Item 8. Financial Statements and Supplemental Data

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Item 8. Financial Statements and Supplemental Data

TABLE OF CONTENTS



Report of Independent Registered Public Accounting Firm	56
Consolidated Statements of Operations for Each of the Three Fiscal Years in the Period Ended December 31, 2017	57
Consolidated Statements of Comprehensive Income for Each of the Three Fiscal Years in the Period Ended December 31, 2017	58
Consolidated Balance Sheets as of December 31, 2017 and January 1, 2017	59
Consolidated Statements of Stockholders’ Equity for Each of the Three Fiscal Years in the Period Ended December 31, 2017	60
Consolidated Statements of Cash Flows for Each of the Three Fiscal Years in the Period Ended December 31, 2017	61
Notes to Consolidated Financial Statements	62

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors of PerkinElmer, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of PerkinElmer, Inc. and subsidiaries (the “Company”) as of December 31, 2017 and January 1, 2017, and the related consolidated statements of operations, comprehensive income, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2017, the related notes, and the schedule listed in the Index at Item 15 (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and January 1, 2017, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2017, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 27, 2018 expressed an unqualified opinion on the Company’s internal control over financial reporting.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s / DELOITTE & TOUCHE LLP

Boston, Massachusetts

February 27, 2018

We have served as the Company’s auditor since 2002.

CONSOLIDATED STATEMENTS OF OPERATIONS

For the Fiscal Years Ended



	December 31, 2017		January 1, 2017		January 3, 2016
	(In thousands, except per share data)
Revenue
Product revenue	$	1,477,414	$	1,396,896	$	1,395,102
Service revenue	779,568		718,621		709,721
Total revenue	2,256,982		2,115,517		2,104,823
Cost of product revenue	708,685		664,803		696,461
Cost of service revenue	475,266		437,361		444,131
Selling, general and administrative expenses	616,167		600,885		587,219
Research and development expenses	139,404		124,278		112,539
Restructuring and contract termination charges, net	12,657		5,124		13,547
Operating income from continuing operations	304,803		283,066		250,926
Interest and other expense, net	8,085		38,998		42,119
Income from continuing operations before income taxes	296,718		244,068		208,807
Provision for income taxes	139,828		28,362		20,022
Income from continuing operations	156,890		215,706		188,785
Income from discontinued operations before income taxes	650		22,229		35,205
Gain (loss) on disposition of discontinued operations before income taxes	179,615		619		(28		)
Provision for income taxes on discontinued operations and dispositions	44,522		4,255		11,537
Income from discontinued operations and dispositions	135,743		18,593		23,640
Net income	$	292,633	$	234,299	$	212,425
Basic earnings per share:
Income from continuing operations	$	1.43	$	1.97	$	1.68
Income from discontinued operations and dispositions	1.24		0.17		0.21
Net income	$	2.67	$	2.14	$	1.89
Diluted earnings per share:
Income from continuing operations	$	1.42	$	1.96	$	1.67
Income from discontinued operations and dispositions	1.22		0.17		0.21
Net income	$	2.64	$	2.12	$	1.87

The accompanying notes are an integral part of these consolidated financial statements.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

For the Fiscal Years Ended



	December 31, 2017			January 1, 2017			January 3, 2016
	(In thousands)
Net income	$	292,633		$	234,299		$	212,425
Other comprehensive income (loss)
Foreign currency translation adjustments	54,341			(54,077		)	(70,178		)
Unrecognized prior service costs, net of tax	(77		)	(860		)	(316		)
Unrealized gains (losses) on securities, net of tax	79			32			(262		)
Other comprehensive income (loss)	54,343			(54,905		)	(70,756		)
Comprehensive income	$	346,976		$	179,394		$	141,669

The accompanying notes are an integral part of these consolidated financial statements.

CONSOLIDATED BALANCE SHEETS

As of the Fiscal Years Ended



	December 31, 2017			January 1, 2017
	(In thousands, except share and per share data)
Current assets:
Cash and cash equivalents	$	202,134		$	359,265
Accounts receivable, net	552,304			425,588
Inventories	351,675			246,847
Other current assets	93,842			99,246
Current assets of discontinued operations	—			58,985
Total current assets	1,199,955			1,189,931
Property, plant and equipment, net	298,066			145,494
Intangible assets, net	1,346,940			420,224
Goodwill	3,002,198			2,247,966
Other assets, net	244,304			204,679
Long-term assets of discontinued operations	—			68,389
Total assets	$	6,091,463		$	4,276,683
Current liabilities:
Current portion of long-term debt	$	217,306		$	1,172
Accounts payable	222,093			168,033
Accrued restructuring and contract termination charges	8,759			7,479
Accrued expenses and other current liabilities	500,642			399,700
Current liabilities of discontinued operations	2,102			26,971
Total current liabilities	950,902			603,355
Long-term debt	1,788,803			1,045,254
Long-term liabilities	848,570			459,544
Long-term liabilities of discontinued operations	—			14,960
Total liabilities	3,588,275			2,123,113
Commitments and contingencies (see Notes 13 and 16)
Stockholders’ equity:
Preferred stock—$1 par value per share, authorized 1,000,000 shares; none issued or outstanding	—			—
Common stock—$1 par value per share, authorized 300,000,000 shares; issued and outstanding 110,361,000 and 109,617,000 shares at December 31, 2017 and January 1, 2017, respectively	110,361			109,617
Capital in excess of par value	58,828			26,130
Retained earnings	2,380,517			2,118,684
Accumulated other comprehensive loss	(46,518		)	(100,861		)
Total stockholders’ equity	2,503,188			2,153,570
Total liabilities and stockholders’ equity	$	6,091,463		$	4,276,683

The accompanying notes are an integral part of these consolidated financial statements.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

For the Three Fiscal Years Ended December 31, 2017



	Common Stock Amount			Capital in Excess of Par Value			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total Stockholders’ Equity
	(In thousands)
Balance, December 28, 2014	$	112,481		$	94,276		$	1,810,545		$	24,800		$	2,042,102
Net income	—			—			212,425			—			212,425
Other comprehensive loss	—			—			—			(70,756		)	(70,756		)
Dividends	—			—			(31,539		)	—			(31,539		)
Exercise of employee stock options and related income tax benefits	849			16,491			—			—			17,340
Issuance of common stock for employee stock purchase plans	78			3,608			—			—			3,686
Purchases of common stock	(1,595		)	(74,844		)	—			—			(76,439		)
Issuance of common stock for long-term incentive program	221			9,098			—			—			9,319
Stock compensation	—			4,303			—			—			4,303
Balance, January 3, 2016	$	112,034		$	52,932		$	1,991,431		$	(45,956	)	$	2,110,441
Adjustment to recognize prior year's unrecognized excess tax benefits upon adoption of ASU 2016-09	—			177			14,051			—			14,228
Net income	—			—			234,299			—			234,299
Other comprehensive loss	—			—			—			(54,905		)	(54,905		)
Dividends	—			—			(30,629		)	—			(30,629		)
Exercise of employee stock options and related income tax benefits	576			13,842			—			—			14,418
Issuance of common stock for employee stock purchase plans	50			2,413			—			—			2,463
Purchases of common stock	(3,275		)	(58,058		)	(90,468		)	—			(151,801		)
Issuance of common stock for long-term incentive program	232			10,193			—			—			10,425
Stock compensation	—			4,631			—			—			4,631
Balance, January 1, 2017	$	109,617		$	26,130		$	2,118,684		$	(100,861	)	$	2,153,570
Net income	—			—			292,633			—			292,633
Other comprehensive income	—			—			—			54,343			54,343
Dividends	—			—			(30,800		)	—			(30,800		)
Exercise of employee stock options and related income tax benefits	578			17,426			—			—			18,004
Issuance of common stock for employee stock purchase plans	37			2,430			—			—			2,467
Purchases of common stock	(79		)	(4,288		)	—			—			(4,367		)
Issuance of common stock for long-term incentive program	208			12,145			—			—			12,353
Stock compensation	—			4,985			—			—			4,985
Balance, December 31, 2017	$	110,361		$	58,828		$	2,380,517		$	(46,518	)	$	2,503,188

The accompanying notes are an integral part of these consolidated financial statements.

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Fiscal Years Ended



	December 31, 2017			January 1, 2017			January 3, 2016
	(In thousands)
Operating activities:
Net income	$	292,633		$	234,299		$	212,425
Income from discontinued operations and dispositions, net of income taxes	(135,743		)	(18,593		)	(23,640		)
Income from continuing operations	156,890			215,706			188,785
Adjustments to reconcile income from continuing operations to net cash provided by continuing operations:
Restructuring and contract termination charges, net	12,657			5,124			13,547
Depreciation and amortization	105,000			99,972			105,364
Stock-based compensation	25,421			17,158			17,278
Pension and other postretirement (benefits) expense	(10,439		)	14,511			9,381
Change in fair value of contingent consideration	2,162			16,183			—
Deferred taxes	28,854			(6,526		)	(6,571		)
Contingencies and non-cash tax matters	182			(291		)	(5,342		)
Amortization of deferred debt issuance costs and accretion of discounts	2,592			2,137			1,496
Losses (gains) on disposition of businesses and assets, net	309			(5,562		)	—
Amortization of acquired inventory revaluation	6,188			396			7,275
Excess tax benefit from exercise of common stock options	—			—			(2,435		)
Changes in assets and liabilities which provided (used) cash, excluding effects from companies acquired:
Accounts receivable, net	(36,633		)	(18,960		)	4,061
Inventories	(17,923		)	6,752			(27,931		)
Accounts payable	34,331			30,716			(10,897		)
Accrued expenses and other	(17,436		)	(53,540		)	(30,177		)
Net cash provided by operating activities of continuing operations	292,155			323,776			263,834
Net cash (used in) provided by operating activities of discontinued operations	(3,702		)	26,839			23,264
Net cash provided by operating activities	288,453			350,615			287,098
Investing activities:
Capital expenditures	(39,089		)	(31,702		)	(28,218		)
Settlement of cash flow hedges	36,541			—			—
Purchases of investments	(10,783		)	—			—
Proceeds from disposition of businesses	1,100			21,000			—
Changes in restricted cash balances	17,218			(16,959		)	59
Proceeds from surrender of life insurance policies	45			44			757
Activity related to acquisitions, net of cash and cash equivalents acquired	(1,527,183		)	(71,924		)	(72,040		)
Net cash used in investing activities of continuing operations	(1,522,151		)	(99,541		)	(99,442		)
Net cash provided by (used in) investing activities of discontinued operations	272,779			(1,302		)	(1,414		)
Net cash used in investing activities	(1,249,372		)	(100,843		)	(100,856		)
Financing activities:
Payments on borrowings	(235,965		)	(902,507		)	(485,000		)
Proceeds from borrowings	1,060,952			420,507			451,000
Proceeds from sale of senior debt	—			546,190			—
Payments of debt financing costs	—			(7,868		)	—
Net payments on other credit facilities	(2,831		)	(1,096		)	(1,072		)
Settlement of cash flow hedges	(13,824		)	(1,900		)	18,706
Payments for acquisition-related contingent consideration	(8,940		)	(155		)	(103		)
Excess tax benefit from exercise of common stock options	—			—			2,435
Proceeds from issuance of common stock under stock plans	18,004			14,418			14,905
Purchases of common stock	(3,834		)	(151,801		)	(76,439		)
Dividends paid	(30,793		)	(30,799		)	(31,571		)
Net cash provided by (used in) financing activities of continuing operations	782,769			(115,011		)	(107,139		)
Net cash used in financing activities of discontinued operations	(533		)	—			—
Net cash provided by (used in) financing activities	782,236			(115,011		)	(107,139		)
Effect of exchange rate changes on cash and cash equivalents	21,552			(13,428		)	(15,992		)
Net (decrease) increase in cash and cash equivalents	(157,131		)	121,333			63,111
Cash and cash equivalents at beginning of year	359,265			237,932			174,821
Cash and cash equivalents at end of year	$	202,134		$	359,265		$	237,932

Supplemental disclosures of cash flow information
Cash paid during the year for:
Interest	$	35,780		$	30,718		$	31,741
Income taxes	$	77,607		$	43,549		$	49,275

The accompanying notes are an integral part of these consolidated financial statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 1:	Nature of Operations and Accounting Policies

Nature of Operations: PerkinElmer, Inc. is a leading provider of products, services and solutions to the diagnostics, research, environmental, industrial, food and laboratory services markets. Through its advanced technologies and differentiated solutions, critical issues are addressed that help to improve lives and the world around us.

The consolidated financial statements include the accounts of PerkinElmer, Inc. and its subsidiaries (the “Company”). All intercompany balances and transactions have been eliminated in consolidation.

The Company has two operating segments: Discovery & Analytical Solutions and Diagnostics. The Company's Discovery & Analytical Solutions segment focuses on service and innovating for customers spanning the environmental, food, industrial, life sciences research and laboratory services markets. The Company's Diagnostics segment is targeted towards meeting the needs of clinically-oriented customers, especially within the growing areas of reproductive health, emerging market diagnostics and applied genomics.

The Company's fiscal year ends on the Sunday nearest December 31. The Company reports fiscal years under a 52/53 week format and as a result, certain fiscal years will contain 53 weeks. Each of the fiscal years ended December 31, 2017 ("fiscal year 2017") and January 1, 2017 ("fiscal year 2016") included 52 weeks. The fiscal year ended January 3, 2016 ("fiscal year 2015") included 53 weeks. The additional week in fiscal year 2015 has been reflected in the Company's third quarter. The fiscal year ending December 30, 2018 will include 52 weeks.

Accounting Policies and Estimates: The preparation of consolidated financial statements in accordance with United States (“U.S.”) Generally Accepted Accounting Principles (“GAAP”) requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, the Company evaluates its estimates. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

Revenue Recognition: The Company’s product revenue is recorded when persuasive evidence of an arrangement exists, delivery has occurred, the price to the buyer is fixed or determinable, and collectability is reasonably assured. For products that include installation, and if the installation meets the criteria to be considered a separate element, product revenue is recognized upon delivery, and installation revenue is recognized when the installation is complete. For revenue that includes customer-specified acceptance criteria, revenue is recognized after the acceptance criteria have been met. Certain of the Company’s products require specialized installation. Revenue for these products is deferred until installation is completed. Revenue from services is deferred and recognized over the contractual period, or as services are rendered.

In limited circumstances, the Company has arrangements that include multiple elements that are delivered at different points of time, such as revenue from products and services with a remaining service or storage component, including cord blood processing and storage. For these arrangements, the revenue is allocated to each of the deliverables based upon their relative selling prices as determined by a selling-price hierarchy. A deliverable in an arrangement qualifies as a separate unit of accounting if the delivered item has value to the customer on a stand-alone basis. A delivered item that does not qualify as a separate unit of accounting is combined with the other undelivered items in the arrangement and revenue is recognized for those combined deliverables as a single unit of accounting. The selling price used for each deliverable is based upon vendor-specific objective evidence ("VSOE") if such evidence is available, third-party evidence ("TPE") if VSOE is not available, and management's best estimate of selling price ("BESP") if neither VSOE nor TPE are available. TPE is the price of the Company's or any competitor's largely interchangeable products or services in stand-alone sales to similarly-situated customers. BESP is the price at which the Company would sell the deliverable if it were sold regularly on a stand-alone basis, considering market conditions and entity-specific factors.

Revenue from software licenses and services was 4% of the Company's total revenue for fiscal year 2017, and 5% for each of fiscal years 2016 and 2015. The Company sells its software licenses with maintenance services and, in some cases, also with consulting services. For the undelivered elements, the Company determines VSOE of fair value to be the price charged when the undelivered element is sold separately. The Company determines VSOE for maintenance sold in connection with a software license based on the stated renewal rate method. The Company determines VSOE for consulting services by reference to the amount charged for similar engagements on a stand-alone basis.

The Company recognizes revenue from software licenses sold together with maintenance and/or consulting services upon shipment using the residual method, provided that the above criteria have been met. If VSOE of fair value for the

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

undelivered elements cannot be established, the Company defers all revenue from the arrangement until the earlier of the point at which such sufficient VSOE does exist or all elements of the arrangement have been delivered, or if the only undelivered element is maintenance, then the Company recognizes the entire fee ratably over the maintenance period.

The Company recognizes revenue from the grant of certain intellectual property rights for patented technologies it owns. These rights typically include a combination of the following: the grant of a non-exclusive, retroactive and future license to patented technologies, a covenant-not-to-sue, the release of the licensee from certain claims, and the dismissal of any pending litigation. The intellectual property rights granted may be perpetual in nature, extending until the expiration of the related patents, or can be granted for a defined timeframe. For these arrangements, the revenue is allocated to each of the deliverables based upon their relative selling prices as determined by the selling-price hierarchy. In the case where the agreement includes the dismissal of any pending litigation, the Company allocates between revenue and litigation settlement using the residual method. The Company recognizes revenue when the earnings process is complete and upon the execution of the agreement, when collectability is reasonably assured, or upon receipt of the minimum upfront fee for term agreement renewals, and when all other revenue recognition criteria have been met.

Service revenues represent the Company’s service offerings including service contracts, field service including related time and materials, diagnostic testing, cord blood processing and storage, and training. Service revenues are recognized as the service is performed. Revenues for service contracts and storage contracts are recognized over the contract period.

The Company sells products and accessories predominantly through its direct sales force. As a result, the use of distributors is generally limited to geographic regions where the Company has no direct sales force. The Company does not offer product return or exchange rights (other than those relating to defective goods under warranty) or price protection allowances to its customers, including its distributors. Payment terms granted to distributors are the same as those granted to end-user customers and payments are not dependent upon the distributors’ receipt of payment from their end-user customers. Sales incentives related to distributor revenue are also the same as those for end-user customers.

Warranty Costs: The Company provides for estimated warranty costs for products at the time of their sale. Warranty liabilities are estimated using expected future repair costs based on historical labor and material costs incurred during the warranty period.

Shipping and Handling Costs: The Company reports shipping and handling revenue in revenue, to the extent they are billed to customers, and the associated costs in cost of product revenue.

Inventories: Inventories, which include material, labor and manufacturing overhead, are valued at the lower of cost or market. Inventories are accounted for using the first-in, first-out method of determining inventory costs. Inventory quantities on-hand are regularly reviewed, and where necessary, provisions for excess and obsolete inventory are recorded based primarily on the Company’s estimated forecast of product demand and production requirements.

Income Taxes: The Company uses the asset and liability method of accounting for income taxes. Under the asset and liability method, deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of assets and liabilities and their respective tax bases. This method also requires the recognition of future tax benefits such as net operating loss carryforwards, to the extent that realization of such benefits is more likely than not. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the fiscal years in which those temporary differences are expected to be recovered or settled. A valuation allowance is established for any deferred tax asset for which realization is not more likely than not. With respect to earnings expected to be indefinitely reinvested offshore, the Company does not accrue tax for the repatriation of such foreign earnings.

The Company provides reserves for potential payments of tax to various tax authorities related to uncertain tax positions and other issues. These reserves are based on a determination of whether and how much of a tax benefit taken by the Company in its tax filings or positions is more likely than not to be realized following resolution of any potential contingencies present related to the tax benefit. Potential interest and penalties associated with such uncertain tax positions is recorded as a component of income tax expense. See Note 6 below for additional details.

Property, Plant and Equipment: The Company depreciates property, plant and equipment using the straight-line method over its estimated useful lives, which generally fall within the following ranges: buildings- 10 to 40 years; leasehold improvements-estimated useful life or remaining term of lease, whichever is shorter; and machinery and equipment- 3 to 7 years. Certain tooling costs are capitalized and amortized over a 3-year life, while repairs and maintenance costs are expensed.

Asset Retirement Obligations: The Company records obligations associated with its lease obligations, the retirement of tangible long-lived assets and the associated asset retirement costs in accordance with authoritative guidance on asset

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

retirement obligations. The Company reviews legal obligations associated with the retirement of long-lived assets that result from contractual obligations or the acquisition, construction, development and/or normal use of the assets. If it is determined that a legal obligation exists, regardless of whether the obligation is conditional on a future event, the fair value of the liability for an asset retirement obligation is recognized in the period in which it is incurred, if a reasonable estimate of fair value can be made. The fair value of the liability is added to the carrying amount of the associated asset, and this additional carrying amount is depreciated over the life of the asset. The difference between the gross expected future cash flow and its present value is accreted over the life of the related lease as interest expense. The amounts recorded in the consolidated financial statements are not material to any year presented.

Pension and Other Postretirement Benefits: The Company sponsors both funded and unfunded U.S. and non-U.S. defined benefit pension plans and other postretirement benefits. The Company immediately recognizes actuarial gains and losses in operating results in the year in which the gains and losses occur. Actuarial gains and losses are measured annually as of the calendar month-end that is closest to the Company's fiscal year end and accordingly will be recorded in the fourth quarter, unless the Company is required to perform an interim remeasurement. The remaining components of pension expense, primarily service and interest costs and assumed return on plan assets, are recorded on a quarterly basis. The Company’s funding policy provides that payments to the U.S. pension trusts shall at least be equal to the minimum funding requirements of the Employee Retirement Income Security Act of 1974. Non-U.S. plans are accrued for, but generally not fully funded, and benefits are paid from operating funds.

Translation of Foreign Currencies: For foreign operations, asset and liability accounts are translated at current exchange rates; income and expenses are translated using weighted average exchange rates for the reporting period. Resulting translation adjustments, as well as translation gains and losses from certain intercompany transactions considered permanent in nature, are reported in accumulated other comprehensive (loss) income, a separate component of stockholders’ equity. Gains and losses arising from transactions and translation of period-end balances denominated in currencies other than the functional currency are included in other expense, net.

Business Combinations: Business combinations are accounted for at fair value. Acquisition costs are expensed as incurred and recorded in selling, general and administrative expenses; previously held equity interests are valued at fair value upon the acquisition of a controlling interest; in-process research and development (“IPR&D”) is recorded at fair value as an intangible asset at the acquisition date; restructuring costs associated with a business combination are expensed subsequent to the acquisition date; and changes in deferred tax asset valuation allowances and income tax uncertainties after the acquisition date affect income tax expense. Measurement period adjustments are made in the period in which the amounts are determined and the current period income effect of such adjustments will be calculated as if the adjustments had been completed as of the acquisition date. All changes that do not qualify as measurement period adjustments are also included in current period earnings. The accounting for business combinations requires estimates and judgment as to expectations for future cash flows of the acquired business, and the allocation of those cash flows to identifiable intangible assets, in determining the estimated fair value for assets acquired and liabilities assumed. The fair values assigned to tangible and intangible assets acquired and liabilities assumed, including contingent consideration, are based on management’s estimates and assumptions, as well as other information compiled by management, including valuations that utilize customary valuation procedures and techniques. If the actual results differ from the estimates and judgments used in these estimates, the amounts recorded in the financial statements could result in a possible impairment of the intangible assets and goodwill, require acceleration of the amortization expense of finite-lived intangible assets, or the recognition of additional consideration which would be expensed.

Goodwill and Other Intangible Assets: The Company’s intangible assets consist of (i) goodwill, which is not being amortized; (ii) indefinite lived intangibles, which consist of a trade name that is not subject to amortization; and (iii) amortizing intangibles, which consist of patents, trade names and trademarks, licenses, customer relationships, and purchased technologies, which are being amortized over their estimated useful lives.

The process of testing goodwill for impairment involves the determination of the fair value of the applicable reporting units. The test consists of a two-step process. The first step is the comparison of the fair value to the carrying value of the reporting unit to determine if the carrying value exceeds the fair value. The second step measures the amount of an impairment loss, and is only performed if the carrying value exceeds the fair value of the reporting unit. This annual impairment assessment is performed by the Company on the later of January 1 or the first day of each fiscal year. In January 2017, the Company early adopted Accounting Standards Update No. 2017-04, Intangibles-Goodwill and Other Topic (Topic 350), Simplifying the Test for Goodwill Impairment ("ASU 2017-04"). ASU 2017-04 amends Topic 350 by eliminating Step 2 from the goodwill impairment test and requires an entity to perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and recognize an impairment charge for the amount by which the carrying value exceeds the reporting unit's fair value but not to exceed the total amount of goodwill allocated to that reporting unit. The Company will apply the provisions of ASU 2017-04 in its interim or annual goodwill impairment tests prospectively. Non-amortizing intangibles are also subject to an annual impairment test. The impairment test consists of a comparison of the fair value of the

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

non-amortizing intangible asset with its carrying amount. If the carrying amount of a non-amortizing intangible asset exceeds its fair value, an impairment loss in an amount equal to that excess is recognized. In addition, the Company evaluates the remaining useful life of its non-amortizing intangible assets at least annually to determine whether events or circumstances continue to support an indefinite useful life. If events or circumstances indicate that the useful lives of non-amortizing intangible assets are no longer indefinite, the assets will be tested for impairment. These intangible assets will then be amortized prospectively over their estimated remaining useful life and accounted for in the same manner as other intangible assets that are subject to amortization. Amortizing intangible assets are reviewed for impairment when indicators of impairment are present. When a potential impairment has been identified, forecasted undiscounted net cash flows of the operations to which the asset relates are compared to the current carrying value of the long-lived assets present in that operation. If such cash flows are less than such carrying amounts, long-lived assets, including such intangibles, are written down to their respective fair values. See Note 12 below for additional details.

Stock-Based Compensation: The Company accounts for stock-based compensation expense based on estimated grant date fair value, generally using the Black-Scholes option-pricing model. The fair value is recognized as expense in the consolidated financial statements over the requisite service period. The determination of fair value and the timing of expense using option pricing models such as the Black-Scholes model require the input of highly subjective assumptions, including the expected term and the expected price volatility of the underlying stock. The Company estimates the expected term assumption based on historical experience. In determining the Company’s expected stock price volatility assumption, the Company reviews both the historical and implied volatility of the Company’s common stock, with implied volatility based on the implied volatility of publicly traded options on the Company’s common stock. The Company has one stock-based compensation plan from which it makes grants, which is described more fully in Note 18 below.

Marketable Securities and Investments: The cost of securities sold is based on the specific identification method. If securities are classified as available for sale, the Company records these investments at their fair values with unrealized gains and losses included in accumulated other comprehensive (loss) income. Under the cost method of accounting, equity investments in private companies are carried at cost and are adjusted for other-than-temporary declines in fair value, additional investments or distributions.

Cash and Cash Equivalents: The Company considers all highly liquid unrestricted instruments with a purchased maturity of three months or less to be cash equivalents. The carrying amount of cash equivalents approximates fair value due to the short maturities of these instruments.

Environmental Matters: The Company accrues for costs associated with the remediation of environmental pollution when it is probable that a liability has been incurred and the Company’s proportionate share of the amount can be reasonably estimated. The recorded liabilities have not been discounted.

Research and Development: Research and development costs are expensed as incurred. The fair value of acquired IPR&D costs are recorded at fair value as an intangible asset at the acquisition date and amortized once the product is ready for sale or expensed if abandoned.

Restructuring Charges: In recent fiscal years, the Company has undertaken a series of restructuring actions related to the impact of acquisitions and divestitures, the alignment of its operations with its growth strategy, the integration of its business units and its productivity initiatives. In connection with these initiatives, the Company has recorded restructuring charges, as more fully described in Note 4 below. Generally, costs associated with an exit or disposal activity are recognized when the liability is incurred. Prior to recording restructuring charges for employee separation agreements, the Company notifies all employees of termination. Costs related to employee separation arrangements requiring future service beyond a specified minimum retention period are recognized over the service period. Costs related to lease terminations are recorded at the fair value of the liability based on the remaining lease rental payments, reduced by estimated sublease rentals that could be reasonably obtained for the property, at the date the Company ceases use.

Comprehensive Income: Comprehensive income is defined as net income or loss and other changes in stockholders’ equity from transactions and other events from sources other than stockholders. Comprehensive income is reflected in the consolidated statements of comprehensive income.

Derivative Instruments and Hedging: Derivatives are recorded on the consolidated balance sheets at fair value. Accounting for gains or losses resulting from changes in the values of those derivatives depends on the use of the derivative instrument and whether it qualifies for hedge accounting.

For a cash flow hedge, the effective portion of the derivative’s gain or loss is initially reported as a component of other comprehensive income and subsequently amortized into net earnings when the hedged exposure affects net earnings. Cash flow

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

hedges related to anticipated transactions are designated and documented at the inception of each hedge by matching the terms of the contract to the underlying transaction. The Company classifies the cash flows from hedging transactions in the same categories as the cash flows from the respective hedged items. Once established, cash flow hedges are generally recorded in other comprehensive income, unless an anticipated transaction is no longer likely to occur, and subsequently amortized into net earnings when the hedged exposure affects net earnings. Discontinued or dedesignated cash flow hedges are immediately settled with counterparties, and the related accumulated derivative gains or losses are recognized into net earnings on the consolidated financial statements. Settled cash flow hedges related to forecasted transactions that remain probable are recorded as a component of other comprehensive (loss) income and are subsequently amortized into net earnings when the hedged exposure affects net earnings. Forward contract effectiveness for cash flow hedges is calculated by comparing the fair value of the contract to the change in value of the anticipated transaction using forward rates on a monthly basis. The Company also has entered into other foreign currency forward contracts that are not designated as hedging instruments for accounting purposes. These contracts are recorded at fair value, with the changes in fair value recognized into interest and other expense, net on the consolidated financial statements.

The Company also uses foreign currency denominated debt to hedge its investments in certain foreign subsidiaries. Realized and unrealized translation adjustments from these hedges are included in the foreign currency translation component of Accumulated Other Comprehensive Income ("AOCI"), as well as the offset translation adjustments on the underlying net assets of foreign subsidiaries. The cumulative translation gains or losses will remain in AOCI until the foreign subsidiaries are liquidated or sold.

Recently Issued Accounting Pronouncements: From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (the "FASB") and are adopted by the Company as of the specified effective dates. Unless otherwise discussed, such pronouncements did not have or will not have a significant impact on the Company’s consolidated financial position, results of operations and cash flows or do not apply to the Company’s operations.

In August 2017, the FASB issued Accounting Standards Update No. 2017-12, Derivatives and Hedging (Topic 815), Targeted Improvements to Accounting for Hedging Activities ("ASU 2017-12"), which amends the hedge accounting recognition and presentation requirements in Topic 815. ASU 2017-12 makes targeted changes to the existing hedge accounting model to better align an entity’s financial reporting for hedging relationships with the entity’s risk management activities, and to reduce the complexity of, and simplify the application of, the hedge accounting model. Specifically, ASU 2017-12 expands the types of transactions eligible for hedge accounting, eliminates the requirement to separately measure and present hedge ineffectiveness, simplifies the way assessments of hedge ineffectiveness may be performed, relaxes the documentation requirements for entering into hedging positions, provides targeted improvements to fair value hedges of interest rate risk, and permits an entity to exclude the change in the fair value of cross-currency basis spreads in currency swaps from the assessment of hedge effectiveness. The standard also requires entities to provide new disclosures about the impact fair value and cash flow hedges have on their income statements and about cumulative basis adjustments arising from fair value hedges. The provisions of this guidance are to be applied using a modified retrospective approach to existing hedging relationships as of the adoption date. However, the transition provisions allow for certain elections at the date of adoption and entities may choose to apply any of the provided elections. ASU 2017-12 is effective for annual reporting periods beginning after December 15, 2018, and interim periods within those years. Early adoption is permitted, including adoption in any interim period. The Company early adopted the provisions of this guidance beginning after December 31, 2017. The adoption is not expected to have a material impact on the Company's consolidated financial position, results of operations and cash flows.

In May 2017, the FASB issued Accounting Standards Update No. 2017-09, Compensation - Stock Compensation (Topic 718), Scope of Modification Accounting ("ASU 2017-09"), which amends the scope of modification accounting for share-based payment arrangements. ASU 2017-09 provides guidance on the types of changes to the terms or conditions of share-based payment awards to which an entity would be required to apply modification accounting under Topic 718. Specifically, an entity would not apply modification accounting if the fair value, vesting conditions, and classification of the awards are the same immediately before and after the modification. If an entity modifies its awards and concludes that it is not required to apply modification accounting under the standard, it must still consider whether the modification affects its application of other guidance. Additionally, if a significant modification does not result in incremental compensation cost, entities are required to disclose the “lack of” incremental compensation cost resulting from such significant modification. The standard also removes the guidance in Topic 718 stating that modification accounting is not required when an entity adds an antidilution provision as long as that modification is not made in contemplation of an equity restructuring. The provisions of this guidance are to be applied on a prospective basis to awards modified on or after the effective date. ASU 2017-09 is effective for annual reporting periods beginning after December 15, 2017, and interim periods within those years. Early adoption is permitted, including adoption in any interim period. The adoption is not expected to have a material impact on the Company's consolidated financial position, results of operations and cash flows.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

In March 2017, the FASB issued Accounting Standards Update No. 2017-07, Compensation - Retirement Benefits (Topic 715), Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost ("ASU 2017-07"), which amends the requirements in Topic 715 related to the income statement presentation of the components of net periodic benefit cost for an entity’s sponsored defined benefit pension and other postretirement plans. ASU 2017-07 requires entities to (1) disaggregate the current-service-cost component from the other components of net benefit cost (the “other components”) and present it with other current employee compensation costs in their income statements and (2) present the other components elsewhere in their income statements and outside of income from operations, and disclose the income statement lines that contain the other components if they are not presented on appropriately described separate lines. Additionally, the standard requires that only the service-cost component of net benefit cost is eligible for capitalization (e.g., as part of inventory or property, plant, and equipment). The change in income statement presentation requires retrospective application, while the change in capitalized benefit cost is to be applied prospectively. ASU 2017-07 is effective for annual reporting periods beginning after December 15, 2017, and interim periods within those years, with early adoption permitted. The standard provides a practical expedient that permits entities to use the components of cost disclosed in prior years as a basis for the retrospective application of the new income statement presentation. Entities need to disclose the use of the practical expedient. The Company is evaluating the requirements of this guidance. The adoption is not expected to have a material impact on the Company's consolidated financial position, results of operations and cash flows.

In January 2017, the FASB issued ASU 2017-04, Intangibles-Goodwill and Other Topic (Topic 350), Simplifying the Test for Goodwill Impairment ("ASU 2017-04"), which amends Topic 350 to simplify the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. ASU 2017-04 requires that an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize the impairment charge for the amount by which the carrying amount exceeds the reporting unit's fair value, however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. Additionally, an entity should consider the income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. The provisions of this guidance are to be applied on a prospective basis. ASU 2017-04 is effective for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. In January 2017, the Company early adopted ASU 2017-04 and will apply the provisions of this standard in its interim or annual goodwill impairment tests prospectively.

In January 2017, the FASB issued Accounting Standards Update No. 2017-01, Business Combinations (Topic 805), Clarifying the Definition of a Business ("ASU 2017-01"), which amends Topic 805 to provide a screen to determine when a set of assets and liabilities is not a business. The screen requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business. This screen reduces the number of transactions that need to be further evaluated. If the screen is not met, the standard (1) requires that to be considered a business, a set must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create output and (2) removes the evaluation of whether a market participant could replace missing elements. The standard provides a framework to assist entities in evaluating whether both an input and a substantive process are present. The standard also provides a framework that includes two sets of criteria to consider that depend on whether a set has outputs and a more stringent criteria for sets without outputs. Lastly, the standard narrows the definition of the term "output" so that the term is consistent with how outputs are described in Topic 606, Revenue from Contracts with Customers. The provisions of this guidance are to be applied prospectively. ASU 2017-01 is effective for annual reporting periods beginning after December 15, 2017, and interim periods within those years, with early adoption permitted in limited circumstances. The adoption is not expected to have a material impact on the Company's consolidated financial position, results of operations and cash flows.

In November 2016, the FASB issued Accounting Standards Update No. 2016-18, Statement of Cash Flows (Topic 230), Restricted Cash ("ASU 2016-18"), which amends Topic 230 to add or clarify guidance on the classification and presentation of restricted cash in the statement of cash flows. The standard requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The provisions of this guidance are to be applied using a retrospective transition method to each period presented. ASU 2016-18 is effective for annual reporting periods beginning after December 15, 2017, and interim periods within those years, with early adoption permitted. The adoption is not expected to have a material impact on the Company's consolidated financial position, results of operations and cash flows.

In October 2016, the FASB issued Accounting Standards Update No. 2016-16, Income Taxes (Topic 740), Intra-entity Transfer of Assets Other than Inventory ("ASU 2016-16"). ASU 2016-16 removes the prohibition in ASC 740 against the

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

immediate recognition of the current and deferred income tax effects of intra-entity transfers of assets other than inventory. The standard requires entities to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. The provisions of this guidance are to be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. ASU 2016-16 is effective for annual reporting periods beginning after December 15, 2017, and interim periods within those years, with early adoption permitted. The Company is evaluating the requirements of this guidance and has not yet determined the impact of its adoption on the Company's consolidated financial position, results of operations and cash flows.

In August 2016, the FASB issued Accounting Standards Update No. 2016-15, Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Cash Payments ("ASU 2016-15"). ASU 2016-15 addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows under Topic 230 and other topics. The provisions of this guidance are to be applied using a retrospective transition method to each period presented, and if it is impracticable to apply the amendments retrospectively for some of the issues, ASU 2016-15 allows the amendments for those issues to be applied prospectively as of the earliest date practicable. ASU 2015-16 is effective for annual reporting periods beginning after December 15, 2017, and interim periods within those years, with early adoption permitted. The adoption is not expected to have a material impact on the Company's consolidated financial position, results of operations and cash flows.

In June 2016, the FASB issued Accounting Standards Update No. 2016-13, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments ("ASU 2016-13"). ASU 2016-13 changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The standard requires entities to use the expected loss impairment model and will apply to most financial assets measured at amortized cost and certain other instruments, including trade and other receivables, loans, held-to-maturity debt securities, net investments in leases and off-balance sheet credit exposures. Entities are required to estimate the lifetime “expected credit loss” for each applicable financial asset and record an allowance that, when deducted from the amortized cost basis of the financial asset, presents the net amount expected to be collected on the financial asset. The standard also amends the impairment model for available-for-sale (“AFS”) debt securities and requires entities to determine whether all or a portion of the unrealized loss on an AFS debt security is a credit loss. An entity will recognize an allowance for credit losses on an AFS debt security as a contra-account to the amortized cost basis rather than as a direct reduction of the amortized cost basis of the investment. The provisions of this guidance are to be applied using a modified-retrospective approach. A prospective transition approach is required for debt securities for which an other-than-temporary impairment had been recognized before the effective date. ASU 2016-13 is effective for annual reporting periods beginning after December 15, 2019, and interim periods within those years. Early adoption is permitted for annual periods beginning after December 15, 2018, and interim periods therein. The Company is currently evaluating the requirements of this guidance and has not yet determined the impact of its adoption on the Company's consolidated financial position, results of operations and cash flows.

In February 2016, the FASB issued Accounting Standards Update No. 2016-02, Leases ("ASU 2016-02"). ASU 2016-02 requires organizations that lease assets to recognize assets and liabilities on the balance sheet related to the rights and obligations created by those leases, regardless of whether they are classified as finance or operating leases. Consistent with current guidance, the recognition, measurement, and presentation of expenses and cash flows arising from a lease primarily will depend on its classification as a finance or operating lease. ASU 2016-02 also requires new disclosures to help financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases. The provisions of this guidance are effective for annual periods beginning after December 15, 2018, and interim periods within those years, with early adoption permitted. ASU 2016-02 is to be applied using a modified retrospective approach. The Company is evaluating the requirements of this guidance and has not yet determined the impact of the adoption on its consolidated financial position, results of operations and cash flows. The Company does not intend to early adopt the provisions of this standard.

In July 2015, the FASB issued Accounting Standards Update No. 2015-11, Simplifying the Measurement of Inventory. Under this new guidance, companies that use inventory measurement methods other than last-in, first-out or the retail inventory method should measure inventory at the lower of cost and net realizable value. The provisions of this guidance are to be applied prospectively and are effective for interim and annual periods beginning after December 15, 2016, with early adoption permitted. The Company adopted ASU 2015-11 at the beginning of the first quarter of fiscal year 2017. The adoption did not have a material impact on the Company's consolidated financial position, results of operations and cash flows.

In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers ("ASU 2014-09"). Under this new guidance, an entity should use a five-step process to recognize revenue, depicting the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard also requires new disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. Subsequent to the issuance of the

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

standard, the FASB decided to defer the effective date for one year to annual reporting periods beginning after December 15, 2017, with early adoption permitted for annual reporting periods beginning after December 15, 2016. In November 2017, the FASB also issued Accounting Standards Update No. 2017-14, Income Statement-Reporting Comprehensive Income (Topic 220), Revenue Recognition (Topic 605), and Revenue from Contracts with Customers (Topic 606). ASU 2017-14 includes amendments to certain SEC paragraphs within the FASB Accounting Standards Codification ("Codification"). ASU 2017-14 amends the Codification to incorporate SEC Staff Accounting Bulletin No. 116 and SEC Interpretive Release on Vaccines for Federal Government Stockpiles (SEC Release No. 33-10403) to align existing SEC staff guidance with Revenue from Contracts with Customers (Topic 606). In May 2016, the FASB also issued Accounting Standards Update No. 2016-12, Revenue from Contracts with Customers (Topic 606), Narrow-Scope Improvements and Practical Expedients ("ASU 2016-12"), which amended its revenue recognition guidance in ASU 2014-09 on transition, collectibility, non-cash consideration, contract modifications and completed contracts at transition and the presentation of sales and other similar taxes collected from customers. In April 2016, the FASB also issued Accounting Standards Update No. 2016-10, Revenue from Contracts with Customers (Topic 606), Identifying Performance Obligations and Licensing ("ASU 2016-10"), which amended its revenue recognition guidance in ASU 2014-09 on identifying performance obligations to allow entities to disregard items that are immaterial in the context of the contract, clarify when a promised good or service is separately identifiable (i.e., distinct within the context of the contract) and allow an entity to elect to account for the cost of shipping and handling performed after control of a good has been transferred to the customer as a fulfillment cost (i.e., an expense). ASU 2016-10 also clarifies how an entity should evaluate the nature of its promise in granting a license of intellectual property ("IP") and requires entities to classify IP in one of two categories: functional IP or symbolic IP, which will determine whether it recognizes revenue over time or at a point in time. ASU 2016-10 also address how entities should consider license renewals and restrictions and apply the exception for sales- and usage-based royalties received in exchange for licenses of IP. In March 2016, the FASB also issued Accounting Standards Update No. 2016-08, Revenue from Contracts with Customers (Topic 606), Principal versus Agent Considerations (Reporting Revenue Gross versus Net) ("ASU 2016-08"), which amended the principal-versus-agent implementation guidance and illustrations in ASU 2014-09. ASU 2016-08 clarifies that an entity should evaluate when it is the principal or agent for each specified good or service promised in a contract with a customer. ASU 2017-14, ASU 2016-12, ASU 2016-10, ASU 2016-08 and ASU 2014-09 may be adopted either using a full retrospective approach or a modified retrospective approach. The standards were effective for the Company beginning on January 1, 2018. The Company did not early adopt these standards and adopted these standards using the modified retrospective approach.

The most significant impact of the standards relates to the accounting for certain transactions with multiple elements or “bundled” arrangements. Specifically, for sales of software subscriptions or sales of licenses and maintenance, we will recognize the license revenue predominantly at the time of billing and delivery rather than recognizing the entire sales price ratably over the maintenance period, which is the Company's current practice. In addition, for certain sales of instruments that include customer-specified acceptance criteria, the Company will recognize revenue when the customer obtains control of the instrument which is predominantly at the time of delivery or when title has transferred to the customer, as the Company believes acceptance is perfunctory. The Company will also capitalize incremental commission fees as a result of obtaining contracts when these fees are recoverable and will amortize the assets based on the transfer of goods or services to which the assets relate which typically range from two to six years. The Company elected to apply the modified retrospective approach only to contracts not completed as of January 1, 2018. The adoption of the standards will result in an increase in the retained earnings at January 1, 2018 of approximately $9.3 million for the cumulative effect of initially applying the standards at January 1, 2018. In addition, the adoption of the standards will result in a reduction in deferred revenue of approximately $12.5 million, primarily driven by the upfront recognition of license revenue and certain multi-year software subscriptions, and an increase in deferred income taxes of approximately $3.2 million for the tax impact of the cumulative adjustments. The cumulative effect of recognizing instrument sales upon delivery or transfer of title and capitalizing the incremental commission fees are not material at January 1, 2018. The adoption of the standards will have no impact to cash from or used in operating, investing, or financing activities in the Company's consolidated statement of cash flows at January 1, 2018.


Note 2:	Business Combinations

Acquisitions in fiscal year 2017

Acquisition of EUROIMMUN Medizinische Labordiagnostika AG. During fiscal year 2017, the Company completed the acquisition of 99.98% of the outstanding stock of EUROIMMUN Medizinische Labordiagnostika AG (“EUROIMMUN”) for aggregate consideration of €1.2 billion (equivalent to $1.4 billion at December 19, 2017, the time of closing). The purchase price was funded by borrowings from the Company's senior unsecured revolving credit facility and senior unsecured term loan credit facility of $710.0 million and $200.0 million, respectively, and available cash on hand of $503.8 million. EUROIMMUN is based in Lübeck, Germany, has approximately 2,400 employees, and is recognized as a global leader in autoimmune testing and an emerging force in infectious disease and allergy testing. The excess of the purchase price over the fair value of the acquired net assets represents cost and revenue synergies specific to the Company, as well as non-capitalizable intangible

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

assets, such as the employee workforce acquired. As a result of the acquisition, the Company recorded goodwill of $614.8 million, which is not tax deductible, and intangible assets of $897.4 million. The Company has reported the operations for this acquisition within the results of the Company's Diagnostics segment from the acquisition date. Identifiable definite-lived intangible assets, such as core technology, trade names and customer relationships, acquired as part of this acquisition had a weighted average amortization period of 16.1 years.

Other acquisitions in 2017. During fiscal year 2017, the Company also completed the acquisition of two other businesses for aggregate consideration of $142.1 million. The acquired businesses were Tulip Diagnostics Private Limited (“Tulip”), which was acquired for total consideration of $127.3 million in cash and one other business acquired for total consideration of $14.8 million in cash. The Company has a potential obligation to pay the former shareholders of Tulip up to INR1.6 billion in additional consideration over a two year period, which is currently equivalent to $25.2 million, and is accounted for as compensation expense in the Company's financial statements over a two year period and is excluded from the purchase price allocation shown below. The excess of the purchase prices over the fair values of the acquired businesses' net assets represents cost and revenue synergies specific to the Company, as well as non-capitalizable intangible assets, such as the employee workforces acquired, and has been allocated to goodwill, which is not tax deductible. The Company has reported the operations of Tulip within the results of the Company's Diagnostics segment and the other acquired business within the results of the Company's Discovery & Analytical Solutions segment from the acquisition date. Identifiable definite-lived intangible assets, such as core technology, trade names and customer relationships, acquired as part of these acquisitions had a weighted average amortization period of 11.8 years.

The total purchase price for the acquisitions in fiscal year 2017 have been allocated to the estimated fair values of assets acquired and liabilities assumed as follows:



	EUROIMMUN			2017 Other
	(In thousands)
Fair value of business combination:
Cash payments	$	1,413,780		$	140,861
Other liability	—			1,273
Less: cash acquired	(25,018		)	(2,439		)
Total	$	1,388,762		$	139,695
Identifiable assets acquired and liabilities assumed:
Current assets	$	121,174		$	16,268
Property, plant and equipment	129,964			11,356
Other assets	49,944			1,691
Identifiable intangible assets:
Core technology	160,000			12,400
Trade names	36,000			3,000
Customer relationships	700,000			43,700
In-process research and development ("IPR&D")	1,400			—
Goodwill	614,759			75,453
Deferred taxes	(275,491		)	(15,414		)
Liabilities assumed	(87,631		)	(8,759		)
Debt assumed	(61,357		)	—
Total	$	1,388,762		$	139,695

EUROIMMUN's revenue and net loss for the period from the acquisition date to December 31, 2017 were $13.5 million and $1.0 million, respectively. The following unaudited pro forma information presents the combined financial results for the Company and EUROIMMUN as if the acquisition of EUROIMMUN had been completed at the beginning of fiscal year 2016:

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)



	December 31, 2017		January 1, 2017
	(In thousands, except per share data)
Pro Forma Statement of Operations Information (Unaudited):
Revenue	$	2,562,580	$	2,379,176
Income from continuing operations	143,459		156,210
Basic earnings per share:
Income from continuing operations	$	1.31	$	1.43
Diluted earnings per share:
Income from continuing operations	$	1.29	$	1.42

The unaudited pro forma information for fiscal years 2017 and 2016 have been calculated after applying the Company's accounting policies and the impact of acquisition date fair value adjustments. The fiscal year 2017 unaudited pro forma income from continuing operations was adjusted to exclude approximately $9.8 million of acquisition-related transaction costs. The fiscal year 2016 pro forma income from continuing operations was adjusted to include these acquisition-related transaction costs and the nonrecurring expenses related to the fair value adjustments. These pro forma condensed consolidated financial results have been prepared for comparative purposes only and include certain adjustments, such as fair value adjustment to inventory, increased interest expense on debt obtained to finance the transaction, and increased amortization for the fair value of acquired intangible assets.

The pro forma information does not reflect the effect of costs or synergies that would have been expected to result from the integration of the acquisition. The pro forma information does not purport to be indicative of the results of operations that actually would have resulted had the combination occurred at the beginning of each period presented, or of future results of the consolidated entities.

Acquisitions in fiscal year 2016

During fiscal year 2016, the Company completed the acquisition of two businesses for total consideration of $72.3 million in cash. The acquired businesses were Bioo Scientific Corporation, which was acquired for total consideration of $63.5 million in cash and one other business acquired for total consideration of $8.8 million in cash. The excess of the purchase prices over the fair values of each of the acquired businesses' net assets represents cost and revenue synergies specific to the Company, as well as non-capitalizable intangible assets, such as the employee workforces acquired. As a result of the acquisitions, the Company recorded goodwill of $43.1 million, which is not tax deductible, and intangible assets of $22.1 million. The Company has reported the operations for these acquisitions within the results of the Company's Diagnostics and Discovery & Analytical Solutions segments from the acquisition dates. Identifiable definite-lived intangible assets, such as core technology, trade names and customer relationships, acquired as part of these acquisitions had a weighted average amortization period of 9.4 years.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The total purchase price for the acquisitions in fiscal year 2016 has been allocated to the estimated fair values of assets acquired and liabilities assumed as follows:



	2016 Acquisitions
	(In thousands)
Fair value of business combination:
Cash payments	$	72,497
Working capital and other adjustments	(261		)
Less: cash acquired	(2,152		)
Total	$	70,084
Identifiable assets acquired and liabilities assumed:
Current assets	$	7,153
Property, plant and equipment	7,542
Identifiable intangible assets:
Core technology	6,600
Trade names	570
Customer relationships	14,900
Goodwill	43,072
Deferred taxes	(7,768		)
Liabilities assumed	(1,985		)
Total	$	70,084

Acquisitions in fiscal year 2015

During fiscal year 2015, the Company completed the acquisition of five businesses for total consideration of $77.1 million in cash. The acquired businesses included Vanadis Diagnostics AB (“Vanadis”), which was acquired for total consideration of $35.1 million in cash, as further described in Note 21 below, and other acquisitions for aggregate consideration of $42.0 million in cash. At the time of closing, the Company had a potential obligation to pay the shareholders of Vanadis additional contingent consideration of up to $93.0 million, with an estimated fair value of $56.9 million. The excess of the purchase prices over the fair values of each of the acquired businesses' net assets represents cost and revenue synergies specific to the Company, as well as non-capitalizable intangible assets, such as the employee workforces acquired, and has been allocated to goodwill, of which $9.2 million is tax deductible. The Company has reported the operations for all of these acquisitions within the results of the Company’s Diagnostics and Discovery & Analytical Solutions segments from the acquisition dates. Identifiable definite-lived intangible assets, such as core technology and trade names, acquired as part of these acquisitions had a weighted average amortization period of 9 years.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The total purchase price for the acquisitions in fiscal year 2015 has been allocated to the estimated fair values of assets acquired and liabilities assumed as follows:



	2015 Acquisitions
	(In thousands)
Fair value of business combination:
Cash payments	$	75,285
Contingent consideration	56,878
Working capital and other adjustments	1,832
Less: cash acquired	(3,864		)
Total	$	130,131
Identifiable assets acquired and liabilities assumed:
Current assets	$	2,551
Property, plant and equipment	998
Identifiable intangible assets:
Core technology	15,759
Trade names	200
Licenses	116
Customer relationships	3,073
IPR&D	75,700
Goodwill	53,112
Deferred taxes	(18,528		)
Liabilities assumed	(2,850		)
Total	$	130,131

The Company does not consider the acquisitions completed during fiscal years 2017, 2016 and 2015, with the exception of the EUROIMMUN acquisition, to be material to its consolidated results of operations; therefore, the Company is only presenting pro forma financial information of operations for the EUROIMMUN acquisition. The aggregate revenue for the acquisitions, with the exception of EUROIMMUN, completed during fiscal year 2017 for the period from their acquisition dates to December 31, 2017 was $38.5 million and the results of operations were not material. The aggregate revenue and results of operations for the acquisitions completed during fiscal years 2016 and 2015 for the period from their respective acquisition dates to December 31, 2017 and January 1, 2017 were minimal. The Company has also determined that the presentation of the results of operations for each of those acquisitions, from the date of acquisition, is impracticable due to the integration of the operations upon acquisition.

As of December 31, 2017, the allocations of purchase prices for acquisitions completed in fiscal years 2016 and 2015 were final. The preliminary allocations of the purchase prices for acquisitions completed in fiscal year 2017 were based upon initial valuations. The Company's estimates and assumptions underlying the initial valuations are subject to the collection of information necessary to complete its valuations within the measurement periods, which are up to one year from the respective acquisition dates. The primary areas of the preliminary purchase price allocations that are not yet finalized relate to the fair value of certain tangible and intangible assets acquired and liabilities assumed, assets and liabilities related to income taxes and related valuation allowances, and residual goodwill. The Company expects to continue to obtain information to assist in determining the fair values of the net assets acquired at the acquisition dates during the measurement periods. During the measurement periods, the Company will adjust assets or liabilities if new information is obtained about facts and circumstances that existed as of the acquisition dates that, if known, would have resulted in the recognition of those assets and liabilities as of those dates. These adjustments will be made in the periods in which the amounts are determined and the cumulative effect of such adjustments will be calculated as if the adjustments had been completed as of the acquisition dates. All changes that do not qualify as adjustments made during the measurement periods are also included in current period earnings.

During fiscal year 2017, the Company obtained information relevant to determining the fair values of certain tangible and intangible assets acquired, and liabilities assumed, related to recent acquisitions and adjusted its purchase price allocations. Based on this information, for the Bioo acquisition, the Company recognized an increase in intangible assets of $2.2 million, a

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

decrease in deferred tax liabilities of $0.5 million, a decrease in current assets of $0.1 million, and a decrease in goodwill of $2.6 million, and for the Tulip acquisition, the Company recognized an increase in property and equipment of $1.7 million, with a corresponding decrease in goodwill.

Allocations of the purchase price for acquisitions are based on estimates of the fair value of the net assets acquired and are subject to adjustment upon finalization of the purchase price allocations. The accounting for business combinations requires estimates and judgments as to expectations for future cash flows of the acquired business, and the allocation of those cash flows to identifiable intangible assets, in determining the estimated fair values for assets acquired and liabilities assumed. The fair values assigned to tangible and intangible assets acquired and liabilities assumed, including contingent consideration, are based on management’s estimates and assumptions, as well as other information compiled by management, including valuations that utilize customary valuation procedures and techniques. Contingent consideration is measured at fair value at the acquisition date, based on the probability that revenue thresholds or product development milestones will be achieved during the earnout period, with changes in the fair value after the acquisition date affecting earnings to the extent it is to be settled in cash. Increases or decreases in the fair value of contingent consideration liabilities primarily result from changes in the estimated probabilities of achieving revenue thresholds or product development milestones during the earnout period.

As of December 31, 2017, the Company may have to pay contingent consideration, related to acquisitions with open contingency periods, of up to $83.0 million. As of December 31, 2017, the Company has recorded contingent consideration obligations of $65.3 million, of which $52.2 million was recorded in accrued expenses and other current liabilities, and $13.1 million was recorded in long-term liabilities. As of January 1, 2017, the Company has recorded contingent consideration obligations of $63.2 million, of which $15.4 million was recorded in accrued expenses and other current liabilities, and $47.8 million was recorded in long-term liabilities. The expected maximum earnout period for acquisitions with open contingency periods does not exceed 1.75 years from the respective acquisition dates, and the remaining weighted average expected earnout period at December 31, 2017 was 11 months. If the actual results differ from the estimates and judgments used in these fair values, the amounts recorded in the consolidated financial statements could result in a possible impairment of the intangible assets and goodwill, require acceleration of the amortization expense of definite-lived intangible assets or the recognition of additional contingent consideration which would be recognized as a component of operating expenses from continuing operations.

In connection with the purchase price allocations for acquisitions, the Company estimates the fair value of deferred revenue assumed with its acquisitions. The estimated fair value of deferred revenue is determined by the legal performance obligation at the date of acquisition, and is generally based on the nature of the activities to be performed and the related costs to be incurred after the acquisition date. The fair value of an assumed liability related to deferred revenue is estimated based on the current market cost of fulfilling the obligation, plus a normal profit margin thereon. The estimated costs to fulfill the deferred revenue are based on the historical direct costs related to providing the services. The Company does not include any costs associated with selling effort, research and development, or the related margins on these costs. In most acquisitions, profit associated with selling effort is excluded because the acquired businesses would have concluded the selling effort on the support contracts prior to the acquisition date. The estimated research and development costs are not included in the fair value determination, as these costs are not deemed to represent a legal obligation at the time of acquisition. The sum of the costs and operating income approximates, in theory, the amount that the Company would be required to pay a third-party to assume the obligation.

Total transaction costs related to acquisition and divestiture activities for fiscal years 2017, 2016 and 2015 were $10.8 million, $1.2 million and $0.7 million, respectively. These transaction costs were expensed as incurred and recorded in selling, general and administrative expenses in the Company's consolidated statements of operations.


Note 3:	Disposition of Businesses and Assets

As part of the Company’s continuing efforts to focus on higher growth opportunities, the Company has discontinued certain businesses. When the discontinued operations represented a strategic shift that will have a major effect on the Company's operations and financial statements, the Company has accounted for these businesses as discontinued operations and accordingly, has presented the results of operations and related cash flows as discontinued operations. Any business deemed to be a discontinued operation prior to the adoption of ASU 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of An Entity, continues to be reported as a discontinued operation, and the results of operations and related cash flows are presented as discontinued operations for all periods presented. Any remaining assets and liabilities of these businesses have been presented separately, and are reflected within assets and liabilities from discontinued operations in the accompanying consolidated balance sheets as of December 31, 2017 and January 1, 2017.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Company recorded the following pre-tax gains and losses, which have been reported as a net gain or loss on disposition of discontinued operations during the three fiscal years ended:



	December 31, 2017		January 1, 2017			January 3, 2016
	(In thousands)
Gain on disposition of the Medical Imaging business	$	179,615	$	—		$	—
Gain (loss) on disposition of Technical Services business	—		1,753			(28		)
Loss on disposition of Fluid Sciences Segment	—		(1,134		)	—
Gain (loss) on disposition of discontinued operations before income taxes	$	179,615	$	619		$	(28	)

On May 1, 2017 (the "Closing Date"), the Company completed the sale of its Medical Imaging business to Varex Imaging Corporation ("Varex") pursuant to the terms of the Master Purchase and Sale Agreement, dated December 21, 2016 (the “Agreement”), by and between the Company and Varian Medical Systems, Inc. ("Varian") and the subsequent Assignment and Assumption Agreement, dated January 27, 2017, between Varian and Varex, pursuant to which Varian assigned its rights under the Agreement to Varex. On the Closing Date, the Company received consideration of approximately $277.4 million for the sale of the Medical Imaging business. During fiscal year 2017, the Company paid Varex $4.2 million to settle a post-closing working capital adjustment. During fiscal year 2017, the Company recorded a pre-tax gain of $179.6 million and income tax expense of $43.1 million related to the sale of the Medical Imaging business in discontinued operations and dispositions. The corresponding tax liability was recorded within the other tax liabilities in the consolidated balance sheet, and the Company expects to utilize tax attributes to minimize the tax liability.

Following the closing, the Company is providing certain customary transitional services during a period of up to 12 months. Commercial transactions between the parties following the closing of the transaction are not expected to be significant.

The Company presented its Medical Imaging business as discontinued operations in the Company's consolidated financial statements for fiscal years 2016 and 2015. The results of discontinued operations during fiscal year 2017 include the results of the Medical Imaging business through April 30, 2017.

During fiscal year 2017, the Company sold Suzhou PerkinElmer Medical Laboratory Co., Ltd. for aggregate consideration of $2.3 million, recognizing a pre-tax loss of $1.1 million. The pre-tax loss recognized in fiscal year 2017 is included in interest and other expense, net in the consolidated statement of operations. Suzhou PerkinElmer Medical Laboratory Co., Ltd. was a component of the Company's Diagnostics segment. The divestiture of Suzhou PerkinElmer Medical Laboratory Co., Ltd. has not been classified as a discontinued operation in this Form 10-K because the disposition does not represent a strategic shift that will have a major effect on the Company's operations and financial statements.

During fiscal year 2016, the Company sold PerkinElmer Labs, Inc. for cash consideration of $20.0 million, recognizing a pre-tax gain of $7.1 million. The sale generated a capital loss for tax purposes of $7.3 million, which resulted in an income tax benefit of $2.5 million that was recognized as a discrete benefit during the second quarter of 2016. During fiscal year 2017, the Company recognized an additional pre-tax gain of $1.1 million relating to the earn-out consideration received from the buyer. PerkinElmer Labs, Inc. was a component of the Company's Diagnostics segment. The pre-tax gain recognized in fiscal years 2017 and 2016 is included in interest and other expense, net in the consolidated statement of operations. The divestiture of PerkinElmer Labs, Inc. has not been classified as a discontinued operation in this Form 10-K because the disposition does not represent a strategic shift that will have a major effect on the Company's operations and financial statements.

During fiscal year 2016, the Company entered into a letter of intent to contribute certain assets to an academic institution in the United Kingdom. The Company recognized a pre-tax loss of $1.6 million related to the write-off of assets in the second quarter of 2016 which is included in interest and other expense, net in the consolidated statement of operations.

In August 1999, the Company sold the assets of its Technical Service business. The Company recorded pre-tax gains (losses) of $1.8 million in fiscal year 2016 and $(0.03) million in fiscal year 2015 for a contingency related to this business. These gains (losses) were recognized as a gain (loss) on disposition of discontinued operations before income taxes.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The summary pre-tax operating results of the discontinued operations were as follows during the three fiscal years ended:



	December 31, 2017		January 1, 2017		January 3, 2016
	(In thousands)
Revenue	$	44,343	$	146,217	$	158,128
Cost of revenue	32,933		95,395		97,777
Selling, general and administrative expenses	5,869		13,657		11,712
Research and development expenses	4,891		14,368		13,391
Restructuring and contract termination charges, net	—		568		43
Income from discontinued operations before income taxes	$	650	$	22,229	$	35,205

The Company recorded a tax provision of $44.5 million, $4.3 million and $11.5 million on discontinued operations and dispositions in fiscal years 2017, 2016 and 2015, respectively.

The carrying amounts of the major classes of assets and liabilities included in discontinued operations as of December 31, 2017 and January 1, 2017 consisted of the following:



	December 31, 2017		January 1, 2017
	(In thousands)
Current assets of discontinued operations:
Accounts receivables	$	—	$	28,400
Inventories	—		26,977
Prepaid income taxes	—		425
Other current assets	—		3,183
Total current assets of discontinued operations	—		58,985
Property, plant and equipment	—		25,219
Intangible assets	—		3,292
Goodwill	—		38,794
Other assets, net	—		1,084
Long-term assets of discontinued operations	—		68,389
Total assets of discontinued operations	$	—	$	127,374

Current liabilities of discontinued operations:
Accounts payable	$	—	$	16,770
Accrued restructuring and contract termination charges	—		209
Accrued expenses and other current liabilities	2,102		9,992
Total current liabilities of discontinued operations	2,102		26,971
Deferred income taxes	—		7,851
Long-term liabilities	—		7,109
Total long-term liabilities	—		14,960
Total liabilities of discontinued operations	$	2,102	$	41,931

Note 4: Restructuring and Contract Termination Charges, Net

The Company has undertaken a series of restructuring actions related to the impact of acquisitions and divestitures, the alignment of the Company's operations with its growth strategy, the integration of its business units and its productivity initiatives. The current portion of restructuring and contract termination charges is recorded in accrued restructuring and contract termination charges and the long-term portion of restructuring and contract termination charges is recorded in long-

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

term liabilities. The activities associated with these plans have been reported as restructuring and contract termination charges, net, as applicable, and are included as a component of income from continuing operations.

The Company implemented a restructuring plan in each of the fourth and third quarters of fiscal year 2017 consisting of workforce reductions principally intended to realign resources to emphasize growth initiatives (the "Q4 2017 Plan and "Q3 2017 Plan", respectively). The Company implemented a restructuring plan in the first quarter of fiscal year 2017 consisting of workforce reductions and the closure of excess facility space principally intended to focus resources on higher growth end markets (the "Q1 2017 Plan"). The Company implemented a restructuring plan in the third quarter of fiscal year 2016 consisting of workforce reductions principally intended to focus resources on higher growth product lines (the "Q3 2016 Plan"). The Company implemented a restructuring plan in the second quarter of fiscal year 2016 consisting of workforce reductions principally intended to focus resources on higher growth end markets (the "Q2 2016 Plan"). The Company implemented a restructuring plan in the fourth quarter of fiscal year 2015 consisting of workforce reductions and the closure of excess facility space principally intended to focus resources on higher growth end markets (the "Q4 2015 Plan"). The Company implemented a restructuring plan in the second quarter of fiscal year 2015 consisting of workforce reductions principally intended to realign resources to emphasize growth initiatives (the "Q2 2015 Plan"). All other previous restructuring plans were workforce reductions or the closure of excess facility space principally intended to integrate the Company's businesses in order to realign operations, reduce costs, achieve operational efficiencies and shift resources into geographic regions and end markets that are more consistent with the Company's growth strategy (the "Previous Plans").

The following table summarizes the number of employees reduced, the initial restructuring or contract termination charges by operating segment, and the dates by which payments were substantially completed, or the expected dates by which payments will be substantially completed, for restructuring actions implemented during fiscal years 2017, 2016 and 2015 in continuing operations:



	Workforce Reductions					Closure of Excess Facility				Total			(Expected) Date Payments Substantially Completed by
	Headcount Reduction	Diagnostics		Discovery & Analytical Solutions		Diagnostics		Discovery & Analytical Solutions			Severance	Excess Facility
	(In thousands, except headcount data)
Q4 2017 Plan	29	$	255	$	1,680	$	—	$	—	$	1,935		Q1 FY2019	—
Q3 2017 Plan	27	1,021		1,321		—		—		2,342			Q4 FY2018	—
Q1 2017 Plan	90	1,631		5,000		33		33		6,697			Q2 FY2018	Q2 FY2018

Q3 2016 Plan	22	41		1,779		—		—		1,820			Q4 FY2017	—
Q2 2016 Plan	72	561		4,106		—		—		4,667			Q3 FY2017	—

Q4 2015 Plan	174	1,315		9,980		—		285		11,580			Q1 FY2017	Q4 FY2017
Q2 2015 Plan	95	673		5,290		—		—		5,963			Q2 FY2016	—

The Company expects to make payments under the Previous Plans for remaining residual lease obligations, with terms varying in length, through fiscal year 2022.

The Company also has terminated various contractual commitments in connection with certain disposal activities and has recorded charges, to the extent applicable, for the costs of terminating these contracts before the end of their terms and the costs that will continue to be incurred for the remaining terms without economic benefit to the Company. The Company recorded additional pre-tax charges of $3.6 million, $0.1 million and $0.1 million in the Discovery & Analytical Solutions segment during fiscal years 2017, 2016 and 2015, respectively, and $0.5 million during fiscal year 2017, in the Diagnostics segment as a result of these contract terminations.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

At December 31, 2017, the Company had $14.0 million recorded for accrued restructuring and contract termination charges, of which $8.8 million was recorded in short-term accrued restructuring, $2.3 million was recorded in long-term liabilities and $2.9 million was recorded in other reserves. At January 1, 2017, the Company had $10.5 million recorded for accrued restructuring and contract termination charges, of which $7.5 million was recorded in short-term accrued restructuring and $3.1 million was recorded in long-term liabilities. The following table summarizes the Company's restructuring accrual balances and related activity by restructuring plan, as well as contract termination accrual balances and related activity, during fiscal years 2017, 2016 and 2015 in continuing operations:



		Balance at December 28, 2014		2015 Charges and Changes in Estimates, Net			2015 Amounts Paid			Balance at January 3, 2016		2016 Charges and Changes in Estimates, Net			2016 Amounts Paid			Balance at January 1, 2017		2017 Charges and Changes in Estimates, Net			2017 Amounts Paid			Balance at December 31, 2017
	(In thousands)
Severance:
Q4 2017 Plan		$	—	$	—		$	—		$	—	$	—		$	—		$	—	$	1,935		$	(16	)	$	1,919
Q3 2017 Plan		—		—			—			—		—			—			—		2,342			(270		)	2,072
Q1 2017 Plan		—		—			—			—		—			—			—		6,631			(4,133		)	2,498
Q3 2016 Plan		—		—			—			—		1,820			(612		)	1,208		(202		)	(1,006		)	—
Q2 2016 Plan(1)		—		—			—			—		4,667			(3,231		)	1,436		(829		)	(607		)	—
Q4 2015 Plan(2)		—		11,295			(925		)	10,370		(953		)	(8,198		)	1,219		(1,066		)	(153		)	—
Q2 2015 Plan		—		5,423			(4,322		)	1,101		(533		)	(370		)	198		(198		)	—			—

Facility:
Q1 2017 Plan		—		—			—			—		—			—			—		66			(33		)	33
Q4 2015 Plan		—		285			(26		)	259		—			(248		)	11		—			—			11

Previous Plans(3)		23,522		(3,539		)	(9,695		)	10,288		35			(3,971		)	6,352		727			(2,691		)	4,388
Restructuring		23,522		13,464			(14,968		)	22,018		5,036			(16,630		)	10,424		9,406			(8,909		)	10,921
Contract Termination		304		83			(255		)	132		88			(103		)	117		3,251			(320		)	3,048
Total Restructuring and Contract Termination		$	23,826	$	13,547		$	(15,223	)	$	22,150	$	5,124		$	(16,733	)	$	10,541	$	12,657		$	(9,229	)	$	13,969


(1)	During fiscal year 2017, the Company recognized pre-tax restructuring reversals of $0.4 million each in the Discovery & Analytical Solutions and Diagnostics segments, related to lower than expected costs associated with workforce reductions for the Q2 2016 Plan.


(2)	During fiscal year 2017, the Company recognized pre-tax restructuring reversals of $0.5 million each in the Discovery & Analytical Solutions and Diagnostics segments related, to lower than expected costs associated with workforce reductions for the Q4 2015 Plan.


(3)	During fiscal year 2017, the Company recognized pre-tax restructuring charges of $0.3 million in the Discovery & Analytical Solutions and $0.4 million in the Diagnostics segments related to change in lease assumptions partially offset by lower than expected costs associated with workforce reductions for the Previous Plans.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


Note 5:	Interest and Other Expense, Net

Interest and other expense, net, consisted of the following for the fiscal years ended:



	December 31, 2017			January 1, 2017			January 3, 2016

Interest income	$	(2,571	)	$	(702	)	$	(673	)
Interest expense	43,940			41,528			37,997
Losses (gains) on disposition of businesses and assets, net (see Note 3)	309			(5,562		)	—
Other (income) expense, net	(33,593		)	3,734			4,795
Total interest and other expense, net	$	8,085		$	38,998		$	42,119

Foreign currency transaction (gains) losses were $(29.2) million, $(1.5) million and $25.3 million in fiscal years 2017, 2016 and 2015, respectively. Net (gains) losses from forward currency hedge contracts were $(4.5) million, $5.4 million and $(20.6) million in fiscal years 2017, 2016 and 2015, respectively. These amounts were included in other (income) expense, net.


Note 6:	Income Taxes

The Company regularly reviews its tax positions in each significant taxing jurisdiction in the process of evaluating its unrecognized tax benefits. The Company makes adjustments to its unrecognized tax benefits when: (i) facts and circumstances regarding a tax position change, causing a change in management’s judgment regarding that tax position; (ii) a tax position is effectively settled with a tax authority at a differing amount; and/or (iii) the statute of limitations expires regarding a tax position.

The tabular reconciliation of the total amounts of unrecognized tax benefits is as follows for the fiscal years ended:



	December 31, 2017			January 1, 2017			January 3, 2016
				(In thousands)
Unrecognized tax benefits, beginning of year	$	29,607		$	28,143		$	32,342
Gross increases—tax positions in prior periods	749			1,514			325
Gross decreases—tax positions in prior periods	(828		)	(183		)	(2,305		)
Gross increases—current-period tax positions	2,346			3,547			—
Settlements	(324		)	—			(441		)
Lapse of statute of limitations	(1,371		)	(4,109		)	(1,077		)
Foreign currency translation adjustments	129			695			(701		)
Unrecognized tax benefits, end of year	$	30,308		$	29,607		$	28,143

The Company classifies interest and penalties as a component of income tax expense. At December 31, 2017 and January 1, 2017, the Company had accrued interest and penalties of $1.9 million and $2.2 million, respectively. During fiscal years 2017, 2016 and 2015, the Company recognized a net benefit of $0.3 million, $0.1 million and $1.6 million, respectively, for interest and penalties in its total tax provision primarily due to settlements and statutes of limitations that had lapsed. At December 31, 2017, the Company had gross tax effected unrecognized tax benefits of $30.3 million, of which $28.6 million, if recognized, would affect the continuing operations effective tax rate. The remaining amount, if recognized, would affect discontinued operations.

The Company believes that it is reasonably possible that approximately $3.1 million of its uncertain tax positions at December 31, 2017, including accrued interest and penalties, and net of tax benefits, may be resolved over the next twelve months as a result of lapses in applicable statutes of limitations and potential settlements. Various tax years after 2010 remain open to examination by certain jurisdictions in which the Company has significant business operations, such as Finland, Germany, Italy, Netherlands, Singapore, the United Kingdom and the United States. The tax years under examination vary by jurisdiction.

On December 22, 2017, the President of the United States signed into law tax reform legislation, known as the Tax Cuts and Jobs Act (the "Tax Act"). The Tax Act makes broad and complex changes to the U.S. Internal Revenue Code, which i

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

ncludes reducing the corporate income tax rate from 35% to 21% and implementing a modified territorial tax system that includes a one-time transition tax on deemed repatriated earnings of foreign subsidiaries.

Based on currently available information, the Company performed a preliminary analysis of the impacts of the Tax Act and recorded a discrete tax expense of $106.5 million during fiscal year 2017, which comprised of $21.5 million from the remeasurement of certain net deferred tax assets using the lower enacted corporate income tax rate and $85.0 million from the one-time deemed repatriation tax on earnings of foreign subsidiaries, which will be paid over 8 years. The estimated provision incorporates assumptions made based upon the Company’s current interpretation of the Tax Act, and may change as additional clarification and implementation guidance becomes available during 2018.

The Company will be subject to the new Global Intangible Low Tax Income ("GILTI") tax rules that are part of the modified territorial tax system imposed by the Tax Act. Because of the complexity of the new rules, the Company continues to evaluate this provision of the Tax Act and the application of ASC 740. Under U.S. GAAP, the Company is allowed to make an accounting policy choice of either (1) treating taxes due on future U.S. inclusions in taxable income related to GILTI as a current-period expense when incurred (the “period cost method”) or (2) factoring such amounts into our measurement of deferred taxes (the “deferred method”). The Company's selection of an accounting policy with respect to the new GILTI tax rules will depend, in part, on analyzing its global income to determine whether it expects to have future U.S. inclusions in taxable income related to GILTI and, if so, what the impact is expected to be. Because whether the Company expects to have future U.S. inclusions in taxable income related to GILTI depends not only on its current structure and estimated future results of global operations, but also on the Company's intent and ability to modify its structure and/or business, the Company is currently unable to reasonably estimate the effect of this provision of the Tax Act. Therefore, the Company has not made any adjustments related to potential GILTI tax in the consolidated financial statements and has not made a policy decision regarding whether to record deferred taxes on GILTI.

During fiscal year 2017, the Company recorded net discrete income tax expense of $98.6 million, of which $106.5 million was a result of the enactment of the Tax Act, partially offset by discrete benefit of $5.1 million related to the recognition of excess tax benefits on stock compensation and the resolution of other tax matters. During fiscal years 2016 and 2015, the Company recorded net discrete income tax benefits of $9.6 million and $6.4 million, respectively, primarily related to the recognition of excess tax benefits on stock compensation, reversals of uncertain tax position reserves, and resolution of other tax matters.

The components of income (loss) from continuing operations before income taxes were as follows for the fiscal years ended:



	December 31, 2017		January 1, 2017		January 3, 2016
			(In thousands)
U.S.	$	3,743	$	39,689	$	(21,510	)
Non-U.S.	292,975		204,379		230,317
Total	$	296,718	$	244,068	$	208,807

On a U.S. income tax basis, the Company has reported significant taxable income over the three year period ended December 31, 2017. The Company has utilized tax attributes to minimize cash taxes paid on that taxable income.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The components of the provision for (benefit from) income taxes for continuing operations were as follows:



	Current Expense (Benefit)			Deferred Expense (Benefit)			Total
	(In thousands)
Fiscal year ended December 31, 2017
Federal	$	62,003		$	35,435		$	97,438
State	3,332			(792		)	2,540
Non-U.S.	45,639			(5,789		)	39,850
Total	$	110,974		$	28,854		$	139,828
Fiscal year ended January 1, 2017
Federal	$	14		$	2,994		$	3,008
State	2,143			(575		)	1,568
Non-U.S.	30,754			(6,968		)	23,786
Total	$	32,911		$	(4,549	)	$	28,362
Fiscal year ended January 3, 2016
Federal	$	(10,952	)	$	(4,794	)	$	(15,746	)
State	2,613			(2,563		)	50
Non-U.S.	37,963			(2,245		)	35,718
Total	$	29,624		$	(9,602	)	$	20,022

The total provision for income taxes included in the consolidated financial statements is as follows for the fiscal years ended:



	December 31, 2017		January 1, 2017		January 3, 2016
	(In thousands)
Continuing operations	$	139,828	$	28,362	$	20,022
Discontinued operations	44,522		4,255		11,537
Total	$	184,350	$	32,617	$	31,559

A reconciliation of income tax expense at the U.S. federal statutory income tax rate to the recorded tax provision is as follows for the fiscal years ended:



	December 31, 2017			January 1, 2017			January 3, 2016
				(In thousands)
Tax at statutory rate	$	103,851		$	85,424		$	73,082
Non-U.S. rate differential, net	(65,836		)	(52,648		)	(47,994		)
U.S. taxation of multinational operations	5,408			6,941			1,732
State income taxes, net	1,810			1,509			80
Prior year tax matters	(7,955		)	(9,621		)	(6,387		)
Federal tax credits	(8,249		)	(7,189		)	(2,096		)
Change in valuation allowance	1,951			(2,755		)	2,593
Non-deductible acquisition expense	—			5,701			—
Impact of federal tax reform	106,538			—			—
Others, net	2,310			1,000			(988		)
Total	$	139,828		$	28,362		$	20,022

The variation in the Company's effective tax rate for each year is primarily a result of the recognition of earnings in foreign jurisdictions, predominantly Singapore, Finland, Netherlands and China, which are taxed at rates lower than the U.S. federal statutory rate, resulting in a benefit from income taxes of $55.9 million in fiscal year 2017, $48.2 million in fiscal year 2016 and $36.1 million in fiscal year 2015. These amounts include $10.1 million in fiscal year 2017, $11.4 million in fiscal

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

year 2016 and $8.3 million in fiscal year 2015 of benefits derived from tax holidays in China and Singapore. The effect of these benefits derived from tax holidays on basic and diluted earnings per share for fiscal year 2017 was $0.09 and $0.09, respectively, for fiscal year 2016 was $0.10 and $0.10, respectively, and for fiscal year 2015 was $0.07 and $0.07, respectively. The tax holiday in one of the Company's subsidiaries in China expired in 2017 and the tax holiday in one other subsidiary in China is scheduled to expire in fiscal year 2019. The tax holiday in one of the Company's subsidiaries in Singapore is scheduled to expire in fiscal year 2018.

The tax effects of temporary differences and attributes that gave rise to deferred income tax assets and liabilities as of December 31, 2017 and January 1, 2017 were as follows:



	December 31, 2017			January 1, 2017
	(In thousands)
Deferred tax assets:
Inventory	$	6,376		$	10,994
Reserves and accruals	26,657			24,669
Accrued compensation	17,333			26,715
Net operating loss and credit carryforwards	88,503			113,415
Accrued pension	34,682			37,005
Restructuring reserve	2,586			1,954
Deferred revenue	28,478			38,113
Unrealized foreign exchange loss	10,910			—
All other, net	—			682
Total deferred tax assets	215,525			253,547
Deferred tax liabilities:
Postretirement health benefits	(3,391		)	(4,785		)
Unrealized foreign exchange gain	—			(15,730		)
Depreciation and amortization	(392,293		)	(130,176		)
All other, net	(594		)	—
Total deferred tax liabilities	(396,278		)	(150,691		)
Valuation allowance	(68,895		)	(65,640		)
Net deferred tax (liabilities) assets	$	(249,648	)	$	37,216

The components of net deferred tax (liabilities) assets as of December 31, 2017 and January 1, 2017 were recognized in the consolidated balance sheets as follows:



	December 31, 2017			January 1, 2017
	(In thousands)
Other assets, net	$	67,280		$	85,312
Long-term liabilities	(316,928		)	(48,096		)
Total	$	(249,648	)	$	37,216

At December 31, 2017, for income tax return purposes, the Company had U.S. federal net operating loss carryforwards of $40.6 million, state net operating loss carryforwards of $198.6 million, foreign net operating loss carryforwards of $263.1 million, state tax credit carryforwards of $6.0 million, general business tax credit carryforwards of $0.1 million, and foreign tax credit carryforwards of $0.1 million. These are subject to expiration in years ranging from 2018 to 2037, and without expiration for certain foreign net operating loss carryforwards and certain state credit carryforwards.

Valuation allowances take into consideration limitations imposed upon the use of the tax attributes and reduce the value of such items to the likely net realizable amount. The Company regularly evaluates positive and negative evidence available to determine if valuation allowances are required or if existing valuation allowances are no longer required. Valuation allowances have been provided on state net operating loss and state tax credit carryforwards and on certain foreign tax attributes that the Company has determined are not more likely than not to be realized. The increase in the valuation allowance of $3.3 million in

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

fiscal year 2017 is primarily due to an increase in tax attributes that the Company does not expect to realize for one of its non-U.S. subsidiaries.

The components of net deferred tax (liabilities) assets as of December 31, 2017 and January 1, 2017 were as follows:



	December 31, 2017			January 1, 2017
	(In thousands)
U.S.	$	44,974		$	52,604
Non-U.S.	(294,622		)	(15,388		)
Total	$	(249,648	)	$	37,216

The Company plans to keep its unremitted foreign earnings indefinitely reinvested overseas except for instances where the Company can remit such earnings to the U.S. without an associated net incremental tax cost, such as withholding or state and local taxes. The Company's indefinite reinvestment determination is based on the future operational and capital requirements of its U.S. and non-U.S. operations. As of December 31, 2017, the amount of foreign earnings that the Company has the intent and ability to keep invested outside the U.S. indefinitely and for which no additional incremental U.S. tax cost has been provided, other than the $85.0 million from the one-time transition tax on deemed repatriation, was approximately $1.4 billion. It is not practical to calculate the unrecognized deferred tax liability related to such incremental tax costs on those earnings.


Note 7:	Earnings Per Share

Basic earnings per share was computed by dividing net income by the weighted-average number of common shares outstanding during the period less restricted unvested shares. Diluted earnings per share was computed by dividing net income by the weighted-average number of common shares outstanding plus all potentially dilutive common stock equivalents, primarily shares issuable upon the exercise of stock options using the treasury stock method. The following table reconciles the number of shares utilized in the earnings per share calculations for the fiscal years ended:



	December 31, 2017	January 1, 2017	January 3, 2016
	(In thousands)
Number of common shares—basic	109,857	109,478	112,507
Effect of dilutive securities:
Stock options	708	640	621
Restricted stock awards	294	195	187
Number of common shares—diluted	110,859	110,313	113,315
Number of potentially dilutive securities excluded from calculation due to antidilutive impact	287	458	607

Antidilutive securities include outstanding stock options with exercise prices and average unrecognized compensation cost in excess of the average fair market value of common stock for the related period. Antidilutive options were excluded from the calculation of diluted net income per share and could become dilutive in the future.


Note 8:	Accounts Receivable, Net

Accounts receivable were net of reserves for doubtful accounts of $31.3 million and $29.2 million as of December 31, 2017 and January 1, 2017, respectively.


Note 9:	Inventories

Inventories as of December 31, 2017 and January 1, 2017 consisted of the following:



	December 31, 2017		January 1, 2017
	(In thousands)
Raw materials	$	122,100	$	79,189
Work in progress	18,452		6,561
Finished goods	211,123		161,097
Total inventories	$	351,675	$	246,847


Note 10:	Property, Plant and Equipment, Net

Property, plant and equipment, at cost, as of December 31, 2017 and January 1, 2017, consisted of the following:



	December 31, 2017			January 1, 2017
	(In thousands)
Land	$	5,624		$	4,250
Building and leasehold improvements	262,657			162,780
Machinery and equipment	362,638			260,873
Total property, plant and equipment	630,919			427,903
Accumulated depreciation	(332,853		)	(282,409		)
Total property, plant and equipment, net	$	298,066		$	145,494

Depreciation expense on property, plant and equipment for the fiscal years ended December 31, 2017, January 1, 2017 and January 3, 2016 was $31.3 million, $28.5 million and $28.7 million, respectively.


Note 11:	Marketable Securities and Investments

Investments as of December 31, 2017 and January 1, 2017 consisted of the following:



	December 31, 2017		January 1, 2017
	(In thousands)
Marketable securities	$	2,208	$	1,678
Cost method investments	10,783		—
	$	12,991	$	1,678

Marketable securities. Marketable securities include equity and fixed-income securities held to meet obligations associated with the Company’s supplemental executive retirement plan and other deferred compensation plans. The Company has, accordingly, classified these securities as long-term.

The net unrealized holding gain and loss on marketable securities, net of deferred income taxes, reported as a component of other comprehensive income (loss) in the statements of stockholders’ equity, were not material in fiscal years 2017 and 2016. The proceeds from the sales of securities and the related gains and losses are not material for any period presented.

Marketable securities classified as available for sale as of December 31, 2017 and January 1, 2017 consisted of the following:



	Market Value			Gross Unrealized Holding
	Cost			Gains		(Losses)
			(In thousands)
December 31, 2017
Equity securities	$	811		$	1,161	$	—	$	(350	)
Fixed-income securities	22			22		—		—
Other	1,375			1,438		—		(63		)
	$	2,208		$	2,621	$	—	$	(413	)
January 1, 2017
Equity securities	$	598		$	1,077	$	—	$	(479	)
Fixed-income securities	22			22		—		—
Other	1,058			1,121		—		(63		)
	$	1,678		$	2,220	$	—	$	(542	)

Cost method investments. During fiscal year 2017, the Company purchased an approximately 18% equity interest in Nightingale Health Oy ("Nightingale") for total consideration of $10.8 million in cash. Nightingale is based in Helsinki, Finland, and engaged in the business of natural and technical research and development including related equipment, software and service business. Nightingale also provides laboratory analysis services.

The Company’s investments consist of (i) investments carried at fair value, including available-for-sale securities, and (ii) investments accounted for using the cost method of accounting. The Company regularly reviews its investments for impairment, including when the carrying value of an investment exceeds its market value. If the Company determines that an investment has sustained an other-than-temporary decline in its value, the investment is written down to its fair value by a charge to earnings that is included in Impairment of long-term investments and other assets. Factors that are considered by the Company in determining whether an other-than-temporary decline in value has occurred include (i) the market value of the security in relation to its cost basis, (ii) the financial condition of the investee, and (iii) the Company’s intent and ability to retain the investment for a sufficient period of time to allow for recovery in the market value of the investment.

For investments accounted for using the cost method of accounting, the Company evaluates information available (e.g., budgets, business plans, financial statements, etc.) in addition to quoted market prices, if any, in determining whether an other-than-temporary decline in value exists. Factors indicative of an other-than-temporary decline include recurring operating losses, credit defaults and subsequent rounds of financing at an amount below the cost basis of the Company’s investment.


Note 12:	Goodwill and Intangible Assets, Net

The Company tests goodwill and non-amortizing intangible assets at least annually for possible impairment. Accordingly, the Company completes the annual testing of impairment for goodwill and non-amortizing intangible assets on the later of January 1 or the first day of each fiscal year. In addition to its annual test, the Company regularly evaluates whether events or circumstances have occurred that may indicate a potential impairment of goodwill or non-amortizing intangible assets.

The process of testing goodwill for impairment involves the determination of the fair value of the applicable reporting units. The test consists of a two-step process. The first step is the comparison of the fair value to the carrying value of the reporting unit to determine if the carrying value exceeds the fair value. The second step measures the amount of an impairment loss, and is only performed if the carrying value exceeds the fair value of the reporting unit. The Company performed its annual impairment testing for its reporting units as of January 2, 2017, its annual impairment date for fiscal year 2017. The Company concluded based on the first step of the process that there was no goodwill impairment, and that the fair value exceeded the carrying value by more than 20.0% for each reporting unit, except for the Informatics reporting unit which had a fair value exceeding carrying value by less than 20% but more than 10%. The range of the long-term terminal growth rates for the Company’s reporting units was 0.0% to 3.00% for the fiscal year 2017 impairment analysis. The range for the discount rates for the reporting units was 9.0% to 13.5%. Keeping all other variables constant, a 10.0% change in any one of these input assumptions for the various reporting units, except for the Informatics reporting unit, would still allow the Company to conclude, based on the first step of the process, that there was no impairment of goodwill.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

At January 2, 2017 and January 1, 2018, the Informatics reporting unit, which had a goodwill balance of $217.2 million at December 31, 2017, had a fair value exceeding carrying value by less than 20% but more than 10%. Informatics is at increased risk of an impairment charge given its ongoing weakness due to a highly competitive industry. Despite the increased risk associated with this reporting unit, the Company does not believe there will be a significant change in the key estimates or assumptions driving the fair value of this reporting unit that would lead to a material impairment charge.

The Company has consistently employed the income approach to estimate the current fair value when testing for impairment of goodwill. A number of significant assumptions and estimates are involved in the application of the income approach to forecast operating cash flows, including markets and market share, sales volumes and prices, costs to produce, tax rates, capital spending, discount rates and working capital changes. Cash flow forecasts are based on approved business unit operating plans for the early years’ cash flows and historical relationships in later years. The income approach is sensitive to changes in long-term terminal growth rates and the discount rates. The long-term terminal growth rates are consistent with the Company’s historical long-term terminal growth rates, as the current economic trends are not expected to affect the long-term terminal growth rates of the Company. The Company corroborates the income approach with a market approach.

The Company has consistently employed the relief from royalty model to estimate the current fair value when testing for impairment of non-amortizing intangible assets. The impairment test consists of a comparison of the fair value of the non-amortizing intangible asset with its carrying amount. If the carrying amount of a non-amortizing intangible asset exceeds its fair value, an impairment loss in an amount equal to that excess is recognized. In addition, the Company evaluates the remaining useful lives of its non-amortizing intangible assets at least annually to determine whether events or circumstances continue to support an indefinite useful life. If events or circumstances indicate that the useful lives of non-amortizing intangible assets are no longer indefinite, the assets will be tested for impairment. These intangible assets will then be amortized prospectively over their estimated remaining useful lives and accounted for in the same manner as other intangible assets that are subject to amortization. The Company performed its annual impairment testing as of January 2, 2017, and concluded that there was no impairment of non-amortizing intangible assets. An assessment of the recoverability of amortizing intangible assets takes place when events have occurred that may give rise to an impairment. No such events occurred during fiscal year 2017.

The changes in the carrying amount of goodwill for fiscal years 2017 and 2016 are as follows:



	Discovery & Analytical Solutions			Diagnostics			Consolidated

Balance at January 3, 2016	$	1,296,724		$	940,139		$	2,236,863
Foreign currency translation	(16,602		)	(11,873		)	(28,475		)
Acquisitions, earnouts and other	23,814			15,764			39,578
Balance at January 1, 2017	1,303,936			944,030			2,247,966
Foreign currency translation	37,646			29,091			66,737
Acquisitions, earnouts and other	2,653			684,842			687,495
Balance at December 31, 2017	$	1,344,235		$	1,657,963		$	3,002,198

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Identifiable intangible asset balances at December 31, 2017 by category and by business segment were as follows:



	Discovery & Analytical Solutions			Diagnostics			Consolidated

Patents	$	28,048		$	11,911		$	39,959
Less: Accumulated amortization	(24,448		)	(10,637		)	(35,085		)
Net patents	3,600			1,274			4,874
Trade names and trademarks	29,950			51,024			80,974
Less: Accumulated amortization	(20,022		)	(8,228		)	(28,250		)
Net trade names and trademarks	9,928			42,796			52,724
Licenses	43,061			10,239			53,300
Less: Accumulated amortization	(34,620		)	(8,015		)	(42,635		)
Net licenses	8,441			2,224			10,665
Core technology	230,755			240,985			471,740
Less: Accumulated amortization	(186,364		)	(58,552		)	(244,916		)
Net core technology	44,391			182,433			226,824
Customer relationships	233,573			907,938			1,141,511
Less: Accumulated amortization	(116,696		)	(126,144		)	(242,840		)
Net customer relationships	116,877			781,794			898,671
IPR&D	5,569			82,456			88,025
Less: Accumulated amortization	(4,059		)	(1,368		)	(5,427		)
Net IPR&D	1,510			81,088			82,598
Net amortizable intangible assets	184,747			1,091,609			1,276,356
Non-amortizable intangible assets:
Trade name	70,584			—			70,584
Total	$	255,331		$	1,091,609		$	1,346,940

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Identifiable intangible asset balances at January 1, 2017 by category and business segment were as follows:



	Discovery & Analytical Solutions			Diagnostics			Consolidated

Patents	$	28,001		$	11,900		$	39,901
Less: Accumulated amortization	(22,852		)	(9,556		)	(32,408		)
Net patents	5,149			2,344			7,493
Trade names and trademarks	28,563			11,523			40,086
Less: Accumulated amortization	(15,927		)	(8,090		)	(24,017		)
Net trade names and trademarks	12,636			3,433			16,069
Licenses	49,831			7,936			57,767
Less: Accumulated amortization	(38,745		)	(7,762		)	(46,507		)
Net licenses	11,086			174			11,260
Core technology	233,291			70,896			304,187
Less: Accumulated amortization	(184,340		)	(49,380		)	(233,720		)
Net core technology	48,951			21,516			70,467
Customer relationships	259,419			123,884			383,303
Less: Accumulated amortization	(119,342		)	(93,720		)	(213,062		)
Net customer relationships	140,077			30,164			170,241
IPR&D	5,569			72,946			78,515
Less: Accumulated amortization	(3,445		)	(960		)	(4,405		)
Net IPR&D	2,124			71,986			74,110
Net amortizable intangible assets	220,023			129,617			349,640
Non-amortizable intangible assets:
Trade name	70,584			—			70,584
Total	$	290,607		$	129,617		$	420,224

Total amortization expense related to definite-lived intangible assets was $73.7 million in fiscal year 2017, $71.5 million in fiscal year 2016 and $76.6 million in fiscal year 2015. Estimated amortization expense related to definite-lived intangible assets for each of the next five years is $139.1 million in fiscal year 2018, $145.7 million in fiscal year 2019, $147.4 million in fiscal year 2020, $132.0 million in fiscal year 2021, and $119.8 million in fiscal year 2022.

The Company entered into a strategic agreement in fiscal year 2012 under which it acquired certain intangible assets and received a license to certain core technology for an analytics and data discovery platform, as well as the exclusive right to distribute the platform in certain scientific research and development markets. During fiscal year 2012, the Company paid $6.8 million for net intangible assets and $25.0 million for prepaid royalties. During fiscal year 2013, the Company extended the existing agreement for an additional year. In addition, the Company entered into a new agreement to expand the distribution rights to the clinical and other related markets and acquired additional intangible assets. During fiscal year 2013, the Company paid $7.0 million for net intangible assets and $40.3 million for prepaid royalties. During fiscal year 2016, the Company extended the existing agreement for an additional 3 years and expanded the distribution rights to the related markets. During fiscal year 2016, the Company paid $6.0 million for prepaid royalties related to the extension and new agreement. During the fiscal years 2017 and 2016, the Company paid $5.1 million and $9.4 million, respectively, for additional prepaid royalties. As of December 31, 2017, we have recorded prepaid royalties of $72.8 million, of which $5.1 million was recorded in other current assets, and $67.7 million was recorded in other assets. The Company expenses royalties as revenue is recognized. These intangible assets are being amortized over their estimated useful lives. The Company has reported the amortization of these intangible assets within the results of the Company's Discovery & Analytical Solutions segment from the execution date.


Note 13:	Debt

Senior Unsecured Revolving Credit Facility. The Company's senior unsecured revolving credit facility provides for $1.0 billion of revolving loans and has an initial maturity of August 11, 2021. As of December 31, 2017, undrawn letters of credit in

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

the aggregate amount of $11.4 million were treated as issued and outstanding when calculating the borrowing availability under the senior unsecured revolving credit facility. As of December 31, 2017, the Company had $363.6 million available for additional borrowing under the facility. The Company uses the senior unsecured revolving credit facility for general corporate purposes, which may include working capital, refinancing existing indebtedness, capital expenditures, share repurchases, acquisitions and strategic alliances. The interest rates under the senior unsecured revolving credit facility are based on the Eurocurrency rate or the base rate at the time of borrowing, plus a margin. The base rate is the higher of (i) the rate of interest in effect for such day as publicly announced from time to time by JP Morgan Chase Bank, N.A. as its "prime rate," (ii) the Federal Funds rate plus 50 basis points or (iii) an adjusted one-month Libor plus 1.00%. The Eurocurrency margin as of December 31, 2017 was 110 basis points. The weighted average Eurocurrency interest rate as of December 31, 2017 was 1.56%, resulting in a weighted average effective Eurocurrency rate, including the margin, of 2.66%, which was the interest applicable to the borrowings outstanding under the Eurocurrency rate as of December 31, 2017. As of December 31, 2017, the senior unsecured revolving credit facility had outstanding borrowings of $625.0 million, and $3.3 million of unamortized debt issuance costs. As of January 1, 2017, the senior unsecured revolving credit facility had no outstanding borrowings, and $4.3 million of unamortized debt issuance costs. The credit agreement for the facility contains affirmative, negative and financial covenants and events of default. The financial covenants include a debt-to-capital ratio that remains applicable for so long as the Company's debt is rated as investment grade. In the event that the Company's debt is not rated as investment grade, the debt-to-capital ratio covenant is replaced with a maximum consolidated leverage ratio covenant and a minimum consolidated interest coverage ratio covenant.

Senior Unsecured Term Loan Credit Facility. The Company entered into a senior unsecured term loan credit facility on August 11, 2017 that provides for $200.0 million of term loans and has an initial maturity of twelve months from the date of the initial draw. The Company utilized the senior unsecured term loan facility for the acquisition of EUROIMMUN. The interest rates under the senior unsecured term loan credit facility are based on the Eurocurrency rate or the base rate at the time of the borrowing, plus a margin. The base rate is the higher of (i) the rate of interest in effect for such day as publicly announced from time to time by JP Morgan Chase Bank, N.A. as its "prime rate," (ii) the Federal Funds rate plus 50 basis points or (iii) an adjusted one-month Libor plus 1.00%. The Eurocurrency margin as of December 31, 2017 was 110 basis points. The weighted average Eurocurrency interest rate as of December 31, 2017 was 1.56%, resulting in a weighted average effective Eurocurrency rate, including the margin, of 2.66%, which was the interest applicable to the borrowings outstanding under the Eurocurrency rate as of December 31, 2017. As of December 31, 2017, the senior unsecured term loan credit facility had outstanding borrowings of $200.0 million and has a maturity date of December 18, 2018. The credit agreement for the facility contains affirmative, negative and financial covenants and events of defaults which are substantially similar to those contained in the senior unsecured revolving credit facility.

5% Senior Unsecured Notes due in 2021. On October 25, 2011, the Company issued $500.0 million aggregate principal amount of senior unsecured notes due in 2021 (the “2021 Notes”) in a registered public offering and received $496.9 million of net proceeds from the issuance. The 2021 Notes were issued at 99.4% of the principal amount, which resulted in a discount of $3.1 million. As of December 31, 2017, the 2021 Notes had an aggregate carrying value of $496.6 million, net of $1.4 million of unamortized original issue discount and $2.0 million of unamortized debt issuance costs. As of January 1, 2017, the 2021 Notes had an aggregate carrying value of $495.8 million, net of $1.7 million of unamortized original issue discount and $2.5 million of unamortized debt issuance costs. The 2021 Notes mature in November 2021 and bear interest at an annual rate of 5%. Interest on the 2021 Notes is payable semi-annually on May 15th and November 15th each year. Prior to August 15, 2021 (three months prior to their maturity date), the Company may redeem the 2021 Notes in whole or in part, at its option, at a redemption price equal to the greater of (i) 100% of the principal amount of the 2021 Notes to be redeemed, plus accrued and unpaid interest, or (ii) the sum of the present values of the remaining scheduled payments of principal and interest in respect to the 2021 Notes being redeemed, discounted on a semi-annual basis, at the Treasury Rate plus 45 basis points, plus accrued and unpaid interest. At any time on or after August 15, 2021 (three months prior to their maturity date), the Company may redeem the 2021 Notes, at its option, at a redemption price equal to 100% of the principal amount of the 2021 Notes to be redeemed plus accrued and unpaid interest. Upon a change of control (as defined in the indenture governing the 2021 Notes) and a contemporaneous downgrade of the 2021 Notes below investment grade, each holder of 2021 Notes will have the right to require the Company to repurchase such holder's 2021 Notes for 101% of their principal amount, plus accrued and unpaid interest.

1.875% Senior Unsecured Notes due 2026. On July 19, 2016, the Company issued €500.0 million aggregate principal amount of senior unsecured notes due in 2026 (the “2026 Notes”) in a registered public offering and received approximately €492.3 million of net proceeds from the issuance. The 2026 Notes were issued at 99.118% of the principal amount, which resulted in a discount of €4.4 million. The 2026 Notes mature in July 2026 and bear interest at an annual rate of 1.875%. Interest on the 2026 Notes is payable annually on July 19th each year. The proceeds from the 2026 Notes were used to pay in full the outstanding balance of the Company's previous senior unsecured revolving credit facility. As of December 31, 2017, the 2026 Notes had an aggregate carrying value of $591.7 million, net of $4.7 million of unamortized original issue discount

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

and $4.3 million of unamortized debt issuance costs. As of January 1, 2017, the 2026 Notes had an aggregate carrying value of $517.8 million, net of $4.5 million of unamortized original issue discount and $4.8 million of unamortized debt issuance costs.

Prior to April 19, 2026 (three months prior to their maturity date), the Company may redeem the 2026 Notes in whole at any time or in part from time to time, at its option, at a redemption price equal to the greater of (i) 100% of the principal amount of the 2026 Notes to be redeemed, or (ii) the sum of the present values of the remaining scheduled payments of principal and interest in respect to the 2026 Notes being redeemed, discounted on an annual basis, at the applicable Comparable Government Bond Rate (as defined in the indenture governing the 2026 Notes) plus 35 basis points; plus, in each case, accrued and unpaid interest. In addition, at any time on or after April 19, 2026 (three months prior to their maturity date), the Company may redeem the 2026 Notes, at its option, at a redemption price equal to 100% of the principal amount of the 2026 Notes due to be redeemed plus accrued and unpaid interest.

Upon a change of control (as defined in the indenture governing the 2026 Notes) and a contemporaneous downgrade of the 2026 Notes below investment grade, the Company will, in certain circumstances, make an offer to purchase the 2026 Notes at a price equal to 101% of their principal amount plus any accrued and unpaid interest.

Other Debt Facilities. The Company assumed other debt facilities pursuant to the EUROIMMUN acquisition, which includes Euro-denominated bank loans with an aggregate carrying value of €47.6 million (equivalent to $57.2 million) as of December 31, 2017. These bank loans are primarily utilized for financing fixed assets and are repaid in monthly or quarterly installments with maturity dates extending to 2031. The bank loans in the aggregate amount of $44.8 million bear fixed interest rates between 1.1% and 7.9% and bank loans in the aggregate amount of $12.4 million bear variable interest rates based on the Euribor rate plus a margin between 1.3% and 1.5%. An aggregate amount of $15.0 million of the bank loans are secured by mortgages on the financed land and buildings and the remaining $42.2 million are unsecured. Certain credit agreements for the unsecured bank loans include financial covenants which are based on an equity ratio or an equity ratio and minimum interest coverage ratio.

In addition, the Company has other unsecured revolving credit facilities and a secured bank loan in the amount of $2.7 million and $0.3 million, respectively, as of December 31, 2017. The unsecured revolving debt facilities bear fixed interest rates between 0.05% and 1.95% and will mature in 2018. The secured bank loan of $0.3 million bears a fixed annual interest rate of 1.95% and is repaid in monthly installments until 2027.

Financing Lease Obligations. In fiscal year 2012, the Company entered into agreements with the lessors of certain buildings that the Company is currently occupying and leasing to expand those buildings. The Company provided a portion of the funds needed for the construction of the additions to the buildings, and as a result the Company was considered the owner of the buildings during the construction period. At the end of the construction period, the Company was not reimbursed by the lessors for all of the construction costs. The Company is therefore deemed to have continuing involvement and the leases qualify as financing leases under sale-leaseback accounting guidance, representing debt obligations for the Company and non-cash investing and financing activities. As a result, the Company capitalized $29.3 million in property, plant and equipment, net, representing the fair value of the buildings with a corresponding increase to debt. The Company has also capitalized $11.5 million in additional construction costs necessary to complete the renovations to the buildings, which were funded by the lessors, with a corresponding increase to debt. At December 31, 2017, the Company had $35.9 million recorded for these financing lease obligations, of which $1.4 million was recorded as short-term debt and $34.5 million was recorded as long-term debt. At January 1, 2017, the Company had $37.1 million recorded for these financing lease obligations, of which $1.2 million was recorded as short-term debt and $35.9 million was recorded as long-term debt. The buildings are being depreciated on a straight-line basis over the terms of the leases to their estimated residual values, which will equal the remaining financing obligation at the end of the lease term. At the end of the lease term, the remaining balances in property, plant and equipment, net and debt will be reversed against each other.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following table summarizes the maturities of the Company’s indebtedness as of December 31, 2017:



	Sr. Unsecured Revolving Credit Facility Maturing 2021			Sr. Unsecured Term Loan Credit Facility		5.0% Sr. Notes Maturing 2021			1.875% Sr. Notes Maturing 2026			Other Debt Facilities		Financing Lease Obligations		Total
	(In thousands)
2018	$	—		$	200,000	$	—		$	—		$	16,015	$	1,370	$	217,385
2019	—			—		—			—			12,974		1,532		14,506
2020	—			—		—			—			7,752		1,597		9,349
2021	625,000			—		500,000			—			9,248		1,664		1,135,912
2022	—			—		—			—			4,664		1,639		6,303
2023 and thereafter	—			—		—			600,700			9,562		28,109		638,371
Total before unamortized discount and debt issuance costs	625,000			200,000		500,000			600,700			60,215		35,911		2,021,826
Unamortized discount and debt issuance costs	(3,339		)	—		(3,417		)	(8,961		)	—		—		(15,717		)
Total	$	621,661		$	200,000	$	496,583		$	591,739		$	60,215	$	35,911	$	2,006,109


Note 14:	Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities as of December 31, 2017 and January 1, 2017 consisted of the following:



	December 31, 2017		January 1, 2017
	(In thousands)
Payroll and incentives	$	66,955	$	61,474
Employee benefits	37,354		31,039
Deferred revenue	159,923		162,987
Federal, non-U.S. and state income taxes	10,800		8,189
Other accrued operating expenses	225,610		136,011
Total accrued expenses and other current liabilities	$	500,642	$	399,700


Note 15:	Employee Benefit Plans

Savings Plan: The Company has a 401(k) Savings Plan for the benefit of all qualified U.S. employees, with such employees receiving matching contributions in the amount equal to 100.0% of the first 5.0% of eligible compensation up to applicable Internal Revenue Service limits. Savings plan expense was $12.5 million in fiscal year 2017, and $12.8 million in each of fiscal years 2016 and 2015.

Pension Plans: The Company has a defined benefit pension plan covering certain U.S. employees and non-U.S. pension plans for certain non-U.S. employees. The principal U.S. defined benefit pension plan was closed to new hires effective January 31, 2001, and benefits for those employed by the Company’s former Life Sciences business were frozen as of that date. Plan benefits were frozen as of March 2003 for those employed by the Company’s former Analytical Instruments business and corporate employees. Plan benefits were frozen as of January 31, 2011 for all remaining employees that were still actively accruing in the plan. The plans provide benefits that are based on an employee’s years of service and compensation near retirement.

Net periodic pension (credit) cost for U.S. and non-U.S. plans included the following components for fiscal years ended:



	December 31, 2017			January 1, 2017			January 3, 2016
	(In thousands)
Service and administrative costs	$	4,951		$	4,337		$	4,332
Interest cost	16,707			18,638			20,696
Expected return on plan assets	(26,401		)	(24,245		)	(26,021		)
Curtailment gain	—			—			(907		)
Actuarial (gain) loss	(7,085		)	15,890			12,953
Amortization of prior service cost	(195		)	(210		)	(238		)
Net periodic pension (credit) cost	$	(12,023	)	$	14,410		$	10,815

During fiscal year 2014, the Company notified certain employees of its intention to terminate their employment as part of a restructuring plan that the Company implemented during the third quarter of fiscal year 2014. During fiscal year 2015, the termination of these participants decreased the expected future service lives in excess of the curtailment limit for one of the Company's pension plans, which resulted in a curtailment gain. The Company recorded the curtailment gain of $0.8 million during fiscal year 2015. As part of the curtailment, the Company remeasured the assets and liabilities of the plan that had the curtailment based upon current discount rates and the fair value of the pension plan's assets as of the curtailment date, which resulted in an actuarial loss of $0.8 million.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following table sets forth the changes in the funded status of the principal U.S. pension plan and the principal non-U.S. pension plans and the amounts recognized in the Company’s consolidated balance sheets as of December 31, 2017 and January 1, 2017.



	December 31, 2017								January 1, 2017
Non-U.S.				U.S.				Non-U.S.				U.S.
(In thousands)
Actuarial present value of benefit obligations:
Accumulated benefit obligations	$	334,151			$	308,713			$	271,127			$	300,650
Change in benefit obligations:
Projected benefit obligations at beginning of year	$	279,522			$	300,650			$	276,960			$	301,416
Service and administrative costs	2,201				2,750				2,262				2,075
Interest cost	4,870				11,836				6,205				12,433
Benefits paid and plan expenses	(13,238		)		(20,032		)		(11,940		)		(19,424		)
Participants’ contributions	189				—				209				—
Business acquisition (divestiture)	39,293				—				(2,955		)		—
Plan settlements	—				—				(993		)		—
Actuarial (gain) loss	(1,486		)		13,509				38,623				4,150
Effect of exchange rate changes	32,059				—				(28,849		)		—
Projected benefit obligations at end of year	$	343,410			$	308,713			$	279,522			$	300,650
Change in plan assets:
Fair value of plan assets at beginning of year	$	153,281			$	243,817			$	150,894			$	244,693
Actual return on plan assets	15,866				29,642				32,581				18,548
Benefits paid and plan expenses	(13,238		)		(20,032		)		(11,940		)		(19,424		)
Employer’s contributions	8,422				—				9,562				—
Participants’ contributions	189				—				209				—
Plan settlements	—				—				(993		)		—
Effect of exchange rate changes	15,216				—				(27,032		)		—
Fair value of plan assets at end of year	$	179,736			$	253,427			$	153,281			$	243,817
Net liabilities recognized in the consolidated balance sheets	$	(163,674	)		$	(55,286	)		$	(126,241	)		$	(56,833	)

Net amounts recognized in the consolidated balance sheets consist of:
Noncurrent assets	$	26,591			$	—			$	12,944			$	—
Current liabilities	(7,017		)		—				(6,033		)		—
Noncurrent liabilities	(183,248		)		(55,286		)		(133,152		)		(56,833		)
Net liabilities recognized in the consolidated balance sheets	$	(163,674	)		$	(55,286	)		$	(126,241	)		$	(56,833	)

Net amounts recognized in accumulated other comprehensive income consist of:
Prior service cost	$	(457	)		$	—			$	(603	)		$	—

Actuarial assumptions as of the year-end measurement date:
Discount rate	1.99		%		3.56		%		2.06		%		4.06		%
Rate of compensation increase	3.50		%		None				3.64		%		None

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Actuarial assumptions used to determine net periodic pension cost during the year were as follows:



	December 31, 2017				January 1, 2017				January 3, 2016
	Non-U.S.		U.S.		Non-U.S.		U.S.		Non-U.S.		U.S.
Discount rate	2.06	%	4.06	%	2.88	%	4.25	%	2.75	%	4.08	%
Rate of compensation increase	3.64	%	None		3.26	%	None		3.28	%	None
Expected rate of return on assets	6.00	%	7.25	%	5.30	%	7.25	%	4.60	%	7.25	%

The following table provides a breakdown of the non-U.S. benefit obligations and fair value of assets for pension plans that have benefit obligations in excess of plan assets:



	December 31, 2017		January 1, 2017
	(In thousands)
Pension Plans with Projected Benefit Obligations in Excess of Plan Assets
Projected benefit obligations	$	190,265	$	139,185
Fair value of plan assets	—		—

Pension Plans with Accumulated Benefit Obligations in Excess of Plan Assets
Accumulated benefit obligations	$	187,329	$	136,197
Fair value of plan assets	—		—

Assets of the defined benefit pension plans are primarily equity and debt securities. Asset allocations as of December 31, 2017 and January 1, 2017, and target asset allocations for fiscal year 2018 are as follows:



	Target Allocation				Percentage of Plan Assets at
	December 30, 2018				December 31, 2017				January 1, 2017
Asset Category	Non-U.S.		U.S.		Non-U.S.		U.S.		Non-U.S.		U.S.
Equity securities	45-55%		40-50%		51	%	41	%	48	%	41	%
Debt securities	45-55%		50-60%		49	%	59	%	51	%	59	%
Other	0-5%		0-5%		—	%	—	%	1	%	—	%
Total	100	%	100	%	100	%	100	%	100	%	100	%

The Company maintains target allocation percentages among various asset classes based on investment policies established for the pension plans which are designed to maximize the total rate of return (income and appreciation) after inflation within the limits of prudent risk taking, while providing for adequate near-term liquidity for benefit payments.

The Company’s expected rate of return on assets assumptions are derived from management’s estimates, as well as other information compiled by management, including studies that utilize customary procedures and techniques. The studies include a review of anticipated future long-term performance of individual asset classes and consideration of the appropriate asset allocation strategy given the anticipated requirements of the plans to determine the average rate of earnings expected on the funds invested to provide for the pension plans benefits. While the study gives appropriate consideration to recent fund performance and historical returns, the assumption is primarily a long-term, prospective rate.

The Company's discount rate assumptions are derived from a range of factors, including a yield curve for certain plans, composed of the rates of return on high-quality fixed-income corporate bonds available at the measurement date and the related expected duration for the obligations, and a bond matching approach for certain plans.

For the plans in the United States, the Company adopted the updated projection scale, MP-2015, that was published by the Society of Actuaries in 2015, as of January 3, 2016. The adoption of the updated projection scale resulted in a $6.8 million decrease to the projected benefit obligation as of January 3, 2016. During fiscal year 2016, the Society of Actuaries issued an updated projection scale, MP-2016, which reduced the life expectancy used to determine the projected benefit obligation. The Company adopted MP-2016 as of January 1, 2017. The adoption of the updated projection scale resulted in a $5.5 million decrease to the projected benefit obligation at January 1, 2017. During fiscal year 2017, the Society of Actuaries issued an updated projection scale, MP-2017, which reduced the life expectancy used to determine the projected benefit obligation. The Company adopted MP-2017 as of December 31, 2017. The adoption of the updated projection scale resulted in a $2.6 million decrease to the projected benefit obligation at December 31, 2017. The changes to the projected benefit obligations due to the

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

adoption of the mortality base table and projection scale are included within "Actuarial loss (gain)" in the Change in Benefit Obligations for fiscal years 2017 and 2016 above.

The target allocations for plan assets are listed in the above table. Equity securities primarily include investments in large-cap and mid-cap companies located in the United States and abroad, and equity index funds. Debt securities include corporate bonds of companies from diversified industries, high-yield bonds, and U.S. government securities. Other types of investments include investments in non-U.S. government index linked bonds, multi-strategy hedge funds and venture capital funds that follow several different strategies.

The fair values of the Company’s pension plan assets as of December 31, 2017 and January 1, 2017 by asset category, classified in the three levels of inputs described in Note 21 to the consolidated financial statements are as follows:



				Fair Value Measurements at December 31, 2017 Using:
Total Carrying Value at December 31, 2017			Quoted Prices in Active Markets (Level 1)			Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
(In thousands)
Cash	$	4,307		$	4,307		$	—		$	—
Equity Securities:
U.S. large-cap	30,008			30,008			—			—
International large-cap value	32,613			32,613			—			—
U.S. small mid-cap	2,104			2,104			—			—
Emerging markets growth	14,348			14,348			—			—
Equity index funds	90,838			—			90,838			—
Domestic real estate funds	1,401			1,401			—			—
Commodity funds	7,387			7,387			—			—
Fixed income securities:
Non-U.S. Treasury Securities	24,946			—			24,946			—
Corporate and U.S. debt instruments	138,948			40,290			98,658			—
Corporate bonds	27,571			—			27,571			—
High yield bond funds	5,912			5,912			—			—
Other types of investments:
Multi-strategy hedge funds	16,789			—			—			16,789
Non-U.S. government index linked bonds	35,991			—			35,991			—
Total assets measured at fair value	$	433,163		$	138,370		$	278,004		$	16,789

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)



				Fair Value Measurements at January 1, 2017 Using:
Total Carrying Value at January 1, 2017			Quoted Prices in Active Markets (Level 1)			Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
(In thousands)
Cash	$	6,079		$	6,079		$	—		$	—
Equity Securities:
U.S. large-cap	25,523			25,523			—			—
International large-cap value	28,267			28,267			—			—
U.S. small-cap	1,756			1,756			—			—
Emerging markets growth	12,144			12,144			—			—
Equity index funds	74,274			—			74,274			—
Domestic real estate funds	1,401			1,401			—			—
Commodity funds	6,854			6,854			—			—
Fixed income securities:
Non-U.S. Treasury Securities	22,059			—			22,059			—
Corporate and U.S. debt instruments	133,406			35,971			97,435			—
Corporate bonds	23,906			—			23,906			—
High yield bond funds	5,636			5,636			—			—
Other types of investments:
Multi-strategy hedge funds	23,790			—			—			23,790
Non-U.S. government index linked bonds	32,003			—			32,003			—
Total assets measured at fair value	$	397,098		$	123,631		$	249,677		$	23,790

Valuation Techniques: Valuation techniques utilized need to maximize the use of observable inputs and minimize the use of unobservable inputs. There have been no changes in the methodologies utilized at December 31, 2017 compared to January 1, 2017. The following is a description of the valuation techniques utilized to measure the fair value of the assets shown in the table above.

Equity Securities: Shares of registered investment companies that are publicly traded are categorized as Level 1 assets; they are valued at quoted market prices that represent the net asset value of the fund. These instruments have active markets.

Equity index funds are mutual funds that are not publicly traded and are comprised primarily of underlying equity securities that are publicly traded on exchanges. Price quotes for the assets held by these funds are readily observable and available. Equity index funds are categorized as Level 2 assets.

Fixed Income Securities: Fixed income mutual funds that are publicly traded are valued at quoted market prices that represent the net asset value of securities held by the fund and are categorized as Level 1 assets.

Fixed income index funds that are not publicly traded are stated at net asset value as determined by the issuer of the fund based on the fair value of the underlying investments and are categorized as Level 2 assets.

Individual fixed income bonds are categorized as Level 2 assets except where sufficient quoted prices exist in active markets, in which case such securities are categorized as Level 1 assets. These securities are valued using third-party pricing services. These services may use, for example, model-based pricing methods that utilize observable market data as inputs. Broker dealer bids or quotes of securities with similar characteristics may also be used.

Other Types of Investments: Non-U.S. government index link bond funds are not publicly traded and are stated at net asset value as determined by the issuer of the fund based on the fair value of the underlying investments. Underlying investments consist of bonds in which payment of income on the principal is related to a specific price index and are categorized as Level 2 assets.

Hedge funds, private equity funds and venture capital funds are valued at fair value by using the net asset values provided by the investment managers and are updated, if necessary, using analytical procedures, appraisals, public market data and/or inquiry of the investment managers. The net asset values are determined based upon the fair values of the underlying investments in the funds. These other investments invest primarily in readily available marketable securities and allocate gains,

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

losses, and expense to the investor based on the ownership percentage as described in the fund agreements. They are categorized as Level 3 assets.

The Company's policy is to recognize significant transfers between levels at the actual date of the event.

A reconciliation of the beginning and ending Level 3 assets for fiscal years 2017, 2016 and 2015 is as follows:



	Fair Value Measurements Using Significant Unobservable Inputs (Level 3):
Venture Capital Funds				Multi-strategy Hedge Funds				Total
(In thousands)
Balance at December 28, 2014	$	1			$	23,332			$	23,333
Unrealized gains	—				83				83
Balance at January 3, 2016	1				23,415				23,416
Realized losses	(1		)		—				(1		)
Unrealized gains	—				375				375
Balance at January 1, 2017	—				23,790				23,790
Sales	—				(8,189		)		(8,189		)
Realized gains	—				1,542				1,542
Unrealized losses	—				(354		)		(354		)
Balance at December 31, 2017	$	—			$	16,789			$	16,789

With respect to plans outside of the United States, the Company expects to contribute $8.8 million in the aggregate during fiscal year 2018. In January 2018, the Company made a voluntary $15.0 million contribution to its defined benefit pension plan in the United States for the plan year 2017. During fiscal year 2017, the Company contributed $8.4 million, in the aggregate, to pension plans outside of the United States. During fiscal year 2016, the Company made contributions of $9.6 million, in the aggregate, to plans outside of the United States. During fiscal year 2015, the Company contributed $14.9 million, in the aggregate, to plans outside of the United States and $20.0 million to its defined benefit pension plan in the United States.

The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid as follows:



	Non-U.S.		U.S.
	(In thousands)
2018	$	11,786	$	18,593
2019	12,166		18,860
2020	12,566		19,125
2021	13,151		19,392
2022	13,275		19,630
2023-2026	71,963		97,295

The Company also sponsors a supplemental executive retirement plan to provide senior management with benefits in excess of normal pension benefits. Effective July 31, 2000, this plan was closed to new entrants. At December 31, 2017 and January 1, 2017, the projected benefit obligations were $23.7 million and $21.8 million, respectively. Assets with a fair value of $1.4 million and $1.1 million, segregated in a trust (which is included in marketable securities and investments on the consolidated balance sheets), were available to meet this obligation as of December 31, 2017 and January 1, 2017, respectively. Pension expenses and income for this plan netted to expense of $3.2 million in fiscal year 2017, expense of $1.6 million in fiscal year 2016 and income of $1.6 million in fiscal year 2015.

Postretirement Medical Plans: The Company provides healthcare benefits for eligible retired U.S. employees under a comprehensive major medical plan or under health maintenance organizations where available. Eligible U.S. employees qualify for retiree health benefits if they retire directly from the Company and have at least ten years of service. Generally, the major medical plan pays stated percentages of covered expenses after a deductible is met and takes into consideration payments by other group coverage and by Medicare. The plan requires retiree contributions under most circumstances and has provisions for cost-sharing charges. Effective January 1, 2000, this plan was closed to new hires. For employees retiring after 1991, the

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Company has capped its medical premium contribution based on employees’ years of service. The Company funds the amount allowable under a 401(h) provision in the Company’s defined benefit pension plan. Assets of the plan are primarily equity and debt securities and are available only to pay retiree health benefits.

Net periodic postretirement medical benefit (credit) cost included the following components for the fiscal years ended:



	December 31, 2017			January 1, 2017			January 3, 2016
	(In thousands)
Service cost	$	92		$	101		$	108
Interest cost	125			142			143
Expected return on plan assets	(1,114		)	(1,035		)	(1,062		)
Actuarial (gain) loss	(741		)	(539		)	971
Net periodic postretirement medical benefit (credit) cost	$	(1,638	)	$	(1,331	)	$	160

The following table sets forth the changes in the postretirement medical plan’s funded status and the amounts recognized in the Company’s consolidated balance sheets as of December 31, 2017 and January 1, 2017.



	December 31, 2017			January 1, 2017
	(In thousands)
Actuarial present value of benefit obligations:
Retirees	$	804		$	907
Active employees eligible to retire	379			423
Other active employees	1,948			2,031
Accumulated benefit obligations at beginning of year	3,131			3,361
Service cost	92			101
Interest cost	125			142
Benefits paid	(122		)	(145		)
Actuarial loss (gain)	187			(329		)
Change in accumulated benefit obligations during the year	282			(231		)
Retirees	688			804
Active employees eligible to retire	408			379
Other active employees	2,317			1,948
Accumulated benefit obligations at end of year	$	3,413		$	3,131
Change in plan assets:
Fair value of plan assets at beginning of year	$	15,453		$	14,353
Actual return on plan assets	1,921			1,100
Fair value of plan assets at end of year	$	17,374		$	15,453
Net assets recognized in the consolidated balance sheets	$	13,961		$	12,322

Net amounts recognized in the consolidated balance sheets consist of:
Noncurrent assets	$	13,961		$	12,322

Net amounts recognized in accumulated other comprehensive income consist of:
Prior service cost	$	—		$	—

Actuarial assumptions as of the year-end measurement date:
Discount rate	3.60		%	4.11		%

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Actuarial assumptions used to determine net cost during the year are as follows:



	December 31, 2017		January 1, 2017		January 3, 2016
Discount rate	4.11	%	4.34	%	4.10	%
Expected rate of return on assets	7.25	%	7.25	%	7.25	%

The Company maintains a master trust for plan assets related to the U.S. defined benefit plans and the U.S. postretirement medical plan. Accordingly, investment policies, target asset allocations and actual asset allocations are the same as those disclosed for the U.S. defined benefit plans.

The fair values of the Company’s plan assets at December 31, 2017 and January 1, 2017 by asset category, classified in the three levels of inputs described in Note 21, are as follows:



				Fair Value Measurements at December 31, 2017 Using:
Total Carrying Value at December 31, 2017			Quoted Prices in Active Markets (Level 1)			Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
(In thousands)
Cash	$	268		$	268		$	—		$	—
Equity Securities:
U.S. large-cap	2,057			2,057			—			—
International large-cap value	2,236			2,236			—			—
U.S. small mid-cap	144			144			—			—
Emerging markets growth	984			984			—			—
Domestic real estate funds	96			96			—			—
Commodity funds	506			506			—			—
Fixed income securities:
Corporate debt instruments	9,526			2,762			6,764			—
High yield bond funds	406			406			—			—
Other types of investments:
Multi-strategy hedge funds	1,151			—			—			1,151
Total assets measured at fair value	$	17,374		$	9,459		$	6,764		$	1,151

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)



				Fair Value Measurements at January 1, 2017 Using:
Total Carrying Value at January 1, 2017			Quoted Prices in Active Markets (Level 1)			Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
(In thousands)
Cash	$	319		$	319		$	—		$	—
Equity Securities:
U.S. large-cap	1,618			1,618			—			—
International large-cap value	1,792			1,792			—			—
U.S. small mid-cap	111			111			—			—
Emerging markets growth	770			770			—			—
Domestic real estate funds	89			89			—			—
Commodity funds	434			434			—			—
Fixed income securities:
Corporate debt instruments	8,456			2,280			6,176			—
High yield bond funds	356			356			—			—
Other types of investments:
Multi-strategy hedge funds	1,508			—			—			1,508
Total assets measured at fair value	$	15,453		$	7,769		$	6,176		$	1,508

Valuation Techniques: Valuation techniques are the same as those disclosed for the U.S. defined benefit plans above.

A reconciliation of the beginning and ending Level 3 assets for fiscal years 2017, 2016 and 2015 is as follows:



	Fair Value Measurements Using Significant Unobservable Inputs (Level 3):
Multi-strategy Hedge Funds
(In thousands)
Balance at December 28, 2014	$	1,341
Unrealized gains	33
Balance at January 3, 2016	1,374
Unrealized gains	134
Balance at January 1, 2017	1,508
Sales	(562		)
Realized gains	229
Unrealized losses	(24		)
Balance at December 31, 2017	$	1,151

The Company does not expect to make any contributions to the postretirement medical plan during fiscal year 2018.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid as follows:



Postretirement Medical Plan
	(In thousands)
2018	$	147
2019	166
2020	178
2021	195
2022	211
2023-2026	1,153

Deferred Compensation Plans: During fiscal year 1998, the Company implemented a nonqualified deferred compensation plan that provides benefits payable to officers and certain key employees or their designated beneficiaries at specified future dates, or upon retirement or death. The plan was amended to eliminate deferral elections, with the exception of Company 401(k) excess contributions for eligible participants, for plan years beginning January 1, 2011. Benefit payments under the plan are funded by contributions from participants, and for certain participants, contributions by the Company. The obligations related to the deferred compensation plan totaled $1.0 million at December 31, 2017 and $0.9 million at January 1, 2017.


Note 16:	Contingencies

The Company is conducting a number of environmental investigations and remedial actions at current and former locations of the Company and, along with other companies, has been named a potentially responsible party (“PRP”) for certain waste disposal sites. The Company accrues for environmental issues in the accounting period that the Company's responsibility is established and when the cost can be reasonably estimated. The Company has accrued $9.4 million and $9.9 million as of December 31, 2017 and January 1, 2017, respectively, in accrued expenses and other current liabilities, which represents its management’s estimate of the cost of the remediation of known environmental matters, and does not include any potential liability for related personal injury or property damage claims. The Company's environmental accrual is not discounted and does not reflect the recovery of any material amounts through insurance or indemnification arrangements. The cost estimates are subject to a number of variables, including the stage of the environmental investigations, the magnitude of the possible contamination, the nature of the potential remedies, possible joint and several liability, the time period over which remediation may occur, and the possible effects of changing laws and regulations. For sites where the Company has been named a PRP, management does not currently anticipate any additional liability to result from the inability of other significant named parties to contribute. The Company expects that the majority of such accrued amounts could be paid out over a period of up to ten years. As assessment and remediation activities progress at each individual site, these liabilities are reviewed and adjusted to reflect additional information as it becomes available. There have been no environmental problems to date that have had, or are expected to have, a material adverse effect on the Company’s consolidated financial statements. While it is possible that a loss exceeding the amounts recorded in the consolidated financial statements may be incurred, the potential exposure is not expected to be materially different from those amounts recorded.

The Company is subject to various claims, legal proceedings and investigations covering a wide range of matters that arise in the ordinary course of its business activities. Although the Company has established accruals for potential losses that it believes are probable and reasonably estimable, in the opinion of the Company’s management, based on its review of the information available at this time, the total cost of resolving these contingencies at December 31, 2017 should not have a material adverse effect on the Company’s consolidated financial statements. However, each of these matters is subject to uncertainties, and it is possible that some of these matters may be resolved unfavorably to the Company.


Note 17:	Warranty Reserves

The Company provides warranty protection for certain products usually for a period of one year beyond the date of sale. The majority of costs associated with warranty obligations include the replacement of parts and the time for service personnel to respond to repair and replacement requests. A warranty reserve is recorded based upon historical results, supplemented by management’s expectations of future costs. Warranty reserves are included in “Accrued expenses and other current liabilities” on the consolidated balance sheets.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

A summary of warranty reserve activity for the fiscal years ended December 31, 2017, January 1, 2017 and January 3, 2016 is as follows:



	(In thousands)
Balance at December 28, 2014	$	9,593
Provision charged to income	15,792
Payments	(14,936		)
Adjustments to previously provided warranties, net	(146		)
Foreign currency translation and acquisitions	(460		)
Balance at January 3, 2016	9,843
Provision charged to income	14,901
Payments	(14,749		)
Adjustments to previously provided warranties, net	(850		)
Foreign currency translation and acquisitions	(133		)
Balance at January 1, 2017	9,012
Provision charged to income	13,700
Payments	(14,245		)
Adjustments to previously provided warranties, net	(815		)
Foreign currency translation and acquisitions	1,398
Balance at December 31, 2017	$	9,050


Note 18:	Stock Plans

Stock-Based Compensation:

In addition to the Company’s Employee Stock Purchase Plan, the Company utilizes one stock-based compensation plan, the 2009 Incentive Plan (the “2009 Plan”). Under the 2009 Plan, 10.0 million shares of the Company's common stock are authorized for stock option grants, restricted stock awards, performance restricted stock units, performance units and stock grants as part of the Company’s compensation programs. In addition to shares of the Company’s common stock originally authorized for issuance under the 2009 Plan, the 2009 Plan includes shares of the Company’s common stock previously granted under the Amended and Restated 2001 Incentive Plan and the 2005 Incentive Plan that were canceled or forfeited without the shares being issued.

The following table summarizes total pre-tax compensation expense recognized related to the Company’s stock options, restricted stock, restricted stock units, performance restricted stock units, performance units and stock grants, net of estimated forfeitures, included in the Company’s consolidated statements of operations for fiscal years 2017, 2016 and 2015:



	December 31, 2017		January 1, 2017		January 3, 2016
	(In thousands)
Cost of product and service revenue	$	1,254	$	1,031	$	1,272
Research and development expenses	1,389		902		526
Selling, general and administrative expenses	22,778		15,225		15,480
Total stock-based compensation expense	$	25,421	$	17,158	$	17,278

The total income tax benefit recognized in the consolidated statements of operations for stock-based compensation was $14.5 million in fiscal year 2017, $10.5 million in fiscal year 2016 and $5.8 million in fiscal year 2015. Stock-based compensation costs capitalized as part of inventory were $0.3 million as of each of December 31, 2017 and January 1, 2017.

Stock Options: The Company has granted options to purchase common shares at prices equal to the market price of the common shares on the date the option is granted. Conditions of vesting are determined at the time of grant. Options are generally exercisable in equal annual installments over a period of three years, and will generally expire seven years after the date of grant. Options replaced in association with business combination transactions are generally issued with the same terms of the respective plans under which they were originally issued.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The fair value of each option grant is estimated using the Black-Scholes option pricing model. The fair value is then amortized on a straight-line basis over the requisite service periods of the awards, which is generally the vesting period. Use of a valuation model requires management to make certain assumptions with respect to selected model inputs. Expected volatility was calculated based on the historical and implied volatility of the Company’s stock. The average expected life was based on the contractual term of the option and historic exercise experience. The risk-free interest rate is based on United States Treasury zero-coupon issues with a remaining term equal to the expected life assumed at the date of grant. The Company’s weighted-average assumptions used in the Black-Scholes option pricing model were as follows for the fiscal years ended:



	December 31, 2017		January 1, 2017		January 3, 2016
Risk-free interest rate	2.0	%	1.7	%	1.3	%
Expected dividend yield	0.4	%	0.6	%	0.6	%
Expected lives	5 years		5 years		5 years
Expected stock volatility	22.4	%	25.2	%	26.5	%

The following table summarizes stock option activity for the fiscal year ended December 31, 2017:



	December 31, 2017
	Number of Shares		Weighted- Average Exercise Price
	(Shares in thousands)
Outstanding at beginning of year	2,287		$	37.64
Granted	464		53.94
Exercised	(578	)	31.16
Forfeited	(19	)	50.86
Outstanding at end of year	2,154		$	42.77
Exercisable at end of year	1,229		$	37.79

The aggregate intrinsic value for stock options outstanding at December 31, 2017 was $65.4 million with a weighted-average remaining contractual term of 4.0 years. The aggregate intrinsic value for stock options exercisable at December 31, 2017 was $43.4 million with a weighted-average remaining contractual term of 2.9 years. At December 31, 2017, there were 2.2 million stock options that were vested, and expected to vest in the future, with an aggregate intrinsic value of $65.4 million and a weighted-average remaining contractual term of 4.1 years.

The weighted-average per-share grant-date fair value of options granted during fiscal years 2017, 2016 and 2015 was $11.83, $10.20, and $11.02, respectively. The total intrinsic value of options exercised during fiscal years 2017, 2016 and 2015 was $17.6 million, $16.6 million, and $25.9 million, respectively. Cash received from option exercises for fiscal years 2017, 2016 and 2015 was $18.0 million, $14.4 million, and $14.9 million, respectively. The total compensation expense recognized related to the Company’s outstanding options was $4.7 million in fiscal year 2017, $4.4 million in fiscal year 2016 and $4.1 million in fiscal year 2015.

There was $6.0 million of total unrecognized compensation cost related to nonvested stock options granted as of December 31, 2017. This cost is expected to be recognized over a weighted-average period of 2.0 years.

Restricted Stock Awards: The Company has awarded shares of restricted stock and restricted stock units to certain employees and non-employee directors at no cost to them, which cannot be sold, assigned, transferred or pledged during the restriction period. The restricted stock and restricted stock units vest through the passage of time, assuming continued employment. The fair value of the award at the time of the grant is expensed on a straight line basis primarily in selling, general and administrative expenses over the vesting period, which is generally 3 years. These awards were granted under the Company’s 2009 Plan. Recipients of the restricted stock have the right to vote such shares and receive dividends.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following table summarizes restricted stock award activity for the fiscal year ended December 31, 2017:



	December 31, 2017
	Number of Shares		Weighted- Average Grant- Date Fair Value
	(Shares in thousands)
Nonvested at beginning of year	521		$	46.48
Granted	231		54.75
Vested	(229	)	46.11
Forfeited	(27	)	50.12
Nonvested at end of year	496		$	50.30

The fair value of restricted stock awards vested during fiscal years 2017, 2016 and 2015 was $10.6 million, $8.4 million, and $7.8 million, respectively. The total compensation expense recognized related to the restricted stock awards was $10.3 million in fiscal year 2017, $9.3 million in fiscal year 2016 and $8.4 million in fiscal year 2015.

As of December 31, 2017, there was $13.2 million of total unrecognized compensation cost, related to nonvested restricted stock awards. That cost is expected to be recognized over a weighted-average period of 1.3 years.

Performance Restricted Stock Units: As part of the Company's executive compensation program, the Company granted 54,337 performance restricted stock units during fiscal year 2017 that will vest based on performance of the Company. The weighted-average per-share grant date fair value of performance restricted stock units granted during fiscal year 2017 was $52.78. During fiscal year 2017, no performance restricted stock units were forfeited. The total compensation expense recognized related to the performance restricted stock units was $0.9 million for fiscal year 2017. As of December 31, 2017, there were 54,337 performance restricted stock units outstanding.

Performance Units: The Company’s performance unit program provides a cash award based on the achievement of specific performance criteria. A target number of units are granted at the beginning of a three-year performance period. The number of units earned at the end of the performance period is determined by multiplying the number of units granted by a performance factor ranging from 0% to 200%. Awards are determined by multiplying the number of units earned by the stock price at the end of the performance period, and are paid in cash and accounted for as a liability based award. The compensation expense associated with these units is recognized over the period that the performance targets are expected to be achieved. The Company granted 49,845 performance units, 72,164 performance units, and 66,509 performance units during fiscal years 2017, 2016 and 2015, respectively. The weighted-average per-share grant-date fair value of performance units granted during fiscal years 2017, 2016 and 2015 was $52.69, $42.79, and $46.83, respectively. During fiscal years 2017, 2016 and 2015, 15,139, 19,584 and 8,860 performance units were forfeited, respectively. The total compensation expense related to performance units was $8.7 million, $2.7 million, and $4.0 million for fiscal years 2017, 2016 and 2015, respectively. As of December 31, 2017, there were 164,481 performance units outstanding subject to forfeiture, with a corresponding liability of $11.7 million recorded in accrued expenses and long-term liabilities.

Stock Awards: The Company’s stock award program provides an annual equity award to non-employee directors. For fiscal years 2017, 2016 and 2015, the award equaled the number of shares of the Company’s common stock which has an aggregate fair market value of $100,000 on the date of the award. The stock award is prorated for non-employee directors who serve for only a portion of the year. The compensation expense associated with these stock awards is recognized when the stock award is granted. In fiscal years 2017, 2016 and 2015, each non-employee director was awarded 1,598 shares, 1,821 shares, and 1,953 shares, respectively. The Company also granted 820 shares to a new non-employee director during fiscal year 2017. The weighted-average per-share grant-date fair value of stock awards granted during fiscal years 2017, 2016 and 2015 was $63.14, $54.58, and $51.01, respectively. The total compensation expense recognized related to these stock awards was $0.8 million in each of fiscal years 2017, 2016 and 2015.

Employee Stock Purchase Plan:

In April 1999, the Company’s shareholders approved the 1998 Employee Stock Purchase Plan. In April 2005, the Compensation and Benefits Committee of the Board voted to amend the Employee Stock Purchase Plan, effective July 1, 2005, whereby participating employees have the right to purchase common stock at a price equal to 95% of the closing price on the last day of each six-month offering period. The number of shares which an employee may purchase, subject to certain aggregate limits, is determined by the employee’s voluntary contribution, which may not exceed 10% of the employee’s base

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

compensation. During fiscal year 2017, the Company issued 36,769 shares of common stock under the Company’s Employee Stock Purchase Plan at a weighted-average price of $67.09 per share. During fiscal year 2016, the Company issued 49,578 shares under this plan at a weighted-average price of $49.67 per share. During fiscal year 2015, the Company issued 78,294 shares under this plan at a weighted-average price of $47.08 per share. At December 31, 2017 there remains available for sale to employees an aggregate of 0.9 million shares of the Company’s common stock out of the 5.0 million shares authorized by shareholders for issuance under this plan.


Note 19:	Stockholders’ Equity

Comprehensive Income:

The components of accumulated other comprehensive (loss) income consisted of the following:



	Foreign Currency Translation Adjustment, net of tax			Unrecognized Prior Service Costs, net of tax			Unrealized (Losses) Gains on Securities, net of tax			Accumulated Other Comprehensive Income (Loss)
	(In thousands)
Balance, December 28, 2014	$	23,332		$	1,575		$	(107	)	$	24,800
Current year change	(70,178		)	(316		)	(262		)	(70,756		)
Balance, January 3, 2016	(46,846		)	1,259			(369		)	(45,956		)
Current year change	(54,077		)	(860		)	32			(54,905		)
Balance, January 1, 2017	(100,923		)	399			(337		)	(100,861		)
Current year change	54,341			(77		)	79			54,343
Balance, December 31, 2017	$	(46,582	)	$	322		$	(258	)	$	(46,518	)

During fiscal years 2017, 2016 and 2015, pre-tax expense of $0.1 million, $0.9 million, and $0.3 million, respectively, was reclassified from accumulated other comprehensive income into selling, general and administrative expenses as a component of net periodic pension cost.

Stock Repurchases:

On July 27, 2016, the Board of Directors (the "Board") authorized the Company to repurchase up to 8.0 million shares of common stock under a stock repurchase program (the "Repurchase Program"). The Repurchase Program will expire on July 26, 2018 unless terminated earlier by the Board, and may be suspended or discontinued at any time. During fiscal year 2017, the Company had no stock repurchases under the Repurchase Program. As of December 31, 2017, 8.0 million shares remained available for repurchase under the Repurchase Program.

In addition, the Board has authorized the Company to repurchase shares of common stock to satisfy minimum statutory tax withholding obligations in connection with the vesting of restricted stock awards and restricted stock unit awards granted pursuant to the Company’s equity incentive plans and to satisfy obligations related to the exercise of stock options made pursuant to the Company's equity incentive plans. During fiscal year 2017, the Company repurchased 78,644 shares of common stock for this purpose at an aggregate cost of $4.4 million. During fiscal year 2016, the Company repurchased 75,198 shares of common stock for this purpose at an aggregate cost of $3.6 million. During fiscal year 2015, the Company repurchased 95,129 shares of common stock for this purpose at an aggregate cost of $4.4 million. The repurchased shares have been reflected as additional authorized but unissued shares, with the payments reflected in common stock and capital in excess of par value.

Dividends:

The Board declared a regular quarterly cash dividend of $0.07 per share in each quarter of fiscal years 2017 and 2016. At December 31, 2017, the Company had accrued $7.7 million for a dividend declared on October 27, 2017 for the fourth quarter of fiscal year 2017 that was paid in February 2018. On January 25, 2018, the Company announced that the Board had declared a quarterly dividend of $0.07 per share for the first quarter of fiscal year 2018 that will be payable in May 2018. In the future, the Board may determine to reduce or eliminate the Company’s common stock dividend in order to fund investments for growth, repurchase shares or conserve capital resources.


Note 20:	Derivatives and Hedging Activities

The Company uses derivative instruments as part of its risk management strategy only, and includes derivatives utilized as economic hedges that are not designated as hedging instruments. By nature, all financial instruments involve market and credit risks. The Company enters into derivative instruments with major investment grade financial institutions and has policies

to monitor the credit risk of those counterparties. The Company does not enter into derivative contracts for trading or other speculative purposes, nor does the Company use leveraged financial instruments. Approximately 60% of the Company’s business is conducted outside of the United States, generally in foreign currencies. As a result, fluctuations in foreign currency exchange rates can increase the costs of financing, investing and operating the business.

In the ordinary course of business, the Company enters into foreign exchange contracts for periods consistent with its committed exposures to mitigate the effect of foreign currency movements on transactions denominated in foreign currencies. The intent of these economic hedges is to offset gains and losses that occur on the underlying exposures from these currencies, with gains and losses resulting from the forward currency contracts that hedge these exposures. Transactions covered by hedge contracts include intercompany and third-party receivables and payables. The contracts are primarily in European and Asian currencies, have maturities that do not exceed 12 months, have no cash requirements until maturity, and are recorded at fair value on the Company’s consolidated balance sheets. The unrealized gains and losses on the Company’s foreign currency contracts are recognized immediately in interest and other expense, net. The cash flows related to the settlement of these hedges are included in cash flows from operating activities within the Company’s consolidated statement of cash flows.

Principal hedged currencies include the British Pound, Euro, Swedish Krona, Japanese Yen and Singapore Dollar. The Company held forward foreign exchange contracts, designated as economic hedges, with U.S. dollar equivalent notional amounts totaling $212.1 million at December 31, 2017, $137.5 million at January 1, 2017, and $127.3 million at January 3, 2016, and the fair value of these foreign currency derivative contracts was insignificant. The gains and losses realized on these foreign currency derivative contracts are not material. The duration of these contracts was generally 30 days or less during each of fiscal years 2017, 2016 and 2015.

In addition, in connection with certain intercompany loan agreements utilized to finance its acquisitions and stock repurchase program, the Company enters into forward foreign exchange contracts intended to hedge movements in foreign exchange rates prior to settlement of such intercompany loans denominated in foreign currencies. The Company records these hedges at fair value on the Company’s consolidated balance sheets. The unrealized gains and losses on these hedges, as well as the gains and losses associated with the remeasurement of the intercompany loans, are recognized immediately in interest and other expense, net. The cash flows related to the settlement of these hedges are included in cash flows from financing activities within the Company’s consolidated statement of cash flows.

The outstanding forward exchange contracts designated as economic hedges, which were intended to hedge movements in foreign exchange rates prior to the settlement of certain intercompany loan agreements, included combined Euro notional amounts of €57.2 million and combined U.S. Dollar notional amounts of $1.3 billion as of December 31, 2017, combined Euro notional amounts of €58.6 million, combined U.S. Dollar notional amounts of $8.7 million and combined Swedish Krona notional amounts of kr969.5 million as of January 1, 2017, and combined Euro notional amounts of €107.4 million as of January 3, 2016. The net gains and losses on these derivatives, combined with the gains and losses on the remeasurement of the hedged intercompany loans were not material for each of the fiscal years 2017 and 2016. The Company paid $13.8 million and $1.9 million during the fiscal years 2017 and 2016, respectively, from the settlement of these hedges.

During fiscal year 2016, the Company designated the 2026 Notes to hedge its investments in certain foreign subsidiaries. Realized and unrealized translation adjustments from these hedges were included in the foreign currency translation component of accumulated other comprehensive income ("AOCI"), which offsets translation adjustments on the underlying net assets of foreign subsidiaries. The cumulative translation gains or losses will remain in AOCI until the foreign subsidiaries are liquidated or sold. As of December 31, 2017, the total notional amount of foreign currency denominated debt designated to hedge investments in foreign subsidiaries was €496.1 million. The unrealized foreign exchange loss (gain) recorded in AOCI related to the net investment hedge was $73.0 million and $(23.8) million for the fiscal years 2017 and 2016, respectively. In January 2018, the Company removed the hedging relationship of its 2026 Notes and investments in certain foreign subsidiaries and recognized $2.1 million of unrealized foreign exchange gain in AOCI. The translation adjustment of the 2026 Notes will be recognized in other (income) expense, net within the Company's consolidated statement of operations prospectively.

During fiscal year 2017, the Company entered into several foreign currency forward contracts to purchase Euros to partly mitigate the currency exchange risk associated with the payment of the Euro-denominated purchase price of EUROIMMUN. These currency forward contracts were not designated as hedging instruments and therefore the change in the derivative fair value was marked to market through the consolidated statement of operations. The foreign currency forward contracts were settled during the fourth quarter of fiscal year 2017. The Company received $36.5 million from the settlement of these foreign currency forward contracts and recorded a net foreign exchange gain included in other (income) expense, net amounting to $36.5 million for the fiscal year 2017. The cash flows related to the settlement of these foreign currency forward contracts are included in cash flows from investing activities within the Company’s consolidated statement of cash flows.

The Company does not expect any material net pre-tax gains or losses to be reclassified from accumulated other comprehensive (loss) income into interest and other expense, net within the next twelve months.


Note 21:	Fair Value Measurements

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash equivalents, derivatives, marketable securities and accounts receivable. The Company believes it had no significant concentrations of credit risk as of December 31, 2017.

The Company uses the market approach technique to value its financial instruments and there were no changes in valuation techniques during fiscal years 2017 and 2016. The Company’s financial assets and liabilities carried at fair value are primarily comprised of marketable securities, derivative contracts used to hedge the Company’s currency risk, and acquisition related contingent consideration. The Company has not elected to measure any additional financial instruments or other items at fair value.

Valuation Hierarchy: The following summarizes the three levels of inputs required to measure fair value. For Level 1 inputs, the Company utilizes quoted market prices as these instruments have active markets. For Level 2 inputs, the Company utilizes quoted market prices in markets that are not active, broker or dealer quotations, or utilizes alternative pricing sources with reasonable levels of price transparency. For Level 3 inputs, the Company utilizes unobservable inputs based on the best information available, including estimates by management primarily based on information provided by third-party fund managers, independent brokerage firms and insurance companies. A financial asset’s or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement. In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible.

The following tables show the assets and liabilities carried at fair value measured on a recurring basis as of December 31, 2017 and January 1, 2017 classified in one of the three classifications described above:



				Fair Value Measurements at December 31, 2017 Using:
	Total Carrying Value at December 31, 2017			Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
	(In thousands)
Marketable securities	$	2,208		$	2,208	$	—		$	—
Foreign exchange derivative assets	1,431			—		1,431			—
Foreign exchange derivative liabilities	(23,638		)	—		(23,638		)	—
Contingent consideration	(65,328		)	—		—			(65,328		)



				Fair Value Measurements at January 1, 2017 Using:
	Total Carrying Value at January 1, 2017			Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
	(In thousands)
Marketable securities	$	1,678		$	1,678	$	—		$	—
Foreign exchange derivative assets	1,208			—		1,208			—
Foreign exchange derivative liabilities, net	(1,370		)	—		(1,370		)	—
Contingent consideration	(63,201		)	—		—			(63,201		)

Level 1 and Level 2 Valuation Techniques: The Company’s Level 1 and Level 2 assets and liabilities are comprised of investments in equity and fixed-income securities as well as derivative contracts. For financial assets and liabilities that utilize Level 1 and Level 2 inputs, the Company utilizes both direct and indirect observable price quotes, including common stock price quotes, foreign exchange forward prices and bank price quotes. Below is a summary of valuation techniques for Level 1 and Level 2 financial assets and liabilities.

Marketable securities: Include equity and fixed-income securities measured at fair value using the quoted market prices in active markets at the reporting date.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Foreign exchange derivative assets and liabilities: Include foreign exchange derivative contracts that are valued using quoted forward foreign exchange prices at the reporting date. The Company’s foreign exchange derivative contracts are subject to master netting arrangements that allow the Company and its counterparties to net settle amounts owed to each other. Derivative assets and liabilities that can be net settled under these arrangements have been presented in the Company's consolidated balance sheet on a net basis and are recorded in other assets. As of both December 31, 2017 and January 1, 2017, none of the master netting arrangements involved collateral.

Level 3 Valuation Techniques: The Company’s Level 3 liabilities are comprised of contingent consideration related to acquisitions. For liabilities that utilize Level 3 inputs, the Company uses significant unobservable inputs. Below is a summary of valuation techniques for Level 3 liabilities.

Contingent consideration: Contingent consideration is measured at fair value at the acquisition date using projected milestone dates, discount rates, probabilities of success and projected revenues (for revenue-based considerations). Projected risk-adjusted contingent payments are discounted back to the current period using a discounted cash flow model.

During fiscal year 2015, the Company acquired all the shares of Vanadis. Under the terms of the acquisition, the initial purchase consideration was $32.0 million, net of cash and the Company will be obligated to make potential future milestone payments, based on completion of a proof of concept, regulatory approvals and product sales, of up to $93.0 million ranging from 2016 to 2019. The key assumptions used to determine the fair value of the contingent consideration included projected milestone dates of 2016 to 2019, discount rates ranging from 3.1% to 11.3%, conditional probabilities of success of each individual milestone ranging from 85% to 95% and cumulative probabilities of success for each individual milestone ranging from 53% to 90%. The fair value of the contingent consideration as of the acquisition date was estimated at $56.9 million. During fiscal year 2017, the Company updated the fair value of the contingent consideration and recorded a liability of $65.3 million as of December 31, 2017. The key assumptions used to determine the fair value of the contingent consideration as of December 31, 2017 included projected milestone dates of 2018 to 2019, discount rates ranging from 2.3% to 8.4%, conditional probabilities of success of each individual milestone ranging from 90% to 95% and cumulative probabilities of success for each individual milestone ranging from 65.8% to 95%. A significant delay in the product development (including projected regulatory milestone) achievement date in isolation could result in a significantly lower fair value measurement; a significant acceleration in the product development (including projected regulatory milestone) achievement date in isolation would not have a material impact on the fair value measurement; a significant change in the discount rate in isolation would not have a material impact on the fair value measurement; and a significant change in the probabilities of success in isolation could result in a significant change in fair value measurement.

The fair values of contingent consideration are calculated on a quarterly basis based on a collaborative effort of the Company’s regulatory, research and development, operations, finance and accounting groups, as appropriate. Potential valuation adjustments are made as additional information becomes available, including the progress towards achieving proof of concept, regulatory approvals and revenue targets as compared to initial projections, the impact of market competition and market landscape shifts from non-invasive prenatal testing products, with the impact of such adjustments being recorded in the consolidated statements of operations.

As of December 31, 2017, the Company may have to pay contingent consideration, related to an acquisition with open contingency period, of up to $83.0 million. The expected maximum earnout period for an acquisition with open contingency period do not exceed 1.75 years from the acquisition date, and the remaining weighted average expected earnout period at December 31, 2017 was 11 months.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

A reconciliation of the beginning and ending Level 3 net liabilities for contingent consideration is as follows:



	(In thousands)
Balance at December 28, 2014	$	(91	)
Additions	(57,353		)
Amounts paid and foreign currency translation	113
Change in fair value (included within selling, general and administrative expenses)	(19		)
Balance at January 3, 2016	(57,350		)
Additions	—
Amounts paid and foreign currency translation	332
Reclassified to other current liabilities for milestone achieved	10,000
Change in fair value (included within selling, general and administrative expenses)	(16,183		)
Balance at January 1, 2017	(63,201		)
Additions	—
Amounts paid and foreign currency translation	34
Change in fair value (included within selling, general and administrative expenses)	(2,161		)
Balance at December 31, 2017	$	(65,328	)

The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses approximate fair value due to the short-term maturities of these assets and liabilities. If measured at fair value, cash and cash equivalents would be classified as Level 1.

As of December 31, 2017, the Company’s senior unsecured revolving credit facility, which provides for $1.0 billion of revolving loans, had a carrying value of $621.7 million, net of $3.3 million of unamortized debt issuance costs. As of January 1, 2017, the Company's senior unsecured revolving credit facility had no outstanding borrowings. The interest rate on the Company’s senior unsecured revolving credit facility is reset at least monthly to correspond to variable rates that reflect currently available terms and conditions for similar debt. The Company had no change in credit standing during fiscal year 2017. Consequently, the carrying value approximates fair value and were classified as Level 2.

As of December 31, 2017, the Company’s senior unsecured term loan credit facility, which provides for $200.0 million of term loans, had a carrying value of $200.0 million. The interest rate on the Company’s senior unsecured term loan credit facility will be reset at least monthly to correspond to variable rates that reflect currently available terms and conditions for similar debt. The Company had no change in credit standing during the fiscal year 2017. Consequently, the carrying value approximates fair value and were classified as Level 2.

The Company's 2021 Notes, with a face value of $500.0 million, had an aggregate carrying value of $496.6 million, net of $1.4 million of unamortized original issue discount and $2.0 million of unamortized debt issuance costs as of December 31, 2017. The 2021 Notes had an aggregate carrying value of $495.8 million, net of $1.7 million of unamortized original issue discount and $2.5 million of unamortized debt issuance costs as of January 1, 2017. The 2021 Notes had a fair value of $536.6 million and $539.2 million as of December 31, 2017 and January 1, 2017, respectively. The fair value of the 2021 Notes is estimated using market quotes from brokers and is based on current rates offered for similar debt.

The Company's 2026 Notes, with a face value of €500.0 million, had an aggregate carrying value of $591.7 million, net of $4.7 million of unamortized original issue discount and $4.3 million of unamortized debt issuance costs as of December 31, 2017. The 2026 Notes had an aggregate carrying value of $517.8 million, net of $4.5 million of unamortized original issue discount and $4.8 million of unamortized debt issuance costs as of January 1, 2017. The 2026 Notes had a fair value of €508.9 million and €507.5 million as of December 31, 2017 and January 1, 2017, respectively. The fair value of the 2026 Notes is estimated using market quotes from brokers and is based on current rates offered for similar debt.

The Company's financing lease obligations had an aggregate carrying value of $35.9 million and $37.1 million as of December 31, 2017 and January 1, 2017, respectively. The carrying values of the Company's financing lease obligations approximated their fair value as there has been minimal change in the Company's incremental borrowing rate.

As of December 31, 2017, the 2021 Notes, 2026 Notes and financing lease obligations were classified as Level 2.

The Company’s other debt facilities that were assumed from the EUROIMMUN acquisition had an aggregate carrying value of $60.2 million as of December 31, 2017. The bank loans in the aggregate amount of $47.8 million bear fixed interest

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

rates between 0.05% and 7.9% and bank loans in the aggregate amount of $12.4 million bear variable interest rates based on the Euribor rate plus a margin between 1.25% and 1.5%. The Company had no change in credit standing during fiscal year 2017. Consequently, the carrying value approximates fair value and were classified as Level 2.

As of December 31, 2017, there has not been any significant impact to the fair value of the Company’s derivative liabilities due to credit risk. Similarly, there has not been any significant adverse impact to the Company’s derivative assets based on the evaluation of its counterparties’ credit risks.


Note 22:	Leases

The Company leases certain property and equipment under operating leases. Rental expense charged to continuing operations for fiscal years 2017, 2016 and 2015 amounted to $54.0 million, $52.0 million, and $52.4 million, respectively. Minimum rental commitments under noncancelable operating leases are as follows: $57.0 million in fiscal year 2018, $37.2 million in fiscal year 2019, $27.4 million in fiscal year 2020, $22.0 million in fiscal year 2021, $13.5 million in fiscal year 2022 and $59.6 million in fiscal year 2023 and thereafter.

On August 22, 2013, the Company sold one of its facilities located in Boston, Massachusetts for net proceeds of $47.6 million. Simultaneously with the closing of the sale of the property, the Company entered into a lease agreement to lease back the property for its continued use. The lease has an initial term of 15 years and the Company has the right to extend the term of the lease for two additional periods of ten years each. The lease is accounted for as an operating lease and at the transaction date the Company had deferred $26.5 million of gains which are being amortized in operating expenses over the initial lease term of 15 years. The Company amortized $1.8 million of the deferred gains related to the lease during each of the fiscal years 2017, 2016 and 2015. The deferred gains remaining to be amortized were $18.8 million at December 31, 2017, of which $1.8 million was recorded in accrued expenses and other current liabilities, and $17.0 million was recorded in long-term liabilities. The deferred gains remaining to be amortized were $20.6 million at January 1, 2017, of which $1.8 million was recorded in accrued expenses and other current liabilities, and $18.8 million was recorded in long-term liabilities.


Note 23:	Industry Segment and Geographic Area Information

The Company discloses information about its operating segments based on the way that management organizes the segments within the Company for making operating decisions and assessing financial performance. The Company evaluates the performance of its operating segments based on revenue and operating income. Intersegment revenue and transfers are not significant. The accounting policies of the operating segments are the same as those described in Note 1.

The principal products and services of the Company's two operating segments are:


•	Discovery & Analytical Solutions. Provides products and services targeted towards the environmental, industrial, food, life sciences research and laboratory services markets.


•	Diagnostics. Develops diagnostics, tools and applications focused on clinically-oriented customers, especially within the reproductive health, emerging market diagnostics and applied genomics markets. The Diagnostics segment serves the diagnostics market.

The Company has included the expenses for its corporate headquarters, such as legal, tax, audit, human resources, information technology, and other management and compliance costs, as well as the activity related to the mark-to-market adjustment on postretirement benefit plans, as “Corporate” below. The Company has a process to allocate and recharge expenses to the reportable segments when these costs are administered or paid by the corporate headquarters based on the extent to which the segment benefited from the expenses. These amounts have been calculated in a consistent manner and are included in the Company’s calculations of segment results to internally plan and assess the performance of each segment for all purposes, including determining the compensation of the business leaders for each of the Company’s operating segments. During the first quarter of fiscal year 2017, the Company changed the manner in which certain shared functional costs are allocated to the operating segments. Segment financial information relating to the fiscal years ended January 1, 2017 and January 3, 2016 have been retrospectively adjusted to reflect this change to the cost allocation methodology. Accordingly, for the fiscal years ended January 1, 2017 and January 3, 2016, operating income from continuing operations from the Discovery & Analytical Solutions segment decreased by $10.7 million and $10.9 million, respectively, with corresponding increases in operating income from continuing operations of the Diagnostics segment in both fiscal years.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Revenue and operating income (loss) from continuing operations by operating segment are shown in the table below for the fiscal years ended:



	December 31, 2017			January 1, 2017			January 3, 2016
	(In thousands)
Discovery & Analytical Solutions
Product revenue	$	941,328		$	934,098		$	968,034
Service revenue	637,131			578,886			560,385
Total revenue	1,578,459			1,512,984			1,528,419
Operating income from continuing operations(1)	206,688			196,819			162,762
Diagnostics
Product revenue	536,086			462,798			427,068
Service revenue	142,437			139,735			149,336
Total revenue	678,523			602,533			576,404
Operating income from continuing operations	149,636			149,577			146,478
Corporate
Operating loss from continuing operations(2)	(51,521		)	(63,330		)	(58,314		)
Continuing Operations
Product revenue	1,477,414			1,396,896			1,395,102
Service revenue	779,568			718,621			709,721
Total revenue	2,256,982			2,115,517			2,104,823
Operating income from continuing operations	304,803			283,066			250,926
Interest and other expense, net (see Note 5)	8,085			38,998			42,119
Income from continuing operations before income taxes	$	296,718		$	244,068		$	208,807


(1)	Legal costs for a particular case in the Discovery & Analytical Solutions segment were $2.7 million for fiscal year 2017.


(2)	Activity related to the mark-to-market adjustment on postretirement benefit plans has been included in the Corporate operating loss from continuing operations, and in the aggregate constituted a pre-tax gain of $2.1 million in fiscal year 2017, a pre-tax loss of $15.3 million in fiscal year 2016, and pre-tax loss of $12.4 million in fiscal year 2015.

Additional information relating to the Company’s reporting segments is as follows for the three fiscal years ended December 31, 2017:



	Depreciation and Amortization Expense						Capital Expenditures
	December 31, 2017		January 1, 2017		January 3, 2016		December 31, 2017		January 1, 2017		January 3, 2016
	(In thousands)						(In thousands)
Discovery & Analytical Solutions	$	72,590	$	72,484	$	74,177	$	26,200	$	21,486	$	18,175
Diagnostics	31,204		25,339		29,728		11,262		8,556		6,854
Corporate	1,206		2,149		1,459		1,627		1,660		3,189
Continuing operations	$	105,000	$	99,972	$	105,364	$	39,089	$	31,702	$	28,218
Discontinued operations	$	929	$	6,266	$	6,643	$	182	$	1,302	$	1,414

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)



	Total Assets
	December 31, 2017		January 1, 2017		January 3, 2016
	(In thousands)
Discovery & Analytical Solutions	$	2,744,370	$	2,612,757	$	2,546,583
Diagnostics	3,314,804		1,505,381		1,459,854
Corporate	32,289		31,171		28,497
Current and long-term assets of discontinued operations	—		127,374		131,361
Total assets	$	6,091,463	$	4,276,683	$	4,166,295

The following geographic area information for continuing operations includes revenue based on location of external customers for the three fiscal years ended December 31, 2017 and net long-lived assets based on physical location as of December 31, 2017 and January 1, 2017:



	Revenue
	December 31, 2017		January 1, 2017		January 3, 2016
	(In thousands)
U.S.	$	837,018	$	842,364	$	854,336
International:
China	374,931		336,728		296,908
United Kingdom	65,164		65,904		69,081
Germany	91,669		89,839		86,632
India	84,812		43,891		40,239
Italy	77,477		70,948		71,225
France	80,153		71,104		70,665
Japan	76,322		65,980		69,381
Other international	569,436		528,759		546,356
Total international	1,419,964		1,273,153		1,250,487
Total sales	$	2,256,982	$	2,115,517	$	2,104,823



	Net Long-Lived Assets
	December 31, 2017		January 1, 2017		January 3, 2016
	(In thousands)
U.S.	$	210,116	$	182,186	$	165,827
International:
Germany	88,249		1,292		1,187
China	64,815		36,458		34,494
United Kingdom	28,028		14,638		14,244
India	14,820		2,020		1,508
Finland	14,764		12,295		12,203
Italy	10,334		3,398		2,958
Singapore	9,240		6,820		7,679
Brazil	7,963		1,452		1,225
Netherlands	4,281		4,162		3,835
Sweden	3,869		2,645		1,247
Other international	19,565		7,684		6,619
Total international	265,928		92,864		87,199
Total net long-lived assets	$	476,044	$	275,050	$	253,026

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


Note 24:	Quarterly Financial Information (Unaudited)

Selected quarterly financial information is as follows for the fiscal years ended:



	First Quarter		Second Quarter		Third Quarter			Fourth Quarter(1)			Year
	(In thousands, except per share data)
December 31, 2017
Revenue	$	514,115	$	546,962	$	554,275		$	641,630		$	2,256,982
Gross profit	239,611		257,503		268,822			307,095			1,073,031
Restructuring and contract termination charges, net	9,651		—		3,269			(263		)	12,657
Operating income from continuing operations	51,579		75,997		79,807			97,420			304,803
Income from continuing operations before income taxes	39,983		70,792		105,054			80,889			296,718
Income (loss) from continuing operations	36,062		62,726		96,546			(38,444		)	156,890
Income (loss) from discontinued operations and dispositions	2,541		141,343		(5,468		)	(2,673		)	135,743
Net income (loss)	38,603		204,069		91,078			(41,117		)	292,633
Basic earnings per share:
Income (loss) from continuing operations	$	0.33	$	0.57	$	0.88		$	(0.35	)	$	1.43
Income (loss) from discontinued operations and dispositions	0.02		1.29		(0.05		)	(0.02		)	1.24
Net income (loss)	0.35		1.86		0.83			(0.37		)	2.67
Diluted earnings per share:
Income (loss) from continuing operations	$	0.33	$	0.57	$	0.87		$	(0.35	)	$	1.42
Income (loss) from discontinued operations and dispositions	0.02		1.28		(0.05		)	(0.02		)	1.22
Net income (loss)	0.35		1.84		0.82			(0.37		)	2.64
Cash dividends declared per common share	$	0.07	$	0.07	$	0.07		$	0.07		$	0.28

January 1, 2017
Revenue	$	498,016	$	536,242	$	514,489		$	566,770		$	2,115,517
Gross profit	235,086		253,554		248,550			276,163			1,013,353
Restructuring and contract termination charges, net	—		4,468		656			—			5,124
Operating income from continuing operations	60,577		66,266		75,781			80,442			283,066
Income from continuing operations before income taxes	49,491		60,873		64,518			69,186			244,068
Income from continuing operations	41,744		57,756		53,917			62,289			215,706
Income from discontinued operations and dispositions	5,722		6,101		4,210			2,560			18,593
Net income	47,466		63,857		58,127			64,849			234,299
Basic earnings per share:
Income from continuing operations	$	0.38	$	0.53	$	0.49		$	0.57		$	1.97
Income from discontinued operations and dispositions	0.05		0.06		0.04			0.02			0.17
Net income	0.43		0.59		0.53			0.59			2.14
Diluted earnings per share:
Income continuing operations	$	0.38	$	0.53	$	0.49		$	0.57		$	1.96
Income from discontinued operations and dispositions	0.05		0.06		0.04			0.02			0.17
Net income	0.43		0.58		0.53			0.59			2.12
Cash dividends declared per common share	$	0.07	$	0.07	$	0.07		$	0.07		$	0.28

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


(1)	The fourth quarter of fiscal year 2017 includes a pre-tax gain of $2.1 million as a result of the mark-to-market adjustment on postretirement benefit plans. The fourth quarter of fiscal year 2016 includes a pre-tax loss of $15.3 million as a result of the mark-to-market adjustment on postretirement benefit plans. See Note 1 for a discussion of this accounting policy.

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