Item 1. Financial Statements

CONDENSED CONSOLIDATED BALANCE SHEET

(Unaudited)

						October 1,						December 31,
(In millions except share and per share amounts)						2022						2021
Assets
Current assets:
Cash and cash equivalents						$	2,919					$	4,477
Accounts receivable, less allowances of $185 and $150						7,671						7,977
Inventories						5,722						5,051
Contract assets, net						1,248						968
Other current assets						1,739						1,640
Total current assets						19,299						20,113
Property, plant and equipment, net						8,628						8,333
Acquisition-related intangible assets, net						17,813						20,113
Other assets						4,308						4,640
Goodwill						40,488						41,924
Total assets						$	90,536					$	95,123
Liabilities, redeemable noncontrolling interest and equity
Current liabilities:
Short-term obligations and current maturities of long-term obligations						$	1,010					$	2,537
Accounts payable						2,471						2,867
Accrued payroll and employee benefits						1,864						2,427
Contract liabilities						2,567						2,655
Other accrued expenses						3,206						2,950
Total current liabilities						11,118						13,436
Deferred income taxes						3,140						3,837
Other long-term liabilities						4,401						4,540
Long-term obligations						28,150						32,333
Redeemable noncontrolling interest						119						122
Equity:
Thermo Fisher Scientific Inc. shareholders’ equity:
Preferred stock, $100 par value, 50,000 shares authorized; none issued						—						—
Common stock, $1 par value, 1,200,000,000 shares authorized; 440,352,770 and 439,154,741 shares issued						440						439
Capital in excess of par value						16,596						16,174
Retained earnings						40,452						35,431
Treasury stock at cost, 48,157,213 and 44,720,112 shares						(11,011)						(8,922)
Accumulated other comprehensive items						(2,928)						(2,329)
Total Thermo Fisher Scientific Inc. shareholders’ equity						43,549						40,793
Noncontrolling interests						59						62
Total equity						43,608						40,855
Total liabilities, redeemable noncontrolling interest and equity						$	90,536					$	95,123

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

THERMO FISHER SCIENTIFIC INC.

CONDENSED CONSOLIDATED STATEMENT OF INCOME

(Unaudited)

						Three months ended												Nine months ended
						October 1,						October 2,						October 1,						October 2,
(In millions except per share amounts)						2022						2021						2022						2021
Revenues
Product revenues						$	6,583					$	7,360					$	21,603					$	22,430
Service revenues						4,094						1,970						11,862						6,079
Total revenues						10,677						9,330						33,465						28,509
Costs and operating expenses:
Cost of product revenues						3,494						3,298						10,565						9,977
Cost of service revenues						2,881						1,381						8,535						4,148
Selling, general and administrative expenses						2,208						2,004						6,694						5,729
Research and development expenses						351						351						1,080						1,014
Restructuring and other costs						33						18						59						151
Total costs and operating expenses						8,967						7,052						26,933						21,019
Operating income						1,710						2,278						6,532						7,490
Interest income						68						9						122						32
Interest expense						(173)						(128)						(457)						(375)
Other income/(expense)						(4)						18						(139)						(168)
Income before income taxes						1,601						2,177						6,058						6,979
Provision for income taxes						(31)						(271)						(530)						(906)
Equity in earnings/(losses) of unconsolidated entities						(72)						(3)						(142)						(4)
Net income						1,498						1,903						5,386						6,069
Less: net income attributable to noncontrolling interests and redeemable noncontrolling interest						3						1						12						2
Net income attributable to Thermo Fisher Scientific Inc.						$	1,495					$	1,902					$	5,374					$	6,067
Earnings per share attributable to Thermo Fisher Scientific Inc.
Basic						$	3.82					$	4.83					$	13.72					$	15.41
Diluted						$	3.79					$	4.79					$	13.62					$	15.29
Weighted average shares
Basic						392						394						392						394
Diluted						395						397						395						397

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

THERMO FISHER SCIENTIFIC INC.

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(Unaudited)

						Three months ended												Nine months ended
						October 1,						October 2,						October 1,						October 2,
(In millions)						2022						2021						2022						2021
Comprehensive income
Net income						$	1,498					$	1,903					$	5,386					$	6,069
Other comprehensive items:
Currency translation adjustment:
Currency translation adjustment (net of tax provision (benefit) of $157, $74, $419 and $169)						(216)						(32)						(632)						121
Unrealized gains and losses on hedging instruments:
Reclassification adjustment for losses included in net income (net of tax benefit of $0, $0, $1 and $5)						1						2						2						16
Pension and other postretirement benefit liability adjustments:
Pension and other postretirement benefit liability adjustments arising during the period (net of tax (provision) benefit of $(3), $(1), $(6) and $(3))						4						3						13						7
Amortization of net loss included in net periodic pension cost (net of tax benefit of $0, $2, $2 and $4)						4						3						8						9
Total other comprehensive items						(207)						(24)						(609)						153
Comprehensive income						1,291						1,879						4,777						6,222
Less: comprehensive income/(loss) attributable to noncontrolling interests and redeemable noncontrolling interest						—						1						2						2
Comprehensive income attributable to Thermo Fisher Scientific Inc.						$	1,291					$	1,878					$	4,775					$	6,220

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

THERMO FISHER SCIENTIFIC INC.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(Unaudited)

						Nine months ended
						October 1,						October 2,
(In millions)						2022						2021
Operating activities
Net income						$	5,386					$	6,069
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of property, plant and equipment						730						614
Amortization of acquisition-related intangible assets						1,803						1,295
Change in deferred income taxes						(862)						(455)
Loss on early extinguishment of debt						26						197
Stock-based compensation						232						153
Other non-cash expenses, net						443						192
Changes in assets and liabilities, excluding the effects of acquisitions						(2,091)						(1,210)
Net cash provided by operating activities						5,667						6,855
Investing activities
Acquisitions, net of cash acquired						(39)						(1,519)
Purchase of property, plant and equipment						(1,693)						(1,692)
Proceeds from sale of property, plant and equipment						18						9
Other investing activities, net						80						(38)
Net cash used in investing activities						(1,634)						(3,240)
Financing activities
Net proceeds from issuance of debt						—						3,122
Repayment of debt						(375)						(2,803)
Proceeds from issuance of commercial paper						1,231						—
Repayments of commercial paper						(3,690)						—
Purchases of company common stock						(2,000)						(2,000)
Dividends paid						(338)						(292)
Net proceeds from issuance of company common stock under employee stock plans						57						101
Other financing activities, net						(86)						(14)
Net cash used in financing activities						(5,201)						(1,886)
Exchange rate effect on cash						(389)						(17)
(Decrease) increase in cash, cash equivalents and restricted cash						(1,557)						1,712
Cash, cash equivalents and restricted cash at beginning of period						4,491						10,336
Cash, cash equivalents and restricted cash at end of period						$	2,934					$	12,048

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

THERMO FISHER SCIENTIFIC INC.

CONDENSED CONSOLIDATED STATEMENT OF REDEEMABLE NONCONTROLLING INTEREST AND EQUITY

(Unaudited)

						Redeemable Noncontrolling Interest									Common Stock												Capital in Excess of Par Value						Retained Earnings						Treasury Stock												Accumulated Other Comprehensive Items						Total Thermo Fisher Scientific Inc. Shareholders’ Equity						Noncontrolling Interests						Total Equity
(In millions)												Shares						Amount												Shares						Amount
															Three months ended October 1, 2022
Balance at July 2, 2022						$	117								440						$	440					$	16,467					$	39,074					48						$	(10,964)					$	(2,724)					$	42,293					$	61					$	42,354
Issuance of shares under employees' and directors' stock plans						—									—						—						52						—						—						(47)						—						5						—						5
Stock-based compensation						—									—						—						77						—						—						—						—						77						—						77
Dividends declared ($0.30 per share)						—									—						—						—						(117)						—						—						—						(117)						—						(117)
Net income						5									—						—						—						1,495						—						—						—						1,495						(2)						1,493
Other comprehensive items						(3)									—						—						—						—						—						—						(204)						(204)						—						(204)
Balance at October 1, 2022						$	119								440						$	440					$	16,596					$	40,452					48						$	(11,011)					$	(2,928)					$	43,549					$	59					$	43,608
															Three months ended October 2, 2021
Balance at July 3, 2021						$	—								438						$	438					$	15,826					$	32,076					45						$	(8,856)					$	(2,630)					$	36,854					$	47					$	36,901
Issuance of shares under employees' and directors' stock plans						—									1						1						83						—						—						(55)						—						29						—						29
Stock-based compensation						—									—						—						51						—						—						—						—						51						—						51
Dividends declared ($0.26 per share)						—									—						—						—						(102)						—						—						—						(102)						—						(102)
Net income						—									—						—						—						1,902						—						—						—						1,902						1						1,903
Other comprehensive items						—									—						—						—						—						—						—						(24)						(24)						—						(24)
Contributions from (distributions to) noncontrolling interests						—									—						—						—						—						—						—						—						—						(1)						(1)
Balance at October 2, 2021						$	—								439						$	439					$	15,960					$	33,876					45						$	(8,911)					$	(2,654)					$	38,710					$	47					$	38,757

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

THERMO FISHER SCIENTIFIC INC.

CONDENSED CONSOLIDATED STATEMENT OF REDEEMABLE NONCONTROLLING INTEREST AND EQUITY (Continued)

(Unaudited)

						Redeemable Noncontrolling Interest									Common Stock												Capital in Excess of Par Value						Retained Earnings						Treasury Stock												Accumulated Other Comprehensive Items						Total Thermo Fisher Scientific Inc. Shareholders’ Equity						Noncontrolling Interests						Total Equity
(In millions)												Shares						Amount												Shares						Amount
															Nine months ended October 1, 2022
Balance at December 31, 2021						$	122								439						$	439					$	16,174					$	35,431					45						$	(8,922)					$	(2,329)					$	40,793					$	62					$	40,855
Issuance of shares under employees' and directors' stock plans						—									1						1						190						—						—						(89)						—						102						—						102
Stock-based compensation						—									—						—						232						—						—						—						—						232						—						232
Purchases of company common stock						—									—						—						—						—						3						(2,000)						—						(2,000)						—						(2,000)
Dividends declared ($0.90 per share)						—									—						—						—						(353)						—						—						—						(353)						—						(353)
Net income						14									—						—						—						5,374						—						—						—						5,374						(2)						5,372
Other comprehensive items						(10)									—						—						—						—						—						—						(599)						(599)						—						(599)
Contributions from (distributions to) noncontrolling interests						(7)									—						—						—						—						—						—						—						—						(1)						(1)
Balance at October 1, 2022						$	119								440						$	440					$	16,596					$	40,452					48						$	(11,011)					$	(2,928)					$	43,549					$	59					$	43,608
															Nine months ended October 2, 2021
Balance at December 31, 2020						$	—								437						$	437					$	15,579					$	28,116					40						$	(6,818)					$	(2,807)					$	34,507					$	10					$	34,517
Issuance of shares under employees' and directors' stock plans						—									2						2						228						—						1						(93)						—						137						—						137
Stock-based compensation						—									—						—						153						—						—						—						—						153						—						153
Purchases of company common stock						—									—						—						—						—						4						(2,000)						—						(2,000)						—						(2,000)
Dividends declared ($0.78 per share)						—									—						—						—						(307)						—						—						—						(307)						—						(307)
Net income						—									—						—						—						6,067						—						—						—						6,067						2						6,069
Other comprehensive items						—									—						—						—						—						—						—						153						153						—						153
Contributions from (distributions to) noncontrolling interests						—									—						—						—						—						—						—						—						—						35						35
Balance at October 2, 2021						$	—								439						$	439					$	15,960					$	33,876					45						$	(8,911)					$	(2,654)					$	38,710					$	47					$	38,757

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

THERMO FISHER SCIENTIFIC INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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, increase laboratory productivity, and improve patient health through diagnostics and the development and manufacture of life-changing therapies. Markets served include pharmaceutical and biotech, academic and government, industrial and applied, as well as healthcare and diagnostics.

Interim Financial Statements

The interim condensed consolidated financial statements presented herein have been prepared by the company, are unaudited and, in the opinion of management, reflect all adjustments of a normal recurring nature necessary for a fair statement of the financial position at October 1, 2022, the results of operations for the three- and nine-month periods ended October 1, 2022 and October 2, 2021, and the cash flows for the nine-month periods ended October 1, 2022 and October 2, 2021. Interim results are not necessarily indicative of results for a full year.

The condensed consolidated balance sheet presented as of December 31, 2021 has been derived from the audited consolidated financial statements as of that date. The condensed consolidated financial statements and notes are presented as permitted by Form 10-Q and do not contain all information that is included in the annual financial statements and notes thereto of the company. The condensed consolidated financial statements and notes included in this report should be read in conjunction with the 2021 financial statements and notes included in the company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (SEC). Certain reclassifications of prior year amounts have been made to conform to the current year presentation.

Note 1 to the consolidated financial statements for 2021 describes the significant accounting estimates and policies used in preparation of the consolidated financial statements. There have been no material changes in the company’s significant accounting policies during the nine months ended October 1, 2022.

Inventories

The components of inventories are as follows:

(In millions)						October 1, 2022						December 31, 2021
Raw materials						$	2,405					$	1,922
Work in process						677						676
Finished goods						2,640						2,453
Inventories						$	5,722					$	5,051

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.

The company’s estimates include, among others, asset reserve requirements as well as the amounts of future cash flows associated with certain assets and businesses that are used in assessing the risk of impairment. The negative impacts associated with the ongoing COVID-19 global pandemic significantly lessened in 2021 and 2022. The extent and duration of negative impacts in the future, which may include inflationary pressures and supply chain disruptions, are uncertain and may require changes to estimates. Actual results could differ from those estimates.

THERMO FISHER SCIENTIFIC INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Recent Accounting Pronouncements

In November 2021, the FASB issued new guidance to require entities to disclose information about certain types of government assistance they receive, including cash grants and tax credits. Among other things, the new guidance requires expanded disclosure regarding the qualitative and quantitative characteristics of the nature, amount, timing, and significant terms and conditions of transactions with a government arising from a grant or other forms of assistance accounted for under a contribution model. The company will adopt this guidance in the fourth quarter of 2022 using a prospective method. The adoption of this guidance is not expected to have a material impact on the company’s disclosures; however, the impact in future periods will be dependent on the extent of transactions of this nature entered into by the company.

In September 2022, the FASB issued new guidance to require entities to disclose information about supplier finance programs. Among other things, the new guidance requires expanded disclosure about key program terms, payment terms, and amounts outstanding for obligations under these programs for each period presented. The company will adopt some aspects of this guidance in 2023 using a retrospective method and other aspects in 2024 using a prospective method. The adoption of this guidance is not expected to have a material impact on the company’s disclosures; however, the impact in future periods will be dependent on the extent of arrangements of this nature entered into by the company.

Note 2. Acquisitions

The company’s acquisitions have historically been made at prices above the determined fair value of the acquired identifiable net assets, resulting in goodwill, primarily due to expectations of the synergies that will be realized by combining the businesses and the benefits that will be gained from the assembled workforces. 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 services; and use of the commercial infrastructure of the acquired businesses to cost-effectively expand sales of company products and services.

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.

Pending Acquisition

The company has entered into an agreement to acquire The Binding Site Group for £2.25 billion, payable as €2.59 billion in cash. The Binding Site Group provides specialty diagnostic assays and instruments to improve the diagnosis and management of blood cancers and immune system disorders. The transaction is subject to customary closing conditions, including regulatory approvals. Upon completion, The Binding Site Group will become part of the Specialty Diagnostics segment.

2022

In 2022, the company acquired, within the Analytical Instruments segment, a U.S.-based developer of Fourier-transform infrared gas analysis technologies.

2021

The preliminary allocations of the purchase price for the acquisitions of PPD, Inc. and PeproTech, Inc. were based on estimates of the fair values of the net assets acquired and are subject to adjustment upon finalization, largely with respect to acquired intangible assets, lease assets and liabilities, and the related deferred taxes. Measurements of these items inherently require significant estimates and assumptions. During the first nine months of 2022, the company adjusted the preliminary allocations of PPD and PeproTech, which among others increased goodwill ($122 million) and other liabilities assumed ($35 million), and decreased definite-lived intangible assets ($43 million), property, plant and equipment ($39 million), other current assets ($38 million), contract liabilities ($29 million), equity method investments ($23 million), and the fair value of assumed contingent consideration ($18 million). The adjustments to depreciation and amortization expenses recorded during the first nine months of 2022 were not material.

THERMO FISHER SCIENTIFIC INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 3. Revenues and Contract-related Balances

Disaggregated Revenues

Revenues by type are as follows:

						Three months ended												Nine months ended
(In millions)						October 1, 2022						October 2, 2021						October 1, 2022						October 2, 2021
Revenues
Consumables						$	4,651					$	5,544					$	15,754					$	16,880
Instruments						1,932						1,816						5,849						5,550
Services						4,094						1,970						11,862						6,079
Consolidated revenues						$	10,677					$	9,330					$	33,465					$	28,509

Revenues by geographic region based on customer location are as follows:

						Three months ended												Nine months ended
(In millions)						October 1, 2022						October 2, 2021						October 1, 2022						October 2, 2021
Revenues
North America						$	5,962					$	4,662					$	18,317					$	14,292
Europe						2,406						2,557						8,007						8,037
Asia-Pacific						1,971						1,836						6,077						5,294
Other regions						338						275						1,064						886
Consolidated revenues						$	10,677					$	9,330					$	33,465					$	28,509

Each reportable segment earns revenues from consumables, instruments and services in North America, Europe, Asia-Pacific and other regions. See Note 4 for revenues 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 October 1, 2022 was $26.61 billion. The company will recognize revenues for these performance obligations as they are satisfied, approximately 57% of which is expected to occur within the next twelve months. Amounts expected to occur thereafter generally relate to contract manufacturing, clinical research and extended warranty service agreements, which typically have durations of three to five years.

Contract-related Balances

Noncurrent contract assets and noncurrent contract liabilities are included within other assets and other long-term liabilities in the accompanying balance sheet, respectively. Contract asset and liability balances are as follows:

(In millions)						October 1, 2022						December 31, 2021
Current contract assets, net						$	1,248					$	968
Noncurrent contract assets, net						9						9
Current contract liabilities						2,567						2,655
Noncurrent contract liabilities						1,200						1,238

In the three and nine months ended October 1, 2022, the company recognized revenues of $0.34 billion and $2.33 billion, respectively, that were included in the contract liabilities balance at December 31, 2021. In the three and nine months ended October 2, 2021, the company recognized revenues of $0.17 billion and $1.10 billion, respectively, that were included in the contract liabilities balance at December 31, 2020.

THERMO FISHER SCIENTIFIC INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 4. Business Segment and Geographical Information

Business Segment Information

						Three months ended												Nine months ended
						October 1,						October 2,						October 1,						October 2,
(In millions)						2022						2021						2022						2021
Revenues
Life Sciences Solutions						$	2,962					$	3,721					$	10,485					$	11,481
Analytical Instruments						1,621						1,476						4,746						4,344
Specialty Diagnostics						1,065						1,362						3,648						4,212
Laboratory Products and Biopharma Services						5,585						3,487						16,564						10,667
Eliminations						(556)						(716)						(1,978)						(2,195)
Consolidated revenues						10,677						9,330						33,465						28,509
Segment Income
Life Sciences Solutions						1,039						1,821						4,542						5,818
Analytical Instruments						386						264						1,031						816
Specialty Diagnostics						220						310						816						983
Laboratory Products and Biopharma Services						725						383						2,036						1,360
Subtotal reportable segments						2,370						2,778						8,425						8,977
Cost of revenues adjustments						(22)						—						(41)						(8)
Selling, general and administrative expenses adjustments						(11)						(59)						10						(33)
Restructuring and other costs						(33)						(18)						(59)						(151)
Amortization of acquisition-related intangible assets						(594)						(423)						(1,803)						(1,295)
Consolidated operating income						1,710						2,278						6,532						7,490
Interest income						68						9						122						32
Interest expense						(173)						(128)						(457)						(375)
Other income/(expense)						(4)						18						(139)						(168)
Consolidated income before taxes						$	1,601					$	2,177					$	6,058					$	6,979

Cost of revenues adjustments included in the above table consist of charges for the sale of inventories revalued at the date of acquisition and inventory write-downs associated with large-scale abandonments of product lines. Selling, general and administrative expenses adjustments included in the above table consist of third-party transaction/integration costs related to recent acquisitions, charges/credits for changes in estimates of contingent acquisition consideration, and charges associated with product liability litigation.

Geographical Information

Revenues by country based on customer location are as follows:

						Three months ended												Nine months ended
(In millions)						October 1, 2022						October 2, 2021						October 1, 2022						October 2, 2021
Revenues
United States						$	5,787					$	4,495					$	17,730					$	13,742
China						954						885						2,865						2,454
Other						3,936						3,950						12,870						12,313
Consolidated revenues						$	10,677					$	9,330					$	33,465					$	28,509

THERMO FISHER SCIENTIFIC INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 5. Income Taxes

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 before provision for income taxes due to the following:

						Nine months ended
(In millions)						October 1, 2022						October 2, 2021
Statutory federal income tax rate						21		%				21		%
Provision for income taxes at statutory rate						$	1,272					$	1,466
Increases (decreases) resulting from:
Foreign rate differential						(285)						(159)
Income tax credits						(118)						(205)
Global intangible low-taxed income						126						45
Foreign-derived intangible income						(102)						(114)
Excess tax benefits from stock options and restricted stock units						(63)						(96)
Provision for (reversal of) tax reserves, net						(543)						22
Intra-entity transfers						(18)						(258)
Valuation allowances						240						18
Withholding taxes						48						106
Tax return reassessments and settlements						(94)						1
State income taxes, net of federal tax						133						115
Other, net						(66)						(35)
Provision for income taxes						$	530					$	906

During the third quarter of 2022, the company settled an IRS audit relating to the 2017 and 2018 tax years. The company recorded a $208 million net tax benefit primarily from this settlement and related impacts, which resulted in a decrease in the company’s unrecognized tax benefits of $658 million. The company recorded $49 million of charges for expired tax credits and other related components of the settlement. The company recorded a charge of $395 million to establish a valuation allowance against certain U.S. foreign tax credits which the company believes will more likely than not expire unutilized. The company also recorded $101 million of additional net unrecognized tax benefit liabilities related to other tax audits.

The company has operations and a taxable presence in approximately 70 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.

Unrecognized Tax Benefits

As of October 1, 2022 the company had $0.56 billion of unrecognized tax benefits substantially all of which, if recognized, would reduce the effective tax rate. A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows:

(In millions)						2022
Balance at beginning of year						$	1,124
Additions for tax positions of current year						104
Additions for tax positions of prior years						24
Reductions for tax positions of prior years						(659)
Closure of tax years						(2)
Settlements						(32)
Balance at end of period						$	559

THERMO FISHER SCIENTIFIC INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 6. Earnings per Share

						Three months ended												Nine months ended
						October 1,						October 2,						October 1,						October 2,
(In millions except per share amounts)						2022						2021						2022						2021
Net income attributable to Thermo Fisher Scientific Inc.						$	1,495					$	1,902					$	5,374					$	6,067
Basic weighted average shares						392						394						392						394
Plus effect of: stock options and restricted stock units						3						3						3						3
Diluted weighted average shares						395						397						395						397
Basic earnings per share						$	3.82					$	4.83					$	13.72					$	15.41
Diluted earnings per share						$	3.79					$	4.79					$	13.62					$	15.29
Antidilutive stock options excluded from diluted weighted average shares						2						—						2						1

Note 7. Debt and Other Financing Arrangements

						Effective interest rate at October 1,						October 1,						December 31,
(Dollars in millions)						2022						2022						2021
Commercial Paper												$	—					$	2,522
Floating Rate (SOFR + 0.35%) 1.5-Year Senior Notes, Due 4/18/2023												1,000						1,000
Floating Rate (SOFR + 0.39%) 2-Year Senior Notes, Due 10/18/2023												500						500
0.797% 2-Year Senior Notes, Due 10/18/2023						1.04		%				1,350						1,350
Floating Rate (EURIBOR + 0.20%) 2-Year Senior Notes Due 11/18/2023 (euro-denominated)						0.39		%				1,666						1,933
0.000% 2-Year Senior Notes Due 11/18/2023 (euro-denominated)						0.05		%				540						625
0.75% 8-Year Senior Notes, Due 9/12/2024 (euro-denominated)						0.92		%				980						1,137
1.215% 3-Year Senior Notes, Due 10/18/2024						1.42		%				2,500						2,500
Floating Rate (SOFR + 0.53%) 3-Year Senior Notes, Due 10/18/2024												500						500
0.125% 5.5-Year Senior Notes, Due 3/1/2025 (euro-denominated)						0.39		%				784						910
2.00% 10-Year Senior Notes, Due 4/15/2025 (euro-denominated)						2.09		%				627						728
0.000% 4-Year Senior Notes, Due 11/18/2025 (euro-denominated)						0.13		%				540						625
3.65% 10-Year Senior Notes, Due 12/15/2025												—						350
1.40% 8.5-Year Senior Notes, Due 1/23/2026 (euro-denominated)						1.52		%				686						796
1.45% 10-Year Senior Notes, Due 3/16/2027 (euro-denominated)						1.64		%				490						568
1.75% 7-Year Senior Notes, Due 4/15/2027 (euro-denominated)						1.95		%				588						682
0.50% 8.5-Year Senior Notes, Due 3/1/2028 (euro-denominated)						0.76		%				784						910
1.375% 12-Year Senior Notes, Due 9/12/2028 (euro-denominated)						1.46		%				588						682
1.75% 7-Year Senior Notes, Due 10/15/2028						1.89		%				700						700
1.95% 12-Year Senior Notes, Due 7/24/2029 (euro-denominated)						2.07		%				686						796
2.60% 10-Year Senior Notes, Due 10/1/2029						2.74		%				900						900
0.80% 9-Year Senior Notes, Due 10/18/2030 (euro-denominated)						0.87		%				1,715						1,990
0.875% 12-Year Senior Notes, Due 10/1/2031 (euro-denominated)						1.12		%				882						1,023
2.00% 10-Year Senior Notes, Due 10/15/2031						2.23		%				1,200						1,200
2.375% 12-Year Senior Notes, Due 4/15/2032 (euro-denominated)						2.53		%				588						682
1.125% 12-Year Senior Notes, Due 10/18/2033 (euro-denominated)						1.19		%				1,470						1,706
2.875% 20-Year Senior Notes, Due 7/24/2037 (euro-denominated)						2.94		%				686						796

THERMO FISHER SCIENTIFIC INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

						Effective interest rate at October 1,						October 1,						December 31,
(Dollars in millions)						2022						2022						2021
1.50% 20-Year Senior Notes, Due 10/1/2039 (euro-denominated)						1.73		%				882						1,023
2.80% 20-Year Senior Notes, Due 10/15/2041						2.90		%				1,200						1,200
1.625% 20-Year Senior Notes, Due 10/18/2041 (euro-denominated)						1.75		%				1,225						1,421
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)						1.97		%				980						1,137
2.00% 30-Year Senior Notes, Due 10/18/2051 (euro-denominated)						2.06		%				735						853
Other												72						76
Total borrowings at par value												29,194						34,971
Unamortized discount												(101)						(117)
Unamortized debt issuance costs												(152)						(184)
Total borrowings at carrying value												28,941						34,670
Finance lease liabilities												219						200
Less: Short-term obligations and current maturities												1,010						2,537
Long-term obligations												$	28,150					$	32,333

SOFR - Secured Overnight Financing Rate

EURIBOR - Euro Interbank Offered Rate

The effective interest rates for the fixed-rate debt include the stated interest on the notes, the accretion of any discounts/premiums and the amortization of any debt issuance costs.

See Note 10 for fair value information pertaining to the company’s long-term borrowings.

Credit Facilities

The company has a revolving credit facility (the Facility) with a bank group that provides for up to $5.00 billion of unsecured multi-currency revolving credit. The Facility expires on January 7, 2027. The revolving credit agreement calls for interest at either a Term SOFR, 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 the Facility include a Consolidated Net Interest Coverage Ratio (Consolidated EBITDA to Consolidated Net 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 minimum Consolidated Net Interest Coverage Ratio of 3.5:1.0 as of the last day of any fiscal quarter. As of October 1, 2022, no borrowings were outstanding under the Facility, although available capacity was reduced by immaterial 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 October 1, 2022, there were no outstanding borrowings under these programs.

Senior Notes

Interest is payable quarterly on the floating rate senior notes, annually on the euro-denominated fixed rate senior notes and semi-annually on all other senior notes. Each of the fixed rate senior notes may be redeemed at a redemption price of 100% of the principal amount plus a specified make-whole premium and accrued interest. Except for the euro-denominated floating rate senior notes, which may not be redeemed early, the floating rate senior notes may be redeemed in whole or in part on or after their applicable call dates at a redemption price of 100% of the principal amount plus accrued interest. The company is subject

THERMO FISHER SCIENTIFIC INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

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. The company was in compliance with all covenants at October 1, 2022.

In the first quarter of 2022, the company redeemed all of its 3.650% Senior Notes due 2025. In connection with the redemption, the company incurred $26 million of losses on the early extinguishment of debt included in other income/(expense) on the accompanying statement of income.

Thermo Fisher Scientific (Finance I) B.V. (Thermo Fisher International), a wholly-owned finance subsidiary of the company, issued each of the Floating Rate Senior Notes due 2023, the 0.00% Senior Notes due 2023, the 0.00% Senior Notes due 2025, the 0.80% Senior Notes due 2030, the 1.125% Senior Notes due 2033, the 1.625% Senior Notes due 2041, and the 2.00% Senior Notes due 2051 included in the table above (collectively, the “Euronotes”) in registered public offerings. The company has fully and unconditionally guaranteed all of Thermo Fisher International’s obligations under the Euronotes and all of Thermo Fisher International’s other debt securities, and no other subsidiary of the company will guarantee these obligations. Thermo Fisher International is a “finance subsidiary” as defined in Rule 13-01(a)(4)(vi) of the Exchange Act, with no assets or operations other than those related to the issuance, administration and repayment of the Euronotes and other debt securities issued by Thermo Fisher International from time to time. The financial condition, results of operations and cash flows of Thermo Fisher International are consolidated in the financial statements of the company.

October 2022 Debt Issuances

In the fourth quarter of 2022, the company issued the following senior notes:

(In millions)						Principal Value Issued
0.853% 3-Year Senior Notes, Due 10/20/2025 (yen-denominated)						¥	22,300
1.054% 5-Year Senior Notes, Due 10/20/2027 (yen-denominated)						¥	28,900
1.279% 7-Year Senior Notes, Due 10/19/2029 (yen-denominated)						¥	4,700
1.490% 10-Year Senior Notes, Due 10/20/2032 (yen-denominated)						¥	6,300
2.069% 20-Year Senior Notes, Due 10/20/2042 (yen-denominated)						¥	14,600
2.382% 30-Year Senior Notes, Due 10/18/2052 (yen-denominated)						¥	33,300

Note 8. Commitments and Contingencies

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. At October 1, 2022, there have been no material changes to the accruals for pending environmental-related matters disclosed in the company’s 2021 financial statements and notes included in the company’s Annual Report on Form 10-K. 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 and cash flows.

Litigation and Related Contingencies

The company is involved in various disputes, governmental and/or regulatory inspections, inquiries, investigations and proceedings, and litigation matters that arise from time to time in the ordinary course of business. The disputes and litigation matters include product liability, intellectual property, employment and commercial issues. 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 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 in the company’s 2021 financial statements and notes included in the company’s Annual Report on Form 10-K, nor are material losses deemed probable for such matters. It is reasonably possible, however, that

THERMO FISHER SCIENTIFIC INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

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 company is involved in various proceedings and litigation that arise from time to time in connection with product liability, workers compensation and other personal injury matters. At October 1, 2022, there have been no material changes to the accruals for pending product liability, workers compensation, and other personal injury matters disclosed in the company’s 2021 financial statements and notes included in the company’s Annual Report on Form 10-K. Although the company believes that the amounts accrued and estimated insurance 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, which could have a material adverse effect on the company’s results of operations, financial position, and cash flows. 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.

Note 9. Comprehensive Income and Shareholders' Equity

Comprehensive Income (Loss)

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, 2021						$	(2,065)					$	(35)					$	(229)					$	(2,329)
Other comprehensive items before reclassifications						(632)						—						13						(619)
Amounts reclassified from accumulated other comprehensive items						10						2						8						20
Net other comprehensive items						(622)						2						21						(599)
Balance at October 1, 2022						$	(2,687)					$	(33)					$	(208)					$	(2,928)

Shareholders’ Equity

In the fourth quarter of 2022, the company repurchased $1.00 billion of the company’s common stock (2.0 million shares).

THERMO FISHER SCIENTIFIC INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 10. Fair Value Measurements and Fair Value of Financial Instruments

Fair Value Measurements

The following tables present information about the company’s financial assets and liabilities measured at fair value on a recurring basis:

						October 1,						Quoted prices in active markets						Significant other observable inputs						Significant unobservable inputs
(In millions)						2022						(Level 1)						(Level 2)						(Level 3)
Assets
Cash equivalents						$	1,395					$	1,395					$	—					$	—
Investments						48						48						—						—
Warrants						12						—						12						—
Insurance contracts						152						—						152						—
Derivative contracts						167						—						167						—
Total assets						$	1,774					$	1,443					$	331					$	—
Liabilities
Derivative contracts						$	2					$	—					$	2					$	—
Contingent consideration						168						—						—						168
Total liabilities						$	170					$	—					$	2					$	168

						December 31,						Quoted prices in active markets						Significant other observable inputs						Significant unobservable inputs
(In millions)						2021						(Level 1)						(Level 2)						(Level 3)
Assets
Cash equivalents						$	2,210					$	2,210					$	—					$	—
Investments						298						298						—						—
Warrants						15						—						15						—
Insurance contracts						181						—						181						—
Derivative contracts						36						—						36						—
Total assets						$	2,740					$	2,508					$	232					$	—
Liabilities
Derivative contracts						$	1					$	—					$	1					$	—
Contingent consideration						317						—						—						317
Total liabilities						$	318					$	—					$	1					$	317

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 initially measures the fair value of acquisition-related contingent consideration based on amounts expected to be transferred (probability-weighted) discounted to present value. Changes to the fair value of contingent consideration are recorded in selling, general and administrative expense.

In the three and nine months ended October 1, 2022, the company recorded $13 million and $136 million, respectively, of net losses on investments which are included in other income/(expense) in the accompanying statement of income. In the three and nine months ended October 2, 2021, the company recorded $25 million and $23 million, respectively, of net gains on investments which are included in other income/(expense) in the accompanying statement of income.

THERMO FISHER SCIENTIFIC INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

The following table provides a rollforward of the fair value, as determined by level 3 inputs (such as likelihood of achieving production or revenue milestones, as well as changes in the fair values of the investments underlying a recapitalization investment portfolio), of the contingent consideration.

						Three months ended												Nine months ended
						October 1,						October 2,						October 1,						October 2,
(In millions)						2022						2021						2022						2021
Contingent consideration
Beginning balance						$	216					$	149					$	317					$	70
Acquisitions (including assumed balances)						—						—						(18)						179
Payments						(32)						(1)						(64)						(43)
Changes in fair value included in earnings						(16)						23						(67)						(35)
Ending balance						$	168					$	171					$	168					$	171

Derivative Contracts

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

(In millions)						October 1, 2022						December 31, 2021
Notional amount
Cross-currency interest rate swaps - designated as net investment hedges						$	900					$	900
Currency exchange contracts						1,676						2,149

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

						Fair value – assets												Fair value – liabilities
						October 1,						December 31,						October 1,						December 31,
(In millions)						2022						2021						2022						2021
Derivatives designated as hedging instruments
Cross-currency interest rate swaps (a)						$	145					$	25					$	—					$	—
Derivatives not designated as hedging instruments
Currency exchange contracts (b)						22						11						2						1
Total derivatives						$	167					$	36					$	2					$	1

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

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

						Gain (loss) recognized
						Three months ended												Nine months ended
						October 1,						October 2,						October 1,						October 2,
(In millions)						2022						2021						2022						2021
Fair value hedging relationships
Interest rate swaps
Hedged long-term obligations - included in other income/(expense)						$	—					$	—					$	—					$	25
Derivatives designated as hedging instruments - included in other income/(expense)						—						—						—						(3)
Derivatives designated as cash flow hedges
Interest rate swaps
Amount reclassified from accumulated other comprehensive items to other income/(expense)						(1)						(2)						(3)						(21)

THERMO FISHER SCIENTIFIC INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

						Gain (loss) recognized
						Three months ended												Nine months ended
						October 1,						October 2,						October 1,						October 2,
(In millions)						2022						2021						2022						2021
Financial instruments designated as net investment hedges
Foreign currency-denominated debt and other payables
Included in currency translation adjustment within other comprehensive items						658						297						1,691						673
Cross-currency interest rate swaps
Included in currency translation adjustment within other comprehensive items						46						20						120						52
Included in other income/(expense)						6						2						12						6
Derivatives not designated as hedging instruments
Currency exchange contracts
Included in cost of product revenues						3						7						15						8
Included in other income/(expense)						20						(8)						32						147

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

The company uses foreign currency-denominated debt, certain foreign-denominated payables, and cross-currency interest rate swaps to partially hedge its net investments in foreign operations against adverse movements in exchange rates. A portion of the company’s euro-denominated senior notes, certain foreign-denominated payables, and its 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 certain foreign-denominated payables, 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 to the consolidated financial statements for 2021 included in the company’s Annual Report on Form 10-K for additional information on the company’s risk management objectives and strategies.

Fair Value of Other Financial Instruments

The carrying value and fair value of the company’s debt instruments are as follows:

						October 1, 2022												December 31, 2021
						Carrying						Fair						Carrying						Fair
(In millions)						value						value						value						value
Senior notes						$	28,869					$	25,036					$	32,072					$	33,449
Commercial paper						—						—						2,522						2,522
Other						72						72						76						76
						$	28,941					$	25,108					$	34,670					$	36,047

The fair value of debt instruments 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.

THERMO FISHER SCIENTIFIC INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 11. Supplemental Cash Flow Information

						Nine months ended
(In millions)						October 1, 2022						October 2, 2021
Non-cash investing and financing activities
Acquired but unpaid property, plant and equipment						$	213					$	257
Fair value of acquisition contingent consideration						—						179
Declared but unpaid dividends						119						104
Issuance of stock upon vesting of restricted stock units						225						237

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

(In millions)						October 1, 2022						December 31, 2021
Cash and cash equivalents						$	2,919					$	4,477
Restricted cash included in other current assets						14						13
Restricted cash included in other assets						1						1
Cash, cash equivalents and restricted cash						$	2,934					$	4,491

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

Note 12. Restructuring and Other Costs

In the first nine months of 2022, restructuring and other costs primarily included impairment of long-lived assets and continuing charges for headcount reductions and facility consolidations in an effort to streamline operations. In 2022, severance actions associated with facility consolidations and cost reduction measures affected approximately 0.5% of the company’s workforce.

As of November 4, 2022, the company has identified restructuring actions that will result in additional charges of approximately $85 million, primarily in 2022 and 2023, and expects to identify additional actions in future periods which will be recorded when specified criteria are met, such as communication of benefit arrangements or when the costs have been incurred.

Restructuring and other costs by segment are as follows:

						Three months ended												Nine months ended
(In millions)						October 1, 2022												October 1, 2022
Life Sciences Solutions						$	5											$	11
Analytical Instruments						2												6
Specialty Diagnostics						19												22
Laboratory Products and Biopharma Services						7												20
						$	33											$	59

The following table summarizes the changes in the company’s accrued restructuring balance, which is included in other accrued expenses in the accompanying balance sheet. Other amounts reported as restructuring and other costs in the accompanying statement of income have been summarized in the notes to the table.

THERMO FISHER SCIENTIFIC INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

(In millions)																								Total (a)
Balance at December 31, 2021																								$	17
Net restructuring charges incurred in 2022 (b)																								31
Payments																								(30)
Currency translation																								(1)
Balance at October 1, 2022																								$	17

(a)The movements in the restructuring liability principally consist of severance and other costs such as 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)Excludes $28 million of net non-cash charges, primarily charges for impairment of long-lived assets.

The company expects to pay accrued restructuring costs primarily through 2022.

THERMO FISHER SCIENTIFIC INC.