,334)

Net proceeds from issuance of commercial paper

8,380

9,182

Repayment of commercial paper

(8,514)

(8,278)

Purchases of company common stock

(750)

(1,250)

Dividends paid

(237)

(238)

Net proceeds from issuance of company common stock

1,690

—

Net proceeds from issuance of company common stock under employee stock plans

128

87

Other financing activities, net

(3)

(14)

Net cash provided by financing activities

3,854

2,759

Exchange Rate Effect on Cash

420

(152)

Increase in Cash, Cash Equivalents and Restricted Cash

550

345

Cash, Cash Equivalents and Restricted Cash at Beginning of Period

811

466

Cash, Cash Equivalents and Restricted Cash at End of Period

$

1,361

$

811

Free Cash Flow (a)

$

3,505

$

2,842

(a) Free cash flow is net cash provided by operating activities of continuing operations less net purchases of property, plant and equipment.