Item 1. Financial Statements

116K characters. Original on sec.gov · Markdown

Item 1. Financial Statements

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


	September 30,		December 31,
(In millions except share and per share amounts)	2023		2022
Assets
Current assets:
Cash and cash equivalents	$	6,151	$	8,524
Accounts receivable, less allowances of $184 and $189	8,370		8,115
Inventories	5,404		5,634
Contract assets, net	1,465		1,312

Other current assets	1,702		1,644
Total current assets	23,092		25,229
Property, plant and equipment, net	9,167		9,280
Acquisition-related intangible assets, net	17,091		17,442
Other assets	4,124		4,007
Goodwill	43,583		41,196
Total assets	$	97,057	$	97,154

Liabilities, redeemable noncontrolling interest and equity
Current liabilities:
Short-term obligations and current maturities of long-term obligations	$	4,795	$	5,579
Accounts payable	2,508		3,381
Accrued payroll and employee benefits	1,460		2,095
Contract liabilities	2,547		2,601
Other accrued expenses	2,848		3,354
Total current liabilities	14,158		17,010
Deferred income taxes	2,620		2,849
Other long-term liabilities	4,326		4,238
Long-term obligations	30,489		28,909
Redeemable noncontrolling interest	118		116
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; 441,889,500 and 440,668,112 shares issued	442		441
Capital in excess of par value	17,165		16,743
Retained earnings	45,869		41,910
Treasury stock at cost, 55,517,179 and 50,157,275 shares	(15,121)		(12,017)
Accumulated other comprehensive income/(loss)	(3,027)		(3,099)
Total Thermo Fisher Scientific Inc. shareholders’ equity	45,328		43,978
Noncontrolling interests	18		54
Total equity	45,346		44,032
Total liabilities, redeemable noncontrolling interest and equity	$	97,057	$	97,154

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

THERMO FISHER SCIENTIFIC INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)


	Three months ended				Nine months ended
	September 30,		October 1,		September 30,		October 1,
(In millions except per share amounts)	2023		2022		2023		2022
Revenues
Product revenues	$	6,157	$	6,583	$	18,832	$	21,603
Service revenues	4,417		4,094		13,139		11,862
Total revenues	10,574		10,677		31,971		33,465

Costs and operating expenses:
Cost of product revenues	3,214		3,494		9,829		10,565
Cost of service revenues	3,044		2,881		9,435		8,535
Selling, general and administrative expenses	2,049		2,208		6,313		6,694
Research and development expenses	319		351		1,010		1,080
Restructuring and other costs	84		33		379		59
Total costs and operating expenses	8,710		8,967		26,966		26,933
Operating income	1,864		1,710		5,005		6,532
Interest income	246		68		570		122
Interest expense	(359)		(173)		(985)		(457)
Other income/(expense)	14		(4)		(32)		(139)
Income before income taxes	1,765		1,601		4,558		6,058
Provision for income taxes	(53)		(31)		(151)		(530)
Equity in earnings/(losses) of unconsolidated entities	(17)		(72)		(58)		(142)
Net income	1,695		1,498		4,349		5,386
Less: net income/(losses) attributable to noncontrolling interests and redeemable noncontrolling interest	(20)		3		(16)		12
Net income attributable to Thermo Fisher Scientific Inc.	$	1,715	$	1,495	$	4,365	$	5,374

Earnings per share attributable to Thermo Fisher Scientific Inc.
Basic	$	4.44	$	3.82	$	11.31	$	13.72
Diluted	$	4.42	$	3.79	$	11.25	$	13.62

Weighted average shares
Basic	386		392		386		392
Diluted	388		395		388		395

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

THERMO FISHER SCIENTIFIC INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


	Three months ended				Nine months ended
	September 30,		October 1,		September 30,		October 1,
(In millions)	2023		2022		2023		2022
Comprehensive income
Net income	$	1,695	$	1,498	$	4,349	$	5,386
Other comprehensive income/(loss):
Currency translation adjustment:
Currency translation adjustment (net of tax provision (benefit) of $71, $157, $35 and $419)	(112)		(216)		57		(632)

Unrealized gains and losses on hedging instruments:

Reclassification adjustment for losses included in net income (net of tax (provision) benefit of $0, $0, $1 and $1)	1		1		5		2
Pension and other postretirement benefit liability adjustments:
Pension and other postretirement benefit liability adjustments arising during the period (net of tax (provision) benefit of $(1), $(3), $(1) and $(6))	2		4		2		13
Amortization of net loss included in net periodic pension cost (net of tax (provision) benefit of $(1), $0, $(1) and $2)	—		4		(2)		8
Total other comprehensive income/(loss)	(109)		(207)		62		(609)
Comprehensive income	1,586		1,291		4,411		4,777
Less: comprehensive income/(loss) attributable to noncontrolling interests and redeemable noncontrolling interest	(26)		—		(26)		2
Comprehensive income attributable to Thermo Fisher Scientific Inc.	$	1,612	$	1,291	$	4,437	$	4,775

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

THERMO FISHER SCIENTIFIC INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Nine months ended
	September 30,		October 1,
(In millions)	2023		2022
Operating activities
Net income	$	4,349	$	5,386
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of property, plant and equipment	792		730
Amortization of acquisition-related intangible assets	1,775		1,803
Change in deferred income taxes	(631)		(862)

Loss on early extinguishment of debt	—		26
Stock-based compensation	217		232
Other non-cash expenses, net	441		443
Changes in assets and liabilities, excluding the effects of acquisitions	(2,260)		(2,091)
Net cash provided by operating activities	4,683		5,667

Investing activities
Acquisitions, net of cash acquired	(3,660)		(39)

Purchase of property, plant and equipment	(1,074)		(1,693)
Proceeds from sale of property, plant and equipment	76		18
Other investing activities, net	(108)		80
Net cash used in investing activities	(4,766)		(1,634)

Financing activities
Net proceeds from issuance of debt	3,466		—
Repayment of debt	(2,000)		(375)
Proceeds from issuance of commercial paper	1,620		1,231
Repayments of commercial paper	(1,935)		(3,690)
Purchases of company common stock	(3,000)		(2,000)
Dividends paid	(387)		(338)

Other financing activities, net	42		(29)
Net cash used in financing activities	(2,194)		(5,201)

Exchange rate effect on cash	(92)		(389)
Decrease in cash, cash equivalents and restricted cash	(2,369)		(1,557)
Cash, cash equivalents and restricted cash at beginning of period	8,537		4,491
Cash, cash equivalents and restricted cash at end of period	$	6,168	$	2,934

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 September 30, 2023
Balance at July 1, 2023	$	113		441		$	441	$	17,030		$	44,289		55	$	(15,084)	$	(2,924)	$	43,752	$	50	$	43,802
Issuance of shares under employees' and directors' stock plans	—			1		1		68			—			1	(37)		—		32		—		32
Stock-based compensation	—			—		—		67			—			—	—		—		67		—		67

Dividends declared ($0.35 per share)	—			—		—		—			(135)			—	—		—		(135)		—		(135)
Net income/(loss)	6			—		—		—			1,715			—	—		—		1,715		(26)		1,689
Other comprehensive items	(1)			—		—		—			—			—	—		(103)		(103)		(5)		(108)
Contributions from (distributions to) noncontrolling interests	—			—		—		—			—			—	—		—		—		(1)		(1)

Balance at September 30, 2023	$	118		442		$	442	$	17,165		$	45,869		56	$	(15,121)	$	(3,027)	$	45,328	$	18	$	45,346

				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/(loss)	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

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 September 30, 2023
Balance at December 31, 2022	$	116		441		$	441	$	16,743		$	41,910		50	$	(12,017)	$	(3,099)	$	43,978	$	54	$	44,032

Issuance of shares under employees' and directors' stock plans	—			1		1		205			—			1	(75)		—		131		—		131
Stock-based compensation	—			—		—		217			—			—	—		—		217		—		217
Purchases of company common stock	—			—		—		—			—			5	(3,000)		—		(3,000)		—		(3,000)
Dividends declared ($1.05 per share)	—			—		—		—			(406)			—	—		—		(406)		—		(406)

Net income/(loss)	14			—		—		—			4,365			—	—		—		4,365		(30)		4,335
Other comprehensive income/(loss)	(5)			—		—		—			—			—	—		72		72		(5)		67
Contributions from (distributions to) noncontrolling interests	(7)			—		—		—			—			—	—		—		—		(1)		(1)
Excise tax from stock repurchases	—			—		—		—			—			—	(29)		—		(29)		—		(29)

Balance at September 30, 2023	$	118		442		$	442	$	17,165		$	45,869		56	$	(15,121)	$	(3,027)	$	45,328	$	18	$	45,346

				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/(loss)	14			—		—		—			5,374			—	—		—		5,374		(2)		5,372
Other comprehensive income/(loss)	(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

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 September 30, 2023, the results of operations for the three- and nine-month periods ended September 30, 2023 and October 1, 2022, and the cash flows for the nine-month periods ended September 30, 2023 and October 1, 2022. Interim results are not necessarily indicative of results for a full year.

The condensed consolidated balance sheet presented as of December 31, 2022 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 2022 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 2022 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 September 30, 2023.

Inventories

The components of inventories are as follows:




(In millions)	September 30, 2023		December 31, 2022
Raw materials	$	2,223	$	2,405
Work in process	743		660
Finished goods	2,438		2,569
Inventories	$	5,404	$	5,634

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. Actual results could differ from those estimates.

Recent Accounting Pronouncements

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 adopted some aspects of this guidance in 2023 using a retrospective method and will adopt other aspects in 2024 using a prospective method. The adoption of this guidance did not have, and 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.

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 adopted this guidance in the fourth quarter of 2022 using a prospective method. The adoption of this guidance did not have a material impact on the company’s disclosures.

THERMO FISHER SCIENTIFIC INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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.

2023

On January 3, 2023, the company acquired, within the Specialty Diagnostics segment, The Binding Site Group, a U.K.-based provider of specialty diagnostic assays and instruments to improve the diagnosis and management of blood cancers and immune system disorders. The acquisition expands the segment’s portfolio with the addition of pioneering innovation in diagnostics and monitoring for multiple myeloma. The goodwill recorded as a result of this business combination is not tax deductible.

On August 14, 2023, the company acquired, within the Laboratory Products and Biopharma Services segment, CorEvitas, LLC, a U.S.-based provider of regulatory-grade, real-world evidence for approved medical treatments and therapies. The acquisition expands the segment’s portfolio with the addition of highly complementary real-world evidence solutions to enhance decision-making as well as the time and cost of drug development. The goodwill recorded as a result of this business combination is not expected to be tax deductible.

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


(In millions)	The Binding Site		CorEvitas
Purchase price
Cash paid	$	2,412	$	730
Debt settled	307		184


Cash acquired	(20)		(4)
	$	2,699	$	910

Net assets acquired


Definite-lived intangible assets:
Customer relationships	$	868	$	260
Product technology	172		47
Tradenames	42		—
Backlog	—		46


Goodwill	1,756		626
Net tangible assets	140		(1)

Deferred tax assets (liabilities)	(279)		(68)




	$	2,699	$	910

In addition, in 2023, the company acquired, within the Analytical Instruments segment, a U.S.-based developer of Raman-based spectroscopy solutions for in-line measurement.

The weighted-average amortization period for definite-lived intangible assets acquired in 2023 are 18 years for customer relationships, 14 years for product technology, 15 years for tradenames, and 13 years for backlog. The weighted average amortization period for all definite-lived intangible assets acquired in 2023 is 17 years.

Proposed Acquisition

On October 17, 2023, the company entered into a purchase agreement to acquire all of the issued and outstanding shares of Olink Holding AB (publ) at a price of $26.00 per share, or approximately $3.1 billion. Olink is a leading provider of next-generation proteomics solutions that will expand the company’s capabilities in this field. The company has commenced a tender offer to acquire all of the American Depositary Shares and common shares of Olink. The transaction is expected to close by mid-year 2024, subject to the satisfaction of customary closing conditions including receipt of applicable regulatory approvals, and completion of the tender offer. Upon completion, Olink will become part of the Life Sciences Solutions segment. The company intends to finance the purchase price with cash on hand and the net proceeds from issuances of debt.

THERMO FISHER SCIENTIFIC INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 3. Revenues and Contract-related Balances

Disaggregated Revenues

Revenues by type are as follows:


	Three months ended				Nine months ended

(In millions)	September 30, 2023		October 1, 2022		September 30, 2023		October 1, 2022
Revenues
Consumables	$	4,289	$	4,651	$	13,228	$	15,754
Instruments	1,868		1,932		5,604		5,849
Services	4,417		4,094		13,139		11,862
Consolidated revenues	$	10,574	$	10,677	$	31,971	$	33,465

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


	Three months ended				Nine months ended


(In millions)	September 30, 2023		October 1, 2022		September 30, 2023		October 1, 2022
Revenues
North America	$	5,668	$	5,962	$	17,160	$	18,317
Europe	2,643		2,406		7,898		8,007
Asia-Pacific	1,913		1,971		5,801		6,077
Other regions	350		338		1,112		1,064
Consolidated revenues	$	10,574	$	10,677	$	31,971	$	33,465

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 September 30, 2023 was $26.81 billion. The company will recognize revenues for these performance obligations as they are satisfied, approximately 53% 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)	September 30, 2023		December 31, 2022
Current contract assets, net	$	1,465	$	1,312
Noncurrent contract assets, net	5		7
Current contract liabilities	2,547		2,601
Noncurrent contract liabilities	1,348		1,179

In the three and nine months ended September 30, 2023, the company recognized revenues of $0.35 billion and $2.32 billion, respectively, that were included in the contract liabilities balance at December 31, 2022. 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. Noncurrent contract liabilities increased during 2023 primarily due to rights to advanced payments from a customer.

THERMO FISHER SCIENTIFIC INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 4. Business Segment and Geographical Information

Business Segment Information


	Three months ended				Nine months ended
	September 30,		October 1,		September 30,		October 1,
(In millions)	2023		2022		2023		2022
Revenues
Life Sciences Solutions	$	2,433	$	2,962	$	7,508	$	10,485
Analytical Instruments	1,754		1,621		5,226		4,746
Specialty Diagnostics	1,083		1,065		3,300		3,648
Laboratory Products and Biopharma Services	5,728		5,585		17,322		16,564
Eliminations	(424)		(556)		(1,385)		(1,978)
Consolidated revenues	10,574		10,677		31,971		33,465

Segment Income
Life Sciences Solutions	872		1,039		2,525		4,542
Analytical Instruments	468		386		1,321		1,031
Specialty Diagnostics	283		220		860		816
Laboratory Products and Biopharma Services	937		725		2,554		2,036
Subtotal reportable segments	2,560		2,370		7,260		8,425
Cost of revenues adjustments	(14)		(22)		(73)		(41)
Selling, general and administrative expenses adjustments	(14)		(11)		(28)		10
Restructuring and other costs	(84)		(33)		(379)		(59)
Amortization of acquisition-related intangible assets	(584)		(594)		(1,775)		(1,803)
Consolidated operating income	1,864		1,710		5,005		6,532
Interest income	246		68		570		122
Interest expense	(359)		(173)		(985)		(457)
Other income/(expense)	14		(4)		(32)		(139)
Consolidated income before taxes	$	1,765	$	1,601	$	4,558	$	6,058

Cost of revenues adjustments included in the above table consist of charges for the sale of inventories revalued at the date of acquisition, inventory write-downs associated with large-scale abandonment of product lines, and accelerated depreciation on manufacturing assets to be abandoned due to facility consolidations. 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)	September 30, 2023		October 1, 2022		September 30, 2023		October 1, 2022
Revenues
United States	$	5,490	$	5,787	$	16,608	$	17,730

Other	5,084		4,890		15,363		15,735
Consolidated revenues	$	10,574	$	10,677	$	31,971	$	33,465

THERMO FISHER SCIENTIFIC INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 5. Income Taxes

The provision for income taxes in the accompanying statements 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)	September 30, 2023			October 1, 2022
Statutory federal income tax rate	21		%	21		%
Provision for income taxes at statutory rate	$	957		$	1,272
Increases (decreases) resulting from:
Foreign rate differential	(176)			(285)
Income tax credits	(217)			(118)
Global intangible low-taxed income	66			126
Foreign-derived intangible income	(104)			(102)
Excess tax benefits from stock options and restricted stock units	(60)			(63)
Provision for (reversal of) tax reserves, net	9			(543)
Intra-entity transfers	(144)			(18)
Foreign exchange loss on inter-company debt refinancing	(112)			—
Provision for (reversal of) valuation allowances, net	(44)			240
Withholding taxes	22			48

Tax return reassessments and settlements	(63)			(94)
State income taxes, net of federal tax	45			133
Other, net	(28)			(66)
Provision for income taxes	$	151		$	530

During the third quarter of 2023, the company released a valuation allowance of $183 million in jurisdictions where the deferred tax assets are now expected to be realized. In the first nine months of 2023 the company also recorded a tax benefit of $91 million, net of related tax expenses, from a foreign exchange loss on an intercompany debt refinancing transaction, as well as a $144 million tax benefit resulting from a capital loss generated as part of an intra-entity transaction.

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 September 30, 2023 the company had $0.55 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)	2023
Balance at beginning of year	$	572


Additions for tax positions of current year	4
Additions for tax positions of prior years	26
Reductions for tax positions of prior years	(31)


Closure of tax years	(6)
Settlements	(20)
Balance at end of period	$	545

THERMO FISHER SCIENTIFIC INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 6. Earnings per Share


	Three months ended				Nine months ended
	September 30,		October 1,		September 30,		October 1,

(In millions except per share amounts)	2023		2022		2023		2022
Net income attributable to Thermo Fisher Scientific Inc.	$	1,715	$	1,495	$	4,365	$	5,374

Basic weighted average shares	386		392		386		392
Plus effect of: stock options and restricted stock units	2		3		2		3
Diluted weighted average shares	388		395		388		395

Basic earnings per share	$	4.44	$	3.82	$	11.31	$	13.72
Diluted earnings per share	$	4.42	$	3.79	$	11.25	$	13.62

Antidilutive stock options excluded from diluted weighted average shares	2		2		2		2

Note 7. Debt and Other Financing Arrangements


	Effective interest rate at September 30,		September 30,		December 31,
(Dollars in millions)	2023		2023		2022
Commercial Paper			$	—	$	310

Floating Rate (SOFR + 0.35%) 1.5-Year Senior Notes, Due 4/18/2023			—		1,000
Floating Rate (SOFR + 0.39%) 2-Year Senior Notes, Due 10/18/2023			—		500
0.797% 2-Year Senior Notes, Due 10/18/2023	1.03	%	1,350		1,350
Floating Rate (EURIBOR + 0.20%) 2-Year Senior Notes, Due 11/18/2023 (euro-denominated)	3.79	%	1,797		1,819
0.000% 2-Year Senior Notes, Due 11/18/2023 (euro-denominated)	0.06	%	582		589
0.75% 8-Year Senior Notes, Due 9/12/2024 (euro-denominated)	0.93	%	1,057		1,071
Floating Rate (SOFR + 0.53%) 3-Year Senior Notes, Due 10/18/2024			—		500
1.215% 3-Year Senior Notes, Due 10/18/2024	1.42	%	2,500		2,500
0.125% 5.5-Year Senior Notes, Due 3/1/2025 (euro-denominated)	0.40	%	846		857
2.00% 10-Year Senior Notes, Due 4/15/2025 (euro-denominated)	2.09	%	677		686
0.853% 3-Year Senior Notes, Due 10/20/2025 (yen-denominated)	1.05	%	149		170
0.000% 4-Year Senior Notes, Due 11/18/2025 (euro-denominated)	0.15	%	582		589
3.20% 3-Year Senior Notes, Due 1/21/2026 (euro-denominated)	3.38	%	529		535
1.40% 8.5-Year Senior Notes, Due 1/23/2026 (euro-denominated)	1.52	%	740		749
4.953% 3-Year Senior Notes, Due 8/10/2026	5.19	%	600		—
1.45% 10-Year Senior Notes, Due 3/16/2027 (euro-denominated)	1.65	%	529		535
1.75% 7-Year Senior Notes, Due 4/15/2027 (euro-denominated)	1.96	%	634		642
1.054% 5-Year Senior Notes, Due 10/20/2027 (yen-denominated)	1.18	%	194		221
4.80% 5-Year Senior Notes, Due 11/21/2027	5.00	%	600		600
0.50% 8.5-Year Senior Notes, Due 3/1/2028 (euro-denominated)	0.76	%	846		857
0.77% 5-Year Senior Notes, Due 9/6/2028 (yen-denominated)	0.89	%	194		—
1.375% 12-Year Senior Notes, Due 9/12/2028 (euro-denominated)	1.46	%	634		642
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	%	740		749
2.60% 10-Year Senior Notes, Due 10/1/2029	2.74	%	900		900
1.279% 7-Year Senior Notes, Due 10/19/2029 (yen-denominated)	1.44	%	31		36
4.977% 7-Year Senior Notes, Due 8/10/2030	5.13	%	750		—
0.80% 9-Year Senior Notes, Due 10/18/2030 (euro-denominated)	0.88	%	1,850		1,873

THERMO FISHER SCIENTIFIC INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)


	Effective interest rate at September 30,		September 30,		December 31,
(Dollars in millions)	2023		2023		2022
0.875% 12-Year Senior Notes, Due 10/1/2031 (euro-denominated)	1.13	%	952		963
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)	2.54	%	634		642
1.49% 10-Year Senior Notes, Due 10/20/2032 (yen-denominated)	1.60	%	42		48
4.95% 10-Year Senior Notes, Due 11/21/2032	5.09	%	600		600
5.086% 10-Year Senior Notes, Due 8/10/2033	5.20	%	1,000		—
1.125% 12-Year Senior Notes, Due 10/18/2033 (euro-denominated)	1.20	%	1,586		1,606
3.65% 12-Year Senior Notes, Due 11/21/2034 (euro-denominated)	3.76	%	793		803
1.50% 12-Year Senior Notes, due 9/6/2035 (yen-denominated)	1.57	%	144		—
2.875% 20-Year Senior Notes, Due 7/24/2037 (euro-denominated)	2.94	%	740		749
1.50% 20-Year Senior Notes, Due 10/1/2039 (euro-denominated)	1.73	%	952		963
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)	1.77	%	1,322		1,339
2.069% 20-Year Senior Notes, Due 10/20/2042 (yen-denominated)	2.13	%	98		111
5.404% 20-Year Senior Notes, due 8/10/2043	5.50	%	600		—
2.02% 20-Year Senior Notes, due 9/6/2043 (yen-denominated)	2.06	%	194		—
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	%	1,057		1,071
2.00% 30-Year Senior Notes, Due 10/18/2051 (euro-denominated)	2.06	%	793		803
2.382% 30-Year Senior Notes, Due 10/18/2052 (yen-denominated)	2.43	%	223		254
Other			76		79
Total borrowings at par value			35,367		34,561

Unamortized discount			(108)		(112)
Unamortized debt issuance costs			(175)		(171)
Total borrowings at carrying value			35,084		34,278
Finance lease liabilities			200		210
Less: Short-term obligations and current maturities			4,795		5,579
Long-term obligations			$	30,489	$	28,909

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 September 30, 2023, no borrowings were outstanding under the Facility, although available capacity was reduced by immaterial outstanding letters of credit.

THERMO FISHER SCIENTIFIC INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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.

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 U.S. dollar and euro-denominated fixed rate senior notes and yen-denominated private placement notes may be redeemed at a redemption price of 100% of the principal amount plus a specified make-whole premium and accrued interest, together with swap breakage costs payable to holders of yen-denominated private placement notes who have entered into cross-currency swap agreements. The company is subject to certain affirmative and negative covenants under the indentures and note purchase agreement governing the senior notes, the most restrictive of which limits the ability of the company to pledge certain property and assets as security under borrowing arrangements. The company was in compliance with all covenants at September 30, 2023.

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 statements 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.

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 September 30, 2023, there have been no material changes to the accruals for pending environmental-related matters disclosed in the company’s 2022 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

THERMO FISHER SCIENTIFIC INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

which accrual amounts are not disclosed in the company’s 2022 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 an unfavorable outcome that exceeds the company’s current accrual estimate, if any, for one or more such matters 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 September 30, 2023, 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 2022 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/(Loss)

Comprehensive Income (Loss)

Changes in each component of accumulated other comprehensive income/(loss), 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, 2022	$	(2,880)	$	(33)	$	(186)	$	(3,099)
Other comprehensive income/(loss) before reclassifications	57		—		2		59
Amounts reclassified from accumulated other comprehensive income/(loss)	10		5		(2)		13
Net other comprehensive income/(loss)	67		5		—		72
Balance at September 30, 2023	$	(2,813)	$	(28)	$	(186)	$	(3,027)

THERMO FISHER SCIENTIFIC INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(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:


	September 30,		Quoted prices in active markets		Significant other observable inputs		Significant unobservable inputs
(In millions)	2023		(Level 1)		(Level 2)		(Level 3)
Assets
Cash equivalents	$	2,662	$	2,662	$	—	$	—
Bank time deposits	6		6		—		—
Investments	19		19		—		—
Warrants	11		—		11		—
Insurance contracts	193		—		193		—
Derivative contracts	88		—		88		—
Total assets	$	2,979	$	2,687	$	292	$	—

Liabilities
Derivative contracts	$	153	$	—	$	153	$	—
Contingent consideration	81		—		—		81
Total liabilities	$	234	$	—	$	153	$	81


	December 31,		Quoted prices in active markets		Significant other observable inputs		Significant unobservable inputs
(In millions)	2022		(Level 1)		(Level 2)		(Level 3)
Assets
Cash equivalents	$	5,804	$	5,804	$	—	$	—
Investments	25		25		—		—
Warrants	12		—		12		—
Insurance contracts	162		—		162		—
Derivative contracts	79		—		79		—
Total assets	$	6,082	$	5,829	$	253	$	—

Liabilities
Derivative contracts	$	101	$	—	$	101	$	—
Contingent consideration	174		—		—		174
Total liabilities	$	275	$	—	$	101	$	174

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 September 30, 2023, the company recorded $11 million and $(33) million, respectively, of net gains/(losses) on investments, which are included in other income/(expense) in the accompanying statements of income. 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 statements of income.

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.

THERMO FISHER SCIENTIFIC INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)


	Three months ended				Nine months ended
	September 30,		October 1,		September 30,		October 1,
(In millions)	2023		2022		2023		2022
Contingent consideration
Beginning balance	$	90	$	216	$	174	$	317
Acquisitions (including assumed balances)	—		—		1		(18)
Payments	(5)		(32)		(63)		(64)
Changes in fair value included in earnings	(4)		(16)		(31)		(67)
Ending balance	$	81	$	168	$	81	$	168

Derivative Contracts

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




(In millions)	September 30, 2023		December 31, 2022
Notional amount


Cross-currency interest rate swaps - designated as net investment hedges	$	5,650	$	2,100

Currency exchange contracts	1,607		2,434

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 sheets and statements of income.


	Fair value – assets				Fair value – liabilities
	September 30,		December 31,		September 30,		December 31,
(In millions)	2023		2022		2023		2022
Derivatives designated as hedging instruments

Cross-currency interest rate swaps (a)	$	87	$	77	$	152	$	85
Derivatives not designated as hedging instruments
Currency exchange contracts (b)	1		2		1		16

Total derivatives	$	88	$	79	$	153	$	101

(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
	September 30,		October 1,		September 30,		October 1,
(In millions)	2023		2022		2023		2022







Derivatives designated as cash flow hedges
Interest rate swaps

Amount reclassified from accumulated other comprehensive items to interest expense	$	(1)	$	(1)	$	(6)	$	(3)
Financial instruments designated as net investment hedges
Foreign currency-denominated debt and other payables
Included in currency translation adjustment within other comprehensive items	364		658		158		1,691
Cross-currency interest rate swaps
Included in currency translation adjustment within other comprehensive items	(56)		46		(6)		120
Included in interest expense	35		6		68		12
Derivatives not designated as hedging instruments
Currency exchange contracts
Included in cost of product revenues	2		3		(1)		15
Included in other income/(expense)	(6)		20		(8)		32

THERMO FISHER SCIENTIFIC INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Gains and losses recognized on currency exchange contracts are included in the accompanying statements of income together with the corresponding, offsetting losses and gains on the underlying hedged transactions.

The company uses foreign currency-denominated debt, certain foreign currency-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 currency-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 currency-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 2022 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:


	September 30, 2023				December 31, 2022
	Carrying		Fair		Carrying		Fair
(In millions)	value		value		value		value
Senior notes	$	35,008	$	30,700	$	33,889	$	29,901

Commercial paper	—		—		310		310
Other	76		76		79		79
	$	35,084	$	30,776	$	34,278	$	30,290

The fair value of debt instruments, excluding private placement notes, 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. The fair value of private placement notes was determined based on internally developed pricing models and unobservable inputs, which represent level 3 measurements.

Note 11. Supplemental Cash Flow Information


	Nine months ended


(In millions)	September 30, 2023		October 1, 2022
Non-cash investing and financing activities
Acquired but unpaid property, plant and equipment	$	207	$	213



Declared but unpaid dividends	137		119
Issuance of stock upon vesting of restricted stock units	198		225
Excise tax from stock repurchases	29		—

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




(In millions)	September 30, 2023		December 31, 2022
Cash and cash equivalents	$	6,151	$	8,524
Restricted cash included in other current assets	10		12
Restricted cash included in other assets	7		1
Cash, cash equivalents and restricted cash	$	6,168	$	8,537

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

THERMO FISHER SCIENTIFIC INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 12. Restructuring and Other Costs

In the first nine months of 2023, restructuring and other costs primarily included continuing charges for headcount reductions and facility consolidations in an effort to streamline operations, impairment of long-lived assets, and, to a lesser extent, net charges for pre-acquisition litigation and other matters. In 2023, severance actions associated with facility consolidations and cost reduction measures affected approximately 4% of the company’s workforce.

As of November 3, 2023, the company has identified restructuring actions that will result in additional charges of approximately $65 million, primarily in 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)	September 30, 2023		September 30, 2023
Life Sciences Solutions	$	20	$	100
Analytical Instruments	8		31
Specialty Diagnostics	(1)		9
Laboratory Products and Biopharma Services	52		228
Corporate	5		11
	$	84	$	379

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 statements of income have been summarized in the notes to the table.


(In millions)	Total (a)
Balance at December 31, 2022	$	41
Net restructuring charges incurred in 2023 (b) (c)	175
Payments	(142)
Currency translation	(1)
Balance at September 30, 2023	$	73

(a)The movements in the restructuring liability principally consist of severance and other costs associated with facility consolidations.

(b)Excludes $165 million of net charges, principally $127 million of charges for impairment of long-lived assets in the Laboratory Products and Biopharma Services and Life Sciences Solutions segments, $26 million of contract termination costs associated with facility closures in the Laboratory Products and Biopharma Services segment, $18 million of net charges for pre-acquisition litigation and other matters.

(c)Excludes $39 million of charges for impairment of a disposal group that was held for sale beginning in the third quarter of 2023. The loss attributable to Thermo Fisher Scientific Inc. was reduced by $19 million attributable to a noncontrolling interest.

The company expects to pay accrued restructuring costs primarily through 2023.

THERMO FISHER SCIENTIFIC INC.

Previous: Cover and table of contents · Next: Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations