What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2025-02-20 compared with 2024-02-22 · 1025 added, 1065 removed, 733 unchanged (74% of the section changed)

6 unchanged sentences

Consolidated Statements of Cash Flows for the years ended December 31, 2024, 2023 and 2022

Consolidated Statement s of Redeemable Noncontrolling Interest and Equity for the years ended December 31 , 2023, 2022 and 2021

Consolidated Statements of Redeemable Noncontrolling Interest and Equity for the years ended December 31 , 2024, 2023 and 2022

Notes to Consolidated Financial Statements

Nature of Operations and Summary of Significant Accounting Policies

Revenues and Contract-related Balances

Business Segment and Geographical Information

Other Income/(Expense)

Stock-based Compensation Expense

Pension and Other Postretirement Benefit Plans

Earnings per Share

Supplemental Balance Sheet Information

Debt and Other Financing Arrangements

Fair Value Measurements

Commitments and Contingencies

Supplemental Income Statement Information

Comprehensive Income/(Loss) and Shareholders' Equity

Fair Value Measurements and Fair Value of Financial Instruments

Supplemental Cash Flow Information

Restructuring and Other Costs

Business Segment and Geographical Information

Pension and Other Postretirement Benefit Plans

Stock-based Compensation Expense

Report of Independent Registered Public Accounting Firm

34 unchanged sentences

tax authorities, as well as to tax agreements and treaties among these governments.

Determination of taxable income in any jurisdiction requires management to interpret the related tax laws and regulations and to use estimates and assumptions regarding significant future events, such as the amount, timing and character of deductions, permissible revenue recognition methods under the tax law and the sources and character of income and tax credits.

Determination of taxable income in any jurisdiction requires management to interpret the related tax laws and regulations and the use of estimates and assumptions regarding significant future events, such as the amount, timing and character of deductions, permissible revenue recognition methods under the tax law and the sources and character of income and tax credits.

Management assesses income tax positions and records tax benefits for all years subject to examination based upon management’s evaluation of the facts, circumstances and information available at the reporting date.

20 unchanged sentences

Cash and cash equivalents $ 4,009 $ 8,077

Short-term investments 1,561 3

Accounts receivable, less allowances of $ 173 and $ 193

68 unchanged sentences

7,037 6,298 7,835

Provision for income taxes

Benefit from/(provision for) income taxes

( 657 ) ( 284 ) ( 703 )

1 unchanged sentence

Net income 6,338 5,955 6,960

net (losses) income attributable to noncontrolling interests and redeemable noncontrolling interest ( 40 ) 10 3

net income (losses) attributable to noncontrolling interests and redeemable noncontrolling interest 3 ( 40 ) 10

Net income attributable to Thermo Fisher Scientific Inc.

19 unchanged sentences

Pension and other postretirement benefit liability adjustments arising during the period (net of tax provision (benefit) of $ 2 , $( 22 ) and $ 9 )

( 12 ) ( 69 ) 38

Amortization of net loss and prior service benefit included in net periodic pension cost (net of tax benefit of $ 1 , $ 1 and $ 3 )

4 unchanged sentences

comprehensive income/(loss) attributable to noncontrolling interests and redeemable noncontrolling interest

( 4 ) ( 48 ) 3

Comprehensive income attributable to Thermo Fisher Scientific Inc.

15 unchanged sentences

Stock-based compensation

Loss on early extinguishment of debt — 26 767

Other non-cash expenses

Other net non-cash expenses

Changes in assets and liabilities, excluding the effects of acquisitions:

11 unchanged sentences

Investing activities

Acquisitions, net of cash acquired

( 3,660 ) ( 39 ) ( 19,395 )

Purchase of property, plant and equipment

Purchases of property, plant and equipment

( 1,400 ) ( 1,479 ) ( 2,243 )

1 unchanged sentence

Proceeds from cross-currency interest rate swap interest settlements

Other investing activities, net

Acquisitions, net of cash acquired

( 3,132 ) ( 3,660 ) ( 39 )

Purchases of investments

( 3,396 ) ( 208 ) ( 52 )

Proceeds from sales and maturities of investments 1,770 15 116

Other investing activities, net

Net cash used in investing activities

14 unchanged sentences

Other financing activities, net

Net cash (used in) provided by financing activities

Net cash used in financing activities

( 6,792 ) ( 3,622 ) ( 2,810 )

23 unchanged sentences

— — — — ( 471 ) — — — ( 471 ) — ( 471 )

Recognition upon acquisition 122 — — — — — — — — — —

Net income/(loss)

3 unchanged sentences

Contributions from (distributions to) noncontrolling interests ( 15 ) — — — — — — — — ( 2 ) ( 2 )

— — — 41 — — — — 41 — 41

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

12 unchanged sentences

Contributions from (distributions to) noncontrolling interests ( 14 ) — — — — — — — — ( 1 ) ( 1 )

Excise tax from stock repurchases — — — — — — ( 28 ) — ( 28 ) — ( 28 )

Balance at December 31, 2023 $ 118 442 $ 442 $ 17,286 $ 47,364 56 $ ( 15,133 ) $ ( 3,224 ) $ 46,735 $ ( 11 ) $ 46,724

25 unchanged sentences

All material intercompany accounts and transactions have been eliminated.

The company accounts for investments in businesses using the equity method when it has the ability to exercise significant influence but not control (generally between 20% and 50% ownership), is not the primary beneficiary and has not elected the fair value option.

At December 31, 2023 and 2022, the company had such investments with carrying amounts of $ 489 million and $ 369 million, respectively.

The company has elected the fair value option of accounting for certain of its investments with readily determinable fair values that would otherwise be accounted for under the equity method.

At December 31, 2023 and 2022, the fair value of such investments was $ 5 million and $ 7 million, respectively.

Redeemable Noncontrolling Interest

2 unchanged sentences

Certain reclassifications of prior year amounts have been made to conform to the current year presentation.

Revenue Recognition

Consumables revenues consist of single-use products and are recognized at a point in time following the transfer of control of such products to the customer, which generally occurs upon shipment.

Instruments revenues typically consist of longer-lived assets that, for the substantial majority of sales, are recognized at a point in time in a manner similar to consumables.

Service revenues (primarily clinical research, pharmaceutical, and instrument and enterprise services) are recognized over time as customers receive and consume the benefits of such services.

For revenues recognized over time, the company generally uses costs accumulated relative to total estimated costs to measure progress as this method approximates satisfaction of the performance obligation.

For contracts that contain multiple performance obligations, the company allocates the consideration to which it expects to be entitled (i.e., the transaction price) to each performance obligation based on relative standalone selling prices and recognizes the related revenues when or as control of each individual performance obligation is transferred to customers.

The company exercises judgment in determining the timing of revenue by analyzing the point in time or the period over which the customer has the ability to direct the use of and obtain substantially all of the remaining benefits of the asset.

The company immediately expenses contract costs that would otherwise be capitalized and amortized over a period of less than one year.

Changes to the scope of services contracts generally also include changes in the transaction price.

Typically, these contract modifications are not distinct from existing services provided under the contract, and result in cumulative adjustments to revenue on the modification date.

However, some modifications are distinct from existing services provided under the contract and recognized prospectively.

Payments from customers for most instruments and consumables are typically due in a fixed number of days after shipment or delivery of the product.

Service arrangements commonly call for payments in advance of performing the work (e.g., extended service contracts), upon completion of the service (e.g., pharmaceutical services) or a mix of both.

Some arrangements include variable amounts of consideration that arise from discounts, rebates, and other programs and practices.

In such arrangements, the company estimates the amount by which to reduce the stated contract amount to reflect the transaction price.

The company records reimbursement for third-party pass-through and out-of-pocket costs as revenues and the related expenses as costs of revenues.

THERMO FISHER SCIENTIFIC INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Amounts and percentages reported within these consolidated financial statements are presented and calculated based on underlying unrounded amounts.

As a result, the sum of components may not equal corresponding totals due to rounding.

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.

Cash and Cash Equivalents

Cash equivalents consists principally of money market funds and other marketable securities purchased with a remaining maturity of three months or less.

These investments are carried at cost, which approximates market value (see Note 4).

Inventories are valued at the lower of cost or net realizable value, cost being determined by the first-in, first-out (FIFO) method.

The company periodically reviews quantities of inventories on hand and compares these amounts to the expected use of each product or product line.

In addition, the company has certain inventory that is subject to fluctuating market pricing.

The company records a charge to cost of sales for the amount required to reduce the carrying value of inventory to net realizable value.

Costs associated with the procurement of inventories, such as inbound freight charges, purchasing and receiving costs, and internal transfer costs, are included in cost of revenues in the accompanying statement of income.

Contract-related Balances

6 unchanged sentences

The company does not have any off-balance-sheet credit exposure related to customers.

THERMO FISHER SCIENTIFIC INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Contract assets include revenues recognized in advance of billings where the company’s right to bill includes something other than the passage of time.

4 unchanged sentences

Contract assets and liabilities are presented on a net basis in the consolidated balance sheet if they arise from different performance obligations in the same contract.

Warranty Obligations

The company provides for the estimated cost of standard product warranties, primarily from historical information, in cost of product revenues at the time product revenues are recognized.

The liability for warranties is included in other accrued expenses in the accompanying balance sheet.

Extended warranty agreements are considered service contracts, which are discussed above.

Costs of service contracts are recognized as incurred.

Operating leases that have commenced are included in other assets, other accrued expenses and other long-term liabilities in the consolidated balance sheet.

Finance leases that have commenced are included in property, plant and equipment, net, current maturities of long-term obligations and long-term obligations in the consolidated balance sheet.

Classification of lease liabilities as either current or noncurrent is based on the expected timing of payments due under the company’s obligations.

Right-of-use (ROU) assets represent the company’s right to use an underlying asset for the lease term and lease liabilities represent the company’s obligation to make lease payments arising from the lease.

Lease ROU assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term.

Leases with an initial term of 12 months or less are not recorded on the consolidated balance sheet.

The company recognizes operating lease expense on a straight-line basis over the lease term.

Finance lease expense includes depreciation, which is recognized on a straight-line basis over the expected life of the leased asset, and an immaterial amount of interest expense.

Because most of the company’s leases do not provide an implicit interest rate, the company estimates incremental borrowing rates based on the information available at the commencement date in determining the present value of lease payments.

The company uses the implicit rate when readily determinable.

Lease terms include the effect of options to extend or terminate the lease when it is reasonably certain that the company will exercise that option.

As a lessee, the company accounts for the lease and non-lease components as a single lease component.

Research and Development

The company conducts research and development activities to increase its depth of capabilities in technologies, software and services.

Research and development costs include employee compensation and benefits, consultants, facilities related costs, material costs, depreciation and travel.

Research and development costs are expensed as incurred.

Restructuring Costs

Accounting for the timing and amount of termination benefits provided by the company to employees is determined based on whether:

THERMO FISHER SCIENTIFIC INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

an event specified in an existing plan or agreement, or (d) the termination benefits are a one-time benefit.

In certain circumstances, employee termination benefits may meet more than one of the characteristics listed above and therefore, may have individual elements that are subject to different accounting models.

From time to time when executing a restructuring or exit plan, the company also incurs costs other than termination benefits, such as lease termination costs, that are not associated with or will not be incurred to provide economic benefits to the company.

These include costs that represent amounts under contractual obligations that exist prior to the restructuring plan communication date and will either continue after the restructuring plan is completed with no economic benefit or result in a penalty to cancel a contractual obligation.

Such costs are recognized when incurred, which generally occurs at the contract termination or over the period from when a plan to abandon a leased facility is approved through the cease-use date but charges may continue over the remainder of the original contractual period.

The company recognizes deferred income taxes based on the expected future tax consequences of differences between the financial statement basis and the tax basis of assets and liabilities, calculated using enacted tax rates in effect for the year in which the differences are expected to be reflected in the tax return.

A valuation allowance is provided for tax assets that will more likely than not go unused.

The financial statements reflect expected future tax consequences of uncertain tax positions that the company has taken or expects to take on a tax return presuming the taxing authorities’ full knowledge of the positions and all relevant facts, but without discounting for the time value of money.

Earnings per Share

Basic earnings per share has been computed by dividing net income attributable to Thermo Fisher Scientific Inc.

by the weighted average number of shares outstanding during the year.

Except where the result would be antidilutive to net income attributable to Thermo Fisher Scientific Inc., diluted earnings per share has been computed using the treasury stock method for outstanding stock options and restricted units.

Cash and Cash Equivalents

Cash equivalents consists principally of money market funds, commercial paper and other marketable securities purchased with an original maturity of three months or less.

These investments are carried at cost, which approximates market value.

Inventories are valued at the lower of cost or net realizable value, cost being determined by the first-in, first-out (FIFO) method.

As discussed below, prior to the third quarter of 2021 certain of the company's businesses utilized the last-in, first-out (LIFO) method.

The company periodically reviews quantities of inventories on hand and compares these amounts to the expected use of each product or product line.

In addition, the company has certain inventory that is subject to fluctuating market pricing.

The company records a charge to cost of sales for the amount required to reduce the carrying value of inventory to net realizable value.

The components of inventories are as follows:

December 31, December 31,

(In millions) 2023 2022

Raw materials $ 2,057 $ 2,405

Work in process 705 660

Finished goods 2,326 2,569

Inventories $ 5,088 $ 5,634

Prior to the third quarter of 2021, certain of the company’s businesses utilized the LIFO method of accounting for inventories.

During the third quarter of 2021, these businesses, which comprised approximately 5 % of consolidated inventories, changed from the LIFO method to the 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 Biopharma

THERMO FISHER SCIENTIFIC INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Services ($ 20 million) and Specialty Diagnostics ($ 13 million) segments.

Reductions to cost of revenues as a result of the liquidation of LIFO inventories were nominal during the first half of 2021.

Noncurrent contract assets and noncurrent contract liabilities are included within other assets and other long-term liabilities in the accompanying balance sheet, respectively (see Note 2).

Property, Plant and Equipment

6 unchanged sentences

When assets are retired or otherwise disposed of, the assets and related accumulated depreciation are eliminated from the accounts and the resulting gain or loss is reflected in the accompanying statement of income.

Property, plant and equipment consists of the following:

December 31, December 31,

(In millions) 2023 2022

Land $ 458 $ 454

Buildings and improvements 3,593 3,153

Machinery, equipment and leasehold improvements 9,235 7,967

Construction in progress 2,238 2,695

Property, plant and equipment, at cost 15,524 14,269

Accumulated depreciation and amortization 6,076 4,989

Property, plant and equipment, net $ 9,448 $ 9,280

Acquisition-related Intangible Assets

8 unchanged sentences

If not, or if the company bypasses the optional qualitative assessment, it writes the carrying value down to the fair value, if applicable.

Acquisition-related intangible assets are as follows:

Balance at December 31, 2023 Balance at December 31, 2022

(In millions) Gross Accumulated Amortization Net Gross Accumulated Amortization Net

Definite lived:

Customer relationships

$ 22,762 $ ( 9,410 ) $ 13,352 $ 21,792 $ ( 8,330 ) $ 13,462

Product technology

5,894 ( 4,591 ) 1,303 5,882 ( 4,360 ) 1,522

1,634 ( 1,079 ) 555 1,635 ( 1,008 ) 627

1,084 ( 859 ) 225 1,038 ( 442 ) 596

31,374 ( 15,939 ) 15,435 30,347 ( 14,140 ) 16,207

Indefinite lived:

1,235 N/A 1,235 1,235 N/A 1,235

Acquisition-related intangible assets

$ 32,609 $ ( 15,939 ) $ 16,670 $ 31,582 $ ( 14,140 ) $ 17,442

THERMO FISHER SCIENTIFIC INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The estimated future amortization expense of acquisition-related intangible assets with definite lives as of December 31, 2023 is as follows:

(In millions)

2029 and thereafter 7,586

Estimated future amortization expense of definite-lived intangible assets $ 15,435

Other assets in the accompanying balance sheet include operating lease right-of-use assets, investments, deferred tax assets, pension assets, insurance recovery receivables related to product liability matters, certain intangible assets and other assets.

At December 31, 2023 and 2022, the company had $ 37 million and $ 36 million, respectively, of intangible assets not derived from acquisitions, net of accumulated amortization, which are being amortized using the straight-line method over their estimated useful lives, which range up to 20 years.

Investments include marketable securities, such as marketable equity securities, available for sale debt securities, and bank time deposits with maturities greater than three months, equity method investments, and non-marketable equity investments.

The company classifies investments as current or noncurrent based on the nature of the securities and their availability for use in current operations.

Noncurrent investments are included in other assets.

Marketable securities are stated at fair value with all realized and unrealized gains and losses on investments in marketable equity securities and realized gains and losses on available-for-sale debt securities recognized in other income/(expense).

The company has elected the fair value option of accounting for certain of its investments with readily determinable fair values that would otherwise be accounted for under the equity method (see Note 2).

The company’s share of gains and losses in, and impairments of, equity method investments are recorded in equity in earnings (losses) of unconsolidated entities.

Equity investments that do not have readily determinable fair values and are not eligible for the net asset value (NAV) practical expedient are measured at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or similar investments of the same issuer.

The company performs qualitative assessments to identify impairments of these investments.

At December 31, 2023 and 2022, the company had such investments with carrying amounts of $ 12 million and $ 55 million, respectively, and investments measured at NAV of $ 28 million and $ 22 million, respectively, which are included in other assets.

All gains and losses on non-equity method investments are recognized in other income/(expense).

THERMO FISHER SCIENTIFIC INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The company assesses goodwill for impairment at the reporting unit level annually and whenever events occur or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount.

2 unchanged sentences

If the qualitative assessment results in a determination that the fair value of a reporting unit is more likely than not less than its carrying amount, the company performs a quantitative goodwill impairment test.

The company may bypass the qualitative assessment for the reporting unit in any period and proceed directly to the goodwill impairment test.

The company may bypass the qualitative assessment for the reporting unit in any period and proceed directly to the quantitative goodwill impairment test.

The company estimates the fair value of its reporting units by using forecasts of discounted future cash flows and peer market multiples.

1 unchanged sentence

The company determined that no impairments existed in 2024, 2023 or 2022.

The changes in the carrying amount of goodwill by segment are as follows:

(In millions) Life Sciences

Solutions Analytical

Instruments Specialty

Diagnostics Laboratory

Biopharma Services Total

Balance at December 31, 2021

$ 10,143 $ 5,043 $ 3,277 $ 23,461 $ 41,924

Finalization of purchase price allocations for 2021 acquisitions

9 — — 168 177

Currency translation

( 6 ) ( 102 ) ( 186 ) ( 635 ) ( 929 )

Balance at December 31, 2022

10,146 4,965 3,091 22,994 41,196

— 31 1,741 627 2,399

Currency translation

5 55 91 274 425

Balance at December 31, 2023

$ 10,151 $ 5,051 $ 4,923 $ 23,895 $ 44,020

THERMO FISHER SCIENTIFIC INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Fair Value Measurements

Assets and liabilities carried at fair value are classified and disclosed in one of the following three categories:

Quoted market prices in active markets for identical assets or liabilities that the company has the ability to access.

Observable market based inputs or unobservable inputs that are corroborated by market data such as quoted prices, interest rates and yield curves.

Inputs are unobservable data points that are not corroborated by market data.

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 values of contingent consideration are recorded in selling, general and administrative expense.

The company determines the fair value of its equity method and non-marketable equity investments that are not eligible for the NAV practical expedient by considering factors such as financial position, operating results and cash flows of the investee;

recent transactions in the same or similar securities;

significant recent events affecting the investee;

the price paid by Thermo Fisher;

among others.

Loss Contingencies

2 unchanged sentences

Additionally, the company records receivables from third-party insurers up to the amount of the loss when recovery has been determined to be probable.

Certain liabilities acquired in acquisitions have been recorded at readily determinable fair values and, as such, were discounted to present value at the dates of acquisition.

Currency Translation

The company records accruals for environmental remediation liabilities, based on current interpretations of environmental laws and regulations, when it is probable that a liability has been incurred and the amount of such liability can be reasonably estimated.

The company calculates estimates based upon several factors, including input from environmental specialists and management’s knowledge of and experience with these environmental matters.

The company includes in these estimates potential costs for investigation, remediation and operation and maintenance of cleanup sites.

The company determines the probability and range of possible loss for its litigation and other contingencies based on the current status of each of these matters.

A liability is recorded in the financial statements if it is believed to be probable that a loss has been incurred and the amount of the loss can be reasonably estimated.

The company establishes a liability that is an estimate of amounts expected to be paid in the future for events that have already occurred.

The company accrues the most likely amount or at least the minimum of the range of probable loss when a range of probable loss can be estimated.

The accrued liabilities are based on management’s judgment as to the probability of losses for asserted and unasserted claims and, where applicable, actuarially determined estimates.

Accrual estimates are adjusted as additional information becomes known or payments are made.

The amount of ultimate loss may differ from these estimates.

Warranty Obligations

The company provides for the estimated cost of standard product warranties, primarily from historical information, in cost of product revenues at the time product revenues are recognized.

The liability for warranties is included in other accrued expenses in the accompanying balance sheet.

Extended warranty agreements are considered service contracts, which are discussed above.

Costs of service contracts are recognized as incurred.

THERMO FISHER SCIENTIFIC INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Foreign Currency Translation

All assets and liabilities of the company’s subsidiaries operating in non-U.S.

2 unchanged sentences

Revenues and expenses are translated at average exchange rates for the period.

Currency transaction gains/(losses) are included in the accompanying statement of income and in aggregate were $( 67 ) million, $ 62 million and $ 25 million in 2023, 2022 and 2021, respectively.