What changed in this filing

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Item 1. Financial Statements

2021-11-04 compared with 2021-08-06 · 181 added, 129 removed, 663 unchanged (32% of the section changed)

1 unchanged sentence

CONDENSED CONSOLIDATED BALANCE SHEET

July 3, December 31,

October 2, December 31,

(In millions except share and per share amounts) 2021 2020

43 unchanged sentences

CONDENSED CONSOLIDATED STATEMENT OF INCOME

Three Months Ended Six Months Ended

July 3, June 27, July 3, June 27,

Three Months Ended Nine Months Ended

October 2, September 26, October 2, September 26,

(In millions except per share amounts) 2021 2020 2021 2020

15 unchanged sentences

Restructuring and other costs

119 12 133 50

Total costs and operating expenses

5 unchanged sentences

( 128 ) ( 144 ) ( 375 ) ( 407 )

Other (Expense) Income

Other Income (Expense)

14 ( 39 ) ( 174 ) ( 36 )

13 unchanged sentences

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Three Months Ended Six Months Ended

July 3, June 27, July 3, June 27,

Three Months Ended Nine Months Ended

October 2, September 26, October 2, September 26,

(In millions) 2021 2020 2021 2020

3 unchanged sentences

Currency translation adjustment:

Currency translation adjustment (net of tax (benefit) provision of $( 23 ), $( 17 ), $ 95 and $ 5 )

Currency translation adjustment (net of tax provision (benefit) of $ 74 , $( 76 ), $ 169 and $( 71 ))

( 32 ) 10 121 ( 244 )

1 unchanged sentence

Unrealized losses on hedging instruments (net of tax benefit of $ 0 , $ 0 , $ 0 and $ 20 )

— ( 3 ) — ( 65 )

Reclassification adjustment for losses included in net income (net of tax benefit of $ 0 , $ 2 , $ 5 and $ 4 )

Pension and other postretirement benefit liability adjustments:

Pension and other postretirement benefit liability adjustments arising during the period (net of tax benefit (provision) of $ 0 , $ 6 , $( 2 ) and $ 1 )

Pension and other postretirement benefit liability adjustments arising during the period (net of tax (provision) benefit of $( 1 ), $ 1 , $( 3 ) and $ 2 )

3 ( 4 ) 7 ( 5 )

7 unchanged sentences

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

Six Months Ended

July 3, June 27,

Nine Months Ended

October 2, September 26,

(In millions) 2021 2020

36 unchanged sentences

Exchange Rate Effect on Cash

(Decrease) Increase in Cash, Cash Equivalents and Restricted Cash

( 3,301 ) 3,415

Increase in Cash, Cash Equivalents and Restricted Cash

Cash, Cash Equivalents and Restricted Cash at Beginning of Period

6 unchanged sentences

(In millions) Shares Amount Shares Amount

Three Months Ended July 3, 2021

Balance at April 3, 2021 438 $ 438 $ 15,684 $ 30,350 45 $ ( 8,852 ) $ ( 2,562 ) $ 35,058

Three Months Ended October 2, 2021

Balance at July 3, 2021 438 $ 438 $ 15,826 $ 32,076 45 $ ( 8,856 ) $ ( 2,630 ) $ 36,854

Issuance of shares under employees' and directors' stock plans

7 unchanged sentences

— — — — — — ( 24 ) ( 24 )

Balance at July 3, 2021 438 $ 438 $ 15,826 $ 32,076 45 $ ( 8,856 ) $ ( 2,630 ) $ 36,854

Three Months Ended June 27, 2020

Balance at March 28, 2020 435 $ 435 $ 15,186 $ 22,791 40 $ ( 6,765 ) $ ( 3,088 ) $ 28,559

Balance at October 2, 2021 439 $ 439 $ 15,960 $ 33,876 45 $ ( 8,911 ) $ ( 2,654 ) $ 38,710

Three Months Ended September 26, 2020

Balance at June 27, 2020 436 $ 436 $ 15,334 $ 23,860 40 $ ( 6,766 ) $ ( 2,989 ) $ 29,875

Issuance of shares under employees' and directors' stock plans

7 unchanged sentences

— — — — — — 19 19

Balance at June 27, 2020 436 $ 436 $ 15,334 $ 23,860 40 $ ( 6,766 ) $ ( 2,989 ) $ 29,875

Six Months Ended July 3, 2021

Balance at September 26, 2020 437 $ 437 $ 15,467 $ 25,705 40 $ ( 6,815 ) $ ( 2,970 ) $ 31,824

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 unchanged sentences

— — — — — — 153 153

Balance at July 3, 2021 438 $ 438 $ 15,826 $ 32,076 45 $ ( 8,856 ) $ ( 2,630 ) $ 36,854

Six Months Ended June 27, 2020

Balance at October 2, 2021 439 $ 439 $ 15,960 $ 33,876 45 $ ( 8,911 ) $ ( 2,654 ) $ 38,710

Nine Months Ended September 26, 2020

Balance at December 31, 2019 434 $ 434 $ 15,064 $ 22,092 36 $ ( 5,236 ) $ ( 2,679 ) $ 29,675

Cumulative effect of accounting changes

Cumulative effect of accounting change

— — — ( 1 ) — — — ( 1 )

10 unchanged sentences

— — — — — — ( 291 ) ( 291 )

Balance at June 27, 2020 436 $ 436 $ 15,334 $ 23,860 40 $ ( 6,766 ) $ ( 2,989 ) $ 29,875

Balance at September 26, 2020 437 $ 437 $ 15,467 $ 25,705 40 $ ( 6,815 ) $ ( 2,970 ) $ 31,824

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

7 unchanged sentences

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 July 3, 2021, the results of operations for the three- and six-month periods ended July 3, 2021 and June 27, 2020, and the cash flows for the six-month periods ended July 3, 2021 and June 27, 2020.

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 2, 2021, the results of operations for the three- and nine-month periods ended October 2, 2021 and September 26, 2020, and the cash flows for the nine-month periods ended October 2, 2021 and September 26, 2020.

Interim results are not necessarily indicative of results for a full year.

2 unchanged sentences

The condensed consolidated financial statements and notes included in this report should be read in conjunction with the 2020 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 2020 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 six months ended July 3, 2021.

There have been no material changes in the company’s significant accounting policies during the nine months ended October 2, 2021.

The components of inventories are as follows:

July 3, December 31,

October 2, December 31,

(In millions) 2021 2020

3 unchanged sentences

Inventories $ 4,906 $ 4,029

Prior to the third quarter of 2021, certain of the company’s businesses utilized the last-in, first-out (LIFO) method of accounting for inventories.

During the third quarter of 2021, these businesses, which comprise approximately 5 % of consolidated inventories, changed from the LIFO method to the first-in, first-out (FIFO) method.

The company believes this change is preferable as it will provide a consistent, uniform costing method for all inventories across the company, better reflect the current value of inventories, and improve comparability with peers.

Prior financial statements have not been retrospectively adjusted due to immateriality.

The cumulative pre-tax effect of this change in accounting principle of $ 33 million was recorded as an increase to inventories and a decrease to cost of product revenues in the third quarter of 2021.

This change was recorded in the Laboratory Products and Services ($ 20 million) and Specialty Diagnostics ($ 13 million) segments.

Use of Estimates

1 unchanged sentence

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.

Risks and uncertainties associated with the ongoing COVID-19 global pandemic materially adversely affected certain of the company’s businesses in 2020, particularly in the Analytical Instruments segment and, to a lesser extent, some businesses within the other three segments.

THERMO FISHER SCIENTIFIC INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The negative impacts have significantly lessened so far in 2021.

The extent and duration of negative impacts in the future are uncertain and may require changes to estimates.

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.

Recent Accounting Pronouncements

In October 2021, the FASB amended guidance to recognize and measure contract assets and contract liabilities acquired in a business combination.

Generally, this new guidance will result in the company recognizing contract assets and contract liabilities at the same amounts recorded by the acquiree.

The company will adopt this guidance in the fourth quarter of 2021 retrospectively to all business combinations completed in the first three quarters of 2021 and prospectively to all future business combinations.

The adoption of this guidance will not have a material impact on the company’s consolidated financial statements for prior acquisitions;

however, the impact in future periods will be dependent on the contract assets and contract liabilities acquired in future business combinations.

In July 2021, the FASB amended guidance to require lessors to classify leases as operating leases if they have certain variable lease payment structures and would have selling losses if they were classified as sales-type or direct financing leases.

The company expects to adopt the guidance in the third quarter of 2021 using a prospective method.

The adoption of this guidance is not expected to have a material impact on the company’s consolidated financial statements.

THERMO FISHER SCIENTIFIC INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The company adopted the guidance in the third quarter of 2021 using a prospective method.

The adoption of this guidance did not have a material impact on the company’s consolidated financial statements.

In December 2019, the FASB issued new guidance to simplify the accounting for income taxes.

3 unchanged sentences

however, the impact in future periods will be dependent on the extent of future events or conditions that would be affected such as enacted changes in tax laws or rates.

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.

These synergies include the elimination of redundant facilities, functions and staffing;

9 unchanged sentences

No further action by other PPD shareholders is required to approve the transaction.

The transaction is subject to the satisfaction of customary closing conditions, including the receipt of applicable regulatory approvals.

On July 16, 2021, the company and PPD each received a request for additional information and documentary materials (collectively, the “Second Request”) from the U.S.

1 unchanged sentence

The effect of the Second Request is to extend the waiting period imposed under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”), until the 30th day after substantial compliance by the company and PPD with the Second Request, unless the waiting period is terminated earlier by the FTC.

As of October 22, 2021, both the company and PPD had certified substantial compliance with the Second Request.

The transaction remains subject to the satisfaction of customary closing conditions, including termination of the HSR Act waiting period and receipt of applicable regulatory approvals outside the U.S.

Subject to the satisfaction of the required closing conditions, we continue to expect the merger to be completed by the end of 2021.

On January 15, 2021, the company acquired, within the Laboratory Products and Services segment, the Belgium-based European viral vector manufacturing business of Groupe Novasep SAS for approximately $ 834 million in net cash consideration.

THERMO FISHER SCIENTIFIC INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The European viral vector manufacturing business provides manufacturing services for vaccines and therapies to biotechnology companies and large biopharma customers.

The acquisition expands the segment’s capabilities for cell and gene vaccines and therapies.

The goodwill recorded as a result of the acquisition is not tax deductible.

On February 25, 2021, the company acquired, within the Life Sciences Solutions segment, Mesa Biotech, Inc., a U.S.-based molecular diagnostic company, for approximately $ 406 million in net cash consideration and contingent consideration with an initial fair value of $ 65 million due upon the completion of certain milestones.

The goodwill recorded as a result of this business combination is not tax deductible.

On February 25, 2021, the company acquired, within the Life Sciences Solutions segment, Mesa Biotech, Inc., a U.S.-based molecular diagnostic company, for $ 409 million in net cash consideration and contingent consideration with an initial fair value of $ 65 million due upon the completion of certain milestones.

Mesa Biotech has developed and commercialized a polymerase chain reaction (PCR) based rapid point-of-care testing platform available for detecting infectious diseases including COVID-19.

The acquisition enables the company to accelerate the availability of reliable and accurate advanced molecular diagnostics at the point of care.

The goodwill recorded as a result of the acquisition is not tax deductible.

In addition, in the first six months of 2021 the company acquired, within the Life Sciences Solutions segment, cell sorting technology assets, an Ireland-based life sciences distributor and a developer of a digital PCR platform.

THERMO FISHER SCIENTIFIC INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The goodwill recorded as a result of this business combination is not tax deductible.

On September 30, 2021, the company assumed operating responsibility, within the Laboratory Products and Services segment, of a new state-of-the-art biologics manufacturing facility in Lengnau, Switzerland from CSL Limited to perform pharma services for CSL with capacity to serve other customers as well.

The company expects to make fixed lease payments aggregating to $ 555 million (excluding renewals) from 2021 to 2041, with additional amounts dependent on the extent of revenues from customers of the facility other than CSL.

The goodwill recorded as a result of this business combination is not tax deductible.

In addition, in the first nine months of 2021, the company acquired, within the Life Sciences Solutions segment, cell sorting technology assets, an Ireland-based life sciences distributor and a developer of a digital PCR platform and, within the Analytical Instruments segment, a Belgium-based developer of micro-chip based technology for liquid chromatography columns.

The components of the purchase prices and the allocations to the net assets acquired for 2021 acquisitions are as follows:

(In millions) European Viral Vector Business Mesa Biotech Other

(In millions) European Viral Vector Business Mesa Biotech Lengnau biologics manufacturing facility Other

Purchase Price

1 unchanged sentence

Fair value of contingent consideration

Purchase price payable

Cash acquired

8 unchanged sentences

Product technology

603 239 18 190

Contract liabilities ( 59 ) — — ( 1 )

1 unchanged sentence

( 80 ) ( 72 ) — ( 28 )

Finance lease liabilities

( 24 ) ( 1 ) ( 82 ) —

Other liabilities assumed

1 unchanged sentence

$ 834 $ 474 $ 18 $ 389

The weighted-average amortization periods for definite-lived intangible assets acquired in 2021 are 14 years for customer relationships, 7 years for product technology and 3 years for tradenames.

The weighted average amortization period for all definite-lived intangible assets acquired in 2021 is 9 years.

The preliminary allocation of the purchase price for the acquisition of the European viral vectors business was based on estimates of the fair value of the net assets acquired and is subject to adjustment upon finalization, largely with respect to acquired intangible assets and the related deferred taxes.

Measurements of these items inherently require significant estimates and assumptions.

THERMO FISHER SCIENTIFIC INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The weighted-average amortization periods for definite-lived intangible assets acquired in 2021 are 14 years for customer relationships, 7 years for product technology and 3 years for tradenames.

The weighted average amortization period for all definite-lived intangible assets acquired in 2021 is 9 years.

The allocation of the purchase price for the Lengnau biologics manufacturing facility is preliminary, principally with respect to lease assets and liabilities as well as deferred taxes.

Revenues and Contract-related Balances

1 unchanged sentence

Revenues by type are as follows:

Three Months Ended Six Months Ended

July 3, June 27, July 3, June 27,

Three Months Ended Nine Months Ended

October 2, September 26, October 2, September 26,

(In millions) 2021 2020 2021 2020

4 unchanged sentences

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

Three Months Ended Six Months Ended

July 3, June 27, July 3, June 27,

Three Months Ended Nine Months Ended

October 2, September 26, October 2, September 26,

(In millions) 2021 2020 2021 2020

9 unchanged sentences

Remaining Performance Obligations

The aggregate amount of the transaction price allocated to the remaining performance obligations for all open customer contracts as of July 3, 2021 was $ 13.56 billion.

The aggregate amount of the transaction price allocated to the remaining performance obligations for all open customer contracts as of October 2, 2021 was $ 14.49 billion.

The company will recognize revenues for these performance obligations as they are satisfied, approximately 76 % of which is expected to occur within the next twelve months .

3 unchanged sentences

Contract asset and liability balances are as follows:

July 3, December 31,

October 2, December 31,

(In millions) 2021 2020

3 unchanged sentences

Noncurrent Contract Liabilities 822 763

In the three and six months ended July 3, 2021, the company recognized revenues of $ 365 million and $ 931 million, respectively, that were included in the contract liabilities balance at December 31, 2020.

In the three and six months ended June 27, 2020, the company recognized revenues of $ 226 million and $ 631 million, respectively, that were included in the contract liabilities balance at December 31, 2019.

THERMO FISHER SCIENTIFIC INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

In the three and nine months ended October 2, 2021, the company recognized revenues of $ 173 million and $ 1.10 billion, respectively, that were included in the contract liabilities balance at December 31, 2020.

In the three and nine months ended September 26, 2020, the company recognized revenues of $ 142 million and $ 773 million, respectively, that were included in the contract liabilities balance at December 31, 2019.

Business Segment and Geographical Information

Business Segment Information

Three Months Ended Six Months Ended

July 3, June 27, July 3, June 27,

Three Months Ended Nine Months Ended

October 2, September 26, October 2, September 26,

(In millions) 2021 2020 2021 2020

23 unchanged sentences

— ( 1 ) ( 8 ) ( 5 )

Selling, general and administrative credits (charges)

Selling, general and administrative (charges) credits

( 59 ) 55 ( 33 ) 7

7 unchanged sentences

Interest expense ( 128 ) ( 144 ) ( 375 ) ( 407 )

Other (expense) income

Other income (expense)

14 ( 39 ) ( 174 ) ( 36 )

2 unchanged sentences

Geographical Information

Three Months Ended Six Months Ended

July 3, June 27, July 3, June 27,

Three Months Ended Nine Months Ended

October 2, September 26, October 2, September 26,

(In millions) 2021 2020 2021 2020

9 unchanged sentences

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:

Six Months Ended

July 3, June 27,

Nine Months Ended

October 2, September 26,

(In millions) 2021 2020

13 unchanged sentences

Intra-entity transfers

Withholding taxes

State income taxes, net of federal tax

5 unchanged sentences

Unrecognized Tax Benefits

As of July 3, 2021, the company had $ 1.13 billion of unrecognized tax benefits substantially all of which, if recognized, would reduce the effective tax rate.

As of October 2, 2021, the company had $ 1.12 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:

3 unchanged sentences

Additions for tax positions of prior years

Reductions for tax positions of prior years

Balance at End of Period

THERMO FISHER SCIENTIFIC INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Earnings per Share

Three Months Ended Six Months Ended

July 3, June 27, July 3, June 27,

Three Months Ended Nine Months Ended

October 2, September 26, October 2, September 26,

(In millions except per share amounts) 2021 2020 2021 2020

14 unchanged sentences

Debt and Other Financing Arrangements

Effective Interest Rate at July 3, July 3, December 31,

Effective Interest Rate at October 2, October 2, December 31,

(Dollars in millions) 2021 2021 2020

26 unchanged sentences

1.46 % 696 733

1.750 % 7 -Year Senior Notes, Due 10/15/2028

1.95 % 12 -Year Senior Notes, Due 7/24/2029 (euro-denominated)

6 unchanged sentences

1.14 % 1,043 1,099

2.00 % 10 -Year Senior Notes, Due 10/15/2031

2.23 % 1,200 —

2.375 % 12 -Year Senior Notes, Due 4/15/2032 (euro-denominated)

8 unchanged sentences

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)

9 unchanged sentences

21,598 21,728

Finance Lease Liabilities

Short-term Obligations and Current Maturities

2 unchanged sentences

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

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

In connection with the agreement to acquire PPD (Note 2), the company has available, but does not currently expect to utilize, up to $ 6.5 billion of committed bridge financing.

The company intends to finance the purchase price with cash on hand and the net proceeds from issuance of debt.

The company is currently evaluating future debt financings and the timing of such transactions is subject to market and other conditions.

The company had a cash outlay of $ 29 million in 2021 associated with obtaining the bridge commitment included in other financing activities, net, in the accompanying statement of cash flows.

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

In connection with the agreement to acquire PPD (Note 2), the company had a cash outlay of $ 35 million in 2021 associated with obtaining bridge financing commitments, included in other financing activities, net, in the accompanying statement of cash flows.

The bridge commitments were terminated in October 2021 upon the issuances of senior notes.

The company intends to finance the purchase price with cash on hand and the net proceeds from issuances of debt, including the

THERMO FISHER SCIENTIFIC INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

senior notes issued in October 2021.

The company is currently evaluating a future debt offering and the timing of such transaction is subject to market and other conditions.

Credit Facilities

5 unchanged sentences

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 Interest Coverage Ratio of 3.5 :1.0 as of the last day of any fiscal quarter.

As of July 3, 2021, no borrowings were outstanding under the Facility, although available capacity was reduced by approximately $ 4 million as a result of outstanding letters of credit.

As of October 2, 2021, no borrowings were outstanding under the Facility, although available capacity was reduced by approximately $ 4 million as a result of outstanding letters of credit.

Commercial Paper Programs

5 unchanged sentences

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 July 3, 2021, there were no outstanding borrowings under these programs.

As of October 2, 2021, there were no outstanding borrowings under these programs.

Interest is payable annually on the euro-denominated senior notes and semi-annually on all other senior notes.

1 unchanged sentence

The company is subject to certain affirmative and negative covenants under the indentures governing the senior notes, the most restrictive of which limits the ability of the company to pledge principal properties as security under borrowing arrangements.

The company was in compliance with all covenants at July 3, 2021.

The company was in compliance with all covenants at October 2, 2021.

In the first quarter of 2021, the company redeemed some of its existing senior notes.

In connection with these redemptions, the company incurred $ 197 million of losses on the early extinguishment of debt included in Other (Expense) Income on the accompanying statement of income.

In connection with these redemptions, the company incurred $ 197 million of losses on the early extinguishment of debt included in Other Income (Expense) on the accompanying statement of income.

Upon redemption of the senior notes, the company terminated the related fixed to floating rate interest rate swap arrangements and received $ 22 million, included in other financing activities, net, in the accompanying statement of cash flows.

October 2021 Debt Issuances

Early in the fourth quarter, the company issued the following senior notes:

(In millions) Principal Value Issued

Floating Rate 18 -Month Senior Notes, Due 4/18/2023

Floating Rate 2 -Year Senior Notes, Due 10/18/2023

0.797 % 2 -Year Senior Notes, Due 10/18/2023

Floating Rate 3 -Year Senior Notes, Due 10/18/2024

1.215 % 3 -Year Senior Notes, Due 10/18/2024

0.80 % 9 -Year Senior Notes, Due 10/18/2030 (euro-denominated)

1.125 % 12 -Year Senior Notes, Due 10/18/2033 (euro-denominated)

1.625 % 20 -Year Senior Notes, Due 10/18/2041 (euro-denominated)

2.00 % 30 -Year Senior Notes, Due 10/18/2051 (euro-denominated)

THERMO FISHER SCIENTIFIC INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Thermo Fisher Scientific (Finance I) B.V.

(Thermo Fisher International), a wholly-owned finance subsidiary of the company, issued 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 a registered public offering.

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.

Commitments and Contingencies

3 unchanged sentences

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 July 3, 2021, there have been no material changes to the accruals for pending environmental-related matters disclosed in the company’s 2020 financial statements and notes included in the company’s Annual Report on Form 10-K.

At October 2, 2021, there have been no material changes to the accruals for pending environmental-related matters disclosed in the company’s 2020 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 or cash flows.

THERMO FISHER SCIENTIFIC INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Litigation and Related Contingencies

6 unchanged sentences

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 July 3, 2021, 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 2020 financial statements and notes included in the company’s Annual Report on Form 10-K.

At October 2, 2021, 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 2020 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.

2 unchanged sentences

Management monitors the payment history as well as the financial condition and ratings of its insurers on an ongoing basis.

Strategic Partnership and Long-term Lease

In May 2020, the company entered a strategic partnership with CSL Limited (CSL).

Through a long-term lease agreement with CSL, the company will operate a new state-of-the-art biologics manufacturing facility in Lengnau, Switzerland, when construction is completed in the second half of 2021, to perform pharma services for CSL with capacity to serve other customers as well.

The company made an initial lease payment of $ 50 million in the second quarter of 2020 (included within other assets in the accompanying balance sheet) and expects to make additional fixed lease payments aggregating to $ 555 million (excluding renewals) from 2021 to 2041, with additional amounts dependent on the extent of revenues from customers of the facility other than CSL.

THERMO FISHER SCIENTIFIC INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Loss on Supply Agreement

In the third quarter of 2020, the Analytical Instruments segment recorded a charge to cost of product revenues for $ 108 million related to an existing supply contract for components of electron microscopy instruments.

The agreement requires the company to make future minimum purchases through 2025.

The company developed and launched an alternative product beginning in 2020 and based on the expected demand for the internally developed product vs.

the third-party product, the company does not expect to use all of the product it will be required to buy, resulting in a loss on the purchase commitment.

Comprehensive Income

10 unchanged sentences

121 16 16 153

Balance at July 3, 2021 $ ( 2,285 ) $ ( 77 ) $ ( 268 ) $ ( 2,630 )

THERMO FISHER SCIENTIFIC INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Balance at October 2, 2021 $ ( 2,317 ) $ ( 75 ) $ ( 262 ) $ ( 2,654 )

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 as of July 3, 2021 and December 31, 2020:

July 3, Quoted

The following tables present information about the company’s financial assets and liabilities measured at fair value on a recurring basis as of October 2, 2021 and December 31, 2020:

October 2, Quoted

Markets Significant

12 unchanged sentences

$ 175 $ — $ 4 $ 171

THERMO FISHER SCIENTIFIC INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, Quoted

18 unchanged sentences

Changes to the fair value of contingent consideration are recorded in selling, general and administrative expense.

The following table provides a rollforward of the fair value, as determined by level 3 inputs (such as likelihood of achieving production or revenue

THERMO FISHER SCIENTIFIC INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

milestones), of the contingent consideration.

Three Months Ended Six Months Ended

July 3, June 27, July 3, June 27,

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), of the contingent consideration.

Three Months Ended Nine Months Ended

October 2, September 26, October 2, September 26,

(In millions) 2021 2020 2021 2020

10 unchanged sentences

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

July 3, December 31,

October 2, December 31,

(In millions) 2021 2020

4 unchanged sentences

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.

The following tables present the fair value of derivative instruments in the

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

accompanying balance sheet and statement of income.

Fair Value – Assets Fair Value – Liabilities

July 3, December 31, July 3, December 31,

October 2, December 31, October 2, December 31,

(In millions) 2021 2020 2021 2020

9 unchanged sentences

(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.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

Carrying Amount of the Hedged Liability Cumulative Amount of Fair Value Hedging Adjustment - Increase (Decrease) Included in Carrying Amount of Liability

July 3, December 31, July 3, December 31,

October 2, December 31, October 2, December 31,

(In millions) 2021 2020 2021 2020

1 unchanged sentence

Gain (Loss) Recognized

Three Months Ended Six Months Ended

July 3, June 27, July 3, June 27,

Three Months Ended Nine Months Ended

October 2, September 26, October 2, September 26,

(In millions) 2021 2020 2021 2020

7 unchanged sentences

Included in unrealized losses on hedging instruments within other comprehensive items

— ( 4 ) — ( 85 )

Amount reclassified from accumulated other comprehensive items to other expense

8 unchanged sentences

Included in other income (expense)

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Gain (Loss) Recognized

Three Months Ended Nine Months Ended

October 2, September 26, October 2, September 26,

(In millions) 2021 2020 2021 2020

Derivatives Not Designated as Hedging Instruments

10 unchanged sentences

Accordingly, foreign currency transaction gains or losses due to spot rate fluctuations on the euro-denominated debt instruments and contract fair value changes on the cross-currency interest rate swaps, excluding interest accruals, are included in currency translation adjustment within other comprehensive items and shareholders’ equity.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

See Note 1 to the consolidated financial statements for 2020 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 obligations are as follows:

July 3, 2021 December 31, 2020

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

October 2, 2021 December 31, 2020

Carrying Fair Carrying Fair

2 unchanged sentences

$ 21,598 $ 23,495 $ 21,728 $ 24,658

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

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.

Supplemental Cash Flow Information

Six Months Ended

July 3, June 27,

Nine Months Ended

October 2, September 26,

(In millions) 2021 2020

4 unchanged sentences

Issuance of stock upon vesting of restricted stock units

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

July 3, December 31,

October 2, December 31,

(In millions) 2021 2020

4 unchanged sentences

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

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Restructuring and Other Costs

In the first six months of 2021 the company recorded restructuring and other costs primarily associated with charges for impairment of acquired technology and third-party transaction/integration costs related to recent acquisitions, partially offset by credits for changes in estimates of contingent acquisition consideration.

In the first six months of 2021, severance actions associated with facility consolidations and cost reduction measures affected less than 0.5 % of the company’s workforce.

As of August 6, 2021, the company has identified restructuring actions that will result in additional charges of approximately $ 45 million, primarily in 2021, and expects to identify additional actions during 2021 which will be recorded when specified criteria are met, such as communication of benefit arrangements or when the costs have been incurred.

During the second quarter of 2021, the company recorded net restructuring and other costs (income) by segment as follows:

In the first nine months of 2021 the company recorded restructuring and other costs primarily associated with charges for impairment of acquired technology and third-party transaction/integration costs related to recent acquisitions, partially offset by credits for changes in estimates of contingent acquisition consideration.

In the first nine months of 2021, severance actions associated with facility consolidations and cost reduction measures affected less than 1 % of the company’s workforce.

As of November 4, 2021, the company has identified restructuring actions that will result in additional charges of approximately $ 25 million, primarily in 2021 and 2022, 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.

During the third quarter of 2021, the company recorded net restructuring and other costs (income) by segment as follows:

(In millions) Cost of

4 unchanged sentences

$ — $ 23 $ ( 3 ) $ 20

Analytical Instruments

Specialty Diagnostics

1 unchanged sentence

— 26 ( 3 ) 23

During the first six months of 2021, the company recorded net restructuring and other costs (income) by segment as follows:

$ — $ 59 $ 18 $ 77

During the first nine months of 2021, the company recorded net restructuring and other costs (income) by segment as follows:

(In millions) Cost of

6 unchanged sentences

Specialty Diagnostics

— ( 2 ) 17 15

Laboratory Products and Services

3 unchanged sentences

Life Sciences Solutions

In the first six months of 2021, the Life Sciences Solutions segment recorded $ 128 million of restructuring and other costs, primarily charges of $ 110 million for impairment of acquired technology resulting from a reduction in expected cash flows, and compensation contractually due to employees of acquired businesses at the date of acquisition.

The segment recorded $ 47 million of credits to selling, general, and administrative expense, principally credits for changes in estimates of contingent acquisition consideration, partially offset by third-party transaction costs related to recent acquisitions.

The segment also recorded $ 8 million of charges to cost of revenues for the sale of inventories revalued at the date of acquisition.

Laboratory Products and Services

In the first six months of 2021, the Laboratory Products and Services segment recorded $ 21 million of net restructuring and other charges, primarily for third-party transaction/integration costs related to recent acquisitions.

In the first nine months of 2021, the Life Sciences Solutions segment recorded $ 125 million of restructuring and other costs, primarily charges of $ 110 million for impairment of acquired technology resulting from a reduction in expected cash

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

flows, and compensation contractually due to employees of acquired businesses at the date of acquisition.

The segment recorded $ 24 million of net credits to selling, general, and administrative expense, principally for changes in estimates of contingent acquisition consideration, partially offset by third-party transaction costs related to recent acquisitions.

The segment also recorded $ 8 million of charges to cost of revenues for the sale of inventories revalued at the date of acquisition.

Specialty Diagnostics

In the first nine months of 2021, the Specialty Diagnostics segment recorded $ 17 million of net restructuring and other charges, primarily for severance and write-downs of fixed assets to estimated disposal value in connection with the discontinuation of a product line in Europe.

Laboratory Products and Services

In the first nine months of 2021, the Laboratory Products and Services segment recorded $ 44 million of net restructuring and other charges, primarily for third-party transaction/integration costs related to recent acquisitions.

In the first nine months of 2021, the company recorded $ 18 million of net restructuring and other charges, primarily for product liability litigation and pre-acquisition related matters.

The following table summarizes the changes in the company’s accrued restructuring balance.

4 unchanged sentences

Net restructuring charges incurred in 2021 (b)

Balance at July 3, 2021 $ 13

Currency translation

Balance at October 2, 2021 $ 12

(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 $ 121 million of net charges, principally for impairment of acquired technology and compensation contractually due and paid to employees of acquired businesses at the date of acquisition.

(b) Excludes $ 128 million of net charges, principally for impairment of acquired technology, compensation contractually due and paid to employees of acquired businesses at the date of acquisition, fixed asset write-downs, and charges associated with pre-acquisition related matters.

The company expects to pay accrued restructuring costs primarily through 2021 .

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements