THERMO FISHER SCIENTIFIC INC. 10-Q

Item 1. Financial Statements CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) September 30, December 31, (In millions except share and per share amounts) 2023 2022 Assets Current assets: Cash and cash equivalents $ 6,151 $ 8,524 Accounts receivable, less allowances of $ 184 and $ 189 8,370 8,115 Inventories 5,404 5,634 Contract assets, net 1,465 1,312 Other current assets 1,702 1,644 Total current assets 23,092 25,229 Property, plant and equipment, net 9,167 9,280 Acquisition-related intangible assets, net 17,091 17,442 Other assets 4,124 4,007 Goodwill 43,583 41,196 Total assets $ 97,057 $ 97,154 Liabilities, redeemable noncontrolling interest and equity Current liabilities: Short-term obligations and current maturities of long-term obligations $ 4,795 $ 5,579 Accounts payable 2,508 3,381 Accrued payroll and employee benefits 1,460 2,095 Contract liabilities 2,547 2,601 Other accrued expenses 2,848 3,354 Total current liabilities 14,158 17,010 Deferred income taxes 2,620 2,849 Other long-term liabilities 4,326 4,238 Long-term obligations 30,489 28,909 Redeemable noncontrolling interest 118 116 Equity: Thermo Fisher Scientific Inc. shareholders’ equity: Preferred stock, $ 100 par value, 50,000 shares authorized; none issued — — Common stock, $ 1 par value, 1,200,000,000 shares authorized; 441,889,500 and 440,668,112 shares issued 442 441 Capital in excess of par value 17,165 16,743 Retained earnings 45,869 41,910 Treasury stock at cost, 55,517,179 and 50,157,275 shares ( 15,121 ) ( 12,017 ) Accumulated other comprehensive income/(loss) ( 3,027 ) ( 3,099 ) Total Thermo Fisher Scientific Inc. shareholders’ equity 45,328 43,978 Noncontrolling interests 18 54 Total equity 45,346 44,032 Total liabilities, redeemable noncontrolling interest and equity $ 97,057 $ 97,154 The accompanying notes are an integral part of these condensed consolidated financial statements. 3 THERMO FISHER SCIENTIFIC INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) Three months ended Nine months ended September 30, October 1, September 30, October 1, (In millions except per share amounts) 2023 2022 2023 2022 Revenues Product revenues $ 6,157 $ 6,583 $ 18,832 $ 21,603 Service revenues 4,417 4,094 13,139 11,862 Total revenues 10,574 10,677 31,971 33,465 Costs and operating expenses: Cost of product revenues 3,214 3,494 9,829 10,565 Cost of service revenues 3,044 2,881 9,435 8,535 Selling, general and administrative expenses 2,049 2,208 6,313 6,694 Research and development expenses 319 351 1,010 1,080 Restructuring and other costs 84 33 379 59 Total costs and operating expenses 8,710 8,967 26,966 26,933 Operating income 1,864 1,710 5,005 6,532 Interest income 246 68 570 122 Interest expense ( 359 ) ( 173 ) ( 985 ) ( 457 ) Other income/(expense) 14 ( 4 ) ( 32 ) ( 139 ) Income before income taxes 1,765 1,601 4,558 6,058 Provision for income taxes ( 53 ) ( 31 ) ( 151 ) ( 530 ) Equity in earnings/(losses) of unconsolidated entities ( 17 ) ( 72 ) ( 58 ) ( 142 ) Net income 1,695 1,498 4,349 5,386 Less: net income/(losses) attributable to noncontrolling interests and redeemable noncontrolling interest ( 20 ) 3 ( 16 ) 12 Net income attributable to Thermo Fisher Scientific Inc. $ 1,715 $ 1,495 $ 4,365 $ 5,374 Earnings per share attributable to Thermo Fisher Scientific Inc. Basic $ 4.44 $ 3.82 $ 11.31 $ 13.72 Diluted $ 4.42 $ 3.79 $ 11.25 $ 13.62 Weighted average shares Basic 386 392 386 392 Diluted 388 395 388 395 The accompanying notes are an integral part of these condensed consolidated financial statements. 4 THERMO FISHER SCIENTIFIC INC. CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) Three months ended Nine months ended September 30, October 1, September 30, October 1, (In millions) 2023 2022 2023 2022 Comprehensive income Net income $ 1,695 $ 1,498 $ 4,349 $ 5,386 Other comprehensive income/(loss): Currency translation adjustment: Currency translation adjustment (net of tax provision (benefit) of $ 71 , $ 157 , $ 35 and $ 419 ) ( 112 ) ( 216 ) 57 ( 632 ) Unrealized gains and losses on hedging instruments: Reclassification adjustment for losses included in net income (net of tax (provision) benefit of $ 0 , $ 0 , $ 1 and $ 1 ) 1 1 5 2 Pension and other postretirement benefit liability adjustments: Pension and other postretirement benefit liability adjustments arising during the period (net of tax (provision) benefit of $( 1 ), $( 3 ), $( 1 ) and $( 6 )) 2 4 2 13 Amortization of net loss included in net periodic pension cost (net of tax (provision) benefit of $( 1 ), $ 0 , $( 1 ) and $ 2 ) — 4 ( 2 ) 8 Total other comprehensive income/(loss) ( 109 ) ( 207 ) 62 ( 609 ) Comprehensive income 1,586 1,291 4,411 4,777 Less: comprehensive income/(loss) attributable to noncontrolling interests and redeemable noncontrolling interest ( 26 ) — ( 26 ) 2 Comprehensive income attributable to Thermo Fisher Scientific Inc. $ 1,612 $ 1,291 $ 4,437 $ 4,775 The accompanying notes are an integral part of these condensed consolidated financial statements. 5 THERMO FISHER SCIENTIFIC INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Nine months ended September 30, October 1, (In millions) 2023 2022 Operating activities Net income $ 4,349 $ 5,386 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation of property, plant and equipment 792 730 Amortization of acquisition-related intangible assets 1,775 1,803 Change in deferred income taxes ( 631 ) ( 862 ) Loss on early extinguishment of debt — 26 Stock-based compensation 217 232 Other non-cash expenses, net 441 443 Changes in assets and liabilities, excluding the effects of acquisitions ( 2,260 ) ( 2,091 ) Net cash provided by operating activities 4,683 5,667 Investing activities Acquisitions, net of cash acquired ( 3,660 ) ( 39 ) Purchase of property, plant and equipment ( 1,074 ) ( 1,693 ) Proceeds from sale of property, plant and equipment 76 18 Other investing activities, net ( 108 ) 80 Net cash used in investing activities ( 4,766 ) ( 1,634 ) Financing activities Net proceeds from issuance of debt 3,466 — Repayment of debt ( 2,000 ) ( 375 ) Proceeds from issuance of commercial paper 1,620 1,231 Repayments of commercial paper ( 1,935 ) ( 3,690 ) Purchases of company common stock ( 3,000 ) ( 2,000 ) Dividends paid ( 387 ) ( 338 ) Other financing activities, net 42 ( 29 ) Net cash used in financing activities ( 2,194 ) ( 5,201 ) Exchange rate effect on cash ( 92 ) ( 389 ) Decrease in cash, cash equivalents and restricted cash ( 2,369 ) ( 1,557 ) Cash, cash equivalents and restricted cash at beginning of period 8,537 4,491 Cash, cash equivalents and restricted cash at end of period $ 6,168 $ 2,934 The accompanying notes are an integral part of these condensed consolidated financial statements. 6 THERMO FISHER SCIENTIFIC INC. CONDENSED CONSOLIDATED STATEMENT OF REDEEMABLE NONCONTROLLING INTEREST AND EQUITY (Unaudited) Redeemable Noncontrolling Interest Common Stock Capital in Excess of Par Value Retained Earnings Treasury Stock Accumulated Other Comprehensive Items Total Thermo Fisher Scientific Inc. Shareholders’ Equity Noncontrolling Interests Total Equity (In millions) Shares Amount Shares Amount Three months ended September 30, 2023 Balance at July 1, 2023 $ 113 441 $ 441 $ 17,030 $ 44,289 55 $ ( 15,084 ) $ ( 2,924 ) $ 43,752 $ 50 $ 43,802 Issuance of shares under employees' and directors' stock plans — 1 1 68 — 1 ( 37 ) — 32 — 32 Stock-based compensation — — — 67 — — — — 67 — 67 Dividends declared ($ 0.35 per share) — — — — ( 135 ) — — — ( 135 ) — ( 135 ) Net income/(loss) 6 — — — 1,715 — — — 1,715 ( 26 ) 1,689 Other comprehensive items ( 1 ) — — — — — — ( 103 ) ( 103 ) ( 5 ) ( 108 ) Contributions from (distributions to) noncontrolling interests — — — — — — — — — ( 1 ) ( 1 ) Balance at September 30, 2023 $ 118 442 $ 442 $ 17,165 $ 45,869 56 $ ( 15,121 ) $ ( 3,027 ) $ 45,328 $ 18 $ 45,346 Three months ended October 1, 2022 Balance at July 2, 2022 $ 117 440 $ 440 $ 16,467 $ 39,074 48 $ ( 10,964 ) $ ( 2,724 ) $ 42,293 $ 61 $ 42,354 Issuance of shares under employees' and directors' stock plans — — — 52 — — ( 47 ) — 5 — 5 Stock-based compensation — — — 77 — — — — 77 — 77 Dividends declared ($ 0.30 per share) — — — — ( 117 ) — — — ( 117 ) — ( 117 ) Net income/(loss) 5 — — — 1,495 — — — 1,495 ( 2 ) 1,493 Other comprehensive items ( 3 ) — — — — — — ( 204 ) ( 204 ) — ( 204 ) Balance at October 1, 2022 $ 119 440 $ 440 $ 16,596 $ 40,452 48 $ ( 11,011 ) $ ( 2,928 ) $ 43,549 $ 59 $ 43,608 The accompanying notes are an integral part of these condensed consolidated financial statements. 7 THERMO FISHER SCIENTIFIC INC. CONDENSED CONSOLIDATED STATEMENT OF REDEEMABLE NONCONTROLLING INTEREST AND EQUITY (Continued) (Unaudited) Redeemable Noncontrolling Interest Common Stock Capital in Excess of Par Value Retained Earnings Treasury Stock Accumulated Other Comprehensive Items Total Thermo Fisher Scientific Inc. Shareholders’ Equity Noncontrolling Interests Total Equity (In millions) Shares Amount Shares Amount Nine months ended September 30, 2023 Balance at December 31, 2022 $ 116 441 $ 441 $ 16,743 $ 41,910 50 $ ( 12,017 ) $ ( 3,099 ) $ 43,978 $ 54 $ 44,032 Issuance of shares under employees' and directors' stock plans — 1 1 205 — 1 ( 75 ) — 131 — 131 Stock-based compensation — — — 217 — — — — 217 — 217 Purchases of company common stock — — — — — 5 ( 3,000 ) — ( 3,000 ) — ( 3,000 ) Dividends declared ($ 1.05 per share) — — — — ( 406 ) — — — ( 406 ) — ( 406 ) Net income/(loss) 14 — — — 4,365 — — — 4,365 ( 30 ) 4,335 Other comprehensive income/(loss) ( 5 ) — — — — — — 72 72 ( 5 ) 67 Contributions from (distributions to) noncontrolling interests ( 7 ) — — — — — — — — ( 1 ) ( 1 ) Excise tax from stock repurchases — — — — — — ( 29 ) — ( 29 ) — ( 29 ) Balance at September 30, 2023 $ 118 442 $ 442 $ 17,165 $ 45,869 56 $ ( 15,121 ) $ ( 3,027 ) $ 45,328 $ 18 $ 45,346 Nine months ended October 1, 2022 Balance at December 31, 2021 $ 122 439 $ 439 $ 16,174 $ 35,431 45 $ ( 8,922 ) $ ( 2,329 ) $ 40,793 $ 62 $ 40,855 Issuance of shares under employees' and directors' stock plans — 1 1 190 — — ( 89 ) — 102 — 102 Stock-based compensation — — — 232 — — — — 232 — 232 Purchases of company common stock — — — — — 3 ( 2,000 ) — ( 2,000 ) — ( 2,000 ) Dividends declared ($ 0.90 per share) — — — — ( 353 ) — — — ( 353 ) — ( 353 ) Net income/(loss) 14 — — — 5,374 — — — 5,374 ( 2 ) 5,372 Other comprehensive income/(loss) ( 10 ) — — — — — — ( 599 ) ( 599 ) — ( 599 ) Contributions from (distributions to) noncontrolling interests ( 7 ) — — — — — — — — ( 1 ) ( 1 ) Balance at October 1, 2022 $ 119 440 $ 440 $ 16,596 $ 40,452 48 $ ( 11,011 ) $ ( 2,928 ) $ 43,549 $ 59 $ 43,608 The accompanying notes are an integral part of these condensed consolidated financial statements. 8 THERMO FISHER SCIENTIFIC INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note 1. Nature of Operations and Summary of Significant Accounting Policies Nature of Operations Thermo Fisher Scientific Inc. (the company or Thermo Fisher) enables customers to make the world healthier, cleaner and safer by helping them accelerate life sciences research, solve complex analytical challenges, increase laboratory productivity, and improve patient health through diagnostics and the development and manufacture of life-changing therapies. Markets served include pharmaceutical and biotech, academic and government, industrial and applied, as well as healthcare and diagnostics. Interim Financial Statements The interim condensed consolidated financial statements presented herein have been prepared by the company, are unaudited and, in the opinion of management, reflect all adjustments of a normal recurring nature necessary for a fair statement of the financial position at September 30, 2023, the results of operations for the three- and nine-month periods ended September 30, 2023 and October 1, 2022, and the cash flows for the nine-month periods ended September 30, 2023 and October 1, 2022. Interim results are not necessarily indicative of results for a full year. The condensed consolidated balance sheet presented as of December 31, 2022 has been derived from the audited consolidated financial statements as of that date. The condensed consolidated financial statements and notes are presented as permitted by Form 10-Q and do not contain all information that is included in the annual financial statements and notes thereto of the company. The condensed consolidated financial statements and notes included in this report should be read in conjunction with the 2022 financial statements and notes included in the company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (SEC). Certain reclassifications of prior year amounts have been made to conform to the current year presentation. Note 1 to the consolidated financial statements for 2022 describes the significant accounting estimates and policies used in preparation of the consolidated financial statements. There have been no material changes in the company’s significant accounting policies during the nine months ended September 30, 2023. Inventories The components of inventories are as follows: (In millions) September 30, 2023 December 31, 2022 Raw materials $ 2,223 $ 2,405 Work in process 743 660 Finished goods 2,438 2,569 Inventories $ 5,404 $ 5,634 Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The company’s estimates include, among others, asset reserve requirements as well as the amounts of future cash flows associated with certain assets and businesses that are used in assessing the risk of impairment. Actual results could differ from those estimates. Recent Accounting Pronouncements In September 2022, the FASB issued new guidance to require entities to disclose information about supplier finance programs. Among other things, the new guidance requires expanded disclosure about key program terms, payment terms, and amounts outstanding for obligations under these programs for each period presented. The company adopted some aspects of this guidance in 2023 using a retrospective method and will adopt other aspects in 2024 using a prospective method. The adoption of this guidance did not have, and is not expected to have, a material impact on the company’s disclosures; however, the impact in future periods will be dependent on the extent of arrangements of this nature entered into by the company. In November 2021, the FASB issued new guidance to require entities to disclose information about certain types of government assistance they receive, including cash grants and tax credits. Among other things, the new guidance requires expanded disclosure regarding the qualitative and quantitative characteristics of the nature, amount, timing, and significant terms and conditions of transactions with a government arising from a grant or other forms of assistance accounted for under a contribution model. The company adopted this guidance in the fourth quarter of 2022 using a prospective method. The adoption of this guidance did not have a material impact on the company’s disclosures. 9 THERMO FISHER SCIENTIFIC INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note 2. Acquisitions The company’s acquisitions have historically been made at prices above the determined fair value of the acquired identifiable net assets, resulting in goodwill, primarily due to expectations of the synergies that will be realized by combining the businesses and the benefits that will be gained from the assembled workforces. These synergies include the elimination of redundant facilities, functions and staffing; use of the company’s existing commercial infrastructure to expand sales of the acquired businesses’ products and services; and use of the commercial infrastructure of the acquired businesses to cost-effectively expand sales of company products and services. Acquisitions have been accounted for using the acquisition method of accounting, and the acquired companies’ results have been included in the accompanying financial statements from their respective dates of acquisition. 2023 On January 3, 2023, the company acquired, within the Specialty Diagnostics segment, The Binding Site Group, a U.K.-based provider of specialty diagnostic assays and instruments to improve the diagnosis and management of blood cancers and immune system disorders. The acquisition expands the segment’s portfolio with the addition of pioneering innovation in diagnostics and monitoring for multiple myeloma. The goodwill recorded as a result of this business combination is not tax deductible. On August 14, 2023, the company acquired, within the Laboratory Products and Biopharma Services segment, CorEvitas, LLC, a U.S.-based provider of regulatory-grade, real-world evidence for approved medical treatments and therapies. The acquisition expands the segment’s portfolio with the addition of highly complementary real-world evidence solutions to enhance decision-making as well as the time and cost of drug development. The goodwill recorded as a result of this business combination is not expected to be tax deductible. The components of the purchase price and net assets acquired are as follows: (In millions) The Binding Site CorEvitas Purchase price Cash paid $ 2,412 $ 730 Debt settled 307 184 Cash acquired ( 20 ) ( 4 ) $ 2,699 $ 910 Net assets acquired Definite-lived intangible assets: Customer relationships $ 868 $ 260 Product technology 172 47 Tradenames 42 — Backlog — 46 Goodwill 1,756 626 Net tangible assets 140 ( 1 ) Deferred tax assets (liabilities) ( 279 ) ( 68 ) $ 2,699 $ 910 In addition, in 2023, the company acquired, within the Analytical Instruments segment, a U.S.-based developer of Raman-based spectroscopy solutions for in-line measurement. The weighted-average amortization period for definite-lived intangible assets acquired in 2023 are 18 years for customer relationships, 14 years for product technology, 15 years for tradenames, and 13 years for backlog. The weighted average amortization period for all definite-lived intangible assets acquired in 2023 is 17 years. Proposed Acquisition On October 17, 2023, the company entered into a purchase agreement to acquire all of the issued and outstanding shares of Olink Holding AB (publ) at a price of $ 26.00 per share, or approximately $ 3.1 billion. Olink is a leading provider of next-generation proteomics solutions that will expand the company’s capabilities in this field. The company has commenced a tender offer to acquire all of the American Depositary Shares and common shares of Olink. The transaction is expected to close by mid-year 2024, subject to the satisfaction of customary closing conditions including receipt of applicable regulatory approvals, and completion of the tender offer. Upon completion, Olink will become part of the Life Sciences Solutions segment. The company intends to finance the purchase price with cash on hand and the net proceeds from issuances of debt. 10 THERMO FISHER SCIENTIFIC INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note 3. Revenues and Contract-related Balances Disaggregated Revenues Revenues by type are as follows: Three months ended Nine months ended (In millions) September 30, 2023 October 1, 2022 September 30, 2023 October 1, 2022 Revenues Consumables $ 4,289 $ 4,651 $ 13,228 $ 15,754 Instruments 1,868 1,932 5,604 5,849 Services 4,417 4,094 13,139 11,862 Consolidated revenues $ 10,574 $ 10,677 $ 31,971 $ 33,465 Revenues by geographic region based on customer location are as follows: Three months ended Nine months ended (In millions) September 30, 2023 October 1, 2022 September 30, 2023 October 1, 2022 Revenues North America $ 5,668 $ 5,962 $ 17,160 $ 18,317 Europe 2,643 2,406 7,898 8,007 Asia-Pacific 1,913 1,971 5,801 6,077 Other regions 350 338 1,112 1,064 Consolidated revenues $ 10,574 $ 10,677 $ 31,971 $ 33,465 Each reportable segment earns revenues from consumables, instruments and services in North America, Europe, Asia-Pacific and other regions. See Note 4 for revenues by reportable segment and other geographic data. Remaining Performance Obligations The aggregate amount of the transaction price allocated to the remaining performance obligations for all open customer contracts as of September 30, 2023 was $ 26.81 billion. The company will recognize revenues for these performance obligations as they are satisfied, approximately 53 % of which is expected to occur within the next twelve months . Amounts expected to occur thereafter generally relate to contract manufacturing, clinical research and extended warranty service agreements, which typically have durations of three to five years . Contract-related Balances Noncurrent contract assets and noncurrent contract liabilities are included within other assets and other long-term liabilities in the accompanying balance sheet, respectively. Contract asset and liability balances are as follows: (In millions) September 30, 2023 December 31, 2022 Current contract assets, net $ 1,465 $ 1,312 Noncurrent contract assets, net 5 7 Current contract liabilities 2,547 2,601 Noncurrent contract liabilities 1,348 1,179 In the three and nine months ended September 30, 2023, the company recognized revenues of $ 0.35 billion and $ 2.32 billion, respectively, that were included in the contract liabilities balance at December 31, 2022. In the three and nine months ended October 1, 2022, the company recognized revenues of $ 0.34 billion and $ 2.33 billion, respectively, that were included in the contract liabilities balance at December 31, 2021. Noncurrent contract liabilities increased during 2023 primarily due to rights to advanced payments from a customer. 11 THERMO FISHER SCIENTIFIC INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note 4. Business Segment and Geographical Information Business Segment Information Three months ended Nine months ended September 30, October 1, September 30, October 1, (In millions) 2023 2022 2023 2022 Revenues Life Sciences Solutions $ 2,433 $ 2,962 $ 7,508 $ 10,485 Analytical Instruments 1,754 1,621 5,226 4,746 Specialty Diagnostics 1,083 1,065 3,300 3,648 Laboratory Products and Biopharma Services 5,728 5,585 17,322 16,564 Eliminations ( 424 ) ( 556 ) ( 1,385 ) ( 1,978 ) Consolidated revenues 10,574 10,677 31,971 33,465 Segment Income Life Sciences Solutions 872 1,039 2,525 4,542 Analytical Instruments 468 386 1,321 1,031 Specialty Diagnostics 283 220 860 816 Laboratory Products and Biopharma Services 937 725 2,554 2,036 Subtotal reportable segments 2,560 2,370 7,260 8,425 Cost of revenues adjustments ( 14 ) ( 22 ) ( 73 ) ( 41 ) Selling, general and administrative expenses adjustments ( 14 ) ( 11 ) ( 28 ) 10 Restructuring and other costs ( 84 ) ( 33 ) ( 379 ) ( 59 ) Amortization of acquisition-related intangible assets ( 584 ) ( 594 ) ( 1,775 ) ( 1,803 ) Consolidated operating income 1,864 1,710 5,005 6,532 Interest income 246 68 570 122 Interest expense ( 359 ) ( 173 ) ( 985 ) ( 457 ) Other income/(expense) 14 ( 4 ) ( 32 ) ( 139 ) Consolidated income before taxes $ 1,765 $ 1,601 $ 4,558 $ 6,058 Cost of revenues adjustments included in the above table consist of charges for the sale of inventories revalued at the date of acquisition, inventory write-downs associated with large-scale abandonment of product lines, and accelerated depreciation on manufacturing assets to be abandoned due to facility consolidations. Selling, general and administrative expenses adjustments included in the above table consist of third-party transaction/integration costs related to recent acquisitions, charges/credits for changes in estimates of contingent acquisition consideration, and charges associated with product liability litigation. Geographical Information Revenues by country based on customer location are as follows: Three months ended Nine months ended (In millions) September 30, 2023 October 1, 2022 September 30, 2023 October 1, 2022 Revenues United States $ 5,490 $ 5,787 $ 16,608 $ 17,730 Other 5,084 4,890 15,363 15,735 Consolidated revenues $ 10,574 $ 10,677 $ 31,971 $ 33,465 12 THERMO FISHER SCIENTIFIC INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note 5. Income Taxes The provision for income taxes in the accompanying statements of income differs from the provision calculated by applying the statutory federal income tax rate to income before provision for income taxes due to the following: Nine months ended (In millions) September 30, 2023 October 1, 2022 Statutory federal income tax rate 21 % 21 % Provision for income taxes at statutory rate $ 957 $ 1,272 Increases (decreases) resulting from: Foreign rate differential ( 176 ) ( 285 ) Income tax credits ( 217 ) ( 118 ) Global intangible low-taxed income 66 126 Foreign-derived intangible income ( 104 ) ( 102 ) Excess tax benefits from stock options and restricted stock units ( 60 ) ( 63 ) Provision for (reversal of) tax reserves, net 9 ( 543 ) Intra-entity transfers ( 144 ) ( 18 ) Foreign exchange loss on inter-company debt refinancing ( 112 ) — Provision for (reversal of) valuation allowances, net ( 44 ) 240 Withholding taxes 22 48 Tax return reassessments and settlements ( 63 ) ( 94 ) State income taxes, net of federal tax 45 133 Other, net ( 28 ) ( 66 ) Provision for income taxes $ 151 $ 530 During the third quarter of 2023, the company released a valuation allowance of $ 183 million in jurisdictions where the deferred tax assets are now expected to be realized. In the first nine months of 2023 the company also recorded a tax benefit of $ 91 million, net of related tax expenses, from a foreign exchange loss on an intercompany debt refinancing transaction, as well as a $ 144 million tax benefit resulting from a capital loss generated as part of an intra-entity transaction. During the third quarter of 2022, the company settled an IRS audit relating to the 2017 and 2018 tax years. The company recorded a $ 208 million net tax benefit primarily from this settlement and related impacts, which resulted in a decrease in the company’s unrecognized tax benefits of $ 658 million. The company recorded $ 49 million of charges for expired tax credits and other related components of the settlement. The company recorded a charge of $ 395 million to establish a valuation allowance against certain U.S. foreign tax credits which the company believes will more likely than not expire unutilized. The company also recorded $ 101 million of additional net unrecognized tax benefit liabilities related to other tax audits. The company has operations and a taxable presence in approximately 70 countries outside the U.S. The company's effective income tax rate differs from the U.S. federal statutory rate each year due to certain operations that are subject to tax incentives, state and local taxes, and foreign taxes that are different than the U.S. federal statutory rate. Unrecognized Tax Benefits As of September 30, 2023 the company had $ 0.55 billion of unrecognized tax benefits substantially all of which, if recognized, would reduce the effective tax rate. A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows: (In millions) 2023 Balance at beginning of year $ 572 Additions for tax positions of current year 4 Additions for tax positions of prior years 26 Reductions for tax positions of prior years ( 31 ) Closure of tax years ( 6 ) Settlements ( 20 ) Balance at end of period $ 545 13 THERMO FISHER SCIENTIFIC INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note 6. Earnings per Share Three months ended Nine months ended September 30, October 1, September 30, October 1, (In millions except per share amounts) 2023 2022 2023 2022 Net income attributable to Thermo Fisher Scientific Inc. $ 1,715 $ 1,495 $ 4,365 $ 5,374 Basic weighted average shares 386 392 386 392 Plus effect of: stock options and restricted stock units 2 3 2 3 Diluted weighted average shares 388 395 388 395 Basic earnings per share $ 4.44 $ 3.82 $ 11.31 $ 13.72 Diluted earnings per share $ 4.42 $ 3.79 $ 11.25 $ 13.62 Antidilutive stock options excluded from diluted weighted average shares 2 2 2 2 Note 7. Debt and Other Financing Arrangements Effective interest rate at September 30, September 30, December 31, (Dollars in millions) 2023 2023 2022 Commercial Paper $ — $ 310 Floating Rate (SOFR + 0.35 %) 1.5 -Year Senior Notes, Due 4/18/2023 — 1,000 Floating Rate (SOFR + 0.39 %) 2 -Year Senior Notes, Due 10/18/2023 — 500 0.797 % 2 -Year Senior Notes, Due 10/18/2023 1.03 % 1,350 1,350 Floating Rate (EURIBOR + 0.20 %) 2 -Year Senior Notes, Due 11/18/2023 (euro-denominated) 3.79 % 1,797 1,819 0.000 % 2 -Year Senior Notes, Due 11/18/2023 (euro-denominated) 0.06 % 582 589 0.75 % 8 -Year Senior Notes, Due 9/12/2024 (euro-denominated) 0.93 % 1,057 1,071 Floating Rate (SOFR + 0.53 %) 3 -Year Senior Notes, Due 10/18/2024 — 500 1.215 % 3 -Year Senior Notes, Due 10/18/2024 1.42 % 2,500 2,500 0.125 % 5.5 -Year Senior Notes, Due 3/1/2025 (euro-denominated) 0.40 % 846 857 2.00 % 10 -Year Senior Notes, Due 4/15/2025 (euro-denominated) 2.09 % 677 686 0.853 % 3 -Year Senior Notes, Due 10/20/2025 (yen-denominated) 1.05 % 149 170 0.000 % 4 -Year Senior Notes, Due 11/18/2025 (euro-denominated) 0.15 % 582 589 3.20 % 3 -Year Senior Notes, Due 1/21/2026 (euro-denominated) 3.38 % 529 535 1.40 % 8.5 -Year Senior Notes, Due 1/23/2026 (euro-denominated) 1.52 % 740 749 4.953 % 3 -Year Senior Notes, Due 8/10/2026 5.19 % 600 — 1.45 % 10 -Year Senior Notes, Due 3/16/2027 (euro-denominated) 1.65 % 529 535 1.75 % 7 -Year Senior Notes, Due 4/15/2027 (euro-denominated) 1.96 % 634 642 1.054 % 5 -Year Senior Notes, Due 10/20/2027 (yen-denominated) 1.18 % 194 221 4.80 % 5 -Year Senior Notes, Due 11/21/2027 5.00 % 600 600 0.50 % 8.5 -Year Senior Notes, Due 3/1/2028 (euro-denominated) 0.76 % 846 857 0.77 % 5 -Year Senior Notes, Due 9/6/2028 (yen-denominated) 0.89 % 194 — 1.375 % 12 -Year Senior Notes, Due 9/12/2028 (euro-denominated) 1.46 % 634 642 1.75 % 7 -Year Senior Notes, Due 10/15/2028 1.89 % 700 700 1.95 % 12 -Year Senior Notes, Due 7/24/2029 (euro-denominated) 2.07 % 740 749 2.60 % 10 -Year Senior Notes, Due 10/1/2029 2.74 % 900 900 1.279 % 7 -Year Senior Notes, Due 10/19/2029 (yen-denominated) 1.44 % 31 36 4.977 % 7 -Year Senior Notes, Due 8/10/2030 5.13 % 750 — 0.80 % 9 -Year Senior Notes, Due 10/18/2030 (euro-denominated) 0.88 % 1,850 1,873 14 THERMO FISHER SCIENTIFIC INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Effective interest rate at September 30, September 30, December 31, (Dollars in millions) 2023 2023 2022 0.875 % 12 -Year Senior Notes, Due 10/1/2031 (euro-denominated) 1.13 % 952 963 2.00 % 10 -Year Senior Notes, Due 10/15/2031 2.23 % 1,200 1,200 2.375 % 12 -Year Senior Notes, Due 4/15/2032 (euro-denominated) 2.54 % 634 642 1.49 % 10 -Year Senior Notes, Due 10/20/2032 (yen-denominated) 1.60 % 42 48 4.95 % 10 -Year Senior Notes, Due 11/21/2032 5.09 % 600 600 5.086 % 10 -Year Senior Notes, Due 8/10/2033 5.20 % 1,000 — 1.125 % 12 -Year Senior Notes, Due 10/18/2033 (euro-denominated) 1.20 % 1,586 1,606 3.65 % 12 -Year Senior Notes, Due 11/21/2034 (euro-denominated) 3.76 % 793 803 1.50 % 12 -Year Senior Notes, due 9/6/2035 (yen-denominated) 1.57 % 144 — 2.875 % 20 -Year Senior Notes, Due 7/24/2037 (euro-denominated) 2.94 % 740 749 1.50 % 20 -Year Senior Notes, Due 10/1/2039 (euro-denominated) 1.73 % 952 963 2.80 % 20 -Year Senior Notes, Due 10/15/2041 2.90 % 1,200 1,200 1.625 % 20 -Year Senior Notes, Due 10/18/2041 (euro-denominated) 1.77 % 1,322 1,339 2.069 % 20 -Year Senior Notes, Due 10/20/2042 (yen-denominated) 2.13 % 98 111 5.404 % 20 -Year Senior Notes, due 8/10/2043 5.50 % 600 — 2.02 % 20 -Year Senior Notes, due 9/6/2043 (yen-denominated) 2.06 % 194 — 5.30 % 30 -Year Senior Notes, Due 2/1/2044 5.37 % 400 400 4.10 % 30 -Year Senior Notes, Due 8/15/2047 4.23 % 750 750 1.875 % 30 -Year Senior Notes, Due 10/1/2049 (euro-denominated) 1.98 % 1,057 1,071 2.00 % 30 -Year Senior Notes, Due 10/18/2051 (euro-denominated) 2.06 % 793 803 2.382 % 30 -Year Senior Notes, Due 10/18/2052 (yen-denominated) 2.43 % 223 254 Other 76 79 Total borrowings at par value 35,367 34,561 Unamortized discount ( 108 ) ( 112 ) Unamortized debt issuance costs ( 175 ) ( 171 ) Total borrowings at carrying value 35,084 34,278 Finance lease liabilities 200 210 Less: Short-term obligations and current maturities 4,795 5,579 Long-term obligations $ 30,489 $ 28,909 SOFR - Secured Overnight Financing Rate EURIBOR - Euro Interbank Offered Rate The effective interest rates for the fixed-rate debt include the stated interest on the notes, the accretion of any discounts/premiums and the amortization of any debt issuance costs. See Note 10 for fair value information pertaining to the company’s long-term borrowings. Credit Facilities The company has a revolving credit facility (the Facility) with a bank group that provides for up to $ 5.00 billion of unsecured multi-currency revolving credit. The Facility expires on January 7, 2027. The revolving credit agreement calls for interest at either a Term SOFR, a EURIBOR-based rate (for funds drawn in euro) or a rate based on the prime lending rate of the agent bank, at the company’s option. The agreement contains affirmative, negative and financial covenants, and events of default customary for facilities of this type. The covenants in the Facility include a Consolidated Net Interest Coverage Ratio (Consolidated EBITDA to Consolidated Net Interest Expense), as such terms are defined in the Facility. Specifically, the company has agreed that, so long as any lender has any commitment under the Facility, any letter of credit is outstanding under the Facility, or any loan or other obligation is outstanding under the Facility, it will maintain a minimum Consolidated Net Interest Coverage Ratio of 3.5 :1.0 as of the last day of any fiscal quarter. As of September 30, 2023, no borrowings were outstanding under the Facility, although available capacity was reduced by immaterial outstanding letters of credit. 15 THERMO FISHER SCIENTIFIC INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Commercial Paper Programs The company has commercial paper programs pursuant to which it may issue and sell unsecured, short-term promissory notes (CP Notes). Under the U.S. program, a) maturities may not exceed 397 days from the date of issue and b) the CP Notes are issued on a private placement basis under customary terms in the commercial paper market and are not redeemable prior to maturity nor subject to voluntary prepayment. Under the euro program, maturities may not exceed 183 days and may be denominated in euro, U.S. dollars, Japanese yen, British pounds sterling, Swiss franc, Canadian dollars or other currencies. Under both programs, the CP Notes are issued at a discount from par (or premium to par, in the case of negative interest rates), or, alternatively, are sold at par and bear varying interest rates on a fixed or floating basis. Senior Notes Interest is payable quarterly on the floating rate senior notes, annually on the euro-denominated fixed rate senior notes and semi-annually on all other senior notes. Each of the U.S. dollar and euro-denominated fixed rate senior notes and yen-denominated private placement notes may be redeemed at a redemption price of 100 % of the principal amount plus a specified make-whole premium and accrued interest, together with swap breakage costs payable to holders of yen-denominated private placement notes who have entered into cross-currency swap agreements. The company is subject to certain affirmative and negative covenants under the indentures and note purchase agreement governing the senior notes, the most restrictive of which limits the ability of the company to pledge certain property and assets as security under borrowing arrangements. The company was in compliance with all covenants at September 30, 2023. In the first quarter of 2022, the company redeemed all of its 3.650 % Senior Notes due 2025. In connection with the redemption, the company incurred $ 26 million of losses on the early extinguishment of debt included in other income/(expense) on the accompanying statements of income. Thermo Fisher Scientific (Finance I) B.V. (Thermo Fisher International), a wholly-owned finance subsidiary of the company, issued each of the Floating Rate Senior Notes due 2023, the 0.00 % Senior Notes due 2023, the 0.00 % Senior Notes due 2025, the 0.80 % Senior Notes due 2030, the 1.125 % Senior Notes due 2033, the 1.625 % Senior Notes due 2041, and the 2.00 % Senior Notes due 2051 included in the table above (collectively, the “Euronotes”) in registered public offerings. The company has fully and unconditionally guaranteed all of Thermo Fisher International’s obligations under the Euronotes and all of Thermo Fisher International’s other debt securities, and no other subsidiary of the company will guarantee these obligations. Thermo Fisher International is a “finance subsidiary” as defined in Rule 13-01(a)(4)(vi) of the Exchange Act, with no assets or operations other than those related to the issuance, administration and repayment of the Euronotes and other debt securities issued by Thermo Fisher International from time to time. The financial condition, results of operations and cash flows of Thermo Fisher International are consolidated in the financial statements of the company. Note 8. Commitments and Contingencies Environmental Matters The company is currently involved in various stages of investigation and remediation related to environmental matters. The company cannot predict all potential costs related to environmental remediation matters and the possible impact on future operations given the uncertainties regarding the extent of the required cleanup, the complexity and interpretation of applicable laws and regulations, the varying costs of alternative cleanup methods and the extent of the company’s responsibility. Expenses for environmental remediation matters related to the costs of installing, operating and maintaining groundwater-treatment systems and other remedial activities related to historical environmental contamination at the company’s domestic and international facilities were not material in any period presented. At September 30, 2023, there have been no material changes to the accruals for pending environmental-related matters disclosed in the company’s 2022 financial statements and notes included in the company’s Annual Report on Form 10-K. While management believes the accruals for environmental remediation are adequate based on current estimates of remediation costs, the company may be subject to additional remedial or compliance costs due to future events such as changes in existing laws and regulations, changes in agency direction or enforcement policies, developments in remediation technologies or changes in the conduct of the company’s operations, which could have a material adverse effect on the company’s financial position, results of operations and cash flows. Litigation and Related Contingencies The company is involved in various disputes, governmental and/or regulatory inspections, inquiries, investigations and proceedings, and litigation matters that arise from time to time in the ordinary course of business. The disputes and litigation matters include product liability, intellectual property, employment and commercial issues. Due to the inherent uncertainties associated with pending litigation or claims, the company cannot predict the outcome, nor, with respect to certain pending litigation or claims where no liability has been accrued, make a meaningful estimate of the reasonably possible loss or range of loss that could result from an unfavorable outcome. The company has no material accruals for pending litigation or claims for 16 THERMO FISHER SCIENTIFIC INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) which accrual amounts are not disclosed in the company’s 2022 financial statements and notes included in the company’s Annual Report on Form 10-K, nor are material losses deemed probable for such matters. It is reasonably possible, however, that an unfavorable outcome that exceeds the company’s current accrual estimate, if any, for one or more such matters could have a material adverse effect on the company’s results of operations, financial position and cash flows. Product Liability, Workers Compensation and Other Personal Injury Matters The company is involved in various proceedings and litigation that arise from time to time in connection with product liability, workers compensation and other personal injury matters. At September 30, 2023, there have been no material changes to the accruals for pending product liability, workers compensation, and other personal injury matters disclosed in the company’s 2022 financial statements and notes included in the company’s Annual Report on Form 10-K. Although the company believes that the amounts accrued and estimated insurance recoveries are probable and appropriate based on available information, including actuarial studies of loss estimates, the process of estimating losses and insurance recoveries involves a considerable degree of judgment by management and the ultimate amounts could vary, which could have a material adverse effect on the company’s results of operations, financial position, and cash flows. Insurance contracts do not relieve the company of its primary obligation with respect to any losses incurred. The collectability of amounts due from its insurers is subject to the solvency and willingness of the insurer to pay, as well as the legal sufficiency of the insurance claims. Management monitors the payment history as well as the financial condition and ratings of its insurers on an ongoing basis. Note 9. Comprehensive Income/(Loss) Comprehensive Income (Loss) Changes in each component of accumulated other comprehensive income/(loss), net of tax, are as follows: (In millions) Currency translation adjustment Unrealized losses on hedging instruments Pension and other postretirement benefit liability adjustment Total Balance at December 31, 2022 $ ( 2,880 ) $ ( 33 ) $ ( 186 ) $ ( 3,099 ) Other comprehensive income/(loss) before reclassifications 57 — 2 59 Amounts reclassified from accumulated other comprehensive income/(loss) 10 5 ( 2 ) 13 Net other comprehensive income/(loss) 67 5 — 72 Balance at September 30, 2023 $ ( 2,813 ) $ ( 28 ) $ ( 186 ) $ ( 3,027 ) 17 THERMO FISHER SCIENTIFIC INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note 10. Fair Value Measurements and Fair Value of Financial Instruments Fair Value Measurements The following tables present information about the company’s financial assets and liabilities measured at fair value on a recurring basis: September 30, Quoted prices in active markets Significant other observable inputs Significant unobservable inputs (In millions) 2023 (Level 1) (Level 2) (Level 3) Assets Cash equivalents $ 2,662 $ 2,662 $ — $ — Bank time deposits 6 6 — — Investments 19 19 — — Warrants 11 — 11 — Insurance contracts 193 — 193 — Derivative contracts 88 — 88 — Total assets $ 2,979 $ 2,687 $ 292 $ — Liabilities Derivative contracts $ 153 $ — $ 153 $ — Contingent consideration 81 — — 81 Total liabilities $ 234 $ — $ 153 $ 81 December 31, Quoted prices in active markets Significant other observable inputs Significant unobservable inputs (In millions) 2022 (Level 1) (Level 2) (Level 3) Assets Cash equivalents $ 5,804 $ 5,804 $ — $ — Investments 25 25 — — Warrants 12 — 12 — Insurance contracts 162 — 162 — Derivative contracts 79 — 79 — Total assets $ 6,082 $ 5,829 $ 253 $ — Liabilities Derivative contracts $ 101 $ — $ 101 $ — Contingent consideration 174 — — 174 Total liabilities $ 275 $ — $ 101 $ 174 The company uses the Black-Scholes model to value its warrants. The company determines the fair value of its insurance contracts by obtaining the cash surrender value of the contracts from the issuer. The fair value of derivative contracts is the estimated amount that the company would receive/pay upon liquidation of the contracts, taking into account the change in interest rates and currency exchange rates. The company initially measures the fair value of acquisition-related contingent consideration based on amounts expected to be transferred (probability-weighted) discounted to present value. Changes to the fair value of contingent consideration are recorded in selling, general and administrative expense. In the three and nine months ended September 30, 2023, the company recorded $ 11 million and $( 33 ) million, respectively, of net gains/(losses) on investments, which are included in other income/(expense) in the accompanying statements of income. In the three and nine months ended October 1, 2022, the company recorded $ 13 million and $ 136 million, respectively, of net losses on investments, which are included in other income/(expense) in the accompanying statements of income. The following table provides a rollforward of the fair value, as determined by level 3 inputs (such as likelihood of achieving production or revenue milestones, as well as changes in the fair values of the investments underlying a recapitalization investment portfolio), of the contingent consideration. 18 THERMO FISHER SCIENTIFIC INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Three months ended Nine months ended September 30, October 1, September 30, October 1, (In millions) 2023 2022 2023 2022 Contingent consideration Beginning balance $ 90 $ 216 $ 174 $ 317 Acquisitions (including assumed balances) — — 1 ( 18 ) Payments ( 5 ) ( 32 ) ( 63 ) ( 64 ) Changes in fair value included in earnings ( 4 ) ( 16 ) ( 31 ) ( 67 ) Ending balance $ 81 $ 168 $ 81 $ 168 Derivative Contracts The following table provides the aggregate notional value of outstanding derivative contracts. (In millions) September 30, 2023 December 31, 2022 Notional amount Cross-currency interest rate swaps - designated as net investment hedges $ 5,650 $ 2,100 Currency exchange contracts 1,607 2,434 While certain derivatives are subject to netting arrangements with counterparties, the company does not offset derivative assets and liabilities within the balance sheet. The following tables present the fair value of derivative instruments in the accompanying balance sheets and statements of income. Fair value – assets Fair value – liabilities September 30, December 31, September 30, December 31, (In millions) 2023 2022 2023 2022 Derivatives designated as hedging instruments Cross-currency interest rate swaps (a) $ 87 $ 77 $ 152 $ 85 Derivatives not designated as hedging instruments Currency exchange contracts (b) 1 2 1 16 Total derivatives $ 88 $ 79 $ 153 $ 101 (a) The fair value of the cross-currency interest rate swaps is included in the accompanying balance sheet under the caption other assets or other long-term liabilities. (b) The fair value of the currency exchange contracts is included in the accompanying balance sheet under the captions other current assets or other accrued expenses. Gain (loss) recognized Three months ended Nine months ended September 30, October 1, September 30, October 1, (In millions) 2023 2022 2023 2022 Derivatives designated as cash flow hedges Interest rate swaps Amount reclassified from accumulated other comprehensive items to interest expense $ ( 1 ) $ ( 1 ) $ ( 6 ) $ ( 3 ) Financial instruments designated as net investment hedges Foreign currency-denominated debt and other payables Included in currency translation adjustment within other comprehensive items 364 658 158 1,691 Cross-currency interest rate swaps Included in currency translation adjustment within other comprehensive items ( 56 ) 46 ( 6 ) 120 Included in interest expense 35 6 68 12 Derivatives not designated as hedging instruments Currency exchange contracts Included in cost of product revenues 2 3 ( 1 ) 15 Included in other income/(expense) ( 6 ) 20 ( 8 ) 32 19 THERMO FISHER SCIENTIFIC INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Gains and losses recognized on currency exchange contracts are included in the accompanying statements of income together with the corresponding, offsetting losses and gains on the underlying hedged transactions. The company uses foreign currency-denominated debt, certain foreign currency-denominated payables, and cross-currency interest rate swaps to partially hedge its net investments in foreign operations against adverse movements in exchange rates. A portion of the company’s euro-denominated senior notes, certain foreign currency-denominated payables, and its cross-currency interest rate swaps have been designated as, and are effective as, economic hedges of part of the net investment in a foreign operation. Accordingly, foreign currency transaction gains or losses due to spot rate fluctuations on the euro-denominated debt instruments and certain foreign currency-denominated payables, and contract fair value changes on the cross-currency interest rate swaps, excluding interest accruals, are included in currency translation adjustment within other comprehensive items and shareholders’ equity. See Note 1 to the consolidated financial statements for 2022 included in the company’s Annual Report on Form 10-K for additional information on the company’s risk management objectives and strategies. Fair Value of Other Financial Instruments The carrying value and fair value of the company’s debt instruments are as follows: September 30, 2023 December 31, 2022 Carrying Fair Carrying Fair (In millions) value value value value Senior notes $ 35,008 $ 30,700 $ 33,889 $ 29,901 Commercial paper — — 310 310 Other 76 76 79 79 $ 35,084 $ 30,776 $ 34,278 $ 30,290 The fair value of debt instruments, excluding private placement notes, was determined based on quoted market prices and on borrowing rates available to the company at the respective period ends, which represent level 2 measurements. The fair value of private placement notes was determined based on internally developed pricing models and unobservable inputs, which represent level 3 measurements. Note 11. Supplemental Cash Flow Information Nine months ended (In millions) September 30, 2023 October 1, 2022 Non-cash investing and financing activities Acquired but unpaid property, plant and equipment $ 207 $ 213 Declared but unpaid dividends 137 119 Issuance of stock upon vesting of restricted stock units 198 225 Excise tax from stock repurchases 29 — Cash, cash equivalents and restricted cash is included in the accompanying balance sheet as follows: (In millions) September 30, 2023 December 31, 2022 Cash and cash equivalents $ 6,151 $ 8,524 Restricted cash included in other current assets 10 12 Restricted cash included in other assets 7 1 Cash, cash equivalents and restricted cash $ 6,168 $ 8,537 Amounts included in restricted cash primarily represent funds held as collateral for bank guarantees and incoming cash in China awaiting government administrative clearance. 20 THERMO FISHER SCIENTIFIC INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note 12. Restructuring and Other Costs In the first nine months of 2023, restructuring and other costs primarily included continuing charges for headcount reductions and facility consolidations in an effort to streamline operations, impairment of long-lived assets, and, to a lesser extent, net charges for pre-acquisition litigation and other matters. In 2023, severance actions associated with facility consolidations and cost reduction measures affected approximately 4 % of the company’s workforce. As of November 3, 2023, the company has identified restructuring actions that will result in additional charges of approximately $ 65 million, primarily in 2023, and expects to identify additional actions in future periods which will be recorded when specified criteria are met, such as communication of benefit arrangements or when the costs have been incurred. Restructuring and other costs by segment are as follows: Three months ended Nine months ended (In millions) September 30, 2023 September 30, 2023 Life Sciences Solutions $ 20 $ 100 Analytical Instruments 8 31 Specialty Diagnostics ( 1 ) 9 Laboratory Products and Biopharma Services 52 228 Corporate 5 11 $ 84 $ 379 The following table summarizes the changes in the company’s accrued restructuring balance, which is included in other accrued expenses in the accompanying balance sheet. Other amounts reported as restructuring and other costs in the accompanying statements of income have been summarized in the notes to the table. (In millions) Total (a) Balance at December 31, 2022 $ 41 Net restructuring charges incurred in 2023 (b) (c) 175 Payments ( 142 ) Currency translation ( 1 ) Balance at September 30, 2023 $ 73 (a) The movements in the restructuring liability principally consist of severance and other costs associated with facility consolidations. (b) Excludes $ 165 million of net charges, principally $ 127 million of charges for impairment of long-lived assets in the Laboratory Products and Biopharma Services and Life Sciences Solutions segments, $ 26 million of contract termination costs associated with facility closures in the Laboratory Products and Biopharma Services segment, $ 18 million of net charges for pre-acquisition litigation and other matters. (c) Excludes $ 39 million of charges for impairment of a disposal group that was held for sale beginning in the third quarter of 2023. The loss attributable to Thermo Fisher Scientific Inc. was reduced by $ 19 million attributable to a noncontrolling interest. The company expects to pay accrued restructuring costs primarily through 2023. 21 THERMO FISHER SCIENTIFIC INC.