THERMO FISHER SCIENTIFIC INC. 10-Q

Item 1. Financial Statements CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited) October 2, December 31, (In millions except share and per share amounts) 2021 2020 Assets Current Assets: Cash and cash equivalents $ 12,027 $ 10,325 Accounts receivable, less allowances of $ 138 and $ 135 5,557 5,741 Inventories 4,906 4,029 Contract assets, net 808 731 Other current assets 1,426 1,131 Total current assets 24,724 21,957 Property, Plant and Equipment, Net 7,049 5,912 Acquisition-related Intangible Assets, Net 11,927 12,685 Other Assets 2,991 2,457 Goodwill 26,909 26,041 Total Assets $ 73,600 $ 69,052 Liabilities and Shareholders' Equity Current Liabilities: Short-term obligations and current maturities of long-term obligations $ 19 $ 2,628 Accounts payable 2,301 2,175 Accrued payroll and employee benefits 1,816 1,916 Contract liabilities 1,442 1,271 Other accrued expenses 2,175 2,314 Total current liabilities 7,753 10,304 Deferred Income Taxes 1,465 1,794 Other Long-term Liabilities 3,984 3,340 Long-term Obligations 21,688 19,107 Shareholders' Equity: Preferred stock, $ 100 par value, 50,000 shares authorized; none issued Common stock, $ 1 par value, 1,200,000,000 shares authorized; 438,749,893 and 437,088,297 shares issued 439 437 Capital in excess of par value 15,960 15,579 Retained earnings 33,876 28,116 Treasury stock at cost, 44,701,806 and 40,417,789 shares ( 8,911 ) ( 6,818 ) Accumulated other comprehensive items ( 2,654 ) ( 2,807 ) Total shareholders' equity 38,710 34,507 Total Liabilities and Shareholders' Equity $ 73,600 $ 69,052 The accompanying notes are an integral part of these condensed consolidated financial statements. 3 THERMO FISHER SCIENTIFIC INC. CONDENSED CONSOLIDATED STATEMENT OF INCOME (Unaudited) Three Months Ended Nine Months Ended October 2, September 26, October 2, September 26, (In millions except per share amounts) 2021 2020 2021 2020 Revenues Product revenues $ 7,360 $ 6,782 $ 22,430 $ 16,662 Service revenues 1,970 1,739 6,079 5,006 Total revenues 9,330 8,521 28,509 21,668 Costs and Operating Expenses: Cost of product revenues 3,298 3,001 9,977 7,732 Cost of service revenues 1,381 1,189 4,148 3,488 Selling, general and administrative expenses 2,004 1,592 5,729 4,853 Research and development expenses 351 296 1,014 805 Restructuring and other costs 18 17 151 67 Total costs and operating expenses 7,052 6,095 21,019 16,945 Operating Income 2,278 2,426 7,490 4,723 Interest Income 9 9 32 53 Interest Expense ( 128 ) ( 144 ) ( 375 ) ( 407 ) Other Income (Expense) 14 ( 39 ) ( 174 ) ( 36 ) Income Before Income Taxes 2,173 2,252 6,973 4,333 Provision for Income Taxes ( 271 ) ( 319 ) ( 906 ) ( 456 ) Net Income $ 1,902 $ 1,933 $ 6,067 $ 3,877 Earnings per Share Basic $ 4.83 $ 4.88 $ 15.41 $ 9.79 Diluted $ 4.79 $ 4.84 $ 15.29 $ 9.71 Weighted Average Shares Basic 394 396 394 396 Diluted 397 399 397 399 The accompanying notes are an integral part of these condensed consolidated financial statements. 4 THERMO FISHER SCIENTIFIC INC. CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (Unaudited) Three Months Ended Nine Months Ended October 2, September 26, October 2, September 26, (In millions) 2021 2020 2021 2020 Comprehensive Income Net Income $ 1,902 $ 1,933 $ 6,067 $ 3,877 Other Comprehensive Items: Currency translation adjustment: Currency translation adjustment (net of tax provision (benefit) of $ 74 , $( 76 ), $ 169 and $( 71 )) ( 32 ) 10 121 ( 244 ) Unrealized gains and losses on hedging instruments: Unrealized losses on hedging instruments (net of tax benefit of $ 0 , $ 0 , $ 0 and $ 20 ) — — — ( 65 ) Reclassification adjustment for losses included in net income (net of tax benefit of $ 0 , $ 2 , $ 5 and $ 4 ) 2 6 16 10 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 ), $ 1 , $( 3 ) and $ 2 ) 3 ( 4 ) 7 ( 5 ) Amortization of net loss included in net periodic pension cost (net of tax benefit of $ 2 , $ 1 , $ 4 and $ 4 ) 3 7 9 13 Total other comprehensive items ( 24 ) 19 153 ( 291 ) Comprehensive Income $ 1,878 $ 1,952 $ 6,220 $ 3,586 The accompanying notes are an integral part of these condensed consolidated financial statements. 5 THERMO FISHER SCIENTIFIC INC. CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited) Nine Months Ended October 2, September 26, (In millions) 2021 2020 Operating Activities Net income $ 6,067 $ 3,877 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation of property, plant and equipment 614 467 Amortization of acquisition-related intangible assets 1,295 1,256 Change in deferred income taxes ( 455 ) ( 496 ) Loss on early extinguishment of debt 197 — Stock-based compensation 153 145 Other non-cash expenses, net 194 209 Changes in assets and liabilities, excluding the effects of acquisitions ( 1,210 ) ( 508 ) Net cash provided by operating activities 6,855 4,950 Investing Activities Acquisitions, net of cash acquired ( 1,519 ) ( 3 ) Purchase of property, plant and equipment ( 1,692 ) ( 888 ) Proceeds from sale of property, plant and equipment 9 7 Other investing activities, net ( 38 ) — Net cash used in investing activities ( 3,240 ) ( 884 ) Financing Activities Net proceeds from issuance of debt 3,122 3,464 Repayment of debt ( 2,807 ) ( 712 ) Proceeds from issuance of commercial paper — 383 Repayments of commercial paper — ( 387 ) Purchases of company common stock ( 2,000 ) ( 1,500 ) Dividends paid ( 292 ) ( 250 ) Net proceeds from issuance of company common stock under employee stock plans 101 156 Other financing activities, net ( 10 ) ( 146 ) Net cash (used in) provided by financing activities ( 1,886 ) 1,008 Exchange Rate Effect on Cash ( 17 ) 74 Increase in Cash, Cash Equivalents and Restricted Cash 1,712 5,148 Cash, Cash Equivalents and Restricted Cash at Beginning of Period 10,336 2,422 Cash, Cash Equivalents and Restricted Cash at End of Period $ 12,048 $ 7,570 The accompanying notes are an integral part of these condensed consolidated financial statements. 6 THERMO FISHER SCIENTIFIC INC. CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (Unaudited) Common Stock Capital in Excess of Par Value Retained Earnings Treasury Stock Accumulated Other Comprehensive Items Total Shareholders' Equity (In millions) Shares Amount Shares Amount 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 1 1 83 — — ( 55 ) — 29 Stock-based compensation — — 51 — — — — 51 Dividends declared ($ 0.26 per share) — — — ( 102 ) — — — ( 102 ) Net income — — — 1,902 — — — 1,902 Other comprehensive items — — — — — — ( 24 ) ( 24 ) 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 1 1 81 — — ( 49 ) — 33 Stock-based compensation — — 52 — — — — 52 Dividends declared ($ 0.22 per share) — — — ( 88 ) — — — ( 88 ) Net income — — — 1,933 — — — 1,933 Other comprehensive items — — — — — — 19 19 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 Issuance of shares under employees' and directors' stock plans 2 2 228 — 1 ( 93 ) — 137 Stock-based compensation — — 153 — — — — 153 Purchases of company common stock — — — — 4 ( 2,000 ) — ( 2,000 ) Dividends declared ($ 0.78 per share) — — — ( 307 ) — — — ( 307 ) Net income — — — 6,067 — — — 6,067 Other comprehensive items — — — — — — 153 153 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 change — — — ( 1 ) — — — ( 1 ) Issuance of shares under employees' and directors' stock plans 3 3 258 — — ( 79 ) — 182 Stock-based compensation — — 145 — — — — 145 Purchases of company common stock — — — — 4 ( 1,500 ) — ( 1,500 ) Dividends declared ($ 0.66 per share) — — — ( 263 ) — — — ( 263 ) Net income — — — 3,877 — — — 3,877 Other comprehensive items — — — — — — ( 291 ) ( 291 ) 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 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, improve patient diagnostics and therapies, and increase laboratory productivity. Markets served include pharmaceutical and biotech, academic and government, industrial and applied, as well as healthcare and diagnostics. Interim Financial Statements The interim condensed consolidated financial statements presented herein have been prepared by the company, are unaudited and, in the opinion of management, reflect all adjustments of a normal recurring nature necessary for a fair statement of the financial position at October 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. The condensed consolidated balance sheet presented as of December 31, 2020, 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 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 nine months ended October 2, 2021. Inventories The components of inventories are as follows: October 2, December 31, (In millions) 2021 2020 Raw Materials $ 1,840 $ 1,305 Work in Process 680 540 Finished Goods 2,386 2,184 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 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. 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 8 THERMO FISHER SCIENTIFIC INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited) segments. The negative impacts have significantly lessened so far in 2021. 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 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. Among other things, the new guidance requires the effects of enacted changes in tax laws or rates to be reflected in the annual effective tax rate computation in the interim period that includes the enactment date. The company adopted this guidance in 2021 using a prospective method. The adoption of this guidance did not have a material impact on the company’s consolidated financial statements; however, the impact in future periods will be dependent on the extent of future events or conditions that would be affected such as enacted changes in tax laws or rates. 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 workforce. These synergies include the elimination of redundant facilities, functions and staffing; use of the company’s existing commercial infrastructure to expand sales of the acquired businesses’ products; and use of the commercial infrastructure of the acquired businesses to cost-effectively expand sales of company products. Acquisitions have been accounted for using the acquisition method of accounting, and the acquired companies’ results have been included in the accompanying financial statements from their respective dates of acquisition. Pending Acquisition On April 15, 2021, the company entered into a definitive agreement under which it will acquire PPD, Inc. for $ 47.50 per share for a total cash purchase price of $ 17.4 billion plus the assumption of approximately $ 3.5 billion of net debt. PPD provides a broad range of clinical research and specialized laboratory services to enable customers to accelerate innovation and increase drug development productivity. Upon close of the transaction, PPD will become part of the Laboratory Products and Services Segment. Shareholders holding in aggregate approximately 60 % of the issued and outstanding shares of common stock of PPD on April 15, 2021, have approved the transaction by written consent. No further action by other PPD shareholders is required to approve the transaction. 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. Federal Trade Commission (FTC), in connection with the FTC’s review of the proposed merger. 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. 9 THERMO FISHER SCIENTIFIC INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited) 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 $ 834 million in net cash consideration. 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 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 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 Lengnau biologics manufacturing facility Other Purchase Price Cash paid $ 853 $ 423 $ — $ 287 Fair value of contingent consideration — 65 1 113 Purchase price payable — — 17 — Cash acquired ( 19 ) ( 14 ) — ( 11 ) $ 834 $ 474 $ 18 $ 389 Net Assets Acquired Current assets $ 39 $ 54 $ — $ 10 Property, plant and equipment 59 2 92 3 Definite-lived intangible assets: Customer relationships 302 — — 2 Product technology 25 279 — 220 Tradenames — 2 — 3 Goodwill 603 239 18 190 Other assets 4 4 361 — Contract liabilities ( 59 ) — — ( 1 ) Deferred tax liabilities ( 80 ) ( 72 ) — ( 28 ) Finance lease liabilities ( 24 ) ( 1 ) ( 82 ) — Other liabilities assumed ( 35 ) ( 33 ) ( 371 ) ( 10 ) $ 834 $ 474 $ 18 $ 389 10 THERMO FISHER SCIENTIFIC INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited) 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. Note 3. Revenues and Contract-related Balances Disaggregated Revenues Revenues by type are as follows: Three Months Ended Nine Months Ended October 2, September 26, October 2, September 26, (In millions) 2021 2020 2021 2020 Revenues Consumables 5,544 4,956 $ 16,880 $ 12,214 Instruments 1,816 1,826 5,550 4,448 Services 1,970 1,739 6,079 5,006 Consolidated revenues $ 9,330 $ 8,521 $ 28,509 $ 21,668 Revenues by geographic region based on customer location are as follows: Three Months Ended Nine Months Ended October 2, September 26, October 2, September 26, (In millions) 2021 2020 2021 2020 Revenues North America $ 4,662 $ 4,587 $ 14,292 $ 11,418 Europe 2,557 2,032 8,037 5,464 Asia-Pacific 1,836 1,607 5,294 4,054 Other regions 275 295 886 732 Consolidated revenues $ 9,330 $ 8,521 $ 28,509 $ 21,668 Each reportable segment earns revenues from consumables, instruments and services in North America, Europe, Asia-Pacific and other regions. See Note 4 for revenues by reportable segment and other geographic data. Remaining Performance Obligations The aggregate amount of the transaction price allocated to the remaining performance obligations for all open customer contracts as of October 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 . Contract-related Balances Noncurrent contract assets are included within other assets in the accompanying balance sheet. Noncurrent contract liabilities are included within other long-term liabilities in the accompanying balance sheet. Contract asset and liability balances are as follows: October 2, December 31, (In millions) 2021 2020 Current Contract Assets, Net $ 808 $ 731 Noncurrent Contract Assets, Net 11 11 Current Contract Liabilities 1,442 1,271 Noncurrent Contract Liabilities 822 763 11 THERMO FISHER SCIENTIFIC INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited) 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. Note 4. Business Segment and Geographical Information Business Segment Information Three Months Ended Nine Months Ended October 2, September 26, October 2, September 26, (In millions) 2021 2020 2021 2020 Revenues Life Sciences Solutions $ 3,721 $ 3,424 $ 11,481 $ 7,800 Analytical Instruments 1,476 1,336 4,344 3,488 Specialty Diagnostics 1,362 1,430 4,212 3,376 Laboratory Products and Services 3,487 3,112 10,667 8,629 Eliminations ( 716 ) ( 781 ) ( 2,195 ) ( 1,625 ) Consolidated revenues 9,330 8,521 28,509 21,668 Segment Income Life Sciences Solutions 1,821 1,879 5,818 3,788 Analytical Instruments 264 171 816 477 Specialty Diagnostics 310 398 983 848 Laboratory Products and Services 383 355 1,360 931 Subtotal reportable segments 2,778 2,803 8,977 6,044 Cost of revenues charges — ( 1 ) ( 8 ) ( 5 ) Selling, general and administrative (charges) credits ( 59 ) 55 ( 33 ) 7 Restructuring and other costs ( 18 ) ( 17 ) ( 151 ) ( 67 ) Amortization of acquisition-related intangible assets ( 423 ) ( 414 ) ( 1,295 ) ( 1,256 ) Consolidated operating income 2,278 2,426 7,490 4,723 Interest income 9 9 32 53 Interest expense ( 128 ) ( 144 ) ( 375 ) ( 407 ) Other income (expense) 14 ( 39 ) ( 174 ) ( 36 ) Income before income taxes $ 2,173 $ 2,252 $ 6,973 $ 4,333 Geographical Information Three Months Ended Nine Months Ended October 2, September 26, October 2, September 26, (In millions) 2021 2020 2021 2020 Revenues (a) United States $ 4,495 $ 4,428 $ 13,742 $ 10,981 China 885 828 2,454 1,886 Other 3,950 3,265 12,313 8,801 Consolidated revenues $ 9,330 $ 8,521 $ 28,509 $ 21,668 (a) Revenues are attributed to countries based on customer location. 12 THERMO FISHER SCIENTIFIC INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited) Note 5. Income Taxes The provision for income taxes in the accompanying statement of income differs from the provision calculated by applying the statutory federal income tax rate to income before provision for income taxes due to the following: Nine Months Ended October 2, September 26, (In millions) 2021 2020 Statutory Federal Income Tax Rate 21 % 21 % Provision for Income Taxes at Statutory Rate $ 1,464 $ 910 Increases (Decreases) Resulting From: Foreign rate differential ( 159 ) ( 132 ) Income tax credits ( 205 ) ( 205 ) Global intangible low-taxed income 45 82 Foreign-derived intangible income ( 114 ) ( 53 ) Excess tax benefits from stock options and restricted stock units ( 96 ) ( 94 ) Intra-entity transfers ( 258 ) — Withholding taxes 106 10 State income taxes, net of federal tax 115 29 Other, net 8 ( 91 ) Provision for Income Taxes $ 906 $ 456 The company has operations and a taxable presence in approximately 50 countries outside the U.S. The company's effective income tax rate differs from the U.S. federal statutory rate each year due to certain operations that are subject to tax incentives, state and local taxes, and foreign taxes that are different than the U.S. federal statutory rate. Unrecognized Tax Benefits 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: (In millions) 2021 Balance at Beginning of Year $ 1,091 Additions for tax positions of current year 30 Additions for tax positions of prior years 15 Reductions for tax positions of prior years ( 2 ) Settlements ( 16 ) Balance at End of Period $ 1,118 Note 6. Earnings per Share Three Months Ended Nine Months Ended October 2, September 26, October 2, September 26, (In millions except per share amounts) 2021 2020 2021 2020 Net Income $ 1,902 $ 1,933 $ 6,067 $ 3,877 Basic Weighted Average Shares 394 396 394 396 Plus Effect of: Stock options and restricted stock units 3 3 3 3 Diluted Weighted Average Shares 397 399 397 399 Basic Earnings per Share $ 4.83 $ 4.88 $ 15.41 $ 9.79 Diluted Earnings per Share $ 4.79 $ 4.84 $ 15.29 $ 9.71 Antidilutive Stock Options Excluded from Diluted Weighted Average Shares — — 1 1 13 THERMO FISHER SCIENTIFIC INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited) Note 7. Debt and Other Financing Arrangements Effective Interest Rate at October 2, October 2, December 31, (Dollars in millions) 2021 2021 2020 2.15 % 7 -Year Senior Notes, Due 7/21/2022 (euro-denominated) $ — $ 611 3.00 % 7 -Year Senior Notes, Due 4/15/2023 — 1,000 4.15 % 10 -Year Senior Notes, Due 2/1/2024 — 1,000 0.75 % 8 -Year Senior Notes, Due 9/12/2024 (euro-denominated) 0.94 % 1,159 1,222 0.125 % 5.5 -Year Senior Notes, Due 3/1/2025 (euro-denominated) 0.42 % 928 977 4.133 % 5 -Year Senior Notes, Due 3/25/2025 4.32 % 1,100 1,100 2.00 % 10 -Year Senior Notes, Due 4/15/2025 (euro-denominated) 2.10 % 742 782 3.65 % 10 -Year Senior Notes, Due 12/15/2025 3.77 % 350 350 1.40 % 8.5 -Year Senior Notes, Due 1/23/2026 (euro-denominated) 1.53 % 812 855 2.95 % 10 -Year Senior Notes, Due 9/19/2026 3.19 % 1,200 1,200 1.45 % 10 -Year Senior Notes, Due 3/16/2027 (euro-denominated) 1.66 % 580 611 1.75 % 7 -Year Senior Notes, Due 4/15/2027 (euro-denominated) 1.97 % 696 733 3.20 % 10 -Year Senior Notes, Due 8/15/2027 3.39 % 750 750 0.50 % 8.5 -Year Senior Notes, Due 3/1/2028 (euro-denominated) 0.78 % 928 977 1.375 % 12 -Year Senior Notes, Due 9/12/2028 (euro-denominated) 1.46 % 696 733 1.750 % 7 -Year Senior Notes, Due 10/15/2028 1.89 % 700 — 1.95 % 12 -Year Senior Notes, Due 7/24/2029 (euro-denominated) 2.08 % 812 855 2.60 % 10 -Year Senior Notes, Due 10/1/2029 2.74 % 900 900 4.497 % 10 -Year Senior Notes, Due 3/25/2030 5.31 % 1,100 1,100 0.875 % 12 -Year Senior Notes, Due 10/1/2031 (euro-denominated) 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) 2.55 % 696 733 2.875 % 20 -Year Senior Notes, Due 7/24/2037 (euro-denominated) 2.94 % 812 855 1.50 % 20 -Year Senior Notes, Due 10/1/2039 (euro-denominated) 1.73 % 1,043 1,099 2.80 % 20 -Year Senior Notes, Due 10/15/2041 2.90 % 1,200 — 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) 1.99 % 1,159 1,222 Other 77 5 Total Borrowings at Par Value 21,833 21,919 Fair Value Hedge Accounting Adjustments — 25 Unamortized Discount ( 107 ) ( 102 ) Unamortized Debt Issuance Costs ( 128 ) ( 114 ) Total Borrowings at Carrying Value 21,598 21,728 Finance Lease Liabilities 109 7 Less: Short-term Obligations and Current Maturities 19 2,628 Long-term Obligations $ 21,688 $ 19,107 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 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 14 THERMO FISHER SCIENTIFIC INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited) 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 The company has a revolving credit facility (the Facility) with a bank group that provides for up to $ 3.00 billion of unsecured multi-currency revolving credit. The Facility expires on December 4, 2025. The revolving credit agreement calls for interest at either a LIBOR-based rate (or LIBOR successor rate), a EURIBOR-based rate (for funds drawn in euro) or a rate based on the prime lending rate of the agent bank, at the company’s option. The agreement contains affirmative, negative and financial covenants, and events of default customary for facilities of this type. The covenants in 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 Interest Coverage Ratio of 3.5 :1.0 as of the last day of any fiscal quarter. 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 The company has commercial paper programs pursuant to which it may issue and sell unsecured, short-term promissory notes (CP Notes). Under the U.S. program, a) maturities may not exceed 397 days from the date of issue and b) the CP Notes are issued on a private placement basis under customary terms in the commercial paper market and are not redeemable prior to maturity nor subject to voluntary prepayment. Under the euro program, maturities may not exceed 183 days and may be denominated in euro, U.S. dollars, Japanese yen, British pounds sterling, Swiss franc, Canadian dollars or other currencies. Under both programs, the CP Notes are issued at a discount from par (or premium to par, in the case of negative interest rates), or, alternatively, are sold at par and bear varying interest rates on a fixed or floating basis. As of October 2, 2021, there were no outstanding borrowings under these programs. Senior Notes Interest is payable annually on the euro-denominated senior notes and semi-annually on all other senior notes. Each of the notes may be redeemed at a redemption price of 100% of the principal amount plus a specified make-whole premium and accrued interest. The company is subject to certain affirmative and negative covenants under the indentures governing the senior notes, the most restrictive of which limits the ability of the company to pledge principal properties as security under borrowing arrangements. 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 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 $ 1,000 Floating Rate 2 -Year Senior Notes, Due 10/18/2023 $ 500 0.797 % 2 -Year Senior Notes, Due 10/18/2023 $ 1,350 Floating Rate 3 -Year Senior Notes, Due 10/18/2024 $ 500 1.215 % 3 -Year Senior Notes, Due 10/18/2024 $ 2,500 0.80 % 9 -Year Senior Notes, Due 10/18/2030 (euro-denominated) € 1,750 1.125 % 12 -Year Senior Notes, Due 10/18/2033 (euro-denominated) € 1,500 1.625 % 20 -Year Senior Notes, Due 10/18/2041 (euro-denominated) € 1,250 2.00 % 30 -Year Senior Notes, Due 10/18/2051 (euro-denominated) € 750 15 THERMO FISHER SCIENTIFIC INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited) 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. Note 8. Commitments and Contingencies Environmental Matters The company is currently involved in various stages of investigation and remediation related to environmental matters. The company cannot predict all potential costs related to environmental remediation matters and the possible impact on future operations given the uncertainties regarding the extent of the required cleanup, the complexity and interpretation of applicable laws and regulations, the varying costs of alternative cleanup methods and the extent of the company’s responsibility. Expenses for environmental remediation matters related to the costs of installing, operating and maintaining groundwater-treatment systems and other remedial activities related to historical environmental contamination at the company’s domestic and international facilities were not material in any period presented. At October 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. Litigation and Related Contingencies The company is involved in various disputes, governmental and/or regulatory inspections, inquiries, investigations and proceedings, and litigation matters that arise from time to time in the ordinary course of business. The disputes and litigation matters include product liability, intellectual property, employment and commercial issues. Due to the inherent uncertainties associated with pending litigation or claims, the company cannot predict the outcome, nor, with respect to certain pending litigation or claims where no liability has been accrued, make a meaningful estimate of the reasonably possible loss or range of loss that could result from an unfavorable outcome. The company has no material accruals for pending litigation or claims for which accrual amounts are not disclosed in the company's 2020 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 of the matters described below could have a material adverse effect on the company’s results of operations, financial position and cash flows. Product Liability, Workers Compensation and Other Personal Injury Matters The company is involved in various proceedings and litigation that arise from time to time in connection with product liability, workers compensation and other personal injury matters. At October 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. 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. 16 THERMO FISHER SCIENTIFIC INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited) 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. Note 9. Comprehensive Income Changes in each component of accumulated other comprehensive items, net of tax, are as follows: (In millions) Currency Translation Adjustment Unrealized Losses on Hedging Instruments Pension and Other Postretirement Benefit Liability Adjustment Total Balance at December 31, 2020 $ ( 2,438 ) $ ( 91 ) $ ( 278 ) $ ( 2,807 ) Other comprehensive items before reclassifications 121 — 7 128 Amounts reclassified from accumulated other comprehensive items — 16 9 25 Net other comprehensive items 121 16 16 153 Balance at October 2, 2021 $ ( 2,317 ) $ ( 75 ) $ ( 262 ) $ ( 2,654 ) 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 as of October 2, 2021 and December 31, 2020: October 2, Quoted Prices in Active Markets Significant Other Observable Inputs Significant Unobservable Inputs (In millions) 2021 (Level 1) (Level 2) (Level 3) Assets Cash equivalents $ 10,518 $ 10,518 $ — $ — Investments in common stock, mutual funds and other similar instruments 61 61 — — Warrants 18 — 18 — Insurance contracts 178 — 178 — Derivative contracts 75 — 75 — Total Assets $ 10,850 $ 10,579 $ 271 $ — Liabilities Derivative contracts $ 4 $ — $ 4 $ — Contingent consideration 171 — — 171 Total Liabilities $ 175 $ — $ 4 $ 171 17 THERMO FISHER SCIENTIFIC INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited) December 31, Quoted Prices in Active Markets Significant Other Observable Inputs Significant Unobservable Inputs (In millions) 2020 (Level 1) (Level 2) (Level 3) Assets Cash equivalents $ 8,971 $ 8,971 $ — $ — Investments in common stock, mutual funds and other similar instruments 21 21 — — Warrants 7 — 7 — Insurance contracts 157 — 157 — Derivative contracts 28 — 28 — Total Assets $ 9,184 $ 8,992 $ 192 $ — Liabilities Derivative contracts $ 132 $ — $ 132 $ — Contingent consideration 70 — — 70 Total Liabilities $ 202 $ — $ 132 $ 70 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. 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 Contingent Consideration Beginning Balance $ 149 $ 53 $ 70 $ 55 Acquisitions (including assumed balances) — — 179 — Payments ( 1 ) ( 1 ) ( 43 ) ( 3 ) Changes in fair value included in earnings 23 ( 8 ) ( 35 ) ( 8 ) Ending Balance $ 171 $ 44 $ 171 $ 44 Derivative Contracts The following table provides the aggregate notional value of outstanding derivative contracts. October 2, December 31, (In millions) 2021 2020 Notional Amount Interest rate swaps - fair value hedges $ — $ 1,000 Cross-currency interest rate swaps - designated as net investment hedges 900 900 Currency exchange contracts 4,823 5,206 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 18 THERMO FISHER SCIENTIFIC INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited) accompanying balance sheet and statement of income. Fair Value – Assets Fair Value – Liabilities October 2, December 31, October 2, December 31, (In millions) 2021 2020 2021 2020 Derivatives Designated as Hedging Instruments Interest rate swaps (a) $ — $ 25 $ — $ — Cross-currency interest rate swaps (a) 10 — 4 46 Derivatives Not Designated as Hedging Instruments Currency exchange contracts (b) 65 3 — 86 Total Derivatives $ 75 $ 28 $ 4 $ 132 (a) The fair values of the interest rate swaps and cross-currency interest rate swaps are 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. 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 October 2, December 31, October 2, December 31, (In millions) 2021 2020 2021 2020 Long-term Obligations $ — $ 1,020 $ — $ 25 Gain (Loss) Recognized Three Months Ended Nine Months Ended October 2, September 26, October 2, September 26, (In millions) 2021 2020 2021 2020 Fair Value Hedging Relationships Interest rate swaps Hedged long-term obligations - included in other income (expense) $ — $ — $ 25 $ ( 43 ) Derivatives designated as hedging instruments - included in other income (expense) — — ( 3 ) 43 Derivatives Designated as Cash Flow Hedges Interest rate swaps Included in unrealized losses on hedging instruments within other comprehensive items — — — ( 85 ) Amount reclassified from accumulated other comprehensive items to other expense ( 2 ) ( 8 ) ( 21 ) ( 14 ) Financial Instruments Designated as Net Investment Hedges Foreign currency-denominated debt Included in currency translation adjustment within other comprehensive items 297 ( 295 ) 673 ( 276 ) Cross-currency interest rate swaps Included in currency translation adjustment within other comprehensive items 20 ( 30 ) 52 ( 30 ) Included in other income (expense) 2 2 6 9 19 THERMO FISHER SCIENTIFIC INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited) 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 Currency exchange contracts Included in cost of product revenues 7 ( 2 ) 8 ( 2 ) Included in other income (expense) ( 8 ) 51 147 7 Cross-currency interest rate swaps Included in other income (expense) — 1 — ( 9 ) Gains and losses recognized on currency exchange contracts and the interest rate swaps designated as fair value hedges are included in the accompanying statement of income together with the corresponding, offsetting losses and gains on the underlying hedged transactions. The company uses foreign currency-denominated debt and cross-currency interest rate swaps to partially hedge its net investments in foreign operations against adverse movements in exchange rates. The majority of the company’s euro-denominated senior notes and 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 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 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 instruments are as follows: October 2, 2021 December 31, 2020 Carrying Fair Carrying Fair (In millions) Value Value Value Value Senior notes $ 21,521 $ 23,418 $ 21,723 $ 24,653 Other 77 77 5 5 $ 21,598 $ 23,495 $ 21,728 $ 24,658 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. Note 11. Supplemental Cash Flow Information Nine Months Ended October 2, September 26, (In millions) 2021 2020 Non-cash Investing and Financing Activities Acquired but unpaid property, plant and equipment $ 257 $ 134 Fair value of acquisition contingent consideration 179 — Declared but unpaid dividends 104 88 Issuance of stock upon vesting of restricted stock units 237 209 20 THERMO FISHER SCIENTIFIC INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited) Cash, cash equivalents and restricted cash is included in the accompanying balance sheet as follows: October 2, December 31, (In millions) 2021 2020 Cash and Cash Equivalents $ 12,027 $ 10,325 Restricted Cash Included in Other Current Assets 20 10 Restricted Cash Included in Other Assets 1 1 Cash, Cash Equivalents and Restricted Cash $ 12,048 $ 10,336 Amounts included in restricted cash represent funds held as collateral for bank guarantees and incoming cash in China awaiting government administrative clearance. Note 12. Restructuring and Other Costs In the first nine months of 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 Revenues Selling, General and Administrative Expenses Restructuring and Other Costs Total Life Sciences Solutions $ — $ 23 $ ( 3 ) $ 20 Analytical Instruments — 1 2 3 Specialty Diagnostics — — 14 14 Laboratory Products and Services — 26 ( 3 ) 23 Corporate — 9 8 17 $ — $ 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 Revenues Selling, General and Administrative Expenses Restructuring and Other Costs Total Life Sciences Solutions $ 8 $ ( 24 ) $ 125 $ 109 Analytical Instruments — 1 5 6 Specialty Diagnostics — ( 2 ) 17 15 Laboratory Products and Services — 49 ( 5 ) 44 Corporate — 9 9 18 $ 8 $ 33 $ 151 $ 192 The principal components of net restructuring and other costs (income) by segment are as follows: Life Sciences Solutions 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 21 THERMO FISHER SCIENTIFIC INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited) 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. Corporate 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. Other amounts reported as restructuring and other costs in the accompanying statement of income have been summarized in the notes to the table. Accrued restructuring costs are included in other accrued expenses in the accompanying balance sheet. (In millions) Total (a) Balance at December 31, 2020 21 Net restructuring charges incurred in 2021 (b) 23 Payments ( 31 ) Currency translation ( 1 ) 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 $ 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 . 22 THERMO FISHER SCIENTIFIC INC.