Item 16. Form 10-K Summary

None.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date:			February 26, 2020			THERMO FISHER SCIENTIFIC INC.
						By:			/s/ Marc N. Casper
									Marc N. Casper
									Chairman, President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated, as of February 26, 2020.

By:			/s/ Marc N. Casper						By:			/s/ Jim P. Manzi
			Marc N. Casper									Jim P. Manzi
			Chairman, President and Chief Executive Officer									Director
			(Principal Executive Officer)
By:			/s/ Stephen Williamson						By:			/s/ James C. Mullen
			Stephen Williamson									James C. Mullen
			Senior Vice President and Chief Financial Officer									Director
			(Principal Financial Officer)
									By:			/s/ Lars R. Sørensen
By:			/s/ Peter E. Hornstra									Lars R. Sørensen
			Peter E. Hornstra									Director
			Vice President and Chief Accounting Officer
			(Principal Accounting Officer)
									By:			/s/ Debora L. Spar
By:			/s/ Nelson J. Chai									Debora L. Spar
			Nelson J. Chai									Director
			Director
By:			/s/ C. Martin Harris						By:			/s/ Scott M. Sperling
			C. Martin Harris									Scott M. Sperling
			Director									Director
By:			/s/ Tyler E. Jacks						By:			/s/ Elaine S. Ullian
			Tyler E. Jacks									Elaine S. Ullian
			Director									Director
By:			/s/ Judy C. Lewent						By:			/s/ Dion J. Weisler
			Judy C. Lewent									Dion J. Weisler
			Director									Director
By:			/s/ Thomas J. Lynch
			Thomas J. Lynch
			Director

THERMO FISHER SCIENTIFIC INC.

EXHIBIT INDEX

Exhibit Number						Description of Exhibit
3.1						Amended and Restated Certificate of Incorporation of the Registrant (filed as Exhibit 3.1 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2005 [File No. 1-8002] and incorporated in this document by reference).
3.2						Amendment to Thermo Fisher Scientific Inc.’s Third Amended and Restated Certificate of Incorporation (filed as Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed November 14, 2006 [File No. 1-8002] and incorporated in this document by reference).
3.3						Certificate of Elimination of the Series B Junior Participating Preferred Stock of the Company, dated November 13, 2015 (filed as Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed November 16, 2015 [File No. 1-8002] and incorporated in this document by reference).
3.4						By-Laws of the Registrant, as amended and effective as of March 1, 2017 (filed as Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed March 2, 2017 [File No. 1-8002] and incorporated in this document by reference).
						The Registrant agrees, pursuant to Item 601(b)(4)(iii)(A) of Regulation S-K, to furnish to the Commission, upon request, a copy of each instrument with respect to long-term debt of the Registrant or its consolidated subsidiaries.
4.1						Indenture dated as of November 20, 2009 between the Company and The Bank of New York Mellon Trust Company, N.A. (filed as Exhibit 99.1 to the Registrant’s Current Report on Form 8-K filed November 20, 2009 [File No. 1-8002] and incorporated in this document by reference).
4.2						Sixth Supplemental Indenture, dated as of December 11, 2013, between the Company and The Bank of New York Mellon Trust Company, N.A. (filed as Exhibit 99.2 to the Registrant’s Current Report on Form 8-K filed December 11, 2013 [File No. 1-8002] and incorporated in this document by reference).
4.3						Eighth Supplemental Indenture, dated as of November 24, 2014, among the Company, The Bank of New York Mellon Trust Company, N.A., as trustee, and The Bank of New York Mellon, London Branch, as paying agent (filed as Exhibit 4.2 to the Registrant’s Current Report on Form 8-K filed November 24, 2014 [File No. 1-8002] and incorporated in this document by reference).
4.4						Ninth Supplemental Indenture, dated as of July 21, 2015, among the Company, The Bank of New York Mellon Trust Company, N.A., as trustee, and The Bank of New York Mellon, London Branch, as paying agent (filed as Exhibit 4.2 to the Registrant’s Current Report on Form 8-K filed July 21, 2015 [File No. 1-8002] and incorporated in this document by reference).
4.5						Eleventh Supplemental Indenture, dated as of December 9, 2015, between the Company and The Bank of New York Mellon Trust Company, N.A. (filed as Exhibit 4.2 to the Registrant’s Current Report on Form 8-K filed December 9, 2015 [File No. 1-8002] and incorporated in this document by reference).
4.6						Twelfth Supplemental Indenture, dated as of April 13, 2016, between the Company and The Bank of New York Mellon Trust Company, N.A. (filed as Exhibit 4.2 to the Registrant’s Current Report on Form 8-K filed April 13, 2016 [File No. 1-8002] and incorporated in this document by reference).
4.7						Thirteenth Supplemental Indenture, dated as of September 12, 2016, between the Company and The Bank of New York Mellon Trust Company, N.A., as trustee (filed as Exhibit 4.2 to the Registrant’s Current Report on Form 8-K filed September 12, 2016 [File No. 1-8002] and incorporated in this document by reference).
4.8						Fourteenth Supplemental Indenture, dated as of September 19, 2016, between the Company and The Bank of New York Mellon Trust Company, N.A., as trustee (filed as Exhibit 4.2 to the Registrant’s Current Report on Form 8-K filed September 19, 2016 [File No. 1-8002] and incorporated in this document by reference).
4.9						Fifteenth Supplemental Indenture, dated as of March 16, 2017, between the Company and The Bank of New York Mellon Trust Company, N.A., as trustee (filed as Exhibit 4.2 to the Registrant’s Current Report on Form 8-K filed March 16, 2017 [File No. 1-8002] and incorporated in this document by reference).
4.10						Sixteenth Supplemental Indenture, dated as of July 24, 2017, between the Company and The Bank of New York Mellon Trust Company, N.A., as trustee (filed as Exhibit 4.2 to the Registrant's Current Report on Form 8-K filed July 24, 2017 [File No. 1-8002] and incorporated in this document by reference).
4.11						Seventeenth Supplemental Indenture, dated as of August 14, 2017, between the Company and The Bank of New York Mellon Trust Company, N.A., as trustee (filed as Exhibit 4.2 to the Registrant’s Current Report on Form 8-K filed August 14, 2017 [File No. 1-8002] and incorporated in this document by reference).
4.12						Eighteenth Supplemental Indenture, dated as of September 30, 2019, between the Company, as issuer, and The Bank of New York Mellon Trust Company, N.A., as trustee (filed as Exhibit 4.2 to the Registrant’s Current Report on Form 8-K filed September 30, 2019 [File No. 1-8002] and incorporated in this document by reference).
4.13						Nineteenth Supplemental Indenture, dated as of October 8, 2019, between the Company, as issuer, and the Bank of New York Mellon Trust Company, N.A., as trustee (filed as Exhibit 4.2 to the Registrant’s Current Report on Form 8-K filed October 8, 2019 [File No. 1-8002] and incorporated in this document by reference).
4.14						Indenture, dated as of August 9, 2016, among Thermo Fisher Scientific (Finance I) B.V., as issuer, the Company, as guarantor, and The Bank of New York Mellon Trust Company, N.A., as trustee (filed as Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed August 9, 2016 [File No. 1-8002] and incorporated in this document by reference).
4.15						Second Supplemental Indenture, dated as of August 8, 2018, among Thermo Fisher Scientific (Finance I) B.V., as issuer, the Company, as guarantor, and The Bank of New York Mellon Trust Company, N.A., as trustee (filed as Exhibit 4.2 to the Registrant’s Current Report on Form 8-K filed August 8, 2018 [File No. 1-8002] and incorporated in this document by reference).

THERMO FISHER SCIENTIFIC INC.

EXHIBIT INDEX

Exhibit Number						Description of Exhibit
4.16						Description of the Registrant’s Securities.
10.1						Thermo Fisher Scientific Inc. Deferred Compensation Plan for Directors of the Registrant, as amended and restated on September 12, 2007 (filed as Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 29, 2007 [File No. 1‑8002] and incorporated in this document by reference).*
10.2						Thermo Electron Corporation Deferred Compensation Plan, effective November 1, 2001 (filed as Exhibit 10.13 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 29, 2001 [File No. 1-8002] and incorporated in this document by reference).*
10.3						Form of Amended and Restated Indemnification Agreement between the Registrant and its directors and officers (filed as Exhibit 10.2 to the Registrant’s Registration Statement on Form S-4 [Reg. No. 333-90661] and incorporated in this document by reference).*
10.4						Summary of Thermo Fisher Scientific Inc. Annual Director Compensation.*
10.5						Summary of 2019 Annual Cash Incentive Plan Matters (set forth in Item 5.02 to the Registrant’s Current Report on Form 8-K filed February 28, 2019 [File No.1-8002] under the heading “Compensatory Arrangements of Certain Officers” and incorporated in this document by reference).*
10.6						Form of Noncompetition Agreement between the Registrant and certain key employees and executive officers (filed as Exhibit 10.25 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2009 [File No. 1-8002] and incorporated in this document by reference).*
10.7						Retirement Plan for Non-Employee Directors of Fisher Scientific International Inc. (filed as Exhibit 10.12 to Fisher Scientific International Inc.’s Annual Report on Form 10-K for the year ended December 31, 1992 [File No. 1-10920] and incorporated in this document by reference).*
10.8						First Amendment to the Fisher Scientific International Inc. Retirement Plan for Non-Employee Directors (filed as Exhibit 10.04 to Fisher Scientific International Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2005 [File No. 1-10920] and incorporated in this document by reference).*
10.9						Amendment to Retirement Plan for Non-Employee Directors of Fisher Scientific International Inc. (filed as Exhibit 10.02 to Fisher Scientific International Inc.’s Current Report on Form 8-K filed March 7, 2006 [File No. 1-10920] and incorporated in this document by reference).*
10.10						Thermo Fisher Scientific Inc. Amended and Restated 2005 Deferred Compensation Plan, effective January 1, 2009 (filed as Exhibit 10.43 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2008 [File No. 1-8002] and incorporated in this document by reference).*
10.11						Thermo Fisher Scientific Inc. 2008 Stock Incentive Plan (filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed May 22, 2008 [File No. 1-8002] and incorporated in this document by reference).*
10.12						Amendment No. 1 to Thermo Fisher Scientific Inc. Amended and Restated 2005 Deferred Compensation Plan (filed as Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 27, 2009 [File No. 1-8002] and incorporated in this document by reference).*
10.13						2009 Restatement of Executive Severance Agreement, between Marc Casper and the Registrant, dated November 21, 2009 (filed as Exhibit 10.5 to the Registrant’s Current Report on Form 8-K filed November 25, 2009 [File No. 1-8002] and incorporated in this document by reference).*
10.14						Executive Change In Control Retention Agreement, between Marc Casper and the Registrant, dated November 21, 2009 (filed as Exhibit 10.6 to the Registrant’s Current Report on Form 8-K filed November 25, 2009 [File No. 1-8002] and incorporated in this document by reference).*
10.15						Noncompetition Agreement, between Marc Casper and the Registrant, dated November 21, 2009 (filed as Exhibit 10.7 to the Registrant’s Current Report on Form 8-K filed November 25, 2009 [File No. 1-8002] and incorporated in this document by reference).*
10.16						Amendment No. 1 to 2009 Restatement of Executive Severance Agreement, dated February 25, 2010, between the Registrant and Marc N. Casper (filed as Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed February 25, 2010 [File No. 1-8002] and incorporated in this document by reference).*
10.17						Amendment No. 2 to 2009 Restatement of Executive Severance Agreement, dated November 30, 2010, between the Registrant and Marc N. Casper (filed as Exhibit 10.55 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2010 [File No. 1-8002] and incorporated in this document by reference).*
10.18						Amendment No. 1 to Executive Change In Control Retention Agreement, dated November 30, 2010, between Marc N. Casper and the Registrant (filed as Exhibit 10.56 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2010 [File No. 1-8002] and incorporated in this document by reference).*
10.19						Amendment No. 2 to Executive Change in Control Retention Agreement, dated March 16, 2018, between Marc N. Casper and the Registrant (filed as Exhibit 10.3 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 2018 [File No. 1-8002] and incorporated in this document by reference).*
10.20						Form of Executive Change in Control Retention Agreement for Officers (other than Marc Casper) (filed as Exhibit 10.2 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 2018 [File No. 1-8002] and incorporated in this document by reference).*
10.21						Amendment to 2008 Stock Incentive Plan dated November 10, 2010 (filed as Exhibit 10.57 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2010 [File No. 1-8002] and incorporated in this document by reference).*

THERMO FISHER SCIENTIFIC INC.

EXHIBIT INDEX

Exhibit Number						Description of Exhibit
10.22						Form of Thermo Fisher Scientific Inc.’s Restricted Stock Unit Agreement for Directors (filed as Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended April 2, 2011 [File No. 1-8002] and incorporated in this document by reference).*
10.23						Form of Thermo Fisher Scientific Inc.’s Performance Restricted Stock Unit Agreement (filed as Exhibit 10.4 to the Registrant’s Current Report on Form 8-K filed February 27, 2013 [File No. 1-8002] and incorporated in this document by reference).*
10.24						Form of Thermo Fisher Scientific Inc.’s Restricted Stock Unit Agreement (filed as Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed February 27, 2013 [File No. 1-8002] and incorporated in this document by reference).*
10.25						Form of Performance Restricted Stock Unit Agreement between Thermo Fisher Scientific Inc. and Marc Casper (filed as Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed February 27, 2013 [File No. 1-8002] and incorporated in this document by reference).*
10.26						Form of Restricted Stock Unit Agreement between Thermo Fisher Scientific Inc. and Marc Casper (filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed February 27, 2013 [File No. 1-8002] and incorporated in this document by reference).*
10.27						Form of Stock Option Agreement between Thermo Fisher Scientific Inc. and Marc Casper (filed as Exhibit 10.5 to the Registrant’s Current Report on Form 8-K filed February 27, 2013 [File No. 1-8002] and incorporated in this document by reference).*
10.28						Thermo Fisher Scientific Inc. 2013 Stock Incentive Plan (filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed May 23, 2013 [File No. 1-8002] and incorporated in this document by reference).*
10.29						Supplemental Executive Retirement Plan effective as of December 31, 2005, as amended and restated as of August 28, 2006 (filed as Exhibit 10.3 to Applera Corporation’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2006 [File No. 1-04389] and incorporated in this document by reference).*
10.30						Amendment to Supplemental Executive Retirement Plan, effective as of January 1, 2010 (filed as Exhibit 10.1 to Life Technologies Corporation’s Current Report on Form 8-K filed December 18, 2009 [File No. 000-25317] and incorporated in this document by reference).*
10.31						Noncompetition Agreement between the Registrant and Mark Stevenson, dated September 10, 2015 (filed as Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 26, 2015 [File No. 1-8002] and incorporated in this document by reference).*
10.32						Form of Thermo Fisher Scientific Inc.’s Stock Option Agreement for Officers (filed as Exhibit 10.44 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 2016 [File No. 1-8002] and incorporated in this document by reference).*
10.33						Patheon N.V. 2016 Omnibus Incentive Plan (filed as Exhibit 10.2 to the Current Report on Form 8-K filed by Patheon N.V. on July 26, 2016 [File No. 001-37837] and incorporated in this document by reference).*
10.34						Amendment to Patheon N.V. 2016 Omnibus Incentive Plan, dated March 7, 2017 (filed as exhibit 4.5 to the Registrant's Registration Statement on Form S-8 filed August 29, 2017 [File No. 1-8002] and incorporated in this document by reference).*
10.35						Amendment to Patheon N.V. 2016 Omnibus Incentive Plan, dated August 23, 2017 (filed as exhibit 4.6 to the Registrant's Registration Statement on Form S-8 filed August 29, 2017 [File No. 1-8002] and incorporated in this document by reference).*
10.36						Credit Agreement, dated July 1, 2016, among the Company, certain Subsidiaries of the Company from time to time party thereto, each lender from time to time party thereto, and Bank of America, N.A. (filed as Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed July 1, 2016 [File No. 1-8002] and incorporated in this document by reference).
10.37						Form of Performance Restricted Stock Unit Agreement effective February 26, 2019 (filed as Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 30, 2019 [File No. 1-8002] and incorporated in this document by reference).*
10.38						Form of Performance Restricted Stock Unit Agreement for Marc Casper effective February 26, 2019 (filed as Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 30, 2019 [File No. 1-8002] and incorporated in this document by reference).*
10.39						Letter Agreement between the Registrant and Michel Lagarde dated August 28, 2017.*
10.40						Option Agreement Under the Patheon N.V. 2016 Omnibus Incentive Plan between Patheon N.V. and Michel Lagarde dated July 20, 2016.*
10.41						Restricted Share Unit Award Agreement between Patheon N.V. and Michel Lagarde dated March 23, 2017 as amended.*
10.42						Option Agreement Under the Patheon N.V. 2016 Omnibus Incentive Plan between Patheon N.V. and Michel Lagarde dated March 23, 2017.*
10.43						Thermo Fisher Scientific Inc. Executive Severance Policy (filed as Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 29, 2019 [File No. 1-8002] and incorporated in this document by reference).*
10.44						Form of Noncompetition Agreement between the Registrant and certain key employees and executive officers (filed as Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 29, 2019 [File No. 1-8002] and incorporated in this document by reference).*

THERMO FISHER SCIENTIFIC INC.

EXHIBIT INDEX

Exhibit Number						Description of Exhibit
10.45						Form of Thermo Fisher Scientific Inc.’s Performance Restricted Stock Unit Agreement.*
10.46						Form of Thermo Fisher Scientific Inc.’s Restricted Stock Unit Agreement.*
10.47						Form of Thermo Fisher Scientific Inc.’s Stock Option Agreement for Officers.*
10.48						Form of Performance Restricted Stock Unit Agreement between Thermo Fisher Scientific Inc. and Marc Casper.*
10.49						Form of Restricted Stock Unit Agreement between Thermo Fisher Scientific Inc. and Marc Casper.*
10.50						Form of Stock Option Agreement between Thermo Fisher Scientific Inc. and Marc Casper.*
21						Subsidiaries of the Registrant.
23.1						Consent of PricewaterhouseCoopers LLP, an Independent Registered Public Accounting Firm.
31.1						Certification of Chief Executive Officer required by Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2						Certification of Chief Financial Officer required by Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1						Certification of Chief Executive Officer required by Exchange Act Rules 13a-14(b) and 15d-14(b), as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**
32.2						Certification of Chief Financial Officer required by Exchange Act Rules 13a-14(b) and 15d-14(b), as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**
101.INS						XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH						XBRL Taxonomy Extension Schema Document.
101.CAL						XBRL Taxonomy Calculation Linkbase Document.
101.DEF						XBRL Taxonomy Definition Linkbase Document.
101.LAB						XBRL Taxonomy Label Linkbase Document.
101.PRE						XBRL Taxonomy Presentation Linkbase Document.
104						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

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*Indicates management contract or compensatory plan, contract or arrangement.

** Certification is not deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liability of that section. Such certification is not deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act except to the extent that the registrant specifically incorporates it by reference.

THERMO FISHER SCIENTIFIC INC.

INDEX OF CONSOLIDATED FINANCIAL STATEMENTS

The following Consolidated Financial Statements of the Registrant and its subsidiaries are required to be included in Item 15:

			Page
Report of Independent Registered Public Accounting Firm			F-2
Consolidated Balance Sheet as of December 31, 2019 and 2018			F-6
Consolidated Statement of Income for the years ended December 31, 2019, 2018 and 2017			F-7
Consolidated Statement of Comprehensive Income for the years ended December 31, 2019, 2018 and 2017			F-8
Consolidated Statement of Cash Flows for the years ended December 31, 2019, 2018 and 2017			F-9
Consolidated Statement of Shareholders’ Equity for the years ended December 31, 2019, 2018 and 2017			F-10
Notes to Consolidated Financial Statements			F-11

F-1

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of Thermo Fisher Scientific Inc.

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheet of Thermo Fisher Scientific Inc. and its subsidiaries (the “Company”) as of December 31, 2019 and 2018, and the related consolidated statements of income, of comprehensive income, of shareholders' equity and of cash flows for each of the three years in the period ended December 31, 2019, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2019 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Change in Accounting Principle

As discussed in Note 1 to the consolidated financial statements, the Company changed the manner in which it accounts for leases in 2019.

Basis for Opinions

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Annual Report on Internal Control Over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (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 audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated 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 consolidated 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 consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a

F-2

material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Goodwill impairment assessment

As described in Note 1 to the consolidated financial statements, the Company’s consolidated goodwill balance was $25,714 million as of December 31, 2019. Management evaluates goodwill impairment at the reporting unit level annually and when events occur or circumstances change that would more-likely-than-not reduce the fair value of the reporting unit below its carrying amount. In performing the assessment, management estimates the fair values of its reporting units by using forecasts of discounted future cash flows and peer market multiples. As disclosed by management, estimates of discounted future cash flows require management to make assumptions related to revenue and operating income growth rates, discount rates and other factors. Management also considers peer revenues and earnings trading multiples from companies that have operational and financial characteristics that are similar to the respective reporting units and estimates weighted average costs of capital.

The principal considerations for our determination that performing procedures relating to the goodwill impairment assessment is a critical audit matter are there was significant judgment by management when estimating the fair value of the reporting units. This in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures to evaluate management’s cash flow projections and significant assumptions, including revenue and operating income growth rates, discount rates and peer market multiples. In addition, the audit

F-3

effort involved the use of professionals with specialized skill and knowledge to assist in performing these procedures and evaluating the audit evidence obtained from these procedures.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the goodwill impairment assessment, including controls over the development of assumptions used by management to estimate the fair values of the Company’s reporting units. These procedures also included, among others, testing management’s process for developing the fair value estimates; evaluating the appropriateness of the discounted cash flow models; testing the completeness, accuracy, and relevance of underlying data used in the models; and evaluating the reasonableness of the assumptions used, including revenue and operating income growth rates, discount rates and peer market multiples. Evaluating the reasonableness of management’s assumptions related to revenue and operating income growth rates involved evaluating whether the assumptions used were reasonable considering (i) the current and past performance of the reporting units and (ii) whether the assumptions were consistent with evidence obtained in other areas of the audit. Evaluating the reasonableness of the peer market multiples assumption involved evaluating the population of peer companies used in the analyses and testing selected market data used by management to determine the multiples by comparison to publicly available information. Professionals with specialized skill and knowledge were used to assist in evaluating the appropriateness of the Company’s discounted cash flow model and certain significant assumptions, including the discount rates.

Income taxes

As described in Notes 1 and 8 to the consolidated financial statements, the Company’s total income tax expense for the period ended December 31, 2019 was $374 million. The Company has deferred income tax liabilities, net, of $1,619 million (including a valuation allowance of $408 million) and unrecognized income tax benefits of $1,552 million as of December 31, 2019. As disclosed by management, the Company operates in numerous countries under many legal forms and, as a result, is subject to the jurisdiction of numerous domestic and non-U.S. tax authorities, as well as to tax agreements and treaties among these governments. Determination of taxable income in any jurisdiction requires management to interpret the related tax laws and regulations and t0 use estimates and assumptions regarding significant future events, such as the amount, timing and character of deductions, permissible revenue recognition methods under the tax law and the sources and character of income and tax credits. Management assesses income tax positions and records tax benefits for all years subject to examination based upon evaluation of the facts, circumstances and information available at the reporting date. For those tax positions where it is more likely than not that a tax benefit will be sustained, management has recorded the largest amount of tax benefit with a greater than 50 percent likelihood of being realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information. For those income tax positions where it is not more likely than not that a tax benefit will be sustained, no tax benefit has been recognized in the financial statements. Management estimates the degree to which tax assets will result in a benefit, after consideration of all positive and negative evidence, and provides a valuation allowance for tax assets that it believes will more likely than not go unused. In situations in which management has been able to determine that the Company’s deferred tax assets will be realized, that determination generally relies on future reversals of taxable temporary differences and expected future taxable income. If it becomes more likely than not that a tax asset will be used, management reverses the related valuation allowance. The principal considerations for our determination that performing procedures relating to income taxes is a critical audit matter are there was significant judgment by management when determining the provision for income taxes, deferred tax assets and liabilities, and liabilities for unrecognized tax benefits due to numerous and complex tax laws, the frequency of tax filings, as well as judgments regarding the realizability of deferred tax assets. This in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating audit evidence related to the provision for income taxes, deferred tax assets and liabilities, and

F-4

liabilities for unrecognized tax benefits. In addition, the audit effort involved the use of professionals with specialized skill and knowledge to assist in performing these procedures and evaluating the audit evidence obtained from these procedures.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the financial statements. These procedures included testing the effectiveness of controls relating to the provision for income taxes, deferred tax assets and liabilities, and liabilities for unrecognized tax benefits, including controls over management’s assessment of the realizability of deferred tax assets. These procedures also included, among others, (i) testing the accuracy of the income tax provision, including the rate reconciliation and permanent and temporary differences, (ii) evaluating whether the data utilized in the calculation of the provision for income taxes was appropriate and consistent with evidence obtained in other areas of the audit, (iii) evaluating management’s assessment of the realizability of deferred tax assets on a jurisdictional basis, (iv) evaluating the identification of reserves for unrecognized tax benefits and the reasonableness of the “more likely than not” determination in consideration of jurisdictions, court decisions, legislative actions, statutes of limitations, and developments in tax examinations, (v) testing the calculation of the liability for unrecognized tax benefits by jurisdiction, including estimates of the amount of tax benefit expected to be sustained, and (vi) evaluating the adequacy of the Company’s disclosures. Professionals with specialized skill and knowledge were used to assist in evaluating the reasonableness of management’s judgments and estimates, including application of foreign and domestic tax laws and regulations.

/s/ PricewaterhouseCoopers LLP

Boston, Massachusetts

February 26, 2020

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

F-5

THERMO FISHER SCIENTIFIC INC.

CONSOLIDATED BALANCE SHEET

						December 31,						December 31,
(In millions except share and per share amounts)						2019						2018
Assets
Current Assets:
Cash and cash equivalents						$	2,399					$	2,103
Accounts receivable, less allowances of $102 and $117						4,349						4,136
Inventories						3,370						3,005
Contract assets, net						603						459
Other current assets						1,172						922
Total current assets						11,893						10,625
Property, Plant and Equipment, Net						4,749						4,165
Acquisition-related Intangible Assets, Net						14,014						14,978
Other Assets						2,011						1,117
Goodwill						25,714						25,347
Total Assets						$	58,381					$	56,232
Liabilities and Shareholders' Equity
Current Liabilities:
Short-term obligations and current maturities of long-term obligations						$	676					$	1,271
Accounts payable						1,920						1,615
Accrued payroll and employee benefits						1,010						982
Contract liabilities						916						809
Other accrued expenses						1,675						1,470
Total current liabilities						6,197						6,147
Deferred Income Taxes						2,192						2,265
Other Long-term Liabilities						3,241						2,515
Long-term Obligations						17,076						17,719
Commitments and Contingencies (Note 12)
Shareholders' Equity:
Preferred stock, $100 par value, 50,000 shares authorized; none issued
Common stock, $1 par value, 1,200,000,000 shares authorized; 434,416,804 and 431,566,561 shares issued						434						432
Capital in excess of par value						15,064						14,621
Retained earnings						22,092						18,696
Treasury stock at cost, 35,676,421 and 29,444,882 shares						(5,236)						(3,665)
Accumulated other comprehensive items						(2,679)						(2,498)
Total shareholders' equity						29,675						27,586
Total Liabilities and Shareholders' Equity						$	58,381					$	56,232

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

F-6

THERMO FISHER SCIENTIFIC INC.

CONSOLIDATED STATEMENT OF INCOME

						Year Ended
						December 31,						December 31,						December 31,
(In millions except per share amounts)						2019						2018						2017
Revenues
Product revenues						$	19,496					$	18,868					$	17,374
Service revenues						6,046						5,490						3,544
Total revenues						25,542						24,358						20,918
Costs and Operating Expenses:
Cost of product revenues						10,037						9,682						8,975
Cost of service revenues						4,177						3,819						2,495
Selling, general and administrative expenses						6,144						6,057						5,504
Research and development expenses						1,003						967						887
Restructuring and other (income) costs, net						(413)						50						97
Total costs and operating expenses						20,948						20,575						17,958
Operating Income						4,594						3,783						2,960
Interest Income						224						137						81
Interest Expense						(676)						(667)						(592)
Other (Expense) Income, Net						(72)						9						(20)
Income from Continuing Operations Before Income Taxes						4,070						3,262						2,429
Provision for Income Taxes						(374)						(324)						(201)
Income from Continuing Operations						3,696						2,938						2,228
Loss from Discontinued Operations (net of income tax benefit of $0, $0 and $2)									—						—						(3)
Net Income						$	3,696					$	2,938					$	2,225
Earnings per Share from Continuing Operations
Basic						$	9.24					$	7.31					$	5.65
Diluted						$	9.17					$	7.24					$	5.60
Earnings per Share
Basic						$	9.24					$	7.31					$	5.64
Diluted						$	9.17					$	7.24					$	5.59
Weighted Average Shares
Basic						400						402						395
Diluted						403						406						398

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

F-7

THERMO FISHER SCIENTIFIC INC.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

						Year Ended
						December 31,						December 31,						December 31,
(In millions)						2019						2018						2017
Comprehensive Income
Net Income						$	3,696					$	2,938					$	2,225
Other Comprehensive Items:
Currency translation adjustment:
Currency translation adjustment (net of tax provision (benefit) of $25, $84 and $(145))						(107)						(434)						588
Reclassification adjustment for losses included in net income						30						—						—
Unrealized gains and losses on available-for-sale investments:
Unrealized holding losses arising during the period (net of tax benefit of $0, $0 and $0)						—						—						(1)
Reclassification adjustment for gains included in net income (net of tax provision of $0, $0 and $1)						—						—						(1)
Unrealized gains and losses on hedging instruments:
Unrealized losses on hedging instruments (net of tax benefit of $12, $0 and $0)						(38)						—						—
Reclassification adjustment for losses included in net income (net of tax benefit of $6, $3 and $5)						19						9						7
Pension and other postretirement benefit liability adjustments:
Pension and other postretirement benefit liability adjustments arising during the period (net of tax (benefit) provision of $(31), $2 and $7)						(93)						3						23
Amortization of net loss and prior service benefit included in net periodic pension cost (net of tax benefit of $2, $5 and $5)						8						15						17
Total other comprehensive items						(181)						(407)						633
Comprehensive Income						$	3,515					$	2,531					$	2,858

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

F-8

THERMO FISHER SCIENTIFIC INC.

CONSOLIDATED STATEMENT OF CASH FLOWS

						Year Ended
						December 31,						December 31,						December 31,
(In millions)						2019						2018						2017
Operating Activities
Net income						$	3,696					$	2,938					$	2,225
Loss from discontinued operations						—						—						3
Income from continuing operations						3,696						2,938						2,228
Adjustments to reconcile income from continuing operations to net cash provided by operating activities:
Depreciation of property, plant and equipment						564						526						439
Amortization of acquisition-related intangible assets						1,713						1,741						1,594
Change in deferred income taxes						(302)						(379)						(1,098)
Gain on sales of businesses						(482)						—						—
Non-cash stock-based compensation						181						181						159
Loss on early extinguishment of debt						184						3						4
Other non-cash expenses, net						84						103						186
Changes in assets and liabilities, excluding the effects of acquisitions and disposition:
Accounts receivable						(225)						(366)						(362)
Inventories						(458)						(324)						(81)
Other assets						(408)						54						(153)
Accounts payable						266						201						274
Other liabilities						210						(42)						1,016
Contributions to retirement plans						(50)						(93)						(200)
Net cash provided by continuing operations						4,973						4,543						4,006
Net cash used in discontinued operations						—						—						(1)
Net cash provided by operating activities						4,973						4,543						4,005
Investing Activities
Acquisitions, net of cash acquired						(1,843)						(536)						(7,226)
Proceeds from sale of business, net of cash divested						1,128						—						—
Purchase of property, plant and equipment						(926)						(758)						(508)
Proceeds from sale of property, plant and equipment						36						50						7
Other investing activities, net						118						(9)						(2)
Net cash used in investing activities						(1,487)						(1,253)						(7,729)
Financing Activities
Net proceeds from issuance of debt						5,638						690						6,459
Repayment of debt						(6,360)						(2,052)						(3,299)
Proceeds from issuance of commercial paper						2,781						5,060						8,380
Repayments of commercial paper						(3,464)						(5,254)						(8,514)
Purchases of company common stock						(1,500)						(500)						(750)
Dividends paid						(297)						(266)						(237)
Net proceeds from issuance of company common stock						—						—						1,690
Net proceeds from issuance of company common stock under employee stock plans						153						136						128
Other financing activities, net						(69)						(51)						(3)
Net cash (used in) provided by financing activities						(3,118)						(2,237)						3,854
Exchange Rate Effect on Cash						(63)						(297)						420
Increase in Cash, Cash Equivalents and Restricted Cash						305						756						550
Cash, Cash Equivalents and Restricted Cash at Beginning of Period						2,117						1,361						811
Cash, Cash Equivalents and Restricted Cash at End of Period						$	2,422					$	2,117					$	1,361

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

F-9

THERMO FISHER SCIENTIFIC INC.

CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY

						Common Stock																		Capital in Excess of Par Value						Retained Earnings						Treasury Stock																		Accumulated Other Comprehensive Items						Total Shareholders' Equity
(In millions)						Shares						Amount																		Shares						Amount
Balance at December 31, 2016						415						$	415					$	12,140					$	13,927					22						$	(2,306)					$	(2,636)					$	21,540
Issuance of shares under employees' and directors' stock plans						3						3						196						—						—						(47)						—						152
Issuance of shares						10						10						1,680						—						—						—						—						1,690
Stock-based compensation						—						—						159						—						—						—						—						159
Purchases of company common stock						—						—						—						—						5						(750)						—						(750)
Dividends declared ($0.60 per share)						—						—						—						(238)						—						—						—						(238)
Net income						—						—						—						2,225						—						—						—						2,225
Other comprehensive items						—						—						—						—						—						—						633						633
Other						—						—						2						—						—						—						—						2
Balance at December 31, 2017						428						428						14,177						15,914						27						(3,103)						(2,003)						25,413
Cumulative effect of accounting changes						—						—						—						118						—						—						(88)						30
Issuance of shares under employees' and directors' stock plans						4						4						236						—						—						(62)						—						178
Stock-based compensation						—						—						181						—						—						—						—						181
Purchases of company common stock						—						—						—						—						2						(500)						—						(500)
Dividends declared ($0.68 per share)						—						—						—						(274)						—						—						—						(274)
Net income						—						—						—						2,938						—						—						—						2,938
Other comprehensive items						—						—						—						—						—						—						(407)						(407)
Other						—						—						27						—						—						—						—						27
Balance at December 31, 2018						432						432						14,621						18,696						29						(3,665)						(2,498)						27,586
Cumulative effect of accounting change						—						—						—						4						—						—						—						4
Issuance of shares under employees' and directors' stock plans						2						2						262						—						1						(71)						—						193
Stock-based compensation						—						—						181						—						—						—						—						181
Purchases of company common stock						—						—						—						—						6						(1,500)						—						(1,500)
Dividends declared ($0.76 per share)						—						—						—						(304)						—						—						—						(304)
Net income						—						—						—						3,696						—						—						—						3,696
Other comprehensive items						—						—						—						—						—						—						(181)						(181)
Balance at December 31, 2019						434						$	434					$	15,064					$	22,092					36						$	(5,236)					$	(2,679)					$	29,675

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

F-10

THERMO FISHER SCIENTIFIC INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Nature of Operations and Summary of Significant Accounting Policies

Nature of Operations

Thermo Fisher Scientific Inc. (the company or Thermo Fisher) enables customers to make the world healthier, cleaner and safer by helping them accelerate life sciences research, solve complex analytical challenges, improve patient diagnostics, deliver medicines to market and increase laboratory productivity. Markets served include pharmaceutical and biotech, academic and government, industrial and applied, as well as healthcare and diagnostics.

Principles of Consolidation

The accompanying financial statements include the accounts of the company and its wholly and majority-owned subsidiaries. All material intercompany accounts and transactions have been eliminated. The company accounts for investments in businesses using the equity method when it has the ability to exercise significant influence but not control (generally between 20% and 50% ownership) and is not the primary beneficiary.

Presentation

Certain reclassifications of prior year amounts have been made to conform to the current year presentation.

Revenue Recognition

Prior to 2018, the company recognized revenue after all significant obligations had been met, collectability was probable and title had passed, which typically occurred upon shipment, delivery, completion of services, or ratably over the contract period. Beginning in 2018, the company recognizes revenue as performance obligations are satisfied by transferring control of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. See Recent Accounting Pronouncements below for a discussion of the change in revenue recognition accounting that became effective in 2018.

Consumables revenues consist of single-use products and are recognized at a point in time following the transfer of control of such products to the customer, which generally occurs upon shipment. Instruments revenues typically consist of longer-lived assets that, for the substantial majority of sales, are recognized at a point in time in a manner similar to consumables. Service revenues (clinical trial logistics, pharmaceutical development and manufacturing services, asset management, diagnostic testing, training, service contracts, and field services including related time and materials) are recognized over time as customers receive and consume the benefits of such services. For revenues recognized over time, the company generally uses costs accumulated relative to total estimated costs to measure progress as this method approximates satisfaction of the performance obligation. For contracts that contain multiple performance obligations, the company allocates the consideration to which it expects to be entitled to each performance obligation based on relative standalone selling prices and recognizes the related revenue when or as control of each individual performance obligation is transferred to customers. The company exercises judgment in determining the timing of revenue by analyzing the point in time or the period over which the customer has the ability to direct the use of and obtain substantially all of the remaining benefits of the asset. The company immediately expenses contract costs that would otherwise be capitalized and amortized over a period of less than one year.

Payments from customers for most instruments, consumables and services are typically due in a fixed number of days after shipment or delivery of the product. Service arrangements commonly call for payments in advance of performing the work (e.g. extended service contracts), upon completion of the service (e.g. pharmaceutical development and manufacturing) or a mix of both.

See Note 3 for revenue disaggregated by type and by geographic region as well as further information about remaining performance obligations.

Contract-related Balances

Accounts receivable include amounts that have been billed and are currently due from customers. They are recorded at the invoiced amount and do not bear interest. The company maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers to pay amounts due. The allowance for doubtful accounts is the company’s best estimate of the amount of probable credit losses in existing accounts receivable. The company determines the allowance based on the age of the receivable, the creditworthiness of the customer and any other information that is relevant to the judgment. Account balances are charged off against the allowance when the company believes it is probable the receivable will not be recovered. The company does not have any off-balance-sheet credit exposure related to customers.

F-11

THERMO FISHER SCIENTIFIC INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The changes in the allowance for doubtful accounts are as follows:

						Year Ended December 31,
(In millions)						2019						2018						2017
Beginning Balance						$	117					$	109					$	77
Provision charged to expense						20						18						32
Accounts written off						(32)						(12)						(10)
Acquisitions, currency translation and other						(3)						2						10
Ending Balance						$	102					$	117					$	109

Contract assets include revenues recognized in advance of billings and are recorded net of estimated losses resulting from the inability to invoice customers. Contract assets are classified as current or noncurrent based on the amount of time expected to lapse until the company's right to consideration becomes unconditional. Noncurrent contract assets are included within other assets in the accompanying balance sheet.

Contract liabilities include billings in excess of revenues recognized, such as those resulting from customer advances and deposits and unearned revenue on service contracts. Contract liabilities are classified as current or noncurrent based on the periods over which remaining performance obligations are expected to be transferred to customers. Noncurrent contract liabilities are included within other long-term liabilities in the accompanying balance sheet. Contract assets and liabilities are presented on a net basis in the consolidated balance sheet if they arise from different performance obligations in the same contract. Contract asset and liability balances are as follows:

						December 31,						December 31,
(In millions)						2019						2018
Current Contract Assets, Net						$	603					$	459
Noncurrent Contract Assets, Net						17						15
Current Contract Liabilities						916						809
Noncurrent Contract Liabilities						594						355

Substantially all of the current contract liabilities balance at December 31, 2018 and January 1 2018, was recognized in revenue during 2019 and 2018, respectively. Contract assets increased in 2019 primarily due to growth in pharmaceutical development and manufacturing services. Contract liabilities increased during 2019 primarily due to an advance payment from a customer and an acquisition.

Warranty Obligations

The company provides for the estimated cost of standard product warranties, primarily from historical information, in cost of product revenues at the time product revenue is recognized. While the company engages in extensive product quality programs and processes, including actively monitoring and evaluating the quality of its component supplies, the company’s warranty obligation is affected by product failure rates, utilization levels, material usage, service delivery costs incurred in correcting a product failure and supplier warranties on parts delivered to the company. Should actual product failure rates, utilization levels, material usage, service delivery costs or supplier warranties on parts differ from the company’s estimates, revisions to the estimated warranty liability would be required. The liability for warranties is included in other accrued expenses in the accompanying balance sheet. Extended warranty agreements are considered service contracts, which are discussed above. Costs of service contracts are recognized as incurred. The changes in the carrying amount of standard product warranty obligations are as follows:

F-12

THERMO FISHER SCIENTIFIC INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

						Year Ended
						December 31,						December 31,
(In millions)						2019						2018
Beginning Balance						$	92					$	87
Provision charged to income						115						121
Usage						(112)						(109)
Adjustments to previously provided warranties, net						(2)						(4)
Currency translation						—						(3)
Ending Balance						$	93					$	92

Leases

The company determines whether an arrangement is, or contains, a lease at inception. Prior to 2019, the company did not account for operating leases on the balance sheet. Beginning in 2019, as discussed below under Recent Accounting Pronouncements, operating leases that have commenced are included in other assets, other accrued expenses and other long-term liabilities in the consolidated balance sheet. Classification of operating lease liabilities as either current or noncurrent is based on the expected timing of payments due under the company’s obligations.

Right-of-use (ROU) assets represent the company’s right to use an underlying asset for the lease term and lease liabilities represent the company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. Leases with an initial term of 12 months or less are not recorded on the consolidated balance sheet. The company recognizes lease expense for these leases on a straight-line basis over the lease term.

Because most of the company’s leases do not provide an implicit rate, the company estimates incremental borrowing rates based on the information available at the commencement date in determining the present value of lease payments. The company uses the implicit rate when readily determinable. Lease terms may include the effect of options to extend or terminate the lease when it is reasonably certain that the company will exercise that option. Operating lease expense is recognized on a straight-line basis over the lease term.

As a lessee, the company accounts for the lease and non-lease components as a single lease component.

See Note 11 additional information about the company's leases.

Research and Development

The company conducts research and development activities to increase its depth of capabilities in technologies, software and services. Research and development costs include employee compensation and benefits, consultants, facilities related costs, material costs, depreciation and travel. Research and development costs are expensed as incurred.

Restructuring Costs

Accounting for the timing and amount of termination benefits provided by the company to employees is determined based on whether: (a) the company has a substantive plan to provide such benefits, (b) the company has a written employment contract with the affected employees that includes a provision for such benefits, (c) the termination benefits are due to the occurrence of an event specified in an existing plan or agreement, or (d) the termination benefits are a one-time benefit. In certain circumstances, employee termination benefits may meet more than one of the characteristics listed above and therefore, may have individual elements that are subject to different accounting models.

From time to time when executing a restructuring or exit plan, the company also incurs costs other than termination benefits, such as lease termination costs, that are not associated with or will not be incurred to generate revenues. These include costs that represent amounts under contractual obligations that exist prior to the restructuring plan communication date and will either continue after the restructuring plan is completed with no economic benefit or result in a penalty to cancel a contractual obligation. Such costs are recognized when incurred, which generally occurs at the contract termination or over the period from when a plan to abandon a leased facility is approved through the cease-use date but charges may continue over the remainder of the original contractual period.

F-13

THERMO FISHER SCIENTIFIC INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Income Taxes

The company recognizes deferred income taxes based on the expected future tax consequences of differences between the financial statement basis and the tax basis of assets and liabilities, calculated using enacted tax rates in effect for the year in which the differences are expected to be reflected in the tax return.

The financial statements reflect expected future tax consequences of uncertain tax positions that the company has taken or expects to take on a tax return presuming the taxing authorities’ full knowledge of the positions and all relevant facts, but without discounting for the time value of money (Note 8).

Earnings per Share

Basic earnings per share has been computed by dividing net income by the weighted average number of shares outstanding during the year. Except where the result would be antidilutive to income from continuing operations, diluted earnings per share has been computed using the treasury stock method for outstanding stock options and restricted units (Note 9).

Cash and Cash Equivalents

Cash equivalents consists principally of money market funds, commercial paper and other marketable securities purchased with an original maturity of three months or less. These investments are carried at cost, which approximates market value.

Inventories

Inventories are valued at the lower of cost or net realizable value, cost being determined principally by the first-in, first-out (FIFO) method with certain of the company’s businesses utilizing the last-in, first-out (LIFO) method. The company periodically reviews quantities of inventories on hand and compares these amounts to the expected use of each product or product line. In addition, the company has certain inventory that is subject to fluctuating market pricing. The company assesses the carrying value of this inventory based on a lower of cost or net realizable value analysis. The company records a charge to cost of sales for the amount required to reduce the carrying value of inventory to net realizable value. Costs associated with the procurement of inventories, such as inbound freight charges, purchasing and receiving costs, and internal transfer costs, are included in cost of revenues in the accompanying statement of income. The components of inventories are as follows:

						December 31,						December 31,
(In millions)						2019						2018
Raw Materials						$	971					$	812
Work in Process						517						430
Finished Goods						1,882						1,763
Inventories						$	3,370					$	3,005

The value of inventories maintained using the LIFO method was $268 million and $244 million at December 31, 2019 and 2018, respectively, which was below estimated replacement cost by $39 million and $34 million, respectively. Reductions to cost of revenues as a result of the liquidation of LIFO inventories were nominal during the three years ended December 31, 2019.

Property, Plant and Equipment

Property, plant and equipment are recorded at cost. The costs of additions and improvements are capitalized, while maintenance and repairs are charged to expense as incurred. The company provides for depreciation and amortization using the straight-line method over the estimated useful lives of the property as follows: buildings and improvements, 25 to 40 years; machinery and equipment (including software), 3 to 10 years; and leasehold improvements, the shorter of the term of the lease or the life of the asset. When assets are retired or otherwise disposed of, the assets and related accumulated depreciation are eliminated from the accounts and the resulting gain or loss is reflected in the accompanying statement of income. Property, plant and equipment consists of the following:

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						December 31,						December 31,
(In millions)						2019						2018
Land						$	396					$	397
Buildings and Improvements						1,873						1,729
Machinery, Equipment and Leasehold Improvements						5,495						4,694
Property, Plant and Equipment, at Cost						7,764						6,820
Less: Accumulated Depreciation and Amortization						3,015						2,655
Property, Plant and Equipment, Net						$	4,749					$	4,165

Depreciation and amortization expense of property, plant and equipment was $564 million, $526 million and $439 million in 2019, 2018 and 2017, respectively.

Acquisition-related Intangible Assets

Acquisition-related intangible assets include the costs of acquired customer relationships, product technology, tradenames and other specifically identifiable intangible assets, and are being amortized using the straight-line method over their estimated useful lives, which range from 2 to 20 years. In addition, the company has tradenames and in-process research and development that have indefinite lives and which are not amortized. The company reviews intangible assets for impairment when indication of potential impairment exists, such as a significant reduction in cash flows associated with the assets. Intangible assets with indefinite lives are reviewed for impairment annually or whenever events or changes in circumstances indicate they may be impaired. Acquisition-related intangible assets are as follows:

						Balance at December 31, 2019																														Balance at December 31, 2018
(In millions)						Gross						Accumulated Amortization						Net						Gross						Accumulated Amortization						Net
Definite Lived:
Customer relationships						$	16,906					$	(6,997)					$	9,909					$	17,120					$	(6,833)					$	10,287
Product technology						5,544						(3,121)						2,423						6,036						(3,178)						2,858
Tradenames						1,300						(869)						431						1,495						(929)						566
Other						9						(9)						—						33						(33)						—
						23,759						(10,996)						12,763						24,684						(10,973)						13,711
Indefinite Lived:
Tradenames						1,235						N/A						1,235						1,235						N/A						1,235
In-process research and development						16						N/A						16						32						N/A						32
						1,251						N/A						1,251						1,267						N/A						1,267
Acquisition-related Intangible Assets						$	25,010					$	(10,996)					$	14,014					$	25,951					$	(10,973)					$	14,978

The estimated future amortization expense of acquisition-related intangible assets with definite lives is as follows:

(In millions)
2020						$	1,660
2021						1,552
2022						1,406
2023						1,329
2024						1,168
2025 and Thereafter						5,648
Estimated Future Amortization Expense of Definite-lived Intangible Assets						$	12,763

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Amortization of acquisition-related intangible assets was $1.71 billion, $1.74 billion and $1.59 billion in 2019, 2018 and 2017, respectively.

Other Assets

Other assets in the accompanying balance sheet include operating lease right-of-use assets, deferred tax assets, pension assets, cash surrender value of life insurance, insurance recovery receivables related to product liability matters, investments and other assets.

Prior to January 1, 2018, investments for which there are not readily determinable market values were accounted for under the cost method of accounting. The company periodically evaluated the carrying value of its investments accounted for under the cost method of accounting, which provided that they are recorded at the lower of cost or estimated net realizable value. Effective January 1, 2018, equity investments that do not have readily determinable fair values are measured at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or similar investments of the same issuer. The company performs qualitative assessments to identify impairments of these investments. At December 31, 2019 and 2018, the company had such investments with carrying amounts of $34 million and $36 million, respectively, which are included in other assets.

Goodwill

The company assesses goodwill for impairment at the reporting unit level annually and whenever events occur or circumstances change that would more-likely-than-not reduce the fair value of a reporting unit below its carrying amount. Such events or circumstances generally include the occurrence of operating losses or a significant decline in earnings associated with one or more of the company’s reporting units. The company is permitted to first assess qualitative factors to determine whether the goodwill impairment test is necessary. If the qualitative assessment results in a determination that the fair value of a reporting unit is more-likely-than-not less than its carrying amount, the company performs a quantitative goodwill impairment test. The company may bypass the qualitative assessment for the reporting unit in any period and proceed directly to the goodwill impairment test. The company estimates the fair value of its reporting units by using forecasts of discounted future cash flows and peer market multiples. The company would record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value (limited to the amount of goodwill). The company determined that no impairments existed in 2019, 2018 or 2017.

The changes in the carrying amount of goodwill by segment are as follows:

(In millions)						Life Sciences Solutions						Analytical Instruments						Specialty Diagnostics						Laboratory Products and Services						Total
Balance at December 31, 2017						$	8,391					$	5,027					$	3,856					$	8,016					$	25,290
Acquisitions						161						—						—						—						161
Finalization of purchase price allocations for 2017 acquisitions						—						1						—						20						21
Currency translation						(5)						(77)						(121)						79						(124)
Other						1						(1)						—						(1)						(1)
Balance at December 31, 2018						8,548						4,950						3,735						8,114						25,347
Acquisitions						—						9						—						938						947
Finalization of purchase price allocations for 2018 acquisitions						(2)						—						—						—						(2)
Sale of business						—						—						(478)						—						(478)
Currency translation						(3)						(38)						(72)						11						(102)
Other						1						7						(1)						(5)						2
Balance at December 31, 2019						$	8,544					$	4,928					$	3,184					$	9,058					$	25,714

Loss Contingencies

Accruals are recorded for various contingencies, including legal proceedings, environmental, workers’ compensation, product, general and auto liabilities, self-insurance and other claims that arise in the normal course of business. The accruals are based on management’s judgment, historical claims experience, the probability of losses and, where applicable, the consideration of opinions of internal and/or external legal counsel and actuarial estimates. Additionally, the company records

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receivables from third-party insurers up to the amount of the loss when recovery has been determined to be probable. Liabilities acquired in acquisitions have been recorded at fair value and, as such, were discounted to present value at the dates of acquisition.

Currency Translation

All assets and liabilities of the company’s non-U.S. subsidiaries are translated at period-end exchange rates. Resulting translation adjustments are reflected in the “accumulated other comprehensive items” component of shareholders’ equity. Revenues and expenses are translated at average exchange rates for the period. Currency transaction gains (losses) are included in the accompanying statement of income and in aggregate were $52 million, $19 million and $(31) million in 2019, 2018 and 2017, respectively.

Derivative Contracts

The company is exposed to certain risks relating to its ongoing business operations including changes to interest rates and currency exchange rates. The company uses derivative instruments primarily to manage currency exchange and interest rate risks. The company recognizes derivative instruments as either assets or liabilities and measures those instruments at fair value. If a derivative is a hedge, depending on the nature of the hedge, changes in the fair value of the derivative are either offset against the change in fair value of the hedged item through earnings or recognized in other comprehensive items until the hedged item is recognized in earnings. Derivatives that are not designated as hedges are recorded at fair value through earnings.

The company uses short-term forward and option currency exchange contracts primarily to hedge certain balance sheet and operational exposures resulting from changes in currency exchange rates, predominantly intercompany loans and cash balances that are denominated in currencies other than the functional currencies of the respective operations. The currency-exchange contracts principally hedge transactions denominated in Swiss franc, euro, Canadian dollars, Swedish kronor, British pounds sterling, Japanese yen and Czech koruna. The company does not hold or engage in transactions involving derivative instruments for purposes other than risk management.

Cash flow hedges. For derivative instruments that are designated and qualify as a cash flow hedge, the gain or loss on the derivative is reported as a component of other comprehensive items and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings and is presented in the same income statement line item as the earnings effect of the hedged item.

Fair value hedges. For derivative instruments that are designated and qualify as a fair value hedge, the gain or loss on the derivative, as well as the offsetting loss or gain on the hedged item attributable to the hedged risk, are recognized in earnings.

Net investment hedges. The company also uses foreign currency-denominated debt and cross-currency interest rate swaps to partially hedge its net investments in foreign operations against adverse movements in exchange rates. The majority of the company’s euro-denominated senior notes and cross-currency interest rate swaps have been designated as, and are effective as, economic hedges of part of the net investment in a foreign operation. Accordingly, foreign currency transaction gains or losses due to spot rate fluctuations on the euro-denominated debt instruments and contract fair value changes on the cross-currency interest rate swaps, excluding interest accruals, are included in currency translation adjustment within other comprehensive items and shareholders’ equity.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Recent Accounting Pronouncements

In January 2020, the FASB issued new guidance to clarify the interaction of the accounting for certain equity securities, equity method investments, and certain forward contracts and purchased options. Among other things, the new guidance clarifies that an entity should consider observable transactions that require it to either apply or discontinue the equity method of accounting for the purposes of applying measurement principles for certain equity securities immediately before applying or discontinuing the equity method. The company expects to adopt this guidance in 2020 using a prospective method. The adoption of this guidance is not expected to have a material impact on the company’s consolidated financial statements.

In December 2019, the FASB issued new guidance to simplify the accounting for income taxes. Among other things, the new guidance requires the effects of enacted changes in tax laws or rates to be reflected in the annual effective tax rate

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computation in the interim period that includes the enactment date. The company expects to adopt this guidance when it is effective in 2021 using a prospective method. The adoption of this guidance is not expected to have a material impact on the company’s consolidated financial statements; however, the impact in future periods will be dependent on the extent of future events or conditions that would be affected such as enacted changes in tax laws or rates.

In August 2018, the FASB issued new guidance to modify the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. The company will adopt the guidance in 2020 using a retrospective method. The adoption of this guidance is not expected to have a material impact on the company’s disclosures.

In August 2018, the FASB issued new guidance to modify the disclosure requirements on fair value measurements. The company will adopt the guidance in 2020 with some items requiring a prospective method and others requiring a retrospective method. The adoption of this guidance is not expected to have a material impact on the company’s disclosures.

In February 2018, the FASB issued new guidance to allow reclassifications from accumulated other comprehensive items (AOCI) to retained earnings for certain tax effects on items within AOCI resulting from the Tax Cuts and Jobs Act of 2017 (the Tax Act). The company adopted this guidance in January 2018 and recorded the reclassifications in the period of adoption. The balance sheet impact of adopting this guidance is included in the table below. This guidance only relates to the effects of the Tax Act. For all other tax law changes that have occurred or may occur in the future, the company reclassifies the tax effects to the consolidated statement of income on an item-by-item basis when the pre-tax item in AOCI is reclassified to income.

In December 2017, the SEC staff issued guidance to address the application of accounting guidance in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Tax Act enacted on December 22, 2017. The company reported provisional amounts in its 2017 financial statements for certain income tax effects of the Tax Act for which a reasonable estimate could be determined. Adjustments to provisional amounts identified during the measurement period, which ended December 22, 2018, are included as adjustments to Provision for Income Taxes in 2018 (Note 8).

In August 2017, the FASB issued new guidance to simplify the application of hedge accounting guidance. Among other things, the new guidance will permit more hedging strategies to qualify for hedge accounting, allow for additional time to perform an initial assessment of a hedge’s effectiveness, and permit a qualitative effectiveness test for certain hedges after initial qualification. The company adopted this guidance in January 2018. The balance sheet impact of adopting this guidance is included in the table below.

In October 2016, the FASB issued new guidance eliminating the deferral of the tax effects of intra-entity asset transfers. The impact of this guidance in future periods will be dependent on the extent of future asset transfers which usually occur in connection with planning around acquisitions and other business structuring activities. The balance sheet impact of adopting this guidance as of January 1, 2018 is included in the table below.

In June 2016, the FASB issued new guidance to require a financial asset measured at amortized cost basis, such as accounts receivable, to be presented at the net amount expected to be collected based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. During 2018 and 2019, the FASB issued additional guidance and clarification. The company will adopt the guidance in 2020 using a modified retrospective method. The adoption of this guidance is not expected to have a material impact on the company’s consolidated financial statements.

In February 2016, the FASB issued new guidance which requires lessees to record most leases on their balance sheets as lease liabilities, initially measured at the present value of the future lease payments, with corresponding right-of-use assets. The new guidance also sets forth new disclosure requirements related to leases. During 2017 - 2019, the FASB issued additional guidance and clarification. The company adopted this guidance in January 2019. The company elected to adopt the guidance using a modified retrospective method, by applying the transition approach as of the beginning of the period of adoption. Comparative periods have not been restated. As permitted upon transition, the company did not reassess whether any expired or existing contracts were or contained embedded leases, the lease classification for any expired or existing leases, initial direct costs for any leases, or whether land easements met the definition of a lease if they were not accounted for as leases under the prior guidance. Adoption of the new guidance impacted the company’s Consolidated Balance Sheet as follows:

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(In millions)						December 31, 2018 as Reported						Impact of Adopting New Lease Guidance						January 1, 2019 As Adopted
Other Assets						$	1,117					$	641					$	1,758
Other Accrued Expenses						1,470						132						1,602
Other Long-term Liabilities						2,515						505						3,020
Retained Earnings						18,696						4						18,700

In January 2016, the FASB issued new guidance which affects the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. This guidance requires equity investments to be measured at fair value with subsequent changes recognized in net income, except for those accounted for under the equity method or requiring consolidation. The guidance also changes the accounting for investments without a readily determinable fair value and that do not qualify for the practical expedient permitted by the guidance to estimate fair value. The balance sheet impact of adopting this guidance as of January 1, 2018 is included in the table below.

In May 2014, the FASB issued new revenue recognition guidance which provides a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most previous revenue recognition guidance. The new standard also requires significantly expanded disclosures regarding the qualitative and quantitative information of an entity's nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. During 2016 and 2017, the FASB issued additional guidance and clarification, including the elimination of certain SEC Staff Guidance. The guidance is effective for the company in 2018. The company elected to adopt this guidance through application of the modified retrospective method by applying it to contracts that were not completed as of December 31, 2017 (in addition to new contracts in 2018).

Adoption of new guidance that became effective on January 1, 2018, impacted the company's Consolidated Balance Sheet as follows:

(In millions)						December 31, 2017 as Reported						Impact of Adopting New Revenue Guidance						Impact of Adopting New Equity Investment Guidance						Impact of Adopting New Intra-entity Tax Guidance						Impact of Adopting New Hedge Accounting Guidance						Impact of Adopting New Tax Effects on Items in AOCI Guidance						January 1, 2018 as Adopted
Accounts Receivable, Less Allowances						$	3,879					$	(8)					$	—					$	—					$	—					$	—					$	3,871
Inventories						2,971						(252)						—						—						—						—						2,719
Other Current Assets						1,236						229						—						—						—						—						1,465
Other Assets						1,227						18						—						(77)						—						—						1,168
Deferred Revenue						719						(719)						—						—						—						—						—
Contract Liabilities						—						736						—						—						—						—						736
Other Accrued Expenses						1,848						(153)						—						—						—						—						1,695
Deferred Income Taxes						2,766						—						—						(57)						—						2						2,711
Other Long-term Liabilities						2,569						74						—						—						—						—						2,643
Long-term Obligations						18,873						—						—						—						(3)						—						18,870
Retained Earnings						15,914						49						(1)						(20)						3						87						16,032
Accumulated Other Comprehensive Items						(2,003)						—						1						—						—						(89)						(2,091)

Had the company continued to use the revenue recognition guidance in effect prior to 2018, no material changes would have resulted to the consolidated statements of income, comprehensive income, or cash flows for the year ended December 31, 2018 from amounts reported therein. However, inventories would have been $357 million higher and other current assets would have been $359 million lower as of December 31, 2018, primarily as a result of differences in the accounting for pharmaceutical development and manufacturing services under the new revenue guidance. Under the prior guidance, costs of these services were recorded in inventory and revenues were recognized generally when the products were delivered to customers. Under the new guidance, costs are expensed and revenues are recognized as the manufacturing service is performed and the company's rights to consideration are recorded as contract assets.

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Note 2. Acquisitions and Dispositions

The company’s acquisitions have historically been made at prices above the determined fair value of the acquired identifiable net assets, resulting in goodwill, due to expectations of the synergies that will be realized by combining the businesses. These synergies include the elimination of redundant facilities, functions and staffing; use of the company’s existing commercial infrastructure to expand sales of the acquired businesses’ products; and use of the commercial infrastructure of the acquired businesses to cost-effectively expand sales of company products.

Acquisitions have been accounted for using the acquisition method of accounting, and the acquired companies’ results have been included in the accompanying financial statements from their respective dates of acquisition. Acquisition transaction costs are recorded in selling, general and administrative expenses as incurred.

2019

On April 30, 2019, the company acquired, within the Laboratory Products and Services segment, Brammer Bio for approximately $1.67 billion in cash. Brammer Bio is a leading viral vector contract development and manufacturing organization for gene and cell therapies. The acquisition expands the segment’s contract manufacturing capabilities. Brammer Bio reported revenues of approximately $140 million in 2018. The purchase price exceeded the fair value of the identifiable net assets and, accordingly, $938 million was allocated to goodwill, $405 million of which is tax deductible.

In addition, in 2019 the company acquired, within the Analytical Instruments segment, a Slovakia-based provider of mass spectrometry software used for identification of compounds, and, within the Laboratory Products and Services segment, an active pharmaceutical ingredient (API) manufacturing facility in Cork, Ireland, for an aggregate purchase price of $169 million.

The components of the purchase price and net assets acquired for 2019 acquisitions are as follows:

(In millions)						Brammer Bio						Other						Total
Purchase Price
Cash paid						$	1,710					$	169					$	1,879
Cash acquired						(36)						—						(36)
						$	1,674					$	169					$	1,843
Net Assets Acquired
Current assets						$	52					$	58					$	110
Property, plant and equipment						147						102						249
Definite-lived intangible assets:
Customer relationships						744						—						744
Product technology						65						7						72
Tradenames						7						—						7
Goodwill						938						9						947
Other assets						49						—						49
Contract liabilities						(110)						—						(110)
Deferred tax liabilities						(110)						(6)						(116)
Other liabilities assumed						(108)						(1)						(109)
						$	1,674					$	169					$	1,843

The weighted-average amortization periods for definite-lived intangible assets acquired in 2019 are 14 years for customer relationships, 13 years for product technology and 2 years for tradenames. The weighted average amortization period for all definite-lived intangible assets acquired in 2019 is 14 years.

2018

On October 25, 2018, the company acquired, within the Life Sciences Solutions segment, Becton Dickinson and Company's Advanced Bioprocessing business for $477 million in cash. This North America-based business adds complementary cell culture products that expand the segment’s bioproduction offerings to help customers increase yield during production of biologic drugs. The Advanced Bioprocessing business reported revenues of $100 million in 2017. The purchase price exceeded the fair value of the identifiable net assets and, accordingly, $146 million was allocated to goodwill, all of which is tax deductible.

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In 2018, the company acquired, within the Life Sciences Solutions segment, a North America-based provider of a rapid DNA platform for use in forensics and law enforcement applications, for an aggregate purchase price of $65 million.

The components of the purchase price and net assets acquired for 2018 acquisitions are as follows:

(In millions)						Advanced Bioprocessing business						Other						Total
Purchase Price
Cash paid						$	477					$	55					$	532
Fair value of contingent consideration						—						11						11
Cash acquired						—						(1)						(1)
						$	477					$	65					$	542
Net Assets Acquired
Current assets						$	53					$	4					$	57
Property, plant and equipment						42						—						42
Definite-lived intangible assets:
Customer relationships						108						—						108
Product technology						132						31						163
Tradenames						8						—						8
Indefinite-lived intangible assets:
In-process research and development						—						10						10
Goodwill						146						15						161
Other assets						—						14						14
Deferred tax liabilities						(7)						—						(7)
Other liabilities assumed						(5)						(9)						(14)
						$	477					$	65					$	542

The weighted-average amortization periods for definite-lived intangible assets acquired in 2018 are 14 years for customer relationships, 13 years for product technology and 6 years for tradenames. The weighted average amortization period for all definite-lived intangible assets acquired in 2018 is 13 years.

2017

On August 29, 2017, the company acquired, within the Laboratory Products and Services segment, Patheon N.V., a leading global provider of high-quality drug development and delivery solutions to the pharmaceutical and biopharma sectors, for $35.00 per share in cash, or $7.36 billion, including the assumption of net debt. The company financed the purchase price, including the repayment of indebtedness of Patheon, with issuances of debt and equity.

Patheon provides comprehensive, integrated and highly customizable solutions as well as the expertise to help biopharmaceutical companies of all sizes satisfy complex development and manufacturing needs. The acquisition provided entry into the pharmaceutical contract development and manufacturing organization market and added a complementary service to the company’s existing pharmaceutical services portfolio. Patheon reported revenues of $1.87 billion for the year ended October 31, 2016. The purchase price exceeded the fair market value of the identifiable net assets and, accordingly, $3.28 billion was allocated to goodwill, $125 million of which is tax deductible.

In addition, in 2017 the company acquired, within the Analytical Instruments segment, a North America-based provider of cloud-based platforms supporting scientific data management; within the Life Sciences Solutions segment, a North America-based developer of scalable control automation systems and software for bioproduction; within the Specialty Diagnostics segment, a North America-based molecular diagnostics company offering qPCR tests to the transplant community; and within the Analytical Instruments segment, a provider of desktop scanning electron microscopy solutions and a manufacturer of volatile organic compound monitoring instruments and integrated systems, for an aggregate purchase price of $425 million.

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The components of the purchase price and net assets acquired for 2017 acquisitions are as follows:

(In millions)						Patheon						Other						Total
Purchase Price
Cash paid						$	6,911					$	422					$	7,333
Debt assumed						488						—						488
Fair value of contingent consideration						—						17						17
Fair value of equity awards exchanged						6						—						6
Fair value of previously held interest						—						11						11
Cash acquired						(47)						(25)						(72)
						$	7,358					$	425					$	7,783
Net Assets Acquired
Current assets						$	1,062					$	39					$	1,101
Property, plant and equipment						1,242						4						1,246
Definite-lived intangible assets:
Customer relationships						3,641						90						3,731
Product technology						—						96						96
Tradenames						112						5						117
Indefinite-lived intangible assets:
In-process research and development						—						2						2
Goodwill						3,276						263						3,539
Other assets						54						—						54
Deferred tax liabilities						(1,093)						(40)						(1,133)
Other liabilities assumed						(936)						(34)						(970)
						$	7,358					$	425					$	7,783

The weighted-average amortization periods for definite-lived intangible assets acquired in 2017 are 17 years for customer relationships, 9 years for product technology and 4 years for tradenames. The weighted average amortization period for all definite-lived intangible assets acquired in 2017 is 16 years.

Unaudited Pro Forma Information

The following unaudited pro forma information provides the effect of the company's 2017 acquisition of Patheon as if the acquisition had occurred on January 1, 2016:

(In millions)						2017
Revenues						$	22,144
Net Income						$	2,258

To reflect the acquisition of Patheon as if it had occurred on January 1, 2016, the unaudited pro forma results include adjustments to reflect, among other things, the incremental intangible asset amortization to be incurred based on the preliminary values of each identifiable intangible asset and the interest expense from debt financings obtained to partially fund the cash consideration transferred. Pro forma adjustments were tax effected at the company's historical statutory rates in effect for the respective periods. The unaudited pro forma amounts are not necessarily indicative of the combined results of operations that would have been realized had the acquisition and related financings occurred on the aforementioned date, nor are they meant to be indicative of any anticipated combined results of operations that the company will experience after the transaction. In addition, the amounts do not include any adjustments for actions that may be taken following the completion of the transaction, such as expected cost savings, operating synergies, or revenue enhancements that may be realized subsequent to the transaction.

Pro forma net income for the year ended December 31, 2017, excludes certain items associated with the Patheon acquisition that were included in the determination of net income for that period. These items have been included in the determination of pro forma net income for the year ended December 31, 2016 (not presented), and are as follows: $54 million

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of direct transaction costs, $39 million of accounting policy conformity adjustments, $21 million of initial restructuring costs, $40 million reduction of revenues for revaluing the deferred revenue obligations to fair value, and $55 million of expense related to the fair value adjustment to acquisition-date inventories.

The company’s results would not have been materially different from its pro forma results had the company’s other 2019, 2018 or 2017 acquisitions occurred at the beginning of 2018, 2017 or 2016, respectively.

Disposition

On June 28, 2019, the company sold its Anatomical Pathology business to PHC Holdings Corporation for $1.13 billion, net of cash divested. The business was part of the Specialty Diagnostics segment. The sale of this business resulted in a pre-tax gain of approximately $478 million, included in restructuring and other (income) costs, net. Revenues in 2019, through the date of sale, and the full year 2018 of the business sold were approximately $115 million and $238 million, respectively, net of retained sales through the company's healthcare market and research and safety market channel businesses. The assets and liabilities of the Anatomical Pathology business were as follows on December 31, 2018:

(In millions)						December 31, 2018
Current Assets						$	81
Long-term Assets						528
Current Liabilities						34
Long-term Liabilities						24

Note 3. Revenue

Disaggregated Revenue

Revenue by type is as follows:

(In millions)						2019						2018
Revenues
Consumables						$	13,109					12,576
Instruments						6,387						6,292
Services						6,046						5,490
Consolidated revenues						$	25,542					$	24,358

Revenue by geographic region is as follows:

(In millions)						2019						2018
Revenues (a)
North America						$	12,896					$	12,143
Europe						6,358						6,215
Asia-Pacific						5,524						5,250
Other regions						764						750
Consolidated revenues						$	25,542					$	24,358

(a)Revenues are attributed to regions based on customer location.

Each reportable segment earns revenues from consumables, instruments and services in North America, Europe, Asia-Pacific and other regions. See note 4 for revenue by reportable segment and other geographic data.

Remaining Performance Obligations

The aggregate amount of the transaction price allocated to the remaining performance obligations for all open customer contracts as of December 31, 2019 was $7.77 billion. The company will recognize revenue for these performance obligations as they are satisfied, approximately 63% of which is expected to occur within the next twelve months.

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THERMO FISHER SCIENTIFIC INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 4. Business Segment and Geographical Information

The company’s financial performance is reported in four segments. A description of each segment follows.

Life Sciences Solutions: provides an extensive portfolio of reagents, instruments and consumables used in biological and medical research, discovery and production of new drugs and vaccines as well as diagnosis of disease. These products and services are used by customers in pharmaceutical, biotechnology, agricultural, clinical, academic, and government markets.

Analytical Instruments: provides a broad offering of instruments, consumables, software and services that are used for a range of applications in the laboratory, on the production line and in the field. These products and services are used by customers in pharmaceutical, biotechnology, academic, government, environmental and other research and industrial markets, as well as the clinical laboratory.

Specialty Diagnostics: provides a wide range of diagnostic test kits, reagents, culture media, instruments and associated products used to increase the speed and accuracy of diagnoses. These products are used by customers in healthcare, clinical, pharmaceutical, industrial and food safety laboratories.

Laboratory Products and Services: provides virtually everything needed for the laboratory, including a combination of self-manufactured and sourced products for customers in research, academic, government, industrial and healthcare settings. The segment also includes a comprehensive offering of outsourced services used by the pharmaceutical and biotech industries for drug development, clinical trials logistics and commercial drug manufacturing.

The company’s management evaluates segment operating performance based on operating income before certain charges/credits to cost of revenues and selling, general and administrative expenses, principally associated with acquisition accounting; restructuring and other costs/income including costs arising from facility consolidations such as severance and abandoned lease expense and gains and losses from the sale of real estate and product lines as well as from significant litigation-related matters; and amortization of acquisition-related intangible assets. The company uses this measure because it helps management understand and evaluate the segments’ core operating results and facilitates comparison of performance for determining compensation.

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THERMO FISHER SCIENTIFIC INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Business Segment Information

(In millions)						2019						2018						2017
Revenues
Life Sciences Solutions						$	6,856					$	6,269					$	5,728
Analytical Instruments						5,522						5,469						4,821
Specialty Diagnostics						3,718						3,724						3,486
Laboratory Products and Services						10,599						10,035						7,825
Eliminations						(1,153)						(1,139)						(942)
Consolidated revenues						25,542						24,358						20,918
Segment Income (a)
Life Sciences Solutions						2,446						2,158						1,894
Analytical Instruments						1,273						1,247						1,027
Specialty Diagnostics						930						952						927
Laboratory Products and Services						1,324						1,258						1,004
Subtotal reportable segments (a)						5,973						5,615						4,852
Cost of revenues charges, net						(17)						(12)						(123)
Selling, general and administrative charges, net						(62)						(29)						(78)
Restructuring and other income (costs), net						413						(50)						(97)
Amortization of acquisition-related intangible assets						(1,713)						(1,741)						(1,594)
Consolidated operating income						4,594						3,783						2,960
Interest income (b)						224						137						81
Interest expense (b)						(676)						(667)						(592)
Other (expense) income, net (b)						(72)						9						(20)
Income from Continuing Operations Before Income Taxes						$	4,070					$	3,262					$	2,429
Depreciation
Life Sciences Solutions						$	130					$	119					$	129
Analytical Instruments						75						73						71
Specialty Diagnostics						67						76						72
Laboratory Products and Services						292						258						167
Consolidated depreciation						$	564					$	526					$	439

(a)Represents operating income before certain charges to cost of revenues and selling, general and administrative expenses; restructuring and other costs/income, net; and amortization of acquisition-related intangibles.

(b)The company does not allocate interest or other expense/income, net to its segments.

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THERMO FISHER SCIENTIFIC INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In millions)						2019						2018						2017
Total Assets
Life Sciences Solutions						$	18,306					$	18,774					$	19,063
Analytical Instruments						9,896						9,907						9,960
Specialty Diagnostics						5,867						6,663						7,095
Laboratory Products and Services						21,761						19,051						19,181
Corporate/Other (c)						2,551						1,837						1,370
Consolidated total assets						$	58,381					$	56,232					$	56,669
Capital Expenditures
Life Sciences Solutions						$	151					$	107					$	118
Analytical Instruments						64						85						56
Specialty Diagnostics						83						103						87
Laboratory Products and Services						554						374						178
Corporate/Other						74						89						69
Consolidated capital expenditures						$	926					$	758					$	508

(c)Corporate assets consist primarily of cash and cash equivalents and property and equipment at the company's corporate offices.

Geographical Information

(In millions)						2019						2018						2017
Revenues (d)
United States						$	12,366					$	11,629					$	10,129
China						2,752						2,504						2,060
Other						10,424						10,225						8,729
Consolidated revenues						$	25,542					$	24,358					$	20,918
Long-lived Assets (e)
United States						$	3,099					$	2,444					$	2,349
Other						2,349						1,721						1,698
Consolidated long-lived assets						$	5,448					$	4,165					$	4,047

(d)Revenues are attributed to countries based on customer location.

(e)Includes property, plant and equipment, net, and beginning in 2019, operating lease right-of-use assets.

Note 5. Other Expense/Income, Net

In all periods, other expense, net includes currency transaction gains and losses on monetary assets and liabilities and net periodic pension benefit cost/income, excluding the service cost component which is included in operating expenses on the accompanying statement of income. In 2019, other expense, net includes $184 million of losses on the early extinguishment of debt (see Note 10), offset in part by $44 million of net gains on investments. The investment gains include a $28 million gain on the sale of a joint venture for net proceeds of $42 million.

In 2018, other expense, net also includes $15 million of net losses on investments.

In 2017, other expense, net includes $32 million of charges related to amortization of fees paid to obtain bridge financing commitments related to the Patheon acquisition (Note 2) and $4 million of losses on the early extinguishment of debt, offset in part by $17 million of net gains on investments.

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THERMO FISHER SCIENTIFIC INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 6. Stock-based Compensation Expense

The company has stock-based compensation plans for its key employees, directors and others. These plans permit the grant of a variety of stock and stock-based awards, including restricted stock units, stock options or performance-based shares, as determined by the compensation committee of the company’s Board of Directors or, for certain non-officer grants, by the company’s employee equity committee, which consists of its chief executive officer. The company generally issues new shares of its common stock to satisfy option exercises and restricted unit vestings. Grants of stock options and restricted units generally provide that in the event of both a change in control of the company and a qualifying termination of an option or unit holder’s employment, all options and service-based restricted unit awards held by the recipient become immediately vested (unless an employment or other agreement with the employee provides for different treatment).

Compensation cost is based on the grant-date fair value and is recognized ratably over the requisite vesting period or to the date based on qualifying retirement eligibility, if earlier.

Stock-based compensation expense is primarily included in selling, general and administrative expenses.

(In millions)						2019						2018						2017
Stock-based Compensation Expense						$	181					$	181					$	159

Stock Options

The company’s practice is to grant stock options at fair market value. Options vest over 3-5 years with terms of 7-10 years, assuming continued employment with certain exceptions. Vesting of the option awards is contingent upon meeting certain service conditions. The fair value of most option grants is estimated using the Black-Scholes option pricing model. For option grants that require the achievement of both service and market conditions, a lattice model is used to estimate fair value. 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 volatility of the company’s stock. Historical data on exercise patterns is the basis for estimating the expected life of an option. The risk-free interest rate is based on U.S. Treasury zero-coupon issues with a remaining term which approximates the expected life assumed at the date of grant. The expected annual dividend rate was calculated by dividing the company’s annual dividend, based on the most recent quarterly dividend rate, by the closing stock price on the grant date. The compensation expense recognized for all stock-based awards is net of estimated forfeitures. Forfeitures are estimated based on an analysis of actual option forfeitures.

The weighted average assumptions used in the Black-Scholes option pricing model are as follows:

						2019						2018						2017
Expected Stock Price Volatility						21		%				20		%				20		%
Risk Free Interest Rate						2.4		%				2.6		%				1.9		%
Expected Life of Options (years)						4.3						4.3						4.3
Expected Annual Dividend						0.3		%				0.3		%				0.4		%

The weighted average per share grant-date fair values of options granted during 2019, 2018 and 2017 were $53.37, $43.45 and $30.73, respectively. The total intrinsic value of options exercised during the same periods was $320 million, $312 million and $199 million, respectively. The intrinsic value is the difference between the market value of the shares on the exercise date and the exercise price of the option.

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THERMO FISHER SCIENTIFIC INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

A summary of the company’s option activity for the year ended December 31, 2019 is presented below:

						Shares (in millions)						Weighted Average Exercise Price						Weighted Average Remaining Contractual Term (in years)						Aggregate Intrinsic Value (a) (in millions)
Outstanding at December 31, 2018						8.0						$	148.09
Granted						1.3						256.61
Exercised						(2.0)						111.13
Canceled/Expired						(0.4)						193.78
Outstanding at December 31, 2019						6.9						$	176.26					4.1
Vested and Unvested Expected to Vest at December 31, 2019						6.6						$	174.33					4.1						$	992
Exercisable at December 31, 2019						3.1						$	141.20					2.9						$	561

As of December 31, 2019, there was $95 million of total unrecognized compensation cost related to unvested stock options granted. The cost is expected to be recognized through 2023 with a weighted average amortization period of 2.2 years.

Restricted Share/Unit Awards

Awards of restricted units convert into an equivalent number of shares of common stock. The awards generally vest over 3-4 years, assuming continued employment, with some exceptions. Vesting of the awards is contingent upon meeting certain service conditions and may also be contingent upon meeting certain performance and/or market conditions. The fair market value of the award at the time of the grant is amortized to expense over the requisite service period of the award, which is generally the vesting period. Recipients of restricted units have no voting rights but are entitled to accrue dividend equivalents. The fair value of service- and performance-based restricted unit awards is determined based on the number of units granted and the market value of the company’s shares on the grant date. For awards with market-based vesting conditions, the company uses a lattice model to estimate the grant-date fair value of the award.

A summary of the company’s restricted unit activity for the year ended December 31, 2019 is presented below:

						Units (in millions)						Weighted Average Grant-Date Fair Value
Unvested at December 31, 2018						1.2						$	177.04
Granted						0.6						248.10
Vested						(0.7)						173.61
Forfeited						(0.1)						198.73
Unvested at December 31, 2019						1.0						$	218.34

The total fair value of shares vested during 2019, 2018 and 2017 was $118 million, $114 million and $97 million, respectively.

As of December 31, 2019, there was $141 million of total unrecognized compensation cost related to unvested restricted stock unit awards. The cost is expected to be recognized through 2023 with a weighted average amortization period of 1.9 years.

Employee Stock Purchase Plans

Qualifying employees are eligible to participate in an employee stock purchase plan sponsored by the company. Shares may be purchased under the program at 95% of the fair market value at the end of the purchase period and the shares purchased are not subject to a holding period. Shares are purchased through payroll deductions of up to 10% of each participating

F-28

THERMO FISHER SCIENTIFIC INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

employee’s qualifying gross wages. The company issued 0.2 million, 0.1 million and 0.1 million shares, respectively, of its common stock in 2019, 2018 and 2017 under the employee stock purchase plan.

Note 7. Pension and Other Postretirement Benefit Plans

401(k) Savings Plan and Other Defined Contribution Plans

The company’s 401(k) savings and other defined contribution plans cover the majority of the company’s eligible U.S. and certain non-U.S. employees. Contributions to the plans are made by both the employee and the company. Company contributions are based on the level of employee contributions. Company contributions to these plans are based on formulas determined by the company. In 2019, 2018 and 2017, the company charged to expense $232 million, $204 million and $161 million, respectively, related to its defined contribution plans.

Defined Benefit Pension Plans

Employees of a number of the company’s non-U.S. and certain U.S. subsidiaries participate in defined benefit pension plans covering substantially all full-time employees at those subsidiaries. Some of the plans are unfunded, as permitted under the plans and applicable laws. The company also maintains postretirement healthcare programs at several acquired businesses where certain employees are eligible to participate. The costs of the postretirement healthcare programs are generally funded on a self-insured and insured-premium basis.

The company recognizes the funded status of defined benefit pension and other postretirement benefit plans as an asset or liability. This amount is defined as the difference between the fair value of plan assets and the benefit obligation. The company is required to recognize as a component of other comprehensive items, net of tax, the actuarial gains/losses and prior service costs/credits that arise but were not previously required to be recognized as components of net periodic benefit cost. Other comprehensive items is adjusted as these amounts are later recognized in income as components of net periodic benefit cost.

When a company with a pension plan is acquired, any excess of projected benefit obligation over the plan assets is recognized as a liability and any excess of plan assets over the projected benefit obligation is recognized as an asset. The recognition of a new liability or a new asset results in the elimination of (a) previously existing unrecognized net gain or loss and (b) unrecognized prior service cost or credits.

The company funds annually, at a minimum, the statutorily required minimum amount as actuarially determined. During 2019, 2018 and 2017, the company made cash contributions of approximately $50 million, $93 million and $200 million, respectively. Contributions to the plans included in the following table are estimated at between $40 and $60 million for 2020.

F-29

THERMO FISHER SCIENTIFIC INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table provides a reconciliation of benefit obligations and plan assets of the company’s domestic and non-U.S. pension plans and postretirement benefit plans:

						Domestic Pension Benefits																		Non-U.S. Pension Benefits																		Postretirement Benefits
(In millions)						2019						2018						2019						2018						2019						2018
Change in Projected Benefit Obligations
Benefit Obligation at Beginning of Year						$	1,179					$	1,300					$	1,193					$	1,324					$	50					$	63
Business combinations/divestiture						—						8						(23)						—						—						1
Service costs						—						—						23						26						1						1
Interest costs						45						41						24						23						2						2
Settlements						—						—						(34)						(33)						—						—
Plan participants' contributions						—						—						5						5						—						—
Actuarial (gains) losses						156						(87)						136						(48)						3						(8)
Benefits paid						(78)						(83)						(27)						(34)						(2)						(2)
Currency translation and other						—						—						6						(70)						1						(7)
Benefit Obligation at End of Year						$	1,302					$	1,179					$	1,303					$	1,193					$	55					$	50
Change in Fair Value of Plan Assets
Fair Value of Plan Assets at Beginning of Year						$	1,091					$	1,181					$	932					$	1,011					$	8					$	9
Business combinations/divestiture						—						7						(15)						—						—						—
Actual return on plan assets						183						(49)						60						(21)						2						(1)
Employer contribution						5						35						43						56						2						2
Settlements						—						—						(34)						(33)						—						—
Plan participants' contributions						—						—						5						5						—						—
Benefits paid						(78)						(83)						(27)						(34)						(2)						(2)
Currency translation and other						—						—						22						(52)						—						—
Fair Value of Plan Assets at End of Year						$	1,201					$	1,091					$	986					$	932					$	10					$	8
Funded Status						$	(101)					$	(88)					$	(317)					$	(261)					$	(45)					$	(42)
Accumulated Benefit Obligation						$	1,302					$	1,179					$	1,238					$	1,136
Amounts Recognized in Balance Sheet
Noncurrent assets						$	—					$	—					$	97					$	106					$	9					$	8
Current liability						(6)						(6)						(8)						(8)						(3)						(3)
Noncurrent liabilities						(95)						(82)						(406)						(359)						(51)						(47)
Net amount recognized						$	(101)					$	(88)					$	(317)					$	(261)					$	(45)					$	(42)
Amounts Recognized in Accumulated Other Comprehensive Items
Net actuarial loss						$	195					$	168					$	200					$	106					$	5					$	4
Prior service credits						—						—						(3)						5						(5)						(5)
Net amount recognized						$	195					$	168					$	197					$	111					$	—					$	(1)

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THERMO FISHER SCIENTIFIC INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The actuarial assumptions used to compute the funded status for the plans are based upon information available as of December 31, 2019 and 2018 and are as follows:

						Domestic Pension Benefits																		Non-U.S. Pension Benefits																		Postretirement Benefits
						2019						2018						2019						2018						2019						2018
Weighted Average Assumptions Used to Determine Projected Benefit Obligations
Discount rate						3.12		%				4.21		%				1.60		%				2.34		%				2.86		%				3.81		%
Average rate of increase in employee compensation						N/A						N/A						2.27		%				2.47		%				N/A						N/A
Initial healthcare cost trend rate																														5.98		%				6.35		%
Ultimate healthcare cost trend rate																														4.48		%				4.89		%

The actuarial assumptions used to compute the net periodic pension benefit cost (income) are based upon information available as of the beginning of the year, as presented in the following table:

						Domestic Pension Benefits																														Non-U.S. Pension Benefits
						2019						2018						2017						2019						2018						2017
Weighted Average Assumptions Used to Determine Net Benefit Cost (Income)
Discount rate						4.22		%				3.54		%				4.06		%				2.34		%				2.10		%				1.95		%
Average rate of increase in employee compensation						N/A						N/A						N/A						2.47		%				2.59		%				3.10		%
Expected long-term rate of return on assets						5.76		%				5.75		%				6.50		%				3.25		%				3.31		%				3.11		%

The ultimate healthcare cost trend rates for the postretirement benefit plans are expected to be reached between 2020 and 2040.

The discount rate reflects the rate the company would have to pay to purchase high-quality investments that would provide cash sufficient to settle its current pension obligations. The discount rate is determined based on a range of factors, including the rates of return on high-quality, fixed-income corporate bonds and the related expected duration of the obligations or, in certain instances, the company has used a hypothetical portfolio of high quality instruments with maturities that mirror the benefit obligation in order to accurately estimate the discount rate relevant to a particular plan.

The company utilizes a full yield curve approach in the estimation of these components by applying the specific spot-rates along the yield curve used in the determination of the benefit obligation to the relevant projected cash flows.

The expected long-term rate of return on plan assets reflects the average rate of earnings expected on the funds invested, or to be invested, to provide for the benefits included in the projected benefit obligations. In determining the expected long-term rate of return on plan assets, the company considers the relative weighting of plan assets, the historical performance of total plan assets and individual asset classes and economic and other indicators of future performance. In addition, the company may consult with and consider the opinions of financial and other professionals in developing appropriate return benchmarks.

Asset management objectives include maintaining an adequate level of diversification to reduce interest rate and market risk and providing adequate liquidity to meet immediate and future benefit payment requirements.

The expected rate of compensation increase reflects the long-term average rate of salary increases and is based on historic salary increase experience and management’s expectations of future salary increases.

The amounts in accumulated other comprehensive items expected to be recognized as components of net periodic benefit cost in 2020 are not material.

F-31

THERMO FISHER SCIENTIFIC INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The projected benefit obligation and fair value of plan assets for the company’s qualified and non-qualified pension plans with projected benefit obligations in excess of plan assets are as follows:

						Pension Plans
(In millions)						2019						2018
Pension Plans with Projected Benefit Obligations in Excess of Plan Assets
Projected benefit obligation						$	2,072					$	1,876
Fair value of plan assets						1,557						1,421

The accumulated benefit obligation and fair value of plan assets for the company's qualified and non-qualified pension plans with accumulated benefit obligations in excess of plan assets are as follows:

						Pension Plans
(In millions)						2019						2018
Pension Plans with Accumulated Benefit Obligations in Excess of Plan Assets
Accumulated benefit obligation						$	1,976					$	1,792
Fair value of plan assets						1,525						1,393

The measurement date used to determine benefit information is December 31 for all plan assets and benefit obligations.

The net periodic pension benefit cost (income) includes the following components:

						Domestic Pension Benefits																														Non-U.S. Pension Benefits
(In millions)						2019						2018						2017						2019						2018						2017
Components of Net Benefit Cost (Income)
Service cost-benefits earned						$	—					$	—					$	—					$	23					$	26					$	26
Interest cost on benefit obligation						45						41						43						24						23						21
Expected return on plan assets						(55)						(55)						(56)						(30)						(32)						(29)
Amortization of actuarial net loss						2						3						2						6						7						9
Amortization of prior service benefit						—						—						—						(1)						—						—
Settlement/curtailment loss						—						—						1						4						7						5
Net periodic benefit cost (income)						$	(8)					$	(11)					$	(10)					$	26					$	31					$	32

The net periodic postretirement benefit cost was not material in 2019, 2018 and 2017.

Expected benefit payments are estimated using the same assumptions used in determining the company’s benefit obligation at December 31, 2019. Benefit payments will depend on future employment and compensation levels, average years employed and average life spans, among other factors, and changes in any of these factors could significantly affect these estimated future benefit payments. Estimated future benefit payments during the next five years and in the aggregate for the five fiscal years thereafter, are as follows:

(In millions)						Domestic Pension Benefits						Non-U.S. Pension Benefits						Post- retirement Benefits
Expected Benefit Payments
2020						$	90					$	34					$	2
2021						90						37						2
2022						87						38						2
2023						86						41						2
2024						85						45						2
2025-2029						390						250						8

A change in the assumed healthcare cost trend rate by one percentage point effective January 2019 would not have caused a material change in the accumulated postretirement benefit obligation as of December 31, 2019 and the 2019 aggregate of service and interest costs.

F-32

THERMO FISHER SCIENTIFIC INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Domestic Pension Plan Assets

The company’s overall objective is to manage the assets in a liability framework where investments are selected that are expected to have similar changes in fair value as the related liabilities will have upon changes in interest rates. The company invests in a portfolio of both return-seeking and liability-hedging assets, primarily through the use of institutional collective funds, to achieve long-term growth and to insulate the funded position from interest rate volatility. The strategic asset allocation uses a combination of risk controlled and index strategies in fixed income and global equities. The target allocations for the investments are approximately 10% to funds investing in U.S. equities, approximately 10% to funds investing in international equities and approximately 80% to funds investing in fixed income securities. The portfolio maintains enough liquidity at all times to meet the near-term benefit payments.

Non-U.S. Pension Plan Assets

The company maintains specific plan assets for many of the individual pension plans outside the U.S. The investment strategy of each plan has been uniquely established based on the country specific standards and characteristics of the plans. Several of the plans have contracts with insurance companies whereby the market risks of the benefit obligations are borne by the insurance companies. When assets are held directly in investments, generally the objective is to invest in a portfolio of diversified assets with a variety of fund managers. The investments may include equity funds, fixed income funds, hedge funds, multi-asset funds, alternative investments and derivative funds with the target asset allocations ranging from approximately 0% - 25% for equity funds, 0% - 70% for fixed income funds, 0% - 20% for hedge funds, 0% - 100% for multi-asset funds, 0% to 5% for alternative investments and 0% - 30% for funds holding derivatives. The derivatives held by the funds are primarily interest rate swaps intended to match the movements in the plan liabilities as well as equity futures in a synthetic equity fund which provide targeted exposure to equity markets without the fund holding individual equity positions. Each plan maintains enough liquidity at all times to meet the near-term benefit payments.

The fair values of the company’s plan assets at December 31, 2019 and 2018, by asset category are as follows:

						December 31,						Quoted Prices in Active Markets						Significant Other Observable Inputs						Significant Unobservable Inputs						Not Subject to Leveling (1)
(In millions)						2019						(Level 1)						(Level 2)						(Level 3)
Domestic Pension Plan Assets
U.S. equity funds						$	122					$	—					$	—					$	—					$	122
International equity funds						116						—						—						—						116
Fixed income funds						951						—						—						—						951
Money market funds						12						—						—						—						12
Total Domestic Pension Plans						$	1,201					$	—					$	—					$	—					$	1,201
Non-U.S. Pension Plan Assets
Equity funds						$	37					$	—					$	—					$	—					$	37
Fixed income funds						430						—						—						—						430
Hedge funds						61						—						—						—						61
Multi-asset funds						76						—						—						—						76
Derivative funds						129						—						—						—						129
Alternative investments						4						—						—						—						4
Insurance contracts						237						—						237						—						—
Cash / money market funds						12						9						—						—						3
Total Non-U.S. Pension Plans						$	986					$	9					$	237					$	—					$	740
(1) Investments measured at the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy.

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THERMO FISHER SCIENTIFIC INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

						December 31,						Quoted Prices in Active Markets						Significant Other Observable Inputs						Significant Unobservable Inputs						Not Subject to Leveling (1)
(In millions)						2018						(Level 1)						(Level 2)						(Level 3)
Domestic Pension Plan Assets
U.S. equity funds						$	104					$	—					$	—					$	—					$	104
International equity funds						103						—						—						—						103
Fixed income funds						868						—						—						—						868
Money market funds						16						—						—						—						16
Total Domestic Pension Plans						$	1,091					$	—					$	—					$	—					$	1,091
Non-U.S. Pension Plan Assets
Equity funds						$	43					$	—					$	—					$	—					$	43
Fixed income funds						299						—						—						—						299
Hedge funds						61						—						—						—						61
Multi-asset funds						97						—						—						—						97
Derivative funds						169						—						—						—						169
Alternative investments						20						—						—						—						20
Insurance contracts						237						—						237						—						—
Cash / money market funds						6						5						—						—						1
Total Non-U.S. Pension Plans						$	932					$	5					$	237					$	—					$	690
(1) Investments measured at the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy.

The tables above present the fair value of the company’s plan assets in accordance with the fair value hierarchy (Note 14). Certain investments that are measured at fair value using the net asset value per share practical expedient have not been classified in the fair value hierarchy. The fair value amounts of these investments presented in the above tables are intended to permit reconciliation of the fair value hierarchy to the amounts presented for the total pension plan assets. These investments were also redeemable at the balance sheet date or within limited time restrictions.

Note 8. Income Taxes

The components of income from continuing operations before provision for income taxes are as follows:

(In millions)						2019						2018						2017
U.S.						$	2,278					$	1,329					$	655
Non-U.S.						1,792						1,933						1,774
Income from Continuing Operations						$	4,070					$	3,262					$	2,429

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THERMO FISHER SCIENTIFIC INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The components of the provision for income taxes of continuing operations are as follows:

(In millions)						2019						2018						2017
Current Income Tax Provision
Federal						$	267					$	165					$	1,259
Non-U.S.						544						574						576
State						62						59						62
						873						798						1,897
Deferred Income Tax Provision (Benefit)
Federal						$	(222)					$	(258)					$	(1,437)
Non-U.S.						(252)						(187)						(271)
State						(25)						(29)						12
						(499)						(474)						(1,696)
Provision for Income Taxes						$	374					$	324					$	201

The provision for income taxes in the accompanying statement of income differs from the provision calculated by applying the statutory federal income tax rate to income from continuing operations before provision for income taxes due to the following:

(In millions)						2019						2018						2017
Statutory Federal Income Tax Rate						21		%				21		%				35		%
Provision for Income Taxes at Statutory Rate						$	855					$	685					$	850
Increases (Decreases) Resulting From:
Foreign rate differential						(204)						(375)						(380)
Foreign exchange loss on inter-company debt refinancing						(62)						—						(237)
Income tax credits						(379)						(349)						(273)
Withholding taxes						38						31						55
Global intangible low-taxed income						258						167						—
Foreign-derived intangible income						(111)						(47)						—
Impact of change in tax laws and apportionment on deferred taxes						6						(12)						(1,121)
Transition tax and other impacts of U.S. tax reform						8						117						1,250
Provision for (reversal of) tax reserves, net						62						(49)						99
Excess tax benefits from stock options and restricted stock units						(80)						(77)						(65)
Basis difference on disposal of business						73						—						—
Valuation allowance						(4)						260						7
Intra-entity transfers						(79)						—						—
Other, net						(7)						(27)						16
Provision for Income Taxes						$	374					$	324					$	201

The company has operations and a taxable presence in approximately 50 countries outside the U.S. The company's effective income tax rate differs from the U.S. federal statutory rate each year due to certain operations that are subject to tax incentives, state and local taxes, and foreign taxes that are different than the U.S. federal statutory rate.

U.S. Tax Reform Impacts

On December 22, 2017, the Tax Cuts and Jobs Act of 2017 was enacted. The Tax Act includes significant changes to existing U.S. tax laws that affect the company, including a reduction of the U.S. corporate income tax rate from 35% to 21% beginning in 2018 and creation of a territorial tax system with a one-time transition tax on deemed repatriated earnings and profits of foreign subsidiaries (transition tax). As detailed below, the company recognized a net charge of $204 million for certain aspects of the Tax Act in its 2017 financial statements for which the accounting was provisional, but a reasonable

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THERMO FISHER SCIENTIFIC INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

estimate could be determined. During 2018, the company completed its accounting for the income tax effects of the Tax Act and recognized net adjustments (detailed below) to the provisional amounts, totaling a net charge of $68 million, as a component of income tax expense.

The transition tax is based on the company's total post-1986 earnings and profits, the tax on which was previously deferred from U.S. income taxes under U.S. law. The company recorded a provisional amount for the transition tax liability for each of the foreign subsidiaries, resulting in a total transition liability of $1.25 billion at December 31, 2017. After further analysis of new U.S. Treasury guidance, available tax accounting methods and elections, legislative updates, regulations, earnings and profits computations and foreign taxes, the company finalized the calculations of the transition tax liability during 2018. The increase in the liability for the transition tax in 2018 consisted of an incremental provision of $117 million offset in part by a $49 million reduction of related unrecognized tax benefits established in 2017.

In 2017, as a result of the Tax Act, the company remeasured certain deferred tax assets and liabilities based on the rates at which they were expected to reverse in the future (which was generally 21%), by recording a provisional tax benefit of $1.06 billion. During 2018, no material changes to this provisional amount were made.

The Tax Act included a provision for global intangible low-taxed income. The company has adopted a policy to account for this provision as a period cost.

During 2019, the company recorded a net tax provision of $1 million to adjust the impacts of U.S. tax reform based on final regulations issued by the U.S. Treasury in 2019. The income tax provision consists of an incremental charge of $8 million offset by a $7 million reduction of related unrecognized tax benefits.

Other Tax Impacts

In 2019, the company recorded a $62 million income tax benefit, including both U.S. federal and state taxes, related to a foreign exchange loss for tax purposes on certain intercompany financing arrangements as well as a tax provision of $191 million related to the gain on the sale of the Anatomical Pathology business. Also in 2019, the company recorded a $79 million benefit related to the deferred tax implications of intra-entity transactions which included a tax benefit to release a valuation allowance against net operating losses previously determined to be unrealizable.

In 2018, the provision for income taxes also included a $71 million charge to establish a valuation allowance against net operating losses that will not be utilized as a result of the 2019 sale of the Anatomical Pathology business (Note 2).

The foreign tax credits discussed below are the result of foreign earnings and profits remitted or deemed remitted to the U.S. during the reporting year and the U.S. treatment of taxes paid in the foreign jurisdictions in the years those profits were originally earned.

In 2019, the company implemented foreign tax credit planning in Sweden which resulted in $75 million of foreign tax credits, with no related incremental U.S. income tax expense.

In 2017, the company continued to implement tax planning initiatives related to non U.S. subsidiaries. These non-U.S. subsidiaries incurred foreign tax obligations, and made cash and deemed distributions to the company’s U.S. operations which resulted in no net tax cost. As a result of these distributions, the company benefited from U.S. foreign tax credits of $86 million, offset in part by additional U.S. income taxes of $53 million on the related foreign income (which reduced the benefit from the foreign rate differential in 2017). The company also implemented foreign tax credit planning in Sweden which resulted in $20 million of foreign tax credits, with no related incremental U.S. income tax expense. In 2017, the company refinanced certain long term inter-company debt which resulted in an income tax benefit of $237 million related to a foreign exchange loss recognized for income tax purposes.

The company generally receives a tax deduction upon the exercise of non-qualified stock options by employees, or the vesting of restricted stock units held by employees, for the difference between the exercise price and the market price of the underlying common stock on the date of exercise. The company uses the incremental tax benefit approach for utilization of tax attributes. These excess tax benefits reduce the tax provision. In 2019, 2018 and 2017, the company's tax provision was reduced by $80 million, $77 million and $65 million, respectively, of such benefits.

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THERMO FISHER SCIENTIFIC INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Net deferred tax asset (liability) in the accompanying balance sheet consists of the following:

(In millions)						2019						2018
Deferred Tax Asset (Liability)
Depreciation and amortization						$	(3,084)					$	(3,444)
Net operating loss and credit carryforwards						1,231						1,311
Reserves and accruals						144						148
Accrued compensation						261						250
Inventory basis difference						99						105
Other capitalized costs						71						103
Unrealized losses on hedging instruments						10						23
Other, net						57						143
Deferred tax assets (liabilities), net before valuation allowance						(1,211)						(1,361)
Less: Valuation allowance						408						471
Deferred tax assets (liabilities), net						$	(1,619)					$	(1,832)

The company estimates the degree to which tax assets and loss and credit carryforwards will result in a benefit based on expected profitability by tax jurisdiction and provides a valuation allowance for tax assets and loss and credit carryforwards that it believes will more likely than not expire unutilized. At December 31, 2019, all of the company’s valuation allowance relates to deferred tax assets, primarily net operating losses, for which any subsequently recognized tax benefits will reduce income tax expense.

The changes in the valuation allowance are as follows:

						Year Ended December 31,
(In millions)						2019						2018						2017
Beginning Balance						$	471					$	256					$	113
(Reductions) additions charged to income tax provision, net						(27)						223						28
Additions due to acquisitions						—						17						108
Reduction due to a divestiture						(33)						—						—
Deductions						—						(15)						—
Currency translation and other						(3)						(10)						7
Ending Balance						$	408					$	471					$	256

At December 31, 2019, the company had federal, state and non-U.S. net operating loss carryforwards of $282 million, $1.73 billion and $4.82 billion, respectively. Use of the carryforwards is limited based on the future income of certain subsidiaries. The federal and state net operating loss carryforwards expire in the years 2020 through 2039. Of the non-U.S. net operating loss carryforwards, $1.98 billion expire in the years 2024 through 2039, and the remainder do not expire.

As a result of the Tax Act, U.S. federal taxes have been recorded on $15 billion of undistributed foreign earnings as of December 31, 2019. A provision has not been made for certain U.S. state income taxes or additional non-U.S. taxes that would be due when cash is repatriated to the U.S. as the company’s undistributed foreign earnings are intended to be reinvested outside of the U.S. indefinitely. The determination of the amount of the unrecognized deferred tax liability related to the undistributed foreign earnings is not practicable due to the uncertainty in the manner in which these earnings will be distributed. The company’s intent is to only make distributions from non-U.S. subsidiaries in the future when they can be made at no net tax cost.

Unrecognized Tax Benefits

As of December 31, 2019, the company had $1.55 billion of unrecognized tax benefits which, if recognized, would reduce the effective tax rate.

F-37

THERMO FISHER SCIENTIFIC INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows:

(In millions)						2019						2018						2017
Beginning Balance						$	1,442					$	1,409					$	802
Additions due to acquisitions						—						—						31
Reductions due to acquisitions						—						(5)						—
Additions for tax positions of current year						53						48						565
Additions for tax positions of prior years						69						82						51
Reductions for tax positions of prior years						(7)						—						—
Closure of tax years						—						(5)						—
Settlements						(5)						(87)						(40)
Ending Balance						$	1,552					$	1,442					$	1,409

Substantially all of the total $1.55 billion liability is classified as a long-term liability. The company does not expect its unrecognized tax benefits to change significantly over the next twelve months.

During 2019, the company’s unrecognized tax benefits increased $70 million as a result of uncertain tax positions relating to foreign tax positions and $45 million relating to U.S. federal and state tax positions.

During 2018, the company's unrecognized tax benefits increased $85 million as a result of uncertain tax positions relating to foreign tax positions and $45 million relating to U.S. federal and state tax positions.

During 2017, the company’s unrecognized tax benefits provisionally increased $511 million as a result of uncertain tax positions relating to the scope of the Tax Act’s one-time transition tax, $54 million relating to foreign tax positions, $43 million as a result of a foreign exchange loss recognized on the refinancing of certain long term inter-company debt and $31 million due to an acquisition.

The company classified interest and penalties related to unrecognized tax benefits as income tax expense. The total amount of interest and penalties related to uncertain tax positions and recognized in the balance sheet as of December 31, 2019 and 2018 was $67 million and $59 million, respectively.

The company conducts business globally and, as a result, Thermo Fisher or one or more of its subsidiaries files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. In the normal course of business, the company is subject to examination by taxing authorities throughout the world, including such major jurisdictions as Australia, Canada, China, Denmark, Finland, France, Germany, Japan, Singapore, Sweden, the United Kingdom and the United States. With few exceptions, the company is no longer subject to U.S. federal, state and local, or non-U.S., income tax examinations for years before 2011.

F-38

THERMO FISHER SCIENTIFIC INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 9. Earnings per Share

(In millions except per share amounts)						2019						2018						2017
Income from Continuing Operations						$	3,696					$	2,938					$	2,228
Loss from Discontinued Operations						—						—						(3)
Net Income						$	3,696					$	2,938					$	2,225
Basic Weighted Average Shares						400						402						395
Plus Effect of:
Stock options and restricted units						3						4						3
Diluted Weighted Average Shares						403						406						398
Basic Earnings per Share:
Continuing operations						$	9.24					$	7.31					$	5.65
Discontinued operations						—						—						(0.01)
Basic Earnings per Share						$	9.24					$	7.31					$	5.64
Diluted Earnings per Share:
Continuing operations						$	9.17					$	7.24					$	5.60
Discontinued operations						—						—						(0.01)
Diluted Earnings per Share						$	9.17					$	7.24					$	5.59
Antidilutive Stock Options Excluded from Diluted Weighted Average Shares						1						2						2

F-39

THERMO FISHER SCIENTIFIC INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 10. Debt and Other Financing Arrangements

						Effective Interest Rate at December 31,						December 31,						December 31,
(Dollars in millions)						2019						2019						2018
Commercial Paper												$	—					$	693
Floating Rate 2-Year Senior Notes, Due 7/24/2019 (euro-denominated)												—						574
6.00% 10-Year Senior Notes, Due 3/1/2020												—						750
4.70% 10-Year Senior Notes, Due 5/1/2020												—						300
Floating Rate 2-Year Senior Notes, Due 8/7/2020 (euro-denominated)						0.17		%				673						688
1.50% 5-Year Senior Notes, Due 12/1/2020 (euro-denominated)												—						487
5.00% 10-Year Senior Notes, Due 1/15/2021												—						400
4.50% 10-Year Senior Notes, Due 3/1/2021												—						1,000
3.60% 10-Year Senior Notes, Due 8/15/2021												—						1,100
3.30% 7-Year Senior Notes, Due 2/15/2022												—						800
2.15% 7-Year Senior Notes, Due 7/21/2022 (euro-denominated)						2.28		%				561						574
3.15% 10-Year Senior Notes, Due 1/15/2023												—						800
3.00% 7-Year Senior Notes, Due 4/15/2023						5.02		%				1,000						1,000
4.15% 10-Year Senior Notes, Due 2/1/2024						4.16		%				1,000						1,000
0.75% 8-Year Senior Notes, Due 9/12/2024 (euro-denominated)						0.94		%				1,121						1,147
0.125% 5.5-Year Senior Notes, Due 3/1/2025 (euro-denominated)						0.41		%				897						—
2.00% 10-Year Senior Notes, Due 4/15/2025 (euro-denominated)						2.10		%				717						734
3.65% 10-Year Senior Notes, Due 12/15/2025						3.77		%				350						350
1.40% 8.5-Year Senior Notes, Due 1/23/2026 (euro-denominated)						1.53		%				785						802
2.95% 10-Year Senior Notes, Due 9/19/2026						3.19		%				1,200						1,200
1.45% 10-Year Senior Notes, Due 3/16/2027 (euro-denominated)						1.65		%				561						574
3.20% 10-Year Senior Notes, Due 8/15/2027						3.39		%				750						750
0.50% 8.5-Year Senior Notes, Due 3/1/2028 (euro-denominated)						0.77		%				897						—
1.375% 12-Year Senior Notes, Due 9/12/2028 (euro-denominated)						1.46		%				673						688
1.95% 12-Year Senior Notes, Due 7/24/2029 (euro-denominated)						2.08		%				785						802
2.60% 10-Year Senior Notes, Due 10/1/2029						2.74		%				900						—
0.875% 12-Year Senior Notes, Due 10/1/2031 (euro-denominated)						1.13		%				1,009						—
2.875% 20-Year Senior Notes, Due 7/24/2037 (euro-denominated)						2.94		%				785						802
1.50% 20-Year Senior Notes, Due 10/1/2039 (euro-denominated)						1.73		%				1,009						—
5.30% 30-Year Senior Notes, Due 2/1/2044						5.37		%				400						400
4.10% 30-Year Senior Notes, Due 8/15/2047						4.23		%				750						750
1.875% 30-Year Senior Notes, Due 10/1/2049 (euro-denominated)						1.98		%				1,121						—
Other												16						21
Total Borrowings at Par Value												17,960						19,186
Fair Value Hedge Accounting Adjustments												(13)						(93)
Unamortized Discount, Net												(94)						(21)
Unamortized Debt Issuance Costs												(101)						(82)
Total Borrowings at Carrying Value												17,752						18,990
Less: Short-term Obligations and Current Maturities												676						1,271
Long-term Obligations												$	17,076					$	17,719

The effective interest rates for the fixed-rate debt include the stated interest on the notes, the accretion of any discount or amortization of any premium, the amortization of any debt issuance costs and, if applicable, adjustments related to hedging.

See Note 14 for fair value information pertaining to the company’s long-term obligations.

F-40

THERMO FISHER SCIENTIFIC INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

As of December 31, 2019, the annual repayment requirements for debt obligations are as follows:

(In millions)
2020						$	676
2021						4
2022						564
2023						1,001
2024						2,122
2025 and Thereafter						13,593
						$	17,960

As of December 31, 2018, short-term obligations and current maturities of long-term obligations in the accompanying balance sheet included $693 million of commercial paper, short-term bank borrowings and borrowings under lines of credit of certain of the company’s subsidiaries. The weighted average interest rate for short-term borrowings was 0.74% at December 31, 2018. No such borrowings were outstanding at December 31, 2019. In addition to available borrowings under the company’s revolving credit agreements, discussed below, the company had unused lines of credit of $62 million as of December 31, 2019. These unused lines of credit generally provide for short-term unsecured borrowings at various interest rates.

Credit Facilities

The company has a revolving credit facility with a bank group that provides for up to $2.50 billion of unsecured multi-currency revolving credit. The facility expires in July 2021. The agreement calls for interest at either a LIBOR-based rate, a EURIBOR-based rate (for funds drawn in euro) or a rate based on the prime lending rate of the agent bank, at the company’s option. The agreement contains affirmative, negative and financial covenants, and events of default customary for facilities of this type. The covenants in our revolving credit facility (the Facility) include a Consolidated Leverage Ratio (total debt-to-Consolidated EBITDA) and a Consolidated Interest Coverage Ratio (Consolidated EBITDA to Consolidated Interest Expense), as such terms are defined in the Facility. Specifically, the company has agreed that, so long as any lender has any commitment under the Facility, any letter of credit is outstanding under the Facility, or any loan or other obligation is outstanding under the Facility, it will maintain a maximum Consolidated Leverage Ratio of 3.5:1.0. The company has also agreed that so long as any lender has any commitment under the Facility or any letter of credit is outstanding under the Facility, or any loan or other obligation is outstanding under the Facility, it will maintain a minimum Consolidated Interest Coverage Ratio of 3.0:1.0 as of the last day of any fiscal quarter. As of December 31, 2019, no borrowings were outstanding under the Facility, although available capacity was reduced by approximately $72 million as a result of outstanding letters of credit.

Commercial Paper Programs

The company has commercial paper programs pursuant to which it may issue and sell unsecured, short-term promissory notes (CP Notes). Under the U.S. program, a) maturities may not exceed 397 days from the date of issue and b) the CP Notes are issued on a private placement basis under customary terms in the commercial paper market and are not redeemable prior to maturity nor subject to voluntary prepayment. Under the euro program, maturities may not exceed 183 days and may be denominated in euro, U.S. dollars, Japanese yen, British pounds sterling, Swiss franc, Canadian dollars or other currencies. Under both programs, the CP Notes are issued at a discount from par (or premium to par, in the case of negative interest rates), or, alternatively, are sold at par and bear varying interest rates on a fixed or floating basis. As of December 31, 2019, there were no outstanding borrowings under these programs.

Senior Notes

Interest on the floating rate senior notes is payable quarterly. Interest is payable annually on the other euro-denominated senior notes and semi-annually on all other senior notes. Each of the notes may be redeemed at a redemption price of 100% of the principal amount plus a specified make-whole premium and accrued interest. The company is subject to certain affirmative and negative covenants under the indentures governing the senior notes, the most restrictive of which limits the ability of the company to pledge principal properties as security under borrowing arrangements.

In 2019, the company refinanced certain of its debt by issuing new senior notes and using the proceeds to redeem some of its existing senior notes. In connection with these redemptions, the company incurred $184 million of losses on the early extinguishment of debt included in Other Expense, Net on the accompanying statement of income. Upon redemption of the senior notes, the company terminated the related fixed to floating rate interest rate swap arrangements and paid $17 million, included in other financing activities, net, in the accompanying statement of cash flows. The company also terminated related

F-41

THERMO FISHER SCIENTIFIC INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

cross-currency interest rate swap arrangements and received $44 million, included in other investing activities, net, in the accompanying statement of cash flows.

In 2018, Thermo Fisher Scientific (Finance I) B.V., a wholly-owned finance subsidiary of the company, issued the Floating Rate Senior Notes due 2020 included in the table above. This subsidiary has no independent function other than financing activities. The Floating Rate Senior Notes due 2020 are fully and unconditionally guaranteed by the company and no other subsidiaries of the company have guaranteed the obligations.

Interest Rate Swap Arrangements

The company has entered into LIBOR-based interest rate swap arrangements with various banks. The aggregate amounts of the swaps are equal to the principal amount of the notes and the payment dates of the swaps coincide with the interest payment dates of the note. The swap contracts provide for the company to pay a variable interest rate and receive a fixed rate. The variable interest rates reset monthly. The swaps have been accounted for as fair value hedges of the notes. See Note 14 for additional information on the interest rate swap arrangements and related cross-currency interest rate swap arrangements. The following table summarizes the outstanding interest rate swap arrangements on the company's senior notes at December 31, 2019:

						Aggregate Notional Amount												Pay Rate as of
(Dollars in millions)												Pay Rate						December 31, 2019						Receive Rate
3.00% Senior Notes due 2023 (a)						$	1,000					1-month LIBOR + 1.7640%						3.5038		%				3.00		%

(a) The payments on $900 million notional value of these interest rate swaps are offset in part by cross-currency interest rate swaps which effectively reduced the pay rate as of December 31, 2019 from a weighted average of 3.50% to a weighted average of 1.14%.

The company entered into $900 million notional value of cross-currency interest rate swaps, which effectively convert a portion of the semi-annual payments related to the variable rate, U.S. dollar denominated, LIBOR-based interest rate swaps to payments on variable rate, euro denominated, EURIBOR-based cross-currency interest rate swaps.

Note 11. Leases

As a lessee, the company leases certain logistics, office, and manufacturing facilities, as well as vehicles, copiers, and other equipment. These operating leases generally have remaining lease terms between 1 month and 30 years, and some include options to extend (generally for 1 to 10 years) or have options to terminate the arrangement within 1 year. The company’s finance leases are not material.

The company has guaranteed the residual value of three leased operating facilities with lease terms ending in 2020, 2023 and 2024. The company has agreed with the lessor to comply with certain financial covenants consistent with its other debt arrangements (Note 10). The aggregate maximum guarantee under these three lease arrangements is $147 million. Operating lease ROU assets and lease liabilities for these lease arrangements are recorded on the consolidated balance sheet as of December 31, 2019, but exclude any amounts for residual value guarantees.

As a lessee, the consolidated statement of income includes pre-tax operating lease costs of $208 million and pre-tax variable lease costs of $41 million for the year ended December 31, 2019. Lease costs arising from finance leases, short-term leases, and sublease income are not material.

Cash used in operating activities for payments of amounts included in the measurement of operating lease liabilities was $208 million in the year ended December 31, 2019. Operating lease ROU assets of $205 million were obtained in exchange for new operating lease liabilities in the year ended December 31, 2019.

The weighted-average remaining operating lease term was 6.2 years and the weighted average discount rate was 4.0% as of December 31, 2019.

ROU assets of $699 million as of December 31, 2019, are classified in other assets in the consolidated balance sheet. Operating lease liabilities of $167 million and $571 million as of December 31, 2019, are classified in other accrued expenses and other long-term liabilities, respectively, in the consolidated balance sheet.

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As of December 31, 2019, future payments of operating lease liabilities are as follows:

(In millions)
2020						$	197
2021						158
2022						124
2023						92
2024						68
2025 and Thereafter						197
Total Lease Payments						836
Less: Imputed Interest						98
Total Operating Lease Liability						$	738

As a lessor, operating leases, sales-type leases and direct financing leases are not material.

As previously disclosed in the company's 2018 Annual Report on Form 10-K and under previous lease accounting guidance, income from continuing operations includes expense from operating leases of $211 million and $198 million in 2018 and 2017, respectively, and the following is a summary of annual future minimum lease and rental commitments under noncancelable operating leases as of December 31, 2018:

(In millions)
2019						$	192
2020						158
2021						118
2022						86
2023						58
2024 and Thereafter						177
						$	789

Note 12. Commitments and Contingencies

Purchase Obligations

The company has entered into unconditional purchase obligations, in the ordinary course of business, that include agreements to purchase goods, services or fixed assets and to pay royalties that are enforceable and legally binding and that specify all significant terms including: fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transaction. Purchase obligations exclude agreements that are cancelable at any time without penalty. The aggregate amount of the company’s unconditional purchase obligations totaled $1.20 billion at December 31, 2019 and the majority of these obligations are expected to be settled during 2020.

Letters of Credit, Guarantees and Other Commitments

Outstanding letters of credit and bank guarantees totaled $272 million at December 31, 2019. Substantially all of these letters of credit and guarantees expire before 2026.

Outstanding surety bonds and other guarantees totaled $61 million at December 31, 2019. The expiration of these bonds and guarantees ranges through 2022.

The letters of credit, bank guarantees and surety bonds principally secure performance obligations, and allow the holder to draw funds up to the face amount of the letter of credit, bank guarantee or surety bond if the applicable business unit does not perform as contractually required.

The company is a guarantor of pension plan obligations of a divested business. The purchaser of the divested business has agreed to pay for the pension benefits, however the company was required to guarantee payment of these pension benefits should the purchaser fail to do so. The amount of the guarantee at December 31, 2019 was $41 million.

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In connection with the sale of businesses of the company, the buyers have assumed certain contractual obligations of such businesses and have agreed to indemnify the company with respect to those assumed liabilities. In the event a third-party to a transferred contract does not recognize the transfer of obligations or a buyer defaults on its obligations under the transferred contract, the company could be liable to the third-party for such obligations. However, in such event, the company would be entitled to seek indemnification from the buyer.

Indemnifications

In conjunction with certain transactions, primarily divestitures, the company has agreed to indemnify the other parties with respect to certain liabilities related to the businesses that were sold or leased properties that were abandoned (e.g., retention of certain environmental, tax, employee and product liabilities). The scope and duration of such indemnity obligations vary from transaction to transaction. Where probable, an obligation for such indemnifications is recorded as a liability. Generally, a maximum obligation cannot be reasonably estimated. Other than obligations recorded as liabilities at the time of divestiture, historically the company has not made significant payments for these indemnifications.

In connection with the company’s efforts to reduce the number of facilities that it occupies, the company has vacated some of its leased facilities or sublet them to third parties. When the company sublets a facility to a third-party, it remains the primary obligor under the master lease agreement with the owner of the facility. As a result, if a third-party vacates the sublet facility, the company would be obligated to make lease or other payments under the master lease agreement. The company believes that the financial risk of default by sublessors is individually and in the aggregate not material to the company’s financial position or results of operations.

In connection with the sale of products in the ordinary course of business, the company often makes representations affirming, among other things, that its products do not infringe on the intellectual property rights of others and agrees to indemnify customers against third-party claims for such infringement. The company has not been required to make material payments under such provisions.

Environmental Matters

The company is currently involved in various stages of investigation and remediation related to environmental matters. The company cannot predict all potential costs related to environmental remediation matters and the possible impact on future operations given the uncertainties regarding the extent of the required cleanup, the complexity and interpretation of applicable laws and regulations, the varying costs of alternative cleanup methods and the extent of the company’s responsibility. Expenses for environmental remediation matters related to the costs of installing, operating and maintaining groundwater-treatment systems and other remedial activities related to historical environmental contamination at the company’s domestic and international facilities were not material in any period presented. The company records accruals for environmental remediation liabilities, based on current interpretations of environmental laws and regulations, when it is probable that a liability has been incurred and the amount of such liability can be reasonably estimated. The company calculates estimates based upon several factors, including input from environmental specialists and management’s knowledge of and experience with these environmental matters. The company includes in these estimates potential costs for investigation, remediation and operation and maintenance of cleanup sites. At December 31, 2019, the company’s total environmental liability was approximately $66 million. While management believes the accruals for environmental remediation are adequate based on current estimates of remediation costs, the company may be subject to additional remedial or compliance costs due to future events such as changes in existing laws and regulations, changes in agency direction or enforcement policies, developments in remediation technologies or changes in the conduct of the company’s operations, which could have a material adverse effect on the company’s financial position, results of operations or cash flows.

Litigation and Related Contingencies

There are various lawsuits and claims pending against the company including matters involving product liability, intellectual property, employment and commercial issues. The company determines the probability and range of possible loss based on the current status of each of these matters. A liability is recorded in the financial statements if it is believed to be probable that a loss has been incurred and the amount of the loss can be reasonably estimated. The company establishes a liability that is an estimate of amounts expected to be paid in the future for events that have already occurred. The company accrues the most likely amount or at least the minimum of the range of probable loss when a range of probable loss can be estimated. The accrued liabilities are based on management’s judgment as to the probability of losses for asserted and unasserted claims and, where applicable, actuarially determined estimates. Accrual estimates are adjusted as additional information becomes known or payments are made. The amount of ultimate loss may differ from these estimates. Due to the inherent uncertainties associated with pending litigation or claims, the company cannot predict the outcome, nor, with respect to certain pending litigation or claims where no liability has been accrued, make a meaningful estimate of the reasonably possible

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

loss or range of loss that could result from an unfavorable outcome. The company has no material accruals for pending litigation or claims for which accrual amounts are not disclosed below, nor are material losses deemed probable for such matters. It is reasonably possible, however, that an unfavorable outcome that exceeds the company’s current accrual estimate, if any, for one or more of the matters described below could have a material adverse effect on the company’s results of operations, financial position and cash flows.

Product Liability, Workers Compensation and Other Personal Injury Matters

The range of probable loss for product liability, workers compensation and other personal injury matters of the company’s continuing operations at December 31, 2019, was approximately $206 million to $342 million on an undiscounted basis. The portion of these liabilities assumed in the 2006 merger with Fisher was recorded at its fair (present) value at the date of merger. The company’s accrual for all such matters in total, including the discounted liabilities, was $198 million at December 31, 2019 (or $215 million undiscounted). The accrual includes estimated defense costs and is gross of estimated amounts due from insurers of $84 million at December 31, 2019 (or $96 million undiscounted) that are included in other assets in the accompanying balance sheet. The portion of these insurance assets assumed in the merger with Fisher was also recorded at its fair value at the date of merger. In addition to the above accrual, as of December 31, 2019, the company had a product liability accrual of $9 million (undiscounted) relating to divested businesses.

The assets and liabilities assumed at the Fisher merger date were ascribed a fair value based on the present value of expected future cash flows, using a discount rate equivalent to the risk free rate of interest for monetary assets with comparable maturities (weighted average discount rate of 4.67%). The discount on the liabilities of approximately $17 million and the discount on the assets of approximately $12 million (net discount $5 million) are being accreted to interest expense over the expected settlement period.

Although the company believes that the amounts accrued and estimated recoveries are probable and appropriate based on available information, including actuarial studies of loss estimates, the process of estimating losses and insurance recoveries involves a considerable degree of judgment by management and the ultimate amounts could vary materially. Insurance contracts do not relieve the company of its primary obligation with respect to any losses incurred. The collectability of amounts due from its insurers is subject to the solvency and willingness of the insurer to pay, as well as the legal sufficiency of the insurance claims. Management monitors the payment history as well as the financial condition and ratings of its insurers on an ongoing basis.

Intellectual Property Matters

On June 3, 2013, Unisone Strategic IP filed a complaint against Life Technologies, a subsidiary of the company, in the United States District Court for the Southern District of California alleging patent infringement by Life Technologies’ supply chain management system software, which operates with product “supply centers” installed at customer sites. Plaintiff seeks damages for alleged willful infringement, attorneys’ fees, costs, and injunctive relief. On August 24, 2017, Unisone filed an appeal from a decision by the Patent Trial and Appeal Board (PTAB) that found the challenged patent claims invalid. The United States Court of Appeals for the Federal Circuit upheld the PTAB’s ruling finding the challenged claims in the Unisone patent invalid. Unisone had until March 11, 2019 to file an appeal with the United States Supreme Court. Unisone did not appeal that decision, and consequently the case before the United States District Court, which had been stayed pending the outcome of the PTAB decision, resumed with Unisone filing an amended complaint on September 12, 2019 regarding similar patent claims that were not included in the PTAB proceeding. On November 1, 2019, Life Technologies filed two additional covered business method (CBM) challenges with the PTAB regarding Unisone’s new patent claims. On December 16, 2019, the United States District Court granted Life Technologies’ motion to stay the case pending the PTAB’s decision whether to institute a CBM review of the new patent claims.

Note 13. Comprehensive Income and Shareholders' Equity

Comprehensive Income (Loss)

Comprehensive income combines net income and other comprehensive items. Other comprehensive items represent certain amounts that are reported as components of shareholders’ equity in the accompanying balance sheet.

In the fourth quarter of 2017, the company recorded an out of period adjustment to correct an error in the accounting for income taxes associated with the partial hedge of its net investment in a foreign operation in 2014 through the third quarter of 2017. The adjustment affected deferred income taxes and other comprehensive income and, in the aggregate, increased comprehensive income by $101 million for the year ended December 31, 2017. The adjustment does not have any impact on the

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

company’s statements of income or cash flows. The company determined that the adjustment was not material to the consolidated financial statements for any previously reported annual or interim periods.

Changes in each component of accumulated other comprehensive items, net of tax are as follows:

(In millions)						Currency Translation Adjustment						Unrealized Losses on Hedging Instruments						Pension and Other Postretirement Benefit Liability Adjustment						Total
Balance at December 31, 2018						$	(2,243)					$	(52)					$	(203)					$	(2,498)
Other comprehensive items before reclassifications						(107)						(38)						(93)						(238)
Amounts reclassified from accumulated other comprehensive items						30						19						8						57
Net other comprehensive items						(77)						(19)						(85)						(181)
Balance at December 31, 2019						$	(2,320)					$	(71)					$	(288)					$	(2,679)

Shareholders’ Equity

At December 31, 2019, the company had reserved 25 million unissued shares of its common stock for possible issuance under stock-based compensation plans.

Note 14. Fair Value Measurements and Fair Value of Financial Instruments

Fair Value Measurements

The company uses the market approach technique to value its financial instruments and there were no changes in valuation techniques during 2019. The company’s financial assets and liabilities carried at fair value are primarily comprised of insurance contracts, investments in derivative contracts, mutual funds holding publicly traded securities and other investments in unit trusts held as assets to satisfy outstanding deferred compensation and retirement liabilities; and acquisition-related contingent consideration.

The fair value accounting guidance requires that assets and liabilities carried at fair value be classified and disclosed in one of the following three categories:

Level 1: Quoted market prices in active markets for identical assets or liabilities that the company has the ability to access.

Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data such as quoted prices, interest rates and yield curves.

Level 3: Inputs are unobservable data points that are not corroborated by market data.

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THERMO FISHER SCIENTIFIC INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following tables present information about the company’s financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2019 and December 31, 2018:

						December 31,						Quoted Prices in Active Markets						Significant Other Observable Inputs						Significant Unobservable Inputs
(In millions)						2019						(Level 1)						(Level 2)						(Level 3)
Assets
Cash equivalents						$	1,280					$	1,280					$	—					$	—
Investments in common stock, mutual funds and other similar instruments						19						19						—						—
Warrants						6						—						6						—
Insurance contracts						131						—						131						—
Derivative contracts						37						—						37						—
Total Assets						$	1,473					$	1,299					$	174					$	—
Liabilities
Derivative contracts						$	24					$	—					$	24					$	—
Contingent consideration						55						—						—						55
Total Liabilities						$	79					$	—					$	24					$	55

						December 31,						Quoted Prices in Active Markets						Significant Other Observable Inputs						Significant Unobservable Inputs
(In millions)						2018						(Level 1)						(Level 2)						(Level 3)
Assets
Cash equivalents						$	769					$	769					$	—					$	—
Bank time deposits						2						2						—						—
Investments in mutual funds and other similar instruments						10						10						—						—
Warrants						8						—						8						—
Insurance contracts						113						—						113						—
Derivative contracts						31						—						31						—
Total Assets						$	933					$	781					$	152					$	—
Liabilities
Derivative contracts						$	145					$	—					$	145					$	—
Contingent consideration						37						—						—						37
Total Liabilities						$	182					$	—					$	145					$	37

The company uses the Black-Scholes model to value its warrants. The company determines the fair value of its insurance contracts by obtaining the cash surrender value of the contracts from the issuer. The fair value of derivative contracts is the estimated amount that the company would receive/pay upon liquidation of the contracts, taking into account the change in interest rates and currency exchange rates. The company determines the fair value of acquisition-related contingent consideration based on the probability-weighted discounted cash flows associated with such future payments. Changes to the fair value of contingent consideration are recorded in selling, general and administrative expense. The following table provides a rollforward of the fair value, as determined by level 3 inputs, of the contingent consideration.

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THERMO FISHER SCIENTIFIC INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In millions)						2019						2018
Contingent Consideration
Beginning Balance						$	37					$	35
Acquisitions (including assumed balances)						24						11
Payments						(3)						(8)
Change in fair value included in earnings						(3)						(1)
Ending Balance						$	55					$	37

Derivative Contracts

The following table provides the aggregate notional value of outstanding derivative contracts.

						December 31,						December 31,
(In millions)						2019						2018
Notional Amount
Interest rate swaps (described in Note 10)						$	1,000					$	3,100
Cross-currency interest rate swaps - designated as net investment hedges						900						1,500
Currency exchange contracts						2,846						3,424

While certain derivatives are subject to netting arrangements with counterparties, the company does not offset derivative assets and liabilities within the consolidated balance sheet. The following tables present the fair value of derivative instruments in the consolidated balance sheet and statement of income.

						Fair Value – Assets																		Fair Value – Liabilities
						December 31,						December 31,						December 31,						December 31,
(In millions)						2019						2018						2019						2018
Derivatives Designated as Hedging Instruments
Interest rate swaps (a)						$	—					$	—					$	13					$	129
Cross-currency interest rate swaps (b)						33						28						—						—
Derivatives Not Designated as Hedging Instruments
Currency exchange contracts (c)						4						3						11						16
Total Derivatives						$	37					$	31					$	24					$	145

(a)The fair value of the interest rate swaps is included in the consolidated balance sheet under the caption other long-term liabilities.

(b)The fair value of the cross-currency interest rate swaps is included in the consolidated balance sheet under the caption other assets.

(c)The fair value of the currency exchange contracts is included in the consolidated balance sheet under the captions other current assets or other accrued expenses.

The following amounts related to cumulative basis adjustments for fair value hedges were included in the consolidated balance sheet under the caption long-term obligations:

						Carrying Amount of the Hedged Liability																		Cumulative Amount of Fair Value Hedging Adjustment - Increase (Decrease) Included in Carrying Amount of Liability (d)
						December 31,						December 31,						December 31,						December 31,
(In millions)						2019						2018						2019						2018
Long-term Obligations						$	980					$	3,291					$	(13)					$	(93)

(d)Includes increase in the carrying amount of $30 million at December 31, 2018 on discontinued hedging relationships.

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THERMO FISHER SCIENTIFIC INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

						Gain (Loss) Recognized
(In millions)						2019						2018
Fair Value Hedging Relationships
Interest rate swaps
Hedged long-term obligations - included in other expense, net						$	(93)					$	7
Derivatives designated as hedging instruments - included in other expense, net						97						(5)
Derivatives Designated as Cash Flow Hedges
Interest rate swaps
Included in unrealized losses on hedging instruments within other comprehensive items						(50)						—
Amount reclassified from accumulated other comprehensive items to other expense, net						(25)						(12)
Financial Instruments Designated as Net Investment Hedges
Foreign currency-denominated debt
Included in currency translation adjustment within other comprehensive items						60						336
Cross-currency interest rate swaps
Included in currency translation adjustment within other comprehensive items						49						28
Included in other expense, net						48						21
Derivatives Not Designated as Hedging Instruments
Currency exchange contracts
Included in cost of product revenues						1						2
Included in other expense, net						52						37

Gains and losses recognized on currency exchange contracts and the interest rate swaps designated as fair value hedges are included in the consolidated statement of income together with the corresponding, offsetting losses and gains on the underlying hedged transactions.

The company also uses foreign currency-denominated debt and cross-currency interest rate swaps to partially hedge its net investments in foreign operations against adverse movements in exchange rates. The majority of the company’s euro-denominated senior notes and cross-currency interest rate swaps have been designated as, and are effective as, economic hedges of part of the net investment in a foreign operation. Accordingly, foreign currency transaction gains or losses due to spot rate fluctuations on the euro-denominated debt instruments and contract fair value changes on the cross-currency interest rate swaps, excluding interest accruals, are included in currency translation adjustment within other comprehensive items and shareholders’ equity.

See Note 1 and Note 10 for additional information on the company's risk management objectives and strategies.

Cash Flow Hedge Arrangements

In 2019, the company entered into interest rate swap arrangements to mitigate the risk of interest rates rising prior to the completion of debt offerings. Based on the company's conclusion that the debt offerings were probable, the swaps hedged the cash flow risk for each of the interest payments on €1.80 billion plus $900 million aggregate principal amounts of the planned fixed-rate debt issues. The hedges were terminated in 2019, in connection with the debt offerings. The aggregate fair value of the hedges at that time, $38 million, net of tax, has been classified as a reduction to accumulated other comprehensive items and will be amortized to interest expense over the terms of the related debt issuances. The company had a cash outlay of $50 million in 2019 associated with termination of the arrangements, included in other financing activities, net, in the accompanying statement of cash flows.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Fair Value of Other Financial Instruments

The carrying value and fair value of the company’s notes receivable and debt obligations are as follows:

						December 31, 2019																		December 31, 2018
						Carrying						Fair						Carrying						Fair
(In millions)						Value						Value						Value						Value
Debt Obligations:
Senior notes						$	17,736					$	18,650					$	18,276					$	18,322
Commercial paper						—						—						693						693
Other						16						16						21						21
						$	17,752					$	18,666					$	18,990					$	19,036

The fair value of debt obligations was determined based on quoted market prices and on borrowing rates available to the company at the respective period ends which represent level 2 measurements.

Note 15. Supplemental Cash Flow Information

(In millions)						2019						2018						2017
Cash Paid For:
Interest						$	790					$	687					$	533
Income Taxes						896						591						479
Non-cash Investing and Financing Activities
Declared but unpaid dividends						77						69						61
Issuance of stock upon vesting of restricted stock units						182						170						125

Cash, cash equivalents and restricted cash is included in the consolidated balance sheet as follows:

						December 31,						December 31,
(In millions)						2019						2018
Cash and Cash Equivalents						$	2,399					$	2,103
Restricted Cash Included in Other Current Assets						21						12
Restricted Cash Included in Other Assets						2						2
Cash, Cash Equivalents and Restricted Cash						$	2,422					$	2,117

Amounts included in restricted cash represent funds held as collateral for bank guarantees and incoming cash in China awaiting government administrative clearance.

Note 16. Restructuring and Other Costs (Income), Net

Restructuring and other costs (income), net, in 2019 primarily included the gain on the sale of the company’s Anatomical Pathology business, and, to a lesser extent, transaction/integration costs related to acquisitions and a divestiture; sales of inventory revalued at the date of acquisition; and continuing charges for headcount reductions and facility consolidations in an effort to streamline operations, including the closure and consolidation of operations within several facilities in the U.S. and Europe. In 2019, severance actions associated with facility consolidations and cost reduction measures affected approximately 1% of the company’s workforce.

Restructuring and other costs in 2018 included continuing charges for headcount reductions and facility consolidations in an effort to streamline operations, including the closure and consolidation of operations within several facilities in the U.S. and Europe; third-party transaction/integration costs primarily related to recent acquisitions; sales of inventories revalued at the date of acquisition; and environmental remediation charges. These charges were partially offset by gains on sales of real estate and favorable results of litigation. In 2018, severance actions associated with facility consolidations and cost reduction measures affected approximately 1% of the company’s workforce.

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THERMO FISHER SCIENTIFIC INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Restructuring and other costs in 2017 included continuing charges for headcount reductions and facility consolidations in an effort to streamline operations, including the closure and consolidation of operations within several facilities in the U.S., Europe and Asia; costs to achieve synergies related to acquisitions, including severance and abandoned facility costs; third-party acquisition transaction and integration costs primarily associated with the acquisitions of FEI and Patheon; sales of inventories revalued at the date of acquisition; charges to conform the accounting policies of Patheon to the company's accounting policies; charges for changes in estimates of acquisition contingent consideration; hurricane response/impairment costs; net charges for the settlement/curtailment of retirement plans; and net credits for litigation matters. In 2017, severance actions associated with facility consolidations and cost reduction measures affected less than 2% of the company’s workforce.

As of February 26, 2020, the company has identified restructuring actions that will result in additional charges of approximately $65 million, primarily in 2020, and expects to identify additional actions during 2020 which will be recorded when specified criteria are met, such as communication of benefit arrangements or when the costs have been incurred.

2019

During 2019, the company recorded net restructuring and other costs by segment as follows:

(In millions)						Cost of Revenues						Selling, General and Administrative Expenses						Restructuring and Other Costs (Income), Net						Total
Life Sciences Solutions						$	16					$	—					$	24					$	40
Analytical Instruments						—						24						14						38
Specialty Diagnostics						—						4						(471)						(467)
Laboratory Products and Services						1						35						17						53
Corporate						—						(1)						3						2
						$	17					$	62					$	(413)					$	(334)

The principal components of net restructuring and other costs by segment are as follows:

Life Sciences Solutions

In 2019, the Life Sciences Solutions segment recorded $40 million of net restructuring and other charges, including $16 million of charges to cost of revenues for the sales of inventory revalued at the date of acquisition. The segment also recorded $24 million of net restructuring and other charges for severance and other costs associated with facility consolidations in the U.S and Europe, the impairment of acquired technology in development, and pre-acquisition litigation-related matters.

Analytical Instruments

In 2019, the Analytical Instruments segment recorded $38 million of net restructuring and other charges, including $24 million of charges to selling, general, and administrative expense, principally third-party transaction costs related to the acquisition of Gatan, subsequently terminated. The segment also recorded $14 million of restructuring and other costs, primarily for employee severance and other costs associated with facility consolidations in the U.S. and Europe.

Specialty Diagnostics

In 2019, the Specialty Diagnostics segment recorded $467 million of net restructuring and other income, primarily a gain on the divestiture of its Anatomical Pathology business (see Note 2). The segment also recorded $4 million of charges to selling, general, and administrative expense, principally third-party transaction costs in connection with the sale of the Anatomical Pathology business.

Laboratory Products and Services

In 2019, the Laboratory Products and Services segment recorded $53 million of net restructuring and other charges. The segment recorded charges to cost of revenues of $1 million to conform the accounting policies of recently acquired businesses with the company’s accounting policies and $35 million of charges to selling, general, and administrative expenses, principally third-party transaction/integration costs for recently completed acquisitions. The segment also recorded $17 million of restructuring and other costs, primarily charges for severance at businesses streamlining operations and employee compensation due at Brammer Bio on the date of acquisition.

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Corporate

In 2019, the company recorded $2 million of net restructuring and other costs principally for severance at its corporate operations, partially offset by income from favorable results of product liability litigation.

2018

During 2018, the company recorded net restructuring and other costs by segment as follows:

(In millions)						Cost of Revenues						Selling, General and Administrative Expenses						Restructuring and Other Costs, Net						Total
Life Sciences Solutions						$	4					$	12					$	(17)					$	(1)
Analytical Instruments						3						8						28						39
Specialty Diagnostics						—						3						(1)						2
Laboratory Products and Services						5						16						31						52
Corporate						—						(10)						9						(1)
						$	12					$	29					$	50					$	91

The principal components of net restructuring and other costs by segment are as follows:

Life Sciences Solutions

In 2018, the Life Sciences Solutions segment recorded $1 million of net restructuring and other income. The segment recorded charges to cost of revenues of $4 million for the sales of inventory revalued at the date of acquisition, as well as $12 million of charges to selling, general, and administrative expenses, primarily third-party transaction/integration costs related to recent acquisitions. The segment also recorded $17 million of net restructuring and other income, principally for a $46 million net gain on the resolution of litigation, partially offset by charges for severance other costs associated with facility consolidations in the U.S.

Analytical Instruments

In 2018, the Analytical Instruments segment recorded $39 million of net restructuring and other charges. The segment recorded net charges to cost of revenues of $3 million for the sales of inventory revalued at the date of acquisition; $8 million of net charges to selling, general, and administrative expense, principally third-party transaction costs related to the acquisition of Gatan; and $28 million of restructuring and other costs, primarily for employee severance and other costs associated with facility consolidations in the U.S. and Europe, as well as abandoned facilities costs associated with the remediation and closure of a manufacturing facility in the U.S.

Specialty Diagnostics

In 2018, the Specialty Diagnostics segment recorded $2 million of net restructuring and other charges, including $3 million of net charges to selling, general, and administrative expense, principally third-party transaction costs in connection with the planned sale of the Anatomical Pathology business. The segment also recorded $1 million of net restructuring and other income, including a $6 million gain on the sale of real estate, mostly offset by cash charges for severance and other costs associated with facility consolidations in the U.S. and Europe.

Laboratory Products and Services

In 2018, the Laboratory Products and Services segment recorded $52 million of net restructuring and other charges. The segment recorded charges to cost of revenues of $5 million, principally for the sales of inventory revalued at the date of acquisition, and $16 million of charges to selling, general, and administrative expenses for third-party transaction/integration costs related to the acquisition of Patheon. The segment also recorded $31 million of restructuring and other costs, primarily charges for environmental remediation associated with a Superfund site in the U.S., employee severance, and, to a lesser extent, hurricane response costs.

Corporate

In 2018, the company recorded $1 million of net restructuring and other income, principally income from favorable results of product liability litigation, mostly offset by charges for environmental remediation at an abandoned facility and, to a lesser extent, severance at its corporate operations.

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THERMO FISHER SCIENTIFIC INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2017

During 2017, the company recorded net restructuring and other costs by segment as follows:

(In millions)						Cost of Revenues						Selling, General and Administrative Expenses						Restructuring and Other Costs, Net						Total
Life Sciences Solutions						$	1					$	29					$	(16)					$	14
Analytical Instruments						31						(2)						30						59
Specialty Diagnostics						1						(2)						39						38
Laboratory Products and Services						90						61						41						192
Corporate						—						(8)						3						(5)
						$	123					$	78					$	97					$	298

The principal components of net restructuring and other costs by segment are as follows:

Life Sciences Solutions

In 2017, the Life Sciences Solutions segment recorded $14 million of net restructuring and other charges. The segment recorded $29 million of charges to selling, general and administrative expenses, principally for changes in estimates of acquisition contingent consideration. The segment also recorded $16 million of restructuring and other income, net, including $64 million of net credits principally for pre-acquisition litigation-related matters, and, to a lesser extent, net gains on the settlement of retirement plans. These credits were largely offset by $48 million of cash restructuring costs, including $23 million of severance and related costs primarily to achieve acquisition synergies, and $25 million of abandoned facilities costs primarily for the consolidation of facilities in the U.S.

Analytical Instruments

In 2017, the Analytical Instruments segment recorded $59 million of net restructuring and other charges. The segment recorded charges to cost of revenues of $31 million for the sales of inventory revalued at the date of acquisition, as well as $30 million of restructuring and other costs, primarily for severance and other costs to achieve acquisition synergies, as well as charges for the settlement of retirement plans.

Specialty Diagnostics

In 2017, the Specialty Diagnostics segment recorded $38 million of net restructuring and other charges, principally charges for litigation-related matters, and, to a lesser extent, cash costs for employee severance and other costs associated with headcount reductions in the U.S. and Europe.

Laboratory Products and Services

In 2017, the Laboratory Products and Services segment recorded $192 million of net restructuring and other charges. The segment recorded charges to cost of revenues of $90 million, including $33 million to conform the accounting policies of Patheon to the company's accounting policies and $55 million for sales of inventory revalued at the date of acquisition. The segment also recorded $61 million of charges to selling, general, and administrative expenses, including $55 million for third-party acquisition transaction costs, as well as $6 million to conform the accounting policies of Patheon to the company's accounting policies. The segment also recorded $41 million of restructuring and other costs, primarily for employee severance and compensation due at Patheon on the date of acquisition, and, to a lesser extent, hurricane response/impairment charges.

Corporate

In 2017, the company recorded $5 million of net restructuring and other income, principally $8 million of income from favorable results of product liability litigation, partially offset by charges for the settlement of a retirement plan and severance at its corporate operations.

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THERMO FISHER SCIENTIFIC INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table summarizes the cash components of the company’s restructuring plans. The non-cash components and other amounts reported as restructuring and other costs, net, in the accompanying statement of income have been summarized in the notes to the tables. Accrued restructuring costs are included in other accrued expenses in the accompanying balance sheet.

(In millions)						Severance						Abandonment of Excess Facilities						Other (a)						Total
Balance at December 31, 2016						$	38					$	32					$	2					$	72
Costs incurred in 2017 (c)						62						27						17						106
Reserves reversed (b)						(9)						—						—						(9)
Payments						(62)						(19)						(12)						(93)
Currency translation						1						—						(1)						—
Balance at December 31, 2017						30						40						6						76
Costs incurred in 2018 (d)						51						33						18						102
Reserves reversed (b)						(7)						(4)						(3)						(14)
Payments						(39)						(27)						(17)						(83)
Currency translation						(1)						—						—						(1)
Balance at December 31, 2018						34						42						4						80
Cumulative effect of accounting change (f)						—						(28)						—						(28)
Costs incurred in 2019 (e)						45						7						14						66
Reserves reversed (b)						(13)						(1)						—						(14)
Payments						(47)						(10)						(12)						(69)
Currency translation						(1)						—						—						(1)
Balance at December 31, 2019						$	18					$	10					$	6					$	34

(a)Other includes relocation and moving expenses associated with facility consolidations, as well as employee retention costs which are accrued ratably over the period through which employees must work to qualify for a payment.

(b)Represents reductions in cost of plans.

(c)Excludes $27 million of net credits associated with litigation-related matters, and $27 million of other restructuring charges, net, primarily for hurricane response/impairment, charges associated with the settlement/curtailment of retirement plans, and non-cash compensation due at an acquired business.

(d)Excludes $38 million of income, net, primarily associated with litigation-related matters, gains on sales of real estate, charges for environmental remediation, and hurricane response costs.

(e)Excludes $482 million of net gain on the sale of businesses, and $17 million of other restructuring charges, net, primarily for the impairment of acquired in-process research and development, pre-acquisition litigation-related matters, and compensation due to employees on the date of acquisition.

(f)Impact of adopting new lease accounting guidance on January 1, 2019.

The company expects to pay accrued restructuring costs primarily through 2020.

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THERMO FISHER SCIENTIFIC INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 17. Unaudited Quarterly Information

						2019
(In millions except per share amounts)						First (a)						Second (b)						Third (c)						Fourth (d)
Revenues						$	6,125					$	6,316					$	6,272					$	6,829
Gross Profit						2,707						2,823						2,763						3,035
Net Income						815						1,119						760						1,002
Earnings per Share:
Basic						2.04						2.80						1.89						2.51
Diluted						2.02						2.77						1.88						2.49

Amounts reflect aggregate restructuring and other items, net, as follows:

(a)Costs of $28 million.

(b)Income of $443 million.

(c)Costs of $43 million.

(d)Costs of $38 million.

						2018
(In millions except per share amounts)						First (a)						Second (b)						Third (c)						Fourth (d)
Revenues						$	5,853					$	6,078					$	5,920					$	6,507
Gross Profit						2,580						2,738						2,615						2,924
Net Income						579						752						709						898
Earnings per Share:
Basic						1.44						1.87						1.76						2.23
Diluted						1.43						1.85						1.75						2.22

Amounts reflect aggregate restructuring and other items, net, as follows:

(a)Costs of $56 million.

(b)Costs of $25 million.

(c)Income of $32 million.

(d)Costs of $42 million.

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