UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

ý Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the Quarter Ended

~~September 29, 2018~~March 30, 2019

¨ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number 1-8002

THERMO FISHER SCIENTIFIC INC.

(Exact name of Registrant as specified in its charter)



Delaware	04-2209186
(State of incorporation or organization)	(I.R.S. Employer Identification No.)

168 Third Avenue
Waltham, Massachusetts	02451
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (781) 622-1000

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $1.00 par value	TMO	New York Stock Exchange
Floating Rate Notes due 2019	TMO 19A	New York Stock Exchange
Floating Rate Notes due 2020	TMO /20A	New York Stock Exchange
1.500% Notes due 2020	TMO 20A	New York Stock Exchange
2.150% Notes due 2022	TMO 22A	New York Stock Exchange
0.750% Notes due 2024	TMO 24A	New York Stock Exchange
2.000% Notes due 2025	TMO 25	New York Stock Exchange
1.400% Notes due 2026	TMO 26A	New York Stock Exchange
1.450% Notes due 2027	TMO 27	New York Stock Exchange
1.375% Notes due 2028	TMO 28	New York Stock Exchange
1.950% Notes due 2029	TMO 29	New York Stock Exchange
2.875% Notes due 2037	TMO 37	New York Stock Exchange

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files). Yes ý No o

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer ý Accelerated filer o Non-accelerated filer o

Smaller reporting company o Emerging growth company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No ý

Indicate the number of shares outstanding of each of the issuer’s classes of Common Stock, as of the latest practicable date.



	Class		Outstanding at ~~September 29, 2018~~March 30, 2019
	Common Stock, $1.00 par value		~~402,576,382~~399,981,140

THERMO FISHER SCIENTIFIC INC.

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTER ENDED ~~SEPTEMBER 29, 2018~~MARCH 30, 2019

THERMO FISHER SCIENTIFIC INC.


PART I	FINANCIAL INFORMATION


Item 1.	Financial Statements

CONSOLIDATED BALANCE SHEET

(Unaudited)


	September 29,			December 31,			March 30,			December 31,
(In millions except share and per share amounts)	2018			2017			2019			2018

Assets
Current Assets:
Cash and cash equivalents	$	1,098		$	1,335		$	1,106		$	2,103
Accounts receivable, less allowances of $116 and $109	3,852			3,879
Accounts receivable, less allowances of $114 and $117							4,155			4,136
Inventories	2,982			2,971			3,124			3,005
Refundable income taxes	405			432
Other current assets	1,229			804			1,554			1,381

Total current assets	9,566			9,421			9,939			10,625

Property, Plant and Equipment, Net	3,978			4,047			4,192			4,165
Acquisition-related Intangible Assets, Net	15,219			16,684			14,489			14,978
Other Assets	1,173			1,227			1,740			1,117
Goodwill	25,142			25,290			25,236			25,347

Total Assets	$	55,078		$	56,669		$	55,596		$	56,232

Liabilities and Shareholders' Equity
Current Liabilities:
Short-term obligations and current maturities of long-term obligations	$	1,014		$	2,135		$	1,336		$	1,271
Accounts payable	1,344			1,428			1,462			1,615
Accrued payroll and employee benefits	817			918			704			982
Contract liabilities	797			—			967			809
Deferred revenue	—			719
Other accrued expenses	1,224			1,848			1,429			1,470

Total current liabilities	5,196			7,048			5,898			6,147

Deferred Income Taxes	2,550			2,766			2,145			2,265
Other Long-term Liabilities	2,682			2,569			3,048			2,515
Long-term Obligations	17,760			18,873			16,812			17,719

Shareholders' Equity:
Preferred stock, $100 par value, 50,000 shares authorized; none issued
Common stock, $1 par value, 1,200,000,000 shares authorized; 431,007,744 and 428,327,873 shares issued	431			428
Common stock, $1 par value, 1,200,000,000 shares authorized; 432,856,849 and 431,566,561 shares issued							433			432
Capital in excess of par value	14,526			14,177			14,771			14,621
Retained earnings	17,866			15,914			19,439			18,696
Treasury stock at cost, 28,431,362 and 27,013,311 shares	(3,414		)	(3,103		)
Treasury stock at cost, 32,875,709 and 29,444,882 shares							(4,441		)	(3,665		)
Accumulated other comprehensive items	(2,519		)	(2,003		)	(2,509		)	(2,498		)

Total shareholders' equity	26,890			25,413			27,693			27,586

Total Liabilities and Shareholders' Equity	$	55,078		$	56,669		$	55,596		$	56,232

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

THERMO FISHER SCIENTIFIC INC.

CONSOLIDATED STATEMENT OF INCOME

(Unaudited)


	Three Months Ended						Nine Months Ended						Three Months Ended
	September 29,			September 30,			September 29,			September 30,			March 30,			March 31,
(In millions except per share amounts)	2018			2017			2018			2017			2019			2018

Revenues
Product revenues	$	4,571		$	4,232		$	13,807		$	12,632		$	4,720		$	4,528
Service revenues	1,349			884			4,044			2,239			1,405			1,325

Total revenues	5,920			5,116			17,851			14,871			6,125			5,853

Costs and Operating Expenses:
Cost of product revenues	2,357			2,174			7,072			6,547			2,414			2,325
Cost of service revenues	948			642			2,846			1,547			1,004			948
Selling, general and administrative expenses	1,490			1,400			4,547			4,025			1,528			1,515
Research and development expenses	240			217			716			654			248			234
Restructuring and other (income) costs, net	(27		)	49			35			95
Restructuring and other costs, net													11			45

Total costs and operating expenses	5,008			4,482			15,216			12,868			5,205			5,067

Operating Income	912			634			2,635			2,003			920			786
Other Expense, Net	(102		)	(154		)	(385		)	(394		)	(103		)	(152		)

Income from Continuing Operations Before Income Taxes	810			480			2,250			1,609
(Provision for) Benefit from Income Taxes	(101		)	54			(210		)	89

Income from Continuing Operations	709			534			2,040			1,698
Loss from Discontinued Operations (net of income tax benefit of $0, $0, $0 and $0)	—			—			—			(1		)
Income Before Income Taxes													817			634
Provision for Income Taxes													(2		)	(55		)

Net Income	$	709		$	534		$	2,040		$	1,697		$	815		$	579

Earnings per Share from Continuing Operations
Basic	$	1.76		$	1.35		$	5.07		$	4.33
Diluted	$	1.75		$	1.34		$	5.03		$	4.29

Earnings per Share
Basic	$	1.76		$	1.35		$	5.07		$	4.32		$	2.04		$	1.44
Diluted	$	1.75		$	1.34		$	5.03		$	4.29		$	2.02		$	1.43

Weighted Average Shares
Basic	402			396			402			392			400			402
Diluted	406			400			406			396			403			406

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

THERMO FISHER SCIENTIFIC INC.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(Unaudited)


	Three Months Ended						Nine Months Ended						Three Months Ended
	September 29,			September 30,			September 29,			September 30,			March 30,			March 31,
(In millions)	2018			2017			2018			2017			2019			2018

Comprehensive Income
Net Income	$	709		$	534		$	2,040		$	1,697		$	815		$	579

Other Comprehensive Items:
Currency translation adjustment (net of tax provision of $13, $0, $60 and $0)	(32		)	73			(447		)	452
Unrealized gains and losses on available-for-sale investments:
Unrealized holding gains arising during the period (net of tax provision of $0, ($1), $0 and $0)	—			(2		)	—			—
Reclassification adjustment for (gains) losses included in net income (net of tax (provision) benefit of $0, $0, $0 and ($1))	—			—			—			(1		)
Currency translation adjustment (net of tax provision (benefit) of $45 and ($47))													(15		)	47
Unrealized gains and losses on hedging instruments:
Reclassification adjustment for losses included in net income (net of tax benefit of $1, $1, $3 and $3)	2			2			6			6
Reclassification adjustment for losses included in net income (net of tax benefit of $1 and $1)													2			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 $0, ($2), $1 and ($5))	—			(2		)	3			(11		)
Amortization of net loss and prior service benefit included in net periodic pension cost (net of tax benefit of $0, $1, $3 and $3)	2			2			10			7
Pension and other postretirement benefit liability adjustments arising during the period (net of tax provision (benefit) of $0 and ($1))													1			(2		)
Amortization of net loss and prior service benefit included in net periodic pension cost (net of tax benefit of $1 and $1)													1			2

Total other comprehensive items	(28		)	73			(428		)	453			(11		)	49

Comprehensive Income	$	681		$	607		$	1,612		$	2,150		$	804		$	628

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

THERMO FISHER SCIENTIFIC INC.

CONSOLIDATED STATEMENT OF CASH FLOWS

(Unaudited)

Nine Months Ended
September 29,
September 30,
(In millions) 2018
2017

Operating Activities
Net income $ 2,040
$ 1,697
Loss from discontinued operations —
1

Income from continuing operations 2,040
1,698

Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 1,709
1,459
Change in deferred income taxes (317 ) (484 )
Non-cash stock-based compensation 137
116
Non-cash charges for sale of inventories revalued at the date of acquisition 10
47
Other non-cash expenses, net 67
67
Changes in assets and liabilities, excluding the effects of acquisitions and dispositions:
Accounts receivable (64 ) (161 )
Inventories (333 ) (208 )
Other assets (137 ) (233 )
Accounts payable (45 ) —
Other liabilities (247 ) 24
Contributions to retirement plans (78 ) (184 )

Net cash provided by continuing operations 2,742
2,141
Net cash used in discontinued operations —
(2 )

Net cash provided by operating activities 2,742
2,139

Investing Activities

Acquisitions, net of cash acquired (59 ) (7,160 )
Purchase of property, plant and equipment (474 ) (293 )
Proceeds from sale of property, plant and equipment 6
4
Other investing activities, net (5 ) 3

Net cash used in investing activities $ (532 ) $ (7,446 )

~~THERMO FISHER SCIENTIFIC INC.~~

~~CONSOLIDATED STATEMENT OF CASH FLOWS (Continued)~~

~~(Unaudited)~~


	Nine Months Ended						Three Months Ended
	September 29,			September 30,			March 30,			March 31,
(In millions)	2018			2017			2019			2018

Operating Activities
Net income							$	815		$	579

Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of property, plant and equipment							133			131
Amortization of acquisition-related intangible assets							422			444
Change in deferred income taxes							(106		)	(121		)
Non-cash stock-based compensation							44			43
Other non-cash expenses, net							18			27
Changes in assets and liabilities, excluding the effects of acquisitions:
Accounts receivable							(29		)	(71		)
Inventories							(140		)	(124		)
Other assets							(117		)	(241		)
Accounts payable							(129		)	(94		)
Other liabilities							(230		)	(471		)
Contributions to retirement plans							(32		)	(24		)

Net cash provided by operating activities							649			78

Investing Activities
Acquisitions, net of cash acquired							(1		)	(57		)
Purchase of property, plant and equipment							(201		)	(118		)
Proceeds from sale of property, plant and equipment							6			2
Other investing activities, net							15			(6		)

Net cash used in investing activities							(181		)	(179		)

Financing Activities
Net proceeds from issuance of debt	$	690		$	6,459
Repayment of debt	(2,048		)	(2,552		)	(1		)	(453		)
Proceeds from issuance of commercial paper	3,378			6,030			100			1,306
Repayments of commercial paper	(3,842		)	(5,809		)	(787		)	(1,124		)
Purchases of company common stock	(250		)	(750		)	(750		)	—
Dividends paid	(198		)	(177		)	(68		)	(60		)
Net proceeds from issuance of company common stock	—			1,690
Net proceeds from issuance of company common stock under employee stock plans	97			108			81			39
Other financing activities	(51		)	(1		)	—			(50		)

Net cash (used in) provided by financing activities	(2,224		)	4,998
Net cash used in financing activities							(1,425		)	(342		)

Exchange Rate Effect on Cash	(236		)	256			(32		)	57

Decrease in Cash, Cash Equivalents and Restricted Cash	(250		)	(53		)
Increase in Cash, Cash Equivalents and Restricted Cash							(989		)	(386		)
Cash, Cash Equivalents and Restricted Cash at Beginning of Period	1,361			811			2,117			1,361

Cash, Cash Equivalents and Restricted Cash at End of Period	$	1,111		$	758		$	1,128		$	975

See Note 12 for supplemental cash flow information.

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

THERMO FISHER SCIENTIFIC INC.

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			Common Stock				Capital in Excess of Par Value			Retained Earnings			Treasury Stock					Accumulated Other Comprehensive Items			Total Shareholders' Equity
(In millions)	Shares	Amount				Shares	Retained Earnings				Amount				Accumulated Other Comprehensive Items			Shares	Total Shareholders' Equity				Amount			Capital in Excess of Par Value		Shares	Retained Earnings				Amount				Accumulated Other Comprehensive Items			Total Shareholders' Equity
				Capital in Excess of Par Value
	Three Months Ended September 29, 2018																					Three Months Ended March 30, 2019
Balance at June 30, 2018	430	$	430	$	14,408		$	17,226		27		$	(3,128	)	$	(2,491	)		$	26,445
Balance at December 31, 2018																						432		$	432	$	14,621		$	18,696		29		$	(3,665	)	$	(2,498	)	$	27,586
Cumulative effect of accounting change																						—		—		—			4			—		—			—			4
Issuance of shares under employees' and directors' stock plans	1	1		72			—			—		(36		)	—				37			1		1		106			—			1		(26		)	—			81
Stock-based compensation	—	—		46			—			—		—			—				46			—		—		44			—			—		—			—			44
Purchases of company common stock	—	—		—			—			1		(250		)	—				(250		)	—		—		—			—			3		(750		)	—			(750		)
Dividends declared ($0.17 per share)	—	—		—			(69		)	—		—			—				(69		)
Dividends declared ($0.19 per share)																						—		—		—			(76		)	—		—			—			(76		)
Net income	—	—		—			709			—		—			—				709			—		—		—			815			—		—			—			815
Other comprehensive items	—	—		—			—			—		—			(28		)		(28		)	—		—		—			—			—		—			(11		)	(11		)
Balance at September 29, 2018	431	$	431	$	14,526		$	17,866		28		$	(3,414	)	$	(2,519	)		$	26,890

	Three Months Ended September 30, 2017
Balance at July 1, 2017	417	$	417	$	12,328		$	14,972		27		$	(3,070	)	$	(2,256	)		$	22,391
Issuance of shares under employees' and directors' stock plans	1	1		53			—			—		(31		)	—				23
Issuance of shares	10	10		1,680			—			—		—			—				1,690
Stock-based compensation	—	—		45			—			—		—			—				45
Dividends declared ($0.15 per share)	—	—		—			(60		)	—		—			—				(60		)
Net income	—	—		—			534			—		—			—				534
Other comprehensive items	—	—		—			—			—		—			73				73
Other	—	—		6			—			—		—			—				6
Balance at September 30, 2017	428	$	428	$	14,112		$	15,446		27		$	(3,101	)	$	(2,183	)		$	24,702
Balance at March 30, 2019																						433		$	433	$	14,771		$	19,439		33		$	(4,441	)	$	(2,509	)	$	27,693

	Nine Months Ended September 29, 2018																					Three Months Ended March 31, 2018
Balance at December 31, 2017	428	$	428	$	14,177		$	15,914		27		$	(3,103	)	$	(2,003	)		$	25,413		428		$	428	$	14,177		$	15,914		27		$	(3,103	)	$	(2,003	)	$	25,413
Cumulative effect of accounting changes	—	—		—			118			—		—			(88		)		30			—		—		—			118			—		—			(88		)	30
Issuance of shares under employees' and directors' stock plans	3	3		185			—			—		(61		)	—				127			1		1		72			—			—		(22		)	—			51
Stock-based compensation	—	—		137			—			—		—			—				137			—		—		43			—			—		—			—			43
Purchases of company common stock	—	—		—			—			1		(250		)	—				(250		)
Dividends declared ($0.51 per share)	—	—		—			(206		)	—		—			—				(206		)
Dividends declared ($0.17 per share)																						—		—		—			(69		)	—		—			—			(69		)
Net income	—	—		—			2,040			—		—			—				2,040			—		—		—			579			—		—			—			579
Other comprehensive items	—	—		—			—			—		—			(428		)		(428		)	—		—		—			—			—		—			49			49
Other	—	—		27			—			—		—			—				27			—		—		27			—			—		—			—			27
Balance at September 29, 2018	431	$	431	$	14,526		$	17,866		28		$	(3,414	)	$	(2,519	)		$	26,890

	Nine Months Ended September 30, 2017
Balance at December 31, 2016	415	$	415	$	12,140		$	13,927		22		$	(2,306	)	$	(2,636	)		$	21,540
Issuance of shares under employees' and directors' stock plans	3	3		173			—			—		(45		)	—				131
Issuance of shares	10	10		1,680			—			—		—			—				1,690
Stock-based compensation	—	—		116			—			—		—			—				116
Purchases of company common stock	—	—		—			—			5		(750		)	—				(750		)
Dividends declared ($0.45 per share)	—	—		—			(178		)	—		—			—				(178		)
Net income	—	—		—			1,697			—		—			—				1,697
Other comprehensive items	—	—		—			—			—		—			453				453
Other	—	—		3			—			—		—			—				3
Balance at September 30, 2017	428	$	428	$	14,112		$	15,446		27		$	(3,101	)	$	(2,183	)		$	24,702
Balance at March 31, 2018																						429		$	429	$	14,319		$	16,542		27		$	(3,125	)	$	(2,042	)	$	26,123

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

THERMO FISHER SCIENTIFIC INC.

NOTES TO 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 ~~providing~~helping them accelerate life sciences research, solve complex analytical ~~instruments, equipment, reagents~~challenges, improve patient diagnostics, deliver medicines to market and ~~consumables, software and services for research, manufacturing, analysis, discovery and diagnostics.~~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 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 29, 2018,~~March 30, 2019, the results of operations for the ~~three- and nine-month~~three-month periods ended ~~September 29,~~March 30, 2019 and March 31, 2018, ~~and September 30, 2017,~~ and the cash flows for the ~~nine-month~~three-month periods ended ~~September 29, 2018~~March 30, 2019 and ~~September 30, 2017.~~March 31, 2018. Interim results are not necessarily indicative of results for a full year.

The consolidated balance sheet presented as of December 31, ~~2017,~~2018, has been derived from the audited consolidated financial statements as of that date. The 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 consolidated financial statements and notes included in this report should be read in conjunction with the ~~2017~~2018 financial statements and notes included in the company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (SEC).

Note 1 to the consolidated financial statements for ~~2017~~2018 describes the significant accounting estimates and policies used in preparation of the consolidated financial statements. Except for the accounting for ~~revenue arising from contracts with customers,~~leases, as noted below, there have been no material changes in the company’s significant accounting policies during the ~~nine~~three months ended ~~September 29, 2018.~~March 30, 2019.

~~Revenue Recognition~~Leases

The company determines whether an arrangement is, or contains, a lease at inception. Prior to 2019, the company generally accounted for operating lease payments by charging them to expense as incurred. Beginning in 2019, operating leases that have commenced are included in other assets, other accrued expenses and other long-term liabilities in the consolidated balance sheet. Classification of operating 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. Operating 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 ~~revenue~~lease expense for these leases on a straight-line basis over the ~~transfer~~lease term.

Because most of ~~promised goods or services to customers in~~the company’s leases do not provide an ~~amount that reflects the consideration to which~~implicit rate, the company ~~expects to be entitled in exchange for those goods or services.~~

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 (clinical trial logistics, pharmaceutical development and manufacturing services, asset management, diagnostic testing, training, service contracts, and field services including related time and materials) 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 as inputs to measure progress. For contracts that contain multiple performance obligations, the company allocates the consideration to which it expects to be entitled to each performance obligationestimates incremental borrowing rates based on ~~relative standalone selling prices and recognizes~~ the ~~related revenue when or as control of each individual performance obligation is transferred to customers. The company exercises judgment~~information available at the commencement date in determining the ~~timing~~present value 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.~~lease payments. The company ~~immediately expenses contract costs~~uses the implicit rate when readily determinable. Lease terms may include the effect of options to extend or terminate the lease when it is reasonably certain that ~~would otherwise be capitalized~~the company will exercise that option. Operating lease expense is recognized on a straight-line basis over the lease term.

As a lessee, the company accounts for the lease and ~~amortized over~~non-lease components as a ~~period of less than one year.~~

Payments from customers for most instruments, consumables and services 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 development and manufacturing) or a mix of both.single lease component.

See Note ~~3 for revenue disaggregated by type and by geographic region as well as further~~9 additional information about ~~remaining performance obligations.~~the company's leases.

Contract-related Balances

Contract assets include revenues recognized in advance of billings and are recorded net of estimated losses resulting from the inability to invoice customers. Contract assets are classified as current or noncurrent based on the amount of time expected

~~THERMO FISHER SCIENTIFIC INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Unaudited)~~

~~to lapse until the company's right to consideration becomes unconditional.~~ Current contract assets and noncurrent contract assets are included within other current assets and other assets, respectively, in the accompanying balance sheet.

Contract liabilities include billings in excess of revenues recognized, such as those resulting from customer advances and deposits and unearned revenue on service contracts. Contract liabilities are classified as current or noncurrent based on the periods over which remaining performance obligations are expected to be transferred to customers. Noncurrent contract liabilities are included within other long-term liabilities in the accompanying balance sheet.

Contract asset and liability balances are as follows:

THERMO FISHER SCIENTIFIC INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

September 29,
January 1,
(In millions) 2018
2018

Current Contract Assets, Net $ 462
$ 396
Current Contract Liabilities 797
805
Noncurrent Contract Liabilities 349
302

~~Noncurrent contract assets were immaterial in 2018.~~



	March 30,		December 31,
(In millions)	2019		2018

Current Contract Assets, Net	$	545	$	459
Noncurrent Contract Assets, Net	15		15
Current Contract Liabilities	967		809
Noncurrent Contract Liabilities	497		355

In the first ~~nine~~three months of ~~2018,~~2019, the company recognized revenue of ~~$591~~$336 million that was included in the contract liabilities balance at ~~January 1,~~December 31, 2018. Contract liabilities increased during the first quarter of 2019 primarily due to an advance payment from a customer.

Warranty Obligations

The liability for warranties is included in other accrued expenses in the accompanying balance sheet. The changes in the carrying amount of standard product warranty obligations are as follows:


	Nine Months Ended						Three Months Ended
	September 29,			September 30,			March 30,			March 31,
(In millions)	2018			2017			2019			2018

Beginning Balance	$	87		$	78		$	92		$	87
Provision charged to income	89			76			27			31
Usage	(80		)	(75		)	(28		)	(28		)
Acquisitions	—			1
Adjustments to previously provided warranties, net	(3		)	(2		)	(1		)	(1		)
Currency translation	(2		)	3			—			1

Ending Balance	$	91		$	81		$	90		$	90

Inventories

The components of inventories are as follows:

September 29,
December 31,
(In millions) 2018
2017

Raw Materials $ 807
$ 708
Work in Process 433
505
Finished Goods 1,742
1,758

Inventories $ 2,982
$ 2,971

~~THERMO FISHER SCIENTIFIC INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Unaudited)~~

~~Property, Plant and Equipment~~

~~Property, plant and equipment consists of the following:~~

September 29,
December 31,
(In millions) 2018
2017

Land $ 392
$ 401
Buildings and Improvements 1,677
1,662
Machinery, Equipment and Leasehold Improvements 4,536
4,276

Property, Plant and Equipment, at Cost 6,605
6,339
Less: Accumulated Depreciation and Amortization 2,627
2,292

Property, Plant and Equipment, Net $ 3,978
$ 4,047

~~Acquisition-related Intangible Assets~~

~~Acquisition-related intangible assets are as follows:~~

Balance at September 29, 2018 Balance at December 31, 2017
(In millions) Gross
Accumulated Amortization
Net
Gross
Accumulated Amortization
Net

Definite Lived:
Customer relationships $ 17,092
$ (6,592 ) $ 10,500
$ 17,356
$ (5,902 ) $ 11,454
Product technology 6,003
(3,143 ) 2,860
6,046
(2,811 ) 3,235
Tradenames 1,512
(920 ) 592
1,538
(817 ) 721
Other 33
(33 ) —
34
(34 ) —

24,640
(10,688 ) 13,952
24,974
(9,564 ) 15,410
Indefinite Lived:
Tradenames 1,235
N/A
1,235
1,235
N/A
1,235
In-process research and development 32
N/A
32
39
N/A
39

1,267
N/A
1,267
1,274
N/A
1,274

Acquisition-related Intangible Assets $ 25,907
$ (10,688 ) $ 15,219
$ 26,248
$ (9,564 ) $ 16,684



	March 30,		December 31,
(In millions)	2019		2018

Raw Materials	$	867	$	812
Work in Process	472		430
Finished Goods	1,785		1,763

Inventories	$	3,124	$	3,005

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. In addition, significant estimates were made in estimating future cash flows to assess potential impairment of assets and in determining the fair value of acquired intangible assets (Note 2) and the ultimate loss from abandoning leases at facilities being exited (Note ~~13)~~14). Actual results could differ from those estimates.

Recent Accounting Pronouncements

In August 2018, the FASB issued new guidance to align the accounting for implementation costs incurred in a hosting arrangement that is a service contract with the accounting for implementation costs incurred to develop or obtain internal-use software and hosting arrangements that include an internal-use software license. Under the new guidance, certain implementation costs that previously were required to be expensed will be capitalized and amortized over the term of the hosting arrangement. The company plans to adopt the guidance in the fourth quarter of 2018 prospectively to all

~~THERMO FISHER SCIENTIFIC INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Unaudited)~~

~~implementation costs incurred after the date of adoption. The adoption of this guidance is not expected to have a material impact on the company’s consolidated financial statements.~~

In August 2018, the FASB issued new guidance to modify the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. The company expects to adopt the guidance when it is effective in 2020 using a retrospective method. The adoption of this guidance is not expected to have a material impact on the company’s disclosures.

THERMO FISHER SCIENTIFIC INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

In August 2018, the FASB issued new guidance to modify the disclosure requirements on fair value measurements. The company expects to adopt the guidance when it is effective in 2020 with some items requiring a prospective method and others requiring a retrospective method. The adoption of this guidance is not expected to have a material impact on the company’s disclosures.

In August 2018, the SEC adopted amendments to certain disclosure requirements effective November 5, 2018, including those relating to an interim presentation of the statement of shareholders’ equity. The adoption of this guidance is not expected to have a material impact on the company’s disclosures.

In February 2018, the FASB issued new guidance to allow reclassifications from accumulated other comprehensive items (AOCI) to retained earnings for certain tax effects on items within AOCI resulting from the Tax Cuts and Jobs Act of 2017 (the Tax Act). The company adopted this guidance in January 2018 and recorded the reclassifications in the period of adoption. The balance sheet impact of adopting this guidance is included in the table below. This guidance only relates to the effects of the Tax Act. For all other tax law changes that have occurred or may occur in the future, the company reclassifies the tax effects to the consolidated statement of income on an item-by-item basis when the pre-tax item in AOCI is reclassified to income.

In December 2017, the SEC staff issued guidance to address the application of accounting guidance in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Tax Act enacted on December 22, 2017. The company reported provisional amounts in its 2017 financial statements for certain income tax effects of the Tax Act for which a reasonable estimate could be determined but for which the accounting impact may change. For example, these estimates may be impacted by the need for further analysis and future clarification and guidance regarding available tax accounting methods and elections, earnings and profits computations and state tax conformity to federal changes. Adjustments to provisional amounts identified during the measurement period, which may be up to December 22, 2018, will be included as adjustments to Provision for Income Taxes in the period the amounts are determined (Note 6).

In August 2017, the FASB issued new guidance to simplify the application of hedge accounting guidance. Among other things, the new guidance will permit more hedging strategies to qualify for hedge accounting, allow for additional time to perform an initial assessment of a hedge’s effectiveness, and permit a qualitative effectiveness test for certain hedges after initial qualification. The company adopted this guidance in January 2018. The balance sheet impact of adopting this guidance is included in the table below.

In March 2017, the FASB issued new guidance intended to improve the presentation of net periodic pension cost and net periodic postretirement benefit cost. The new guidance requires the service cost component of net periodic cost be reported in the same line item(s) as other employee compensation costs and all other components of the net periodic cost be reported in the income statement below operating income. The company adopted this guidance on January 1, 2018 and applied the changes to the statement of income retrospectively. As a result of adoption of this guidance, the accompanying 2017 statement of income reflects the following changes from previously reported amounts:

Three Months Ended
Nine Months Ended
September 30,
September 30,
(In millions) 2017
2017

Increase in Total Costs and Operating Expenses (principally Selling, General and Administrative Expenses) $ 2
$ 7
Decrease in Operating Income 2
7
Increase in Other Income (Expense) 2
7

In January 2017, the FASB issued new guidance clarifying the definition of a business and providing criteria to determine when an integrated set of assets and activities is not defined as a business. The new guidance requires such integrated sets to be

~~THERMO FISHER SCIENTIFIC INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Unaudited)~~

defined as an asset (and not a business) if substantially all of the fair value of the gross assets acquired or disposed is concentrated in a single identifiable asset or a group of similar identifiable assets. The adoption of this guidance as of January 1, 2018 did not have a material impact on the company’s consolidated financial statements.

In October 2016, the FASB issued new guidance eliminating the deferral of the tax effects of intra-entity asset transfers. The impact of this guidance in future periods will be dependent on the extent of future asset transfers which usually occur in connection with planning around acquisitions and other business structuring activities. The balance sheet impact of adopting this guidance as of January 1, 2018 is included in the table below.

In June 2016, the FASB issued new guidance to require a financial asset measured at amortized cost basis, such as accounts receivable, to be presented at the net amount expected to be collected based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. During 2018, the FASB issued additional guidance and clarification. The company expects to adopt the guidance when it is effective ~~for the company~~ in 2020 using a modified retrospective ~~method and early adoption is permitted. The company is currently evaluating the timing of adoption.~~method. The adoption of this guidance is not expected to have a material impact on the company’s consolidated financial statements.

In February 2016, the FASB issued new guidance which requires lessees to record most leases on their balance sheets as lease liabilities, initially measured at the present value of the future lease payments, with corresponding right-of-use assets. The new guidance also sets forth new disclosure requirements related to leases. During 2017 ~~and 2018,~~- 2019, the FASB issued additional guidance and clarification. The guidance became effective for the company ~~plans~~in 2019. The company has elected to adopt the guidance ~~on January 1, 2019,~~ using a modified retrospective method, by applying the transition approach as of the beginning of the period of adoption. Comparative periods ~~will~~have not bebeen restated. ~~The~~As permitted upon transition, the company is currently evaluating the impact of this guidance by considering which practical expedients to elect, deploying a software tool to assist in the accounting calculations, surveying functional groups that oversee vendor relationships, and developing processes and controls to manage the changes indid not reassess whether any expired or existing contracts were or contained embedded leases, the lease classification for any expired or existing leases, initial direct costs for any leases, or whether land easements met the definition of a lease if they were not accounted for as leases under the prior guidance. Adoption of the new guidance and gather information for the required disclosures. The company expects that assets and liabilities will increase upon adoption for right-of-use assets and lease liabilities; however, the adoption of this guidance is not expected to have a material impact onimpacted the company’s results of operations or cash flows. The company’s future commitments under lease obligations are summarized in Note 10 to the consolidated financial statements for 2017 included in the company's Annual Report on Form 10-K, filed with the SEC.

In January 2016, the FASB issued new guidance which affects the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. This guidance requires equity investments to be measured at fair value with subsequent changes recognized in net income, except for those accounted for under the equity method or requiring consolidation. The guidance also changes the accounting for investments without a readily determinable fair value and that do not qualify for the practical expedient permitted by the guidance to estimate fair value. The balance sheet impact of adopting this guidance as of January 1, 2018 is included in the table below.

In May 2014, the FASB issued new revenue recognition guidance which provides a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most previous revenue recognition guidance. The new standard also requires significantly expanded disclosures regarding the qualitative and quantitative information of an entity's nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. During 2016 and 2017, the FASB issued additional guidance and clarification, including the elimination of certain SEC Staff Guidance. The guidance is effective for the company in 2018. The company elected to adopt this guidance through application of the modified retrospective method by applying it to contracts that were not completed as of December 31, 2017 (in addition to new contracts in 2018).

~~Adoption of new guidance that became effective on January 1, 2018, impacted the company's~~ Consolidated Balance Sheet as follows:

~~THERMO FISHER SCIENTIFIC INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Unaudited)~~

(In millions) December 31,
2017
as Reported
Impact of Adopting New Revenue Guidance
Impact of Adopting New Equity Investment Guidance
Impact of Adopting New Intra-entity Tax Guidance
Impact of Adopting New Hedge Accounting Guidance
Impact of Adopting New Tax Effects on Items in AOCI Guidance
January 1, 2018
as Adopted

Accounts Receivable, Less Allowances $ 3,879
$ (8 ) $ —
$ —
$ —
$ —
$ 3,871
Inventories 2,971
(252 ) —
—
—
—
2,719
Other Current Assets 804
296
—
—
—
—
1,100
Other Assets 1,227
—
—
(77 ) —
—
1,150
Contract Liabilities —
805
—
—
—
—
805
Deferred Revenue 719
(719 ) —
—
—
—
—
Other Accrued Expenses 1,848
(153 ) —
—
—
—
1,695
Deferred Income Taxes 2,766
—
—
(57 ) —
2
2,711
Other Long-term Liabilities 2,569
54
—
—
—
—
2,623
Long-term Obligations 18,873
—
—
—
(3 ) —
18,870
Retained Earnings 15,914
49
(1 ) (20 ) 3
87
16,032
Accumulated Other Comprehensive Items (2,003 ) —
1
—
—
(89 ) (2,091 )

Had the company continued to use the revenue recognition guidance in effect prior to 2018, no material changes would have resulted to the consolidated statements of income, comprehensive income, or cash flows for the three and nine months ended September 29, 2018, from am~~ounts reported therein. However, inventories would have b~~een $329 million higher and other current assets would have been $339 million lower as of September 29, 2018, primarily as a result of differences in the accounting for pharmaceutical development and manufacturing services under the new revenue guidance. Under the prior guidance, costs of these services were recorded in inventory while under the new guidance, costs are expensed as the manufacturing service is performed and the company's rights to consideration are recorded as contract assets and included in other current assets.



(In millions)	December 31, 2018 as Reported		Impact of Adopting New Lease Guidance		January 1, 2019 As Adopted

Other Assets	$	1,117	$	641	$	1,758
Other Accrued Expenses	1,470		132		1,602
Other Long-term Liabilities	2,515		505		3,020
Retained Earnings	18,696		4		18,700


Note 2.	Acquisitions and Dispositions

The company’s acquisitions have historically been made at prices above the determined fair value of the acquired identifiable net assets, resulting in goodwill, due to expectations of the synergies that will be realized by combining the businesses. These synergies include the elimination of redundant facilities, functions and staffing; 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 purchase method of accounting, and the acquired companies’ results have been included in the accompanying financial statements from their respective dates of acquisition. Acquisition transaction costs are recorded in selling, general and administrative expenses as incurred.

~~2018~~

~~In 2018,~~On April 30, 2019, the company acquired, within the ~~Life Sciences Solutions~~Laboratory Products and Services segment, ~~IntegenX Inc.,~~Brammer Bio for approximately $1.7 billion in cash. Brammer Bio is a ~~North America-based provider~~leading viral vector contract development and manufacturing organization for gene and cell therapies. Revenues of ~~a rapid DNA platform for use in forensics and law enforcement applications, for an aggregate purchase price of $65 million.~~

~~On October 25, 2018, the company acquired, within the Life Sciences Solutions segment, Becton Dickinson and Company's Advanced Bioprocessing business for $477~~Brammer Bio were approximately $140 million in cash, subject to post-closing adjustment. This North America-based business adds complementary cell culture products that expand the segment's bioproduction offerings to help customers increase yield during production of biologic drugs. Revenues of the Advanced Bioprocessing business were $100 million in 2017.2018. The company expects to determine the preliminary purchase price allocation prior to the end of the ~~fourth~~second quarter of ~~2018.~~2019.

~~THERMO FISHER SCIENTIFIC INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Unaudited)~~

The company has entered into an agreement to acquire Gatan, Inc., a wholly owned subsidiary of Roper Technologies, Inc., for approximately $925 million in cash. Gatan is a leading manufacturer of instrumentation and software used to enhance and extend the operation and performance of electron microscopes. The transaction ~~which is expected to be completed by the end of 2018,~~ is subject to customary closing conditions, including regulatory approvals.

~~Unaudited Pro Forma Information~~

~~The following unaudited pro forma information provides the effect of the company's acquisition of Patheon as if the acquisition had occurred on January 1, 2016:~~

Three Months Ended Nine Months Ended
September 30,
September 30,
(In millions except per share amounts) 2017
2017

Revenues $ 5,393
$ 16,076

Net Income $ 522
$ 1,671

The historical consolidated financial information of the company and Patheon has been adjusted in the pro forma information to give effect to pro forma events that are directly attributable to the acquisition and related financing arrangements, are expected to have a continuing impact on the company, and are factually supportable.

To reflect the acquisition of Patheon as if it had occurred on January 1, 2016, the unaudited pro forma results include adjustments to reflect, among other things, the incremental intangible asset amortization to be incurred based on the values of each identifiable intangible asset and the interest expense from debt financing obtained to partially fund the cash consideration transferred. Pro forma adjustments were tax effected at the company's historical statutory rates in effect for the respective periods. The unaudited pro forma amounts are not necessarily indicative of the combined results of operations that would have been realized had the acquisition of Patheon and related financing occurred on January 1, 2016, nor are they meant to be indicative of any anticipated combined results of operations that the company will experience after the transaction. In addition, the amounts do not include any adjustments for actions that may be taken following the Upon successful completion of the ~~transaction, such as expected cost savings, operating synergies, or revenue enhancements that may be realized subsequent~~regulatory approval process, Gatan will become part of the Analytical Instruments segment.

Disposition

On January 28, 2019, the company entered into an agreement to sell its Anatomical Pathology business to PHC Holdings Corporation for approximately $1.14 billion. The business is part of the ~~transaction.~~

~~Pro forma net income for the nine months ended September 30, 2017, excludes certain items associated with the Patheon acquisition that were included~~Specialty Diagnostics segment. Revenues in the determination of net income for that period. These items have been included in the determination of pro forma net income for the nine months ended October 1, 2016 and are as follows: $42 million of direct transaction costs, $33 million of accounting policy conformity adjustments, $18 million of initial restructuring costs, $18 million reduction of revenues for revaluing the deferred revenue obligations to fair value, and $15 million of expense related to the fair value adjustment to acquisition-date inventories.first

~~The company’s results would not have been materially different from its pro forma results had the company’s other 2018 or 2017 acquisitions occurred at the beginning of 2017 or 2016, respectively.~~

THERMO FISHER SCIENTIFIC INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

three months of 2019 and the full year 2018 of the business to be sold were approximately $85 million and $344 million, respectively. The sale is subject to customary closing conditions and is expected to close in the second quarter of 2019. The assets and liabilities of the Anatomical Pathology business were as follows on March 30, 2019:



(In millions)	March 30, 2019

Current Assets	$	85
Long-term Assets	540
Current Liabilities	32
Long-term Liabilities	33


Note 3.	Revenue

Disaggregated Revenue

Revenue by type is as follows:


	Three Months Ended		Nine Months Ended		Three Months Ended
	September 29,		September 29,		March 30,		March 31,
(In millions)	2018		2018		2019		2018

Revenues
Consumables	3,056		$	9,345	$	3,230	3,111
Instruments	1,515		4,462		1,490		1,417
Services	1,349		4,044		1,405		1,325

Consolidated revenues	$	5,920	$	17,851	$	6,125	$	5,853

Revenue by geographic region is as follows:


	Three Months Ended		Nine Months Ended		Three Months Ended
	September 29,		September 29,		March 30,		March 31,
(In millions)	2018		2018		2019		2018

Revenues(a)
North America	$	3,030	$	8,975	$	3,059	$	2,903
Europe	1,454		4,521		1,519		1,518
Asia-Pacific	1,251		3,809		1,363		1,264
Other regions	185		546		184		168

Consolidated revenues	$	5,920	$	17,851	$	6,125	$	5,853


(a)	Revenues are attributed to regions based on customer location.

Each reportable segment earns revenues from consumables, instruments and services in North America, Europe, Asia-Pacific and other regions. See ~~note~~Note 4 for revenue 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 29, 2018~~March 30, 2019 was ~~$5.12~~$5.57 billion. The company will recognize revenue for these performance obligations as they are satisfied, approximately ~~90%~~85% of which is expected to occur within the next twelve months.

THERMO FISHER SCIENTIFIC INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)


Note 4.	Business Segment and Geographical Information

~~The company’s financial performance is reported in four segments. A description of each segment follows.~~

Life Sciences Solutions: provides an extensive portfolio of reagents, instruments and consumables used in biological and medical research, discovery and production of new drugs and vaccines as well as diagnosis of disease. These products and services are used by customers in pharmaceutical, biotechnology, agricultural, clinical, academic, and government markets.

Analytical Instruments: provides a broad offering of instruments, consumables, software and services that are used for a range of applications in the laboratory, on the production line and in the field. These products and services are used by customers in pharmaceutical, biotechnology, academic, government, environmental and other research and industrial markets, as well as the clinical laboratory.

Specialty Diagnostics: provides a wide range of diagnostic test kits, reagents, culture media, instruments and associated products used to increase the speed and accuracy of diagnoses. These products are used by customers in healthcare, clinical, pharmaceutical, industrial and food safety laboratories.

Laboratory Products and Services: provides virtually everything needed for the laboratory, including a combination of self-manufactured and sourced products for customers in research, academic, government, industrial and healthcare settings. The segment also includes a comprehensive offering of outsourced services used by the pharmaceutical and biotech industries for drug development, clinical trials logistics and commercial drug manufacturing.

The company’s management evaluates segment operating performance based on operating income before certain charges/credits to cost of revenues and selling, general and administrative expenses, principally associated with acquisition accounting; restructuring and other costs/income including costs arising from facility consolidations such as severance and abandoned lease expense and gains and losses from the sale of real estate and product lines as well as from significant litigation-related matters; and amortization of acquisition-related intangible assets. The company uses this measure because it helps management understand and evaluate the segments’ core operating results and facilitates comparison of performance for determining compensation.

~~THERMO FISHER SCIENTIFIC INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Unaudited)~~

Business Segment Information


	Three Months Ended						Nine Months Ended						Three Months Ended
	September 29,			September 30,			September 29,			September 30,			March 30,			March 31,
(In millions)	2018			2017			2018			2017			2019			2018

Revenues
Life Sciences Solutions	$	1,504		$	1,382		$	4,572		$	4,150		$	1,607		$	1,499
Analytical Instruments	1,333			1,189			3,901			3,407			1,322			1,257
Specialty Diagnostics	894			844			2,773			2,572			957			947
Laboratory Products and Services	2,470			1,933			7,433			5,424			2,513			2,413
Eliminations	(281		)	(232		)	(828		)	(682		)	(274		)	(263		)

Consolidated revenues	5,920			5,116			17,851			14,871			6,125			5,853

Segment Income (a)
Life Sciences Solutions	495			452			1,534			1,333			561			517
Analytical Instruments	294			257			831			681			282			246
Specialty Diagnostics	223			218			719			685			242			243
Laboratory Products and Services	299			243			916			704			285			280

Subtotal reportable segments (a)	1,311			1,170			4,000			3,403			1,370			1,286

Cost of revenues credits (charges), net	1			(45		)	(7		)	(77		)
Selling, general and administrative credits (charges), net	4			(37		)	(7		)	(75		)
Restructuring and other income (costs), net	27			(49		)	(35		)	(95		)
Cost of revenues charges, net													(6		)	(3		)
Selling, general and administrative charges, net													(11		)	(8		)
Restructuring and other costs, net													(11		)	(45		)
Amortization of acquisition-related intangible assets	(431		)	(405		)	(1,316		)	(1,153		)	(422		)	(444		)

Consolidated operating income	912			634			2,635			2,003			920			786
Other expense, net (b)	(102		)	(154		)	(385		)	(394		)	(103		)	(152		)

Income from continuing operations before income taxes	$	810		$	480		$	2,250		$	1,609		$	817		$	634

Depreciation
Life Sciences Solutions	$	29		$	32		$	89		$	97
Analytical Instruments	18			17			53			51
Specialty Diagnostics	19			19			56			54
Laboratory Products and Services	66			44			195			104

Consolidated depreciation	$	132		$	112		$	393		$	306


(a)	Represents operating income before certain charges to cost of revenues and selling, general and administrative expenses; restructuring and other costs, net; and amortization of acquisition-related intangibles.


(b)	The company does not allocate other expense, net to its segments.

THERMO FISHER SCIENTIFIC INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Geographical Information


	Three Months Ended				Nine Months Ended				Three Months Ended
	September 29,		September 30,		September 29,		September 30,		March 30,		March 31,
(In millions)	2018		2017		2018		2017		2019		2018

Revenues (c)
United States	$	2,918	$	2,454	$	8,588	$	7,315	$	2,918	$	2,756
China	629		523		1,818		1,476		654		541
Other	2,373		2,139		7,445		6,080		2,553		2,556

Consolidated revenues	$	5,920	$	5,116	$	17,851	$	14,871	$	6,125	$	5,853


(c)	Revenues are attributed to countries based on customer location.


Note 5.	Other Expense, Net

The components of other expense, net, in the accompanying statement of income are as follows:


	Three Months Ended						Nine Months Ended						Three Months Ended
	September 29,			September 30,			September 29,			September 30,			March 30,			March 31,
(In millions)	2018			2017			2018			2017			2019			2018

Interest Income	$	41		$	25		$	92		$	61		$	67		$	20
Interest Expense	(162		)	(157		)	(495		)	(426		)	(189		)	(163		)
Other Items, Net	19			(22		)	18			(29		)	19			(9		)

Other Expense, Net	$	(102	)	$	(154	)	$	(385	)	$	(394	)	$	(103	)	$	(152	)

Other Items, Net

In all periods, other items, net includes currency transaction gains and losses on monetary assets and liabilities and net periodic pension benefit cost/income, excluding the service cost component which is included in operating expenses on the accompanying statement of income.

THERMO FISHER SCIENTIFIC INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)


Note 6.	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						Three Months Ended
	September 29,			September 30,			March 30,			March 31,
(In millions)	2018			2017			2019			2018

Statutory Federal Income Tax Rate	21		%	35		%	21		%	21		%

Provision for Income Taxes at Statutory Rate	$	473		$	563		$	172		$	133

Increases (Decreases) Resulting From:
Foreign rate differential	(177		)	(287		)	(36		)	(51		)
Foreign exchange loss on inter-company debt refinancing	—			(237		)	(62		)	—
Income tax credits	(183		)	(101		)	(72		)	(41		)
Global intangible low-taxed income	124			—			70			32
Foreign-derived intangible income	(34		)	—			(12		)	(9		)
Withholding taxes	—			49
Singapore tax holiday	(29		)	(17		)	(7		)	(8		)
Impact of change in tax laws and apportionment on deferred taxes	14			(60		)
Transition tax and other initial impacts of U.S. tax reform	117			—
(Reversal of) provision for tax reserves, net	(49		)	13
Transition tax and other impacts of U.S. tax reform							(20		)	70
Reversal of tax reserves, net							(5		)	(49		)
Excess tax benefits from stock options and restricted stock units	(59		)	(51		)	(36		)	(25		)
Valuation allowance	—			50
Other, net	13			(11		)	10			3

Provision for (benefit from) income taxes	$	210		$	(89	)
Provision for income taxes							$	2		$	55

In the first quarter of ~~2018,~~2019, the company recorded a $62 million income tax benefit related to a foreign exchange loss for tax purposes on certain intercompany financing arrangements. In addition, the company recorded a net tax ~~provision~~benefit of ~~$21~~$27 million ~~to adjust~~in the ~~estimated initial impacts~~first quarter of ~~U.S. tax reform recorded in 2017,~~2019, consisting of an incremental ~~provision~~benefit of ~~$70~~$20 million ~~offset in part by~~and a ~~$49~~$7 million reduction of related unrecognized tax benefits, ~~established in 2017. In the third quarter of 2018, the company recorded an incremental provision of $47 million~~ to adjust the ~~estimated initial~~ impacts of U.S. tax reform ~~recorded in 2017. These adjustments were required~~ based on ~~new~~final regulations issued by the U.S. Treasury ~~guidance and further analysis of available tax accounting methods and elections, legislative updates, regulations, earnings and profits computations and taxpools.~~in January 2019.

The company has significant activities in Singapore and has received considerable tax incentives. The local taxing authority granted the company pioneer company status which provides an incentive encouraging companies to undertake activities that have the effect of promoting economic or technological development in Singapore. This incentive equates to a tax exemption on earnings associated with most of the company’s manufacturing activities in Singapore and continues through December 31, 2026. In ~~2018~~2019 and ~~2017,~~2018, the impact of this tax holiday decreased the annual effective tax rates by ~~1.3~~0.9 percentage points and ~~1.1~~1.3 percentage ~~point,~~points, respectively, and increased diluted earnings per share by approximately ~~$0.07~~$0.02 and ~~$0.04,~~$0.02, respectively.

Unrecognized Tax Benefits

As of ~~September 29, 2018,~~March 30, 2019, the company had ~~$1.37~~$1.43 billion of unrecognized tax benefits substantially all of which, if recognized, would reduce the effective tax rate.

THERMO FISHER SCIENTIFIC INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows:


(In millions)	2018			2019

Balance at beginning of year	$	1,409
Reductions due to acquisitions	(9		)
Balance at Beginning of Year				$	1,442
Additions for tax positions of current year	5			2
Additions for tax positions of prior years	88
Reductions for tax positions of prior years	(69		)	(7		)
Settlements	(52		)	(5		)

Balance at end of period	$	1,372
Balance at End of Period				$	1,432


Note 7.	Earnings per Share


	Three Months Ended				Nine Months Ended					Three Months Ended
	September 29,		September 30,		September 29,		September 30,			March 30,		March 31,
(In millions except per share amounts)	2018		2017		2018		2017			2019		2018

Income from Continuing Operations	$	709	$	534	$	2,040	$	1,698
Loss from Discontinued Operations	—		—		—		(1		)

Net Income	$	709	$	534	$	2,040	$	1,697		$	815	$	579

Basic Weighted Average Shares	402		396		402		392			400		402
Plus Effect of:
Stock options and restricted units	4		4		4		4			3		4

Diluted Weighted Average Shares	406		400		406		396			403		406

Basic Earnings per Share:
Continuing operations	$	1.76	$	1.35	$	5.07	$	4.33
Discontinued operations	—		—		—		—

Basic Earnings per Share	$	1.76	$	1.35	$	5.07	$	4.32		$	2.04	$	1.44

Diluted Earnings per Share:
Continuing operations	$	1.75	$	1.34	$	5.03	$	4.29
Discontinued operations	—		—		—		—

Diluted Earnings per Share	$	1.75	$	1.34	$	5.03	$	4.29		$	2.02	$	1.43

Antidilutive Stock Options Excluded from Diluted Weighted Average Shares	2		2		2		2			2		2

THERMO FISHER SCIENTIFIC INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)


Note 8.	Debt and Other Financing Arrangements


	Effective Interest Rate at September 29,		September 29,			December 31,			Effective Interest Rate at March 30,		March 30,			December 31,
(Dollars in millions)	2018		2018			2017			2019		2019			2018

Commercial Paper	—	%	$	429		$	960				$	—		$	693
Floating Rate 2-Year Senior Notes, Due 8/9/2018 (euro-denominated)			—			721
2.15% 3-Year Senior Notes, Due 12/14/2018			—			450
2.40% 5-Year Senior Notes, Due 2/1/2019			—			900
Floating Rate 2-Year Senior Notes, Due 7/24/2019 (euro-denominated)	0.10	%	581			600			0.10	%	561			574
6.00% 10-Year Senior Notes, Due 3/1/2020	2.98	%	750			750			2.97	%	750			750
4.70% 10-Year Senior Notes, Due 5/1/2020	4.23	%	300			300			4.23	%	300			300
Floating Rate 2-Year Senior Notes, Due 8/7/2020 (euro-denominated)	0.16	%	696			—			0.17	%	673			688
1.50% 5-Year Senior Notes, Due 12/1/2020 (euro-denominated)	1.62	%	493			510			1.62	%	477			487
5.00% 10-Year Senior Notes, Due 1/15/2021	3.25	%	400			400			3.24	%	400			400
4.50% 10-Year Senior Notes, Due 3/1/2021	7.06	%	1,000			1,000			6.78	%	1,000			1,000
3.60% 10-Year Senior Notes, Due 8/15/2021	6.83	%	1,100			1,100			6.42	%	1,100			1,100
3.30% 7-Year Senior Notes, Due 2/15/2022	3.42	%	800			800			3.42	%	800			800
2.15% 7-Year Senior Notes, Due 7/21/2022 (euro-denominated)	2.28	%	581			600			2.28	%	561			574
3.15% 10-Year Senior Notes, Due 1/15/2023	3.30	%	800			800			3.30	%	800			800
3.00% 7-Year Senior Notes, Due 4/15/2023	7.11	%	1,000			1,000			6.63	%	1,000			1,000
4.15% 10-Year Senior Notes, Due 2/1/2024	4.16	%	1,000			1,000			4.16	%	1,000			1,000
0.75% 8-Year Senior Notes, Due 9/12/2024 (euro-denominated)	0.94	%	1,160			1,201			0.94	%	1,122			1,147
2.00% 10-Year Senior Notes, Due 4/15/2025 (euro-denominated)	2.10	%	743			768			2.09	%	718			734
3.65% 10-Year Senior Notes, Due 12/15/2025	3.77	%	350			350			3.77	%	350			350
1.40% 8.5-Year Senior Notes, Due 1/23/2026 (euro-denominated)	1.53	%	812			840			1.53	%	785			802
2.95% 10-Year Senior Notes, Due 9/19/2026	3.19	%	1,200			1,200			3.19	%	1,200			1,200
1.45% 10-Year Senior Notes, Due 3/16/2027 (euro-denominated)	1.66	%	581			600			1.65	%	561			574
3.20% 10-Year Senior Notes, Due 8/15/2027	3.39	%	750			750			3.39	%	750			750
1.375% 12-Year Senior Notes, Due 9/12/2028 (euro-denominated)	1.46	%	696			721			1.46	%	673			688
1.95% 12-Year Senior Notes, Due 7/24/2029 (euro-denominated)	2.08	%	812			840			2.08	%	785			802
2.875% 20-Year Senior Notes, Due 7/24/2037 (euro-denominated)	2.94	%	812			840			2.94	%	785			802
5.30% 30-Year Senior Notes, Due 2/1/2044	5.37	%	400			400			5.37	%	400			400
4.10% 30-Year Senior Notes, Due 8/15/2047	4.23	%	750			750			4.23	%	750			750
Other			22			24					19			21

Total Borrowings at Par Value			19,018			21,175					18,320			19,186
Fair Value Hedge Accounting Adjustments			(143		)	(70		)			(68		)	(93		)
Unamortized Discount, Net			(16		)	(2		)			(26		)	(21		)
Unamortized Debt Issuance Costs			(85		)	(95		)			(78		)	(82		)

Total Borrowings at Carrying Value			18,774			21,008					18,148			18,990
Less: Short-term Obligations and Current Maturities			1,014			2,135					1,336			1,271

Long-term Obligations			$	17,760		$	18,873				$	16,812		$	17,719

The effective interest rates for the fixed-rate debt include the stated interest on the notes, the accretion of any discount or amortization of any premium, the amortization of any debt issuance costs and, if applicable, adjustments related to hedging.

See Note 1112 for fair value information pertaining to the company’s long-term obligations.

~~THERMO FISHER SCIENTIFIC INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Unaudited)~~

Credit Facilities

The company has a revolving credit facility with a bank group that provides for up to $2.50 billion of unsecured multi-currency revolving credit. The facility expires in July 2021. The agreement calls for interest at either a LIBOR-based 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

THERMO FISHER SCIENTIFIC INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

this type. The covenants in our revolving credit facility (the Facility) include a Consolidated Leverage Ratio (total debt-to-Consolidated EBITDA) and a Consolidated Interest Coverage Ratio (Consolidated EBITDA to Consolidated 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 maximum Consolidated Leverage Ratio of 3.5:1.0. The company has also agreed that so long as any lender has any commitment under the Facility or 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 3.0:1.0 as of the last day of any fiscal quarter. As of ~~September 29, 2018,~~March 30, 2019, no borrowings were outstanding under the Facility, although available capacity was reduced by approximately ~~$83~~$87 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 ~~September 29, 2018,~~March 30, 2019, there were no outstanding borrowings under these ~~programs were $429 million, with a weighted average remaining period to maturity of 8 days and are classified as short-term obligations in the accompanying balance sheet.~~programs.

Senior Notes

Interest on the floating rate senior notes is payable quarterly. Interest is payable annually on the other 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.

In 2018, Thermo Fisher Scientific (Finance I) B.V., a wholly-owned finance subsidiary of the company, issued the Floating Rate Senior Notes due 2020 included in the table above. This subsidiary has no independent function other than financing activities. The Floating Rate Senior Notes due 2020 are fully and unconditionally guaranteed by the company and no other subsidiaries of the company have guaranteed the obligations.

Interest Rate Swap Arrangements and related Cross-currency Interest Rate Swap Arrangements

The company has entered into LIBOR-based interest rate swap arrangements with various banks on several of its outstanding senior notes. The aggregate amounts of the swaps are equal to the principal amounts of the notes and the payment dates of the swaps coincide with the interest payment dates of the notes. The swap contracts provide for the company to pay a variable interest rate and receive a fixed rate. The variable interest rates reset monthly. The swaps have been accounted for as fair value hedges of the notes. See Note 1112 for additional information on the interest rate swap arrangements and related cross-currency interest rate swap arrangements. The following table summarizes the outstanding interest rate swap arrangements on the company's senior notes at ~~September 29, 2018:~~

~~THERMO FISHER SCIENTIFIC INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Unaudited)~~

March 30, 2019:


	Aggregate Notional Amount				Pay Rate as of					Aggregate Notional Amount				Pay Rate as of
(Dollars in millions)		Pay Rate		September 29, 2018			Receive Rate			Aggregate Notional Amount	Pay Rate		March 30, 2019			Receive Rate
	Aggregate Notional Amount
4.50% Senior Notes due 2021 (a)	1,000		1-month LIBOR + 3.4420%		5.5458	%		4.50	%	1,000		1-month LIBOR + 3.4420%		5.9313	%		4.50	%
3.60% Senior Notes due 2021	1,100		1-month LIBOR + 2.5150%		4.6734	%		3.60	%	1,100		1-month LIBOR + 2.5150%		4.9988	%		3.60	%
3.00% Senior Notes due 2023 (a)	1,000		1-month LIBOR + 1.7640%		3.9224	%		3.00	%	1,000		1-month LIBOR + 1.7640%		4.2478	%		3.00	%


(a)	The payments on ~~$1.2~~$1.8 billion notional value of these interest rate swaps are offset in part by cross-currency interest rate swaps which effectively reduced the pay rate as of ~~September 29, 2018~~March 30, 2019 from a weighted average of ~~4.73%~~4.93% to a weighted average of ~~1.97%~~1.86%.

~~In 2018, the~~The company has entered into ~~$1.2~~$1.8 billion notional value of cross-currency interest rate swaps, which effectively convert a portion of the semi-annual payments related to the variable rate, U.S. dollar denominated, LIBOR-based interest rate swaps to payments on variable rate, euro denominated, EURIBOR-based cross-currency interest rate swaps.

THERMO FISHER SCIENTIFIC INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)


Note 9.	Leases

As a lessee, the company leases certain logistics, office, and manufacturing facilities, as well as vehicles, copiers, and other equipment. These operating leases generally have remaining lease terms between 1 month and 30 years, and some include options to extend (generally for 1 to 10 years) or have options to terminate the arrangement within 1 year. The company’s finance leases are not material.

The company has guaranteed the residual value of three leased operating facilities with initial lease terms ending in 2019, 2020 and 2023. The company has agreed with the lessor to comply with certain financial covenants consistent with its other debt arrangements (Note 8). The aggregate maximum guarantee under these three lease arrangements is $147 million. Operating lease ROU assets and lease liabilities for these lease arrangements are recorded on the consolidated balance sheet as of March 30, 2019, but exclude any amounts for residual value guarantees.

As a lessee, the consolidated statement of income includes pre-tax operating lease costs and variable lease costs of $48 million and $9 million for the three months ended March 30, 2019. Lease costs arising from finance leases, short-term leases, and sublease income are not material.

Cash used in operating activities for payments of amounts included in the measurement of operating lease liabilities was $48 million in the three months ended March 30, 2019. Operating lease ROU assets of $13 million were obtained in exchange for new operating lease liabilities in the three months ended March 30, 2019.

The weighted-average remaining operating lease term was 6.2 years and the weighted average discount rate was 4.0% as of March 30, 2019.

ROU assets of $600 million as of March 30, 2019, are classified in other assets in the consolidated balance sheet. Operating lease liabilities of $156 million and $487 million as of March 30, 2019, are classified in other accrued expenses and other long-term liabilities, respectively, in the consolidated balance sheet.

As of March 30, 2019, future payments of operating lease liabilities are as follows:



(In millions)

Remainder of 2019	$	140
2020	158
2021	116
2022	84
2023	57
2024	39
2025 and Thereafter	134

Total Lease Payments	728
Less: Imputed Interest	85

Total Operating Lease Liability	$	643

As a lessor, operating leases, sales-type leases and direct financing leases are not material.

THERMO FISHER SCIENTIFIC INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

As previously disclosed in the company's 2018 Annual Report on Form 10-K and under previous lease accounting guidance, the following is a summary of annual future minimum lease and rental commitments under noncancelable operating leases as of December 31, 2018:



(In millions)

2019	$	192
2020	158
2021	118
2022	86
2023	58
2024 and Thereafter	177

	$	789


Note 9.10.	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. 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 reports prepared by 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. At ~~September 29, 2018,~~March 30, 2019, the company’s total environmental liability was approximately ~~$50~~$66 million. 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

There are various lawsuits and claims pending against the company including matters involving product liability, intellectual property, employment and commercial issues. The company determines the probability and range of possible loss 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. 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 below or in the company's ~~2017~~2018 financial statements and notes included in the company's Annual Report on Form 10-K filed with the SEC, 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

THERMO FISHER SCIENTIFIC INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

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.

~~THERMO FISHER SCIENTIFIC INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Unaudited)~~

Product Liability, Workers Compensation and Other Personal Injury Matters

For product liability, workers compensation and other personal injury matters, the company accrues the most likely amount or at least the minimum of the range of possible loss when a range of possible loss can be estimated. The company records estimated amounts due from insurers related to certain product liabilities as an asset. Although the company believes that the amounts accrued and estimated 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 materially. 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.

Intellectual Property Matters

On May 26, 2010, Promega Corp. & Max-Planck-Gesellschaft Zur Forderung Der Wissenschaften EV filed a complaint against Life Technologies in the United States District Court for the Western District of Wisconsin. The plaintiffs allege patent infringement by sales and uses of Applied Biosystems’ short tandem repeat DNA identification products outside the scope of a 2006 license agreement. The plaintiff sought damages for alleged willful infringement, attorneys’ fees, costs, prejudgment interest, and injunctive relief. Although a jury initially found willful infringement and assessed damages at $52 million the District Court subsequently overturned the verdict on the grounds that the plaintiff had failed to prove infringement. The District Court entered judgment in favor of Life Technologies; and plaintiffs and Life Technologies filed cross-appeals with the United States Court of Appeals for the Federal Circuit. The $52 million award was accrued by Life Technologies and the liability was assumed by the company as of the date of the acquisition. On December 15, 2014, the Court of Appeals issued a decision invalidating four of the plaintiffs’ patents, but finding infringement by Life Technologies of the remaining fifth patent. The Court of Appeals also ordered a new trial on damages in the District Court. Life Technologies' petition to the U.S. Supreme Court seeking review of the Court of Appeals’ judgment was granted on June 27, 2016, and the case was stayed in the District Court pending the outcome of the Supreme Court’s review. On February 22, 2017, the Supreme Court issued a decision reversing the Court of Appeals’ judgment and remanding the case to the Court of Appeals for further proceedings in view of the Supreme Court’s legal interpretation of the patent law statute in question. On November 13, 2017, the Court of Appeals issued a decision holding that Promega is not entitled to recover any damages and affirming the District Court’s grant of judgment in favor of Life Technologies and denial of Promega’s motion for a new trial. The Court of Appeals denied Promega’s petition for rehearing on February 14, 2018, and Promega filed a petition with the U.S. Supreme Court on June 14, 2018, seeking review of the Court of Appeals' decision. On October 1, 2018, the U.S. Supreme Court denied Promega's petition. As a result, the company reversed the $52 million accrual in the third quarter of 2018, and recorded the gain in restructuring and other costs (income), net, in the accompanying statement of income.

On June 3, 2013, Unisone Strategic IP filed a complaint against Life Technologies in the United States District Court for the Southern District of California alleging patent infringement by Life Technologies’ supply chain management system software, which operates with product "supply centers" installed at customer sites. Plaintiff seeks damages for alleged willful infringement, attorneys’ fees, costs, and injunctive relief. On August 24, 2017, Unisone filed an appeal from a decision by the Patent Trial and Appeal Board (PTAB) that found the challenged patent claims invalid. The United States Court of Appeals for the Federal Circuit upheld the PTAB’s ruling finding the challenged claims in the Unisone patent invalid. Unisone had until March 11, 2019 to file an appeal with the United States Supreme Court. Unisone did not appeal that decision, and consequently the case before the United States District Court, which had been stayed pending the outcome of the PTAB decision, will resume with respect to similar Unisone patent claims that were not included in the PTAB proceeding.

~~THERMO FISHER SCIENTIFIC INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Unaudited)~~


Note ~~10.~~11.	Comprehensive Income ~~and Shareholders' Equity~~

~~Comprehensive Income (Loss)~~

Comprehensive income (loss) combines net income and other comprehensive items. Other comprehensive items represent certain amounts that are reported as components of shareholders’ equity in the accompanying balance sheet.

Changes in each component of accumulated other comprehensive items, net of tax are as follows:


(In millions)	Currency Translation Adjustment			Unrealized Losses on Available-for- Sale Investments			Unrealized Losses on Hedging Instruments			Pension and Other Postretirement Benefit Liability Adjustment			Total			Currency Translation Adjustment			Unrealized Losses on Hedging Instruments			Pension and Other Postretirement Benefit Liability Adjustment			Total

Balance at December 31, 2017	$	(1,755	)	$	(1	)	$	(50	)	$	(197	)	$	(2,003	)
Cumulative effect of accounting changes (Note 1)	(54		)	1			(11		)	(24		)	(88		)

Balance at December 31, 2018																$	(2,243	)	$	(52	)	$	(203	)	$	(2,498	)
Other comprehensive income (loss) before reclassifications	(447		)	—			—			3			(444		)	(15		)	—			1			(14		)
Amounts reclassified from accumulated other comprehensive items	—			—			6			10			16			—			2			1			3

Net other comprehensive items	(447		)	—			6			13			(428		)	(15		)	2			2			(11		)

Balance at September 29, 2018	$	(2,256	)	$	—		$	(55	)	$	(208	)	$	(2,519	)
Balance at March 30, 2019																$	(2,258	)	$	(50	)	$	(201	)	$	(2,509	)

THERMO FISHER SCIENTIFIC INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)


Note ~~11.~~12.	Fair Value Measurements and Fair Value of Financial Instruments

Fair Value Measurements

The company uses the market approach technique to value its financial instruments and there were no changes in valuation techniques during ~~2018.~~2019. The company’s financial assets and liabilities carried at fair value are primarily comprised of insurance contracts, investments in money market funds, derivative contracts, mutual funds holding publicly traded securities and other investments in unit trusts held as assets to satisfy outstanding deferred compensation and retirement liabilities; and acquisition-related contingent consideration.

The fair value accounting guidance requires that assets and liabilities carried at fair value be classified and disclosed in one of the following three categories:

Level 1: Quoted market prices in active markets for identical assets or liabilities that the company has the ability to access.

Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data such as quoted prices, interest rates and yield curves.

Level 3: Inputs are unobservable data points that are not corroborated by market data.

~~THERMO FISHER SCIENTIFIC INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Unaudited)~~

The following tables present information about the company’s financial assets and liabilities measured at fair value on a recurring basis as of ~~September 29, 2018~~March 30, 2019 and December 31, ~~2017:~~2018:


	September 29,		Quoted Prices in Active Markets		Significant Other Observable Inputs		Significant Unobservable Inputs		March 30,		Quoted Prices in Active Markets		Significant Other Observable Inputs		Significant Unobservable Inputs
(In millions)	2018		(Level 1)		(Level 2)		(Level 3)		2019		(Level 1)		(Level 2)		(Level 3)

Assets
Cash equivalents	$	49	$	49	$	—	$	—	$	77	$	77	$	—	$	—
Bank time deposits	2		2		—		—		2		2		—		—
Investments in mutual funds and other similar instruments	12		12		—		—
Investments in common stock, mutual funds and other similar instruments									19		19		—		—
Warrants	11		—		11		—		6		—		6		—
Insurance contracts	122		—		122		—		120		—		120		—
Derivative contracts	22		—		22		—		75		—		75		—

Total Assets	$	218	$	63	$	155	$	—	$	299	$	98	$	201	$	—

Liabilities
Derivative contracts	$	185	$	—	$	185	$	—	$	103	$	—	$	103	$	—
Contingent consideration	34		—		—		34		37		—		—		37

Total Liabilities	$	219	$	—	$	185	$	34	$	140	$	—	$	103	$	37

THERMO FISHER SCIENTIFIC INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)


	December 31,		Quoted Prices in Active Markets		Significant Other Observable Inputs		Significant Unobservable Inputs		December 31,		Quoted Prices in Active Markets		Significant Other Observable Inputs		Significant Unobservable Inputs
(In millions)	2017		(Level 1)		(Level 2)		(Level 3)		2018		(Level 1)		(Level 2)		(Level 3)

Assets
Cash equivalents	$	22	$	22	$	—	$	—	$	769	$	769	$	—	$	—
Bank time deposits	2		2		—		—		2		2		—		—
Investments in mutual funds and other similar instruments	13		13		—		—		10		10		—		—
Warrants	2		—		2		—		8		—		8		—
Insurance contracts	116		—		116		—		113		—		113		—
Derivative contracts	10		—		10		—		31		—		31		—

Total Assets	$	165	$	37	$	128	$	—	$	933	$	781	$	152	$	—

Liabilities
Derivative contracts	$	139	$	—	$	139	$	—	$	145	$	—	$	145	$	—
Contingent consideration	35		—		—		35		37		—		—		37

Total Liabilities	$	174	$	—	$	139	$	35	$	182	$	—	$	145	$	37

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 determines the fair value of acquisition-related contingent consideration based on the probability-weighted discounted cash flows associated with such future payments. 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, of the contingent consideration.

~~THERMO FISHER SCIENTIFIC INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Unaudited)~~


	Nine Months Ended						Three Months Ended
	September 29,			September 30,			March 30,		March 31,
(In millions)	2018			2017			2019		2018

Contingent Consideration
Beginning Balance	$	35		$	6		$	37	$	35
Acquisitions	11			12			—		11
Payments	(8		)	(1		)	—		(5		)
Change in fair value included in earnings	(4		)	26

Ending Balance	$	34		$	43		$	37	$	41

Derivative Contracts

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


	September 29,		December 31,		March 30,		December 31,
(In millions)	2018		2017		2019		2018

Notional Amount
Interest rate swaps (described in Note 8)	$	3,100	$	3,100	$	3,100	$	3,100
Cross-currency interest rate swaps - designated as net investment hedges	1,200		—		1,800		1,500
Currency exchange contracts	2,991		2,921		3,879		3,424

THERMO FISHER SCIENTIFIC INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

While certain derivatives are subject to netting arrangements with counterparties, the company does not offset derivative assets and liabilities within the consolidated balance sheet. The following tables present the fair value of derivative instruments in the consolidated balance sheet and statement of income.


		Fair Value – Assets				Fair Value – Liabilities					Fair Value – Assets				Fair Value – Liabilities
		September 29,		December 31,		September 29,		December 31,			March 30,		December 31,		March 30,		December 31,
(In millions)		2018		2017		2018		2017			2019		2018		2019		2018

Derivatives Designated as Hedging Instruments	Derivatives Designated as Hedging Instruments									Derivatives Designated as Hedging Instruments
Interest rate swaps (a)		$	—	$	—	$	180	$	124		$	—	$	—	$	100	$	129
Cross-currency interest rate swaps (b)		8		—		—		—			66		28		—		—
Derivatives Not Designated as Hedging Instruments	Derivatives Not Designated as Hedging Instruments									Derivatives Not Designated as Hedging Instruments
Currency exchange contracts (c)		14		10		5		15			9		3		3		16

Total Derivatives		$	22	$	10	$	185	$	139		$	75	$	31	$	103	$	145


(a)	The fair value of the interest rate swaps is included in the consolidated balance sheet under the caption other long-term liabilities.


(b)	The fair value of the cross-currency interest rate swaps is included in the consolidated balance sheet under the caption other assets.


(c)	The fair value of the currency exchange contracts is included in the consolidated balance sheet under the captions other current assets or other accrued expenses.

~~THERMO FISHER SCIENTIFIC INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Unaudited)~~

The following amounts related to cumulative basis adjustments for fair value hedges were included in the consolidated 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 (d)						Carrying Amount of the Hedged Liability				Cumulative Amount of Fair Value Hedging Adjustment - Increase (Decrease) Included in Carrying Amount of Liability (d)
	September 29,		December 31,		September 29,			December 31,			March 30,		December 31,		March 30,			December 31,
(In millions)	2018		2017		2018			2017			2019		2018		2019			2018

Long-term Obligations	$	3,240	$	3,309	$	(143	)	$	(70	)	$	3,317	$	3,291	$	(68	)	$	(93	)


(d)	Includes increases in the carrying amount of ~~$34~~$27 million and ~~$43~~$30 million at ~~September 29, 2018~~March 30, 2019 and December 31, ~~2017,~~2018, respectively, on discontinued hedging relationships.

THERMO FISHER SCIENTIFIC INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Gain (Loss) Recognized
Three Months Ended Nine Months Ended
September 29,
September 30,
September 29,
September 30,
(In millions) 2018
2017
2018
2017

Fair Value Hedging Relationships
Interest rate swaps
Hedged long-term obligations - included in other expense, net $ (8 ) $ 2
$ (57 ) $ 12
Derivatives designated as hedging instruments - included in other expense, net 8
(4 ) 60
(9 )
Derivatives Designated as Cash Flow Hedges
Interest rate swaps
Amount reclassified from accumulated other comprehensive items to other expense, net (3 ) (3 ) (9 ) (9 )
Derivatives Designated as Net Investment Hedges
Foreign currency-denominated debt
Included in currency translation adjustment within other comprehensive items 50
(216 ) 250
(545 )
Cross-currency interest rate swaps
Included in currency translation adjustment within other comprehensive items 5
—
8
—
Included in other expense, net 9
—
12
—
Derivatives Not Designated as Hedging Instruments
Currency exchange contracts
Included in cost of revenues 1
4
1
2
Included in other expense, net (2 ) 33
25
104



	Gain (Loss) Recognized
	Three Months Ended
	March 30,			March 31,
(In millions)	2019			2018

Fair Value Hedging Relationships
Interest rate swaps
Hedged long-term obligations - included in other expense, net	$	(28	)	$	42
Derivatives designated as hedging instruments - included in other expense, net	29			(38		)
Derivatives Designated as Cash Flow Hedges
Interest rate swaps
Amount reclassified from accumulated other comprehensive items to other expense, net	(3		)	(3		)
Derivatives Designated as Net Investment Hedges
Foreign currency-denominated debt
Included in currency translation adjustment within other comprehensive items	156			(200		)
Cross-currency interest rate swaps
Included in currency translation adjustment within other comprehensive items	37			—
Included in other expense, net	14			—
Derivatives Not Designated as Hedging Instruments
Currency exchange contracts
Included in cost of product revenues	2			(2		)
Included in other expense, net	17			(8		)

Gains and losses recognized on currency exchange contracts and the interest rate swaps designated as fair value hedges are included in the consolidated statement of income together with the corresponding, offsetting losses and gains on the underlying hedged transactions.

The company also 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 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 ~~2017~~2018 included in the company's Annual Report on Form 10-K and Note 8 herein for additional information on the company's risk management objectives and strategies.

~~THERMO FISHER SCIENTIFIC INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Unaudited)~~

Fair Value of Other Financial Instruments

The carrying value and fair value of the company’s notes receivable and debt obligations are as follows:


	September 29, 2018				December 31, 2017				March 30, 2019				December 31, 2018
	Carrying		Fair		Carrying		Fair		Carrying		Fair		Carrying		Fair
(In millions)	Value		Value		Value		Value		Value		Value		Value		Value

Notes Receivable	$	92	$	97	$	89	$	93

Debt Obligations:
Senior notes	$	18,323	$	18,487	$	20,024	$	20,639	$	18,129	$	18,781	$	18,276	$	18,322
Commercial paper	429		429		960		960		—		—		693		693
Other	22		22		24		24		19		19		21		21

	$	18,774	$	18,938	$	21,008	$	21,623	$	18,148	$	18,800	$	18,990	$	19,036

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

THERMO FISHER SCIENTIFIC INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)


Note ~~12.~~13.	Supplemental Cash Flow Information


	Nine Months Ended				Three Months Ended
	September 29,		September 30,		March 30,		March 31,
(In millions)	2018		2017		2019		2018

Non-cash Investing and Financing Activities
Declared but unpaid dividends	$	69	$	61	$	77	$	69
Issuance of stock upon vesting of restricted stock units	167		120		69		61

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


	September 29,		December 31,		March 30,		December 31,
(In millions)	2018		2017		2019		2018

Cash and Cash Equivalents	$	1,098	$	1,335	$	1,106	$	2,103
Restricted Cash Included in Other Current Assets	11		24		21		12
Restricted Cash Included in Other Assets	2		2		1		2

Cash, Cash Equivalents and Restricted Cash	$	1,111	$	1,361	$	1,128	$	2,117

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


Note ~~13.~~14.	Restructuring and Other Costs, ~~(Income),~~ Net

Restructuring and other costs, net, in the first ~~nine~~three months of ~~2018~~2019 included continuing charges for headcount reductions and facility consolidations in an effort to streamline operations, including the closure and consolidation of operations within several facilities in the U.S. and Europe; third-party transaction/integration costs related to ~~the~~recently announced acquisitions ~~of Patheon~~ and ~~Gatan;~~divestiture; and sales of inventories revalued at the date of ~~acquisition; and gains from the favorable results of litigation.~~acquisition. In the first ~~nine~~three months of ~~2018,~~2019, severance actions associated with facility consolidations and cost reduction measures affected ~~approximately~~less than 1% of the company’s workforce.

As of May 3, 2019, the company has identified restructuring actions that will result in additional charges of approximately $65 million, primarily in 2019 and 2020, and expects to identify additional actions during 2019 which will be recorded when specified criteria are met, such as communication of benefit arrangements or when the costs have been incurred.

First Three Months of 2019

During the first three months of 2019, the company recorded net restructuring and other costs by segment as follows:



(In millions)	Cost of Revenues		Selling, General and Administrative Expenses		Restructuring and Other Costs, Net		Total

Life Sciences Solutions	$	6	$	—	$	3	$	9
Analytical Instruments	—		6		4		10
Specialty Diagnostics	—		4		1		5
Laboratory Products and Services	—		1		2		3
Corporate	—		—		1		1

	$	6	$	11	$	11	$	28

THERMO FISHER SCIENTIFIC INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

As of November 2, 2018, the company has identified restructuring actions that will result in additional charges of approximately $95 million, primarily in 2018 and 2019, which will be recorded when specified criteria are met, such as communication of benefit arrangements and abandonment of leased facilities.

~~Third Quarter of 2018~~

~~During the third quarter of 2018, the company recorded net restructuring and other income by segment as follows:~~

(In millions) Cost of Revenues (Credits) Charges, Net
Selling, General and Administrative (Credits) Charges, Net
Restructuring and Other (Income) Costs, Net
Total

Life Sciences Solutions $ —
$ (2 ) $ (47 ) $ (49 )
Analytical Instruments —
4
18
22
Specialty Diagnostics —
—
1
1
Laboratory Products and Services (1 ) 5
1
5
Corporate —
(11 ) —
(11 )

$ (1 ) $ (4 ) $ (27 ) $ (32 )

The principal components of net restructuring and other costs by segment are as follows:

Life Sciences Solutions

In the ~~third quarter~~first three months of ~~2018,~~2019, the Life Sciences Solutions segment recorded ~~$49~~$9 million of net restructuring and other ~~income,~~costs, principally charges to cost of revenues of $6 million for ~~a gain on~~ the ~~resolution~~sales of ~~litigation, partially offset by cash restructuring~~inventory revalued at the date of acquisition. The segment also recorded $3 million of charges for ~~employee~~ severance and other costs associated with facility consolidations in the U.S. and Europe.

Analytical Instruments

In the ~~third quarter~~first three months of ~~2018,~~2019, the Analytical Instruments segment recorded ~~$22~~$10 million of net restructuring and other ~~charges. The segment recorded $4~~charges, including $6 million of charges to selling, general, and administrative ~~expenses~~expense for third-party transaction costs related to the pending acquisition of Gatan. The segment also recorded ~~$18~~$4 million of restructuring and other costs, primarily for employee severance and other costs associated with facility consolidations in the U.S. and Europe.

~~Laboratory Products and Services~~Specialty Diagnostics

In the ~~third quarter~~first three months of ~~2018,~~2019, the ~~Laboratory Products and Services~~Specialty Diagnostics segment recorded $5 million of net restructuring and other charges, principally ~~charges to selling, general, and administrative expenses for third-party transaction/integration costs related to the acquisition of Patheon.~~

~~Corporate~~

~~In the third quarter of 2018, the company recorded $11~~$4 million of ~~net restructuring and other income from favorable results of product liability litigation.~~

~~THERMO FISHER SCIENTIFIC INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Unaudited)~~

~~First Nine Months of 2018~~

~~During the first nine months of 2018, the company recorded net restructuring and other costs by segment as follows:~~

(In millions) Cost of
Revenues
Selling,
General and
Administrative
Expenses
Restructuring
and Other
Costs, Net
Total

Life Sciences Solutions $ —
$ (2 ) $ (24 ) $ (26 )
Analytical Instruments 2
3
39
44
Specialty Diagnostics —
—
5
5
Laboratory Products and Services 5
16
14
35
Corporate —
(10 ) 1
(9 )

$ 7
$ 7
$ 35
$ 49

~~The principal components of net restructuring and other costs by segment are as follows:~~

~~Life Sciences Solutions~~

In the first nine months of 2018, the Life Sciences Solutions segment recorded $26 million of net restructuring and other income, principally for a gain on the resolution of litigation, partially offset by charges for severance other costs associated with facility consolidations in the U.S.

~~Analytical Instruments~~

In the first nine months of 2018, the Analytical Instruments segment recorded $44 million of net restructuring and other charges. The segment recorded net charges to cost of revenues of $2 million for the sales of inventory revalued at the date of acquisition; $3 million of net charges to selling, general, and administrative expense ~~principally~~for third-party transaction costs ~~related to the acquisition of Gatan; and $39 million of restructuring and other costs, primarily for employee severance and other costs associated with facility consolidations~~ in ~~the U.S. and Europe, as well as abandoned facilities costs associated~~connection with the ~~remediation and closure~~planned sale of ~~a manufacturing facility in~~ the ~~U.S.~~

~~Specialty Diagnostics~~

~~In the first nine months of 2018, the Specialty Diagnostics~~Anatomical Pathology business. The segment also recorded $5$1 million of ~~net restructuring and other~~ charges for severance and other costs associated with facility consolidations in the U.S. and Europe.

Laboratory Products and Services

In the first ~~nine~~three months of ~~2018,~~2019, the Laboratory Products and Services segment recorded ~~$35~~$3 million of net restructuring and other charges. The segment recorded ~~charges to cost of revenues of $5 million for the sales of inventory revalued at the date of acquisition, as well as $16~~$1 million of charges to selling, general, and administrative ~~expenses~~expense for third-party ~~transaction/integration~~transaction costs related to the acquisition of ~~Patheon.~~Brammer Bio. The segment also recorded ~~$14~~$2 million of restructuring and other costs, primarily for employee ~~severance, as well as hurricane response costs.~~severance.

Corporate

In the first ~~nine~~three months of ~~2018,~~2019, the company recorded $9$1 million of net restructuring and other ~~income, principally income from favorable results of product liability litigation, partially offset by charges~~costs for severance at its corporate operations.

~~THERMO FISHER SCIENTIFIC INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Unaudited)~~

The following table summarizes the cash components of the company’s restructuring plans. The non-cash components and other amounts reported as restructuring and other costs, net, in the accompanying statement of income have been summarized in the notes to the tables. Accrued restructuring costs are included in other accrued expenses in the accompanying balance sheet.

(In millions) Severance

Abandonment
of Excess
Facilities

Other (a)
Total

Balance at December 31, 2017 $ 30
$ 40
$ 6
$ 76
Costs incurred in 2018 (c) 47
29
13
89
Reserves reversed (b) (7 ) (6 ) (1 ) (14 )
Payments (29 ) (20 ) (13 ) (62 )
Currency translation (1 ) —
—
(1 )

Balance at September 29, 2018 $ 40
$ 43
$ 5
$ 88



(In millions)	Severance			Abandonment of Excess Facilities			Other (a)			Total

Balance at December 31, 2018	$	34		$	42		$	4		$	80
Cumulative effect of accounting change (b)	—			(28		)	—			(28		)
Costs incurred in 2019	8			—			3			11
Reserves reversed (c)	(1		)	—			—			(1		)
Payments	(7		)	(4		)	(3		)	(14		)

Balance at March 30, 2019	$	34		$	10		$	4		$	48


(a)	Other includes 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)	~~Represents reductions in cost~~Impact of ~~plans.~~adopting new lease accounting guidance on January 1, 2019.


(c)	~~Excludes $40 million~~Represents reductions in cost of ~~income, net, primarily associated with litigation-related matters, hurricane response costs, and non-cash compensation due at an acquired business.~~plans.

The company expects to pay accrued restructuring costs ~~as follows: severance, employee-retention obligations and other costs,~~ primarily through ~~2019; and abandoned-facility payments, over lease terms expiring through 2027.~~2019.

THERMO FISHER SCIENTIFIC INC.


Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-looking statements, within the meaning of Section 21E of the Securities Exchange Act of 1934 are made throughout this Management’s Discussion and Analysis of Financial Condition and Results of Operations. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements, including without limitation statements regarding: projections of revenue, expenses, earnings, margins, tax rates, tax provisions, cash flows, pension and benefit obligations and funding requirements, our liquidity position; cost reductions, restructuring activities, new product and service developments, competitive strengths or market position, acquisitions or divestitures; growth, declines and other trends in markets we sell into; new or modified laws, regulations and accounting pronouncements; outstanding claims, legal proceedings, tax audits and assessments and other contingent liabilities; foreign currency exchange rates and fluctuations in those rates; general economic and capital markets conditions; the timing of any of the foregoing; assumptions underlying any of the foregoing; and any other statements that address events or developments that Thermo Fisher intends or believes will or may occur in the future. Without limiting the foregoing, the words "believes," "anticipates," "plans," "expects," "seeks," "estimates," and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements are accompanied by such words. While the company may elect to update forward-looking statements in the future, it specifically disclaims any obligation to do so, even if the company’s estimates change, and readers should not rely on those forward-looking statements as representing the company’s views as of any date subsequent to the date of the filing of this Quarterly Report.

A number of important factors could cause the results of the company to differ materially from those indicated by such forward-looking statements, including those detailed under the heading "Risk Factors" in Part II, Item 1A of this report on Form 10-Q.

Overview

The company develops, manufactures and sells a broad range of products that are sold worldwide. The company expands the product lines and services it offers by developing and commercializing its own technologies and by making strategic acquisitions of complementary businesses. The company’s continuing operations fall into four business segments (see Note 4): Life Sciences Solutions, Analytical Instruments, Specialty Diagnostics and Laboratory Products and Services.

Recent Acquisitions

The company’s strategy is to augment internal growth at existing businesses with complementary acquisitions. The company’s principal recent acquisitions and divestitures are described below.

On ~~February 14, 2017,~~October 25, 2018, the company acquired, within the Life Sciences Solutions segment, ~~Finesse Solutions, Inc., a~~Becton Dickinson and Company's Advanced Bioprocessing business for $477 million in cash. This North America-based ~~developer~~business adds complementary cell culture products that expand the segment's bioproduction offerings to help customers increase yield during production of ~~scalable control automation systems and software for bioproduction, for a total purchase price of $221 million, net of cash acquired. The acquisition expanded the company's bioproduction offerings.~~biologic drugs. Revenues of ~~Finesse Solutions~~the Advanced Bioprocessing business were ~~approximately $50~~$100 million in ~~2016.~~2017.

On March 2, 2017, the company acquired, within the Analytical Instruments segment, Core Informatics, a North America-based provider of cloud-based platforms supporting scientific data management, for a total purchase price of $94 million, net of cash acquired. The acquisition enhanced the company's existing informatics solutions. Revenues of Core Informatics were approximately $10 million in 2016.

On August 29, 2017, the company acquired, within the Laboratory Products and Services segment, substantially all of the issued and outstanding shares of Patheon N.V., a leading global provider of high-quality drug development and delivery solutions to the pharmaceutical and biopharma sectors, for $35.00 per share in cash, or $7.36 billion, including the assumption of net debt. The company financed the purchase price, including the repayment of indebtedness of Patheon, with issuances of debt and equity.

Patheon provides comprehensive, integrated and highly customizable solutions as well as the expertise to help biopharmaceutical companies of all sizes satisfy complex development and manufacturing needs. The acquisition provided entry into the pharmaceutical contract development and manufacturing organization market and added a complementary service to the company's existing pharmaceutical services portfolio. Patheon's revenues totaled $1.87 billion for the year ended October 31, 2016.

~~THERMO FISHER SCIENTIFIC INC.~~

~~MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION~~

~~AND RESULTS OF OPERATIONS~~

Overview of Results of Operations and Liquidity


	Three Months Ended										Nine Months Ended										Three Months Ended
	September 29,					September 30,					September 29,					September 30,					March 30,					March 31,
(Dollars in millions)	2018					2017					2018					2017					2019					2018

Revenues
Life Sciences Solutions	$	1,504		25.4	%	$	1,382		27.0	%	$	4,572		25.6	%	$	4,150		27.9	%	$	1,607		26.2	%	$	1,499		25.6	%
Analytical Instruments	1,333			22.5	%	1,189			23.2	%	3,901			21.9	%	3,407			22.9	%	1,322			21.6	%	1,257			21.5	%
Specialty Diagnostics	894			15.1	%	844			16.5	%	2,773			15.5	%	2,572			17.3	%	957			15.6	%	947			16.2	%
Laboratory Products and Services	2,470			41.7	%	1,933			37.8	%	7,433			41.6	%	5,424			36.5	%	2,513			41.0	%	2,413			41.2	%
Eliminations	(281		)	(4.7	)%	(232		)	(4.5	)%	(828		)	(4.6	)%	(682		)	(4.6	)%	(274		)	(4.4	)%	(263		)	(4.5	)%

	$	5,920		100	%	$	5,116		100	%	$	17,851		100	%	$	14,871		100	%	$	6,125		100	%	$	5,853		100	%

Sales in the ~~third~~first quarter of ~~2018~~2019 were ~~$5.92~~$6.13 billion, an increase of ~~$804~~$272 million from ~~2017.~~2018. Sales increased ~~$348~~$31 million due to acquisitions. The unfavorable effects of currency translation resulted in a decrease in revenues of ~~$49~~$180 million in the ~~third~~first quarter of ~~2018.~~2019. Aside from the effects of acquisitions and currency translation, revenues increased ~~$505~~$421 million ~~(10%~~(7%) primarily due to increased demand in the quarter compared to the ~~2017~~2018 quarter. Sales to customers in each of the company's primary end markets grew. Sales growth was strong in each of the company's primary geographic areas, particularly Asia.

THERMO FISHER SCIENTIFIC INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

Overview of Results of Operations and Liquidity (continued)

In the ~~third~~first quarter of ~~2018,~~2019, total company operating income and operating income margin were ~~$912~~$920 million and ~~15.4%~~15.0%, respectively, compared with ~~$634~~$786 million and ~~12.4%~~13.4%, respectively, in ~~2017.~~2018. The increase in operating income was primarily due to profit on higher sales and, to a lesser extent, ~~the effect~~productivity improvements, net of ~~acquisitions,~~inflationary cost increases, and lower restructuring and other costs, net. These increases were offset in part by strategic growth investments, unfavorable foreign currency exchange and unfavorable sales mix. The company’s references to strategic growth investments generally refer to targeted spending for enhancing commercial capabilities, including expansion of geographic sales reach and e-commerce platforms, marketing initiatives, expanded service and operational infrastructure, focused research projects and other expenditures to enhance the customer experience. The company’s references throughout this discussion to productivity improvements generally refer to improved cost efficiencies from its Practical Process Improvement (PPI) business system, reduced costs resulting from global sourcing initiatives, a lower cost structure following restructuring actions, including headcount reductions and consolidation of facilities, and low cost region manufacturing.

The ~~company's effective tax rate was 12.5%~~company recorded a $2 million provision for income taxes in the ~~third~~first quarter of ~~2018.~~2019. The company recorded a $62 million income tax benefit related to a foreign exchange loss for tax purposes on certain intercompany financing arrangements. In ~~the third quarter of 2018,~~addition, the company recorded a net tax ~~provision~~benefit of ~~$47~~$27 million in the first quarter of 2019, to adjust the ~~estimated initial~~ impacts of U.S. tax reform ~~recorded in 2017. This adjustment was required~~ based on ~~further analysis of available tax accounting methods and elections, legislative updates,~~final regulations ~~earnings and profits computations and taxpools.~~issued by the U.S. Treasury in January 2019. The company expects its effective tax rate for all of ~~2018~~2019 will be between 7%6% and ~~10%~~9% based on currently forecasted rates of profitability in the countries in which the company conducts business and expected generation of foreign tax credits. Due primarily to the non-deductibility of intangible asset amortization for tax purposes, the company’s cash payments for income taxes are higher than its income tax expense for financial reporting purposes and are expected to total ~~$525~~$725 to ~~$575~~$775 million in ~~2018.~~2019.

The company recorded a ~~$54~~$55 million ~~benefit from~~provision for income taxes in the ~~third~~first quarter of ~~2017.~~2018. In the ~~third~~first quarter of ~~2017,~~2018, the company ~~refinanced certain long term inter-company debt which resulted~~recorded a net tax provision of $21 million to adjust the estimated initial impacts of U.S. tax reform recorded in 2017, consisting of an ~~income~~incremental provision of $70 million offset in part by a $49 million reduction of related unrecognized tax ~~benefit~~benefits established in 2017. The adjustment was required based on new U.S. Treasury guidance released in the first quarter of $237 million related to a foreign exchange loss recognized for income tax purposes. As a result of this foreign exchange loss, the company reduced its forecasted benefit from foreign tax credits by $100 million as this loss reduced expected U.S. taxes that these credits would have offset for 2017.2018.

Net income increased to ~~$709~~$815 million in the ~~third~~first quarter of ~~2018~~2019 from ~~$534~~$579 million in the ~~third~~first quarter of ~~2017,~~2018, primarily due to the increase in operating income in the ~~2018~~2019 period (discussed above) ~~offset in part by higher~~and, to a lesser extent, lower income taxes (discussed above).

During the first ~~nine~~three months of ~~2018,~~2019, the company’s cash flow from operations totaled ~~$2.74 billion~~$649 million compared with ~~$2.14 billion~~$78 million for ~~2017.~~2018. The increase primarily resulted from higher income before amortization and depreciation in the ~~2018~~2019 period ~~offset in part by higher~~and lower investment in working capital in ~~2018.~~2019.

~~THERMO FISHER SCIENTIFIC INC.~~

~~MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION~~

~~AND RESULTS OF OPERATIONS~~

~~Overview of Results of Operations and Liquidity (continued)~~

the event that commercial paper markets are not available. As of ~~September 29, 2018,~~March 30, 2019, no borrowings were outstanding under the company’s revolving credit facility, although available capacity was reduced by approximately ~~$83~~$87 million as a result of outstanding letters of credit.

~~In October 2018,~~On April 30, 2019, the company completed the acquisition of ~~the Advanced Bioprocessing business~~Brammer Bio for ~~$477 million~~approximately $1.7 billion in cash (Note 2). The acquisition was funded with a combination of existing cash balances and short-term borrowings. The company also expects to fund the acquisition of Gatan ~~(Note 2)~~ with a combination of ~~new debt financing~~existing cash balances and ~~cash.~~short-term borrowings. The company believes that its existing cash and cash equivalents of ~~$1.10~~$1.11 billion as of ~~September 29, 2018~~March 30, 2019 and its future cash flow from operations together with available borrowing capacity under its revolving credit agreement will be sufficient to meet the cash requirements of its existing businesses for the foreseeable future, including at least the next 24 months.

Critical Accounting Policies and Estimates

The company’s discussion and analysis of its financial condition and results of operations is based upon its financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses and related disclosure of contingent liabilities. On an on-going basis, management evaluates its estimates, including those related to ~~business combinations,~~ intangible assets and goodwill, income taxes, contingencies and litigation, and pension costs. Management believes the most complex and sensitive judgments, because of their significance to the consolidated financial statements, result primarily from the need to make estimates about the effects of matters that are inherently uncertain. Management bases its estimates on historical experience, current market and economic

THERMO FISHER SCIENTIFIC INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

conditions and other assumptions that management believes are reasonable. The results of these estimates form the basis for judgments about the carrying value of assets and liabilities where the values are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Management’s Discussion and Analysis and Note 1 to the Consolidated Financial Statements of the company’s Form 10-K for ~~2017,~~2018, describe the significant accounting estimates and policies used in preparation of the consolidated financial statements. While there have been no significant changes in the company's critical accounting policies during the first ~~nine~~three months of ~~2018,~~2019, as described in Note 1, the company changed the manner in which it accounts for ~~revenue from contracts with customers~~leases under guidance that became effective January 1, ~~2018.~~2019.

Results of Operations

~~Third~~First Quarter ~~2018~~2019 Compared With ~~Third~~First Quarter ~~2017~~2018


	Three Months Ended																		Three Months Ended
(In millions)	September 29, 2018			September 30, 2017			Total Change			Currency Translation			Acquisitions			Operations			March 30, 2019			March 31, 2018			Total Change			Currency Translation			Acquisitions		Operations

Revenues
Life Sciences Solutions	$	1,504		$	1,382		$	122		$	(15	)	$	3		$	134		$	1,607		$	1,499		$	108		$	(48	)	$	31	$	125
Analytical Instruments	1,333			1,189			144			(13		)	10			147			1,322			1,257			65			(38		)	—		103
Specialty Diagnostics	894			844			50			(6		)	—			56			957			947			10			(27		)	—		37
Laboratory Products and Services	2,470			1,933			537			(16		)	339			214			2,513			2,413			100			(72		)	—		172
Eliminations	(281		)	(232		)	(49		)	1			(4		)	(46		)	(274		)	(263		)	(11		)	5			—		(16		)

Consolidated Revenues	$	5,920		$	5,116		$	804		$	(49	)	$	348		$	505		$	6,125		$	5,853		$	272		$	(180	)	$	31	$	421

Sales in the ~~third~~first quarter of ~~2018~~2019 were ~~$5.92~~$6.13 billion, an increase of ~~$804~~$272 million from the ~~third~~first quarter of ~~2017.~~2018. Sales increased ~~$348~~$31 million due to acquisitions. The unfavorable effects of currency translation resulted in a decrease in revenues of ~~$49~~$180 million in ~~2018.~~2019. Aside from the effects of acquisitions/divestitures and currency translation, revenues increased ~~$505~~$421 million ~~(10%~~(7%) primarily due to increased demand in the quarter compared to the ~~2017~~2018 quarter. Sales to customers in each of the company's primary end markets grew. Sales growth was strong in each of the company's primary geographic areas, particularly Asia.

~~THERMO FISHER SCIENTIFIC INC.~~

~~MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION~~

~~AND RESULTS OF OPERATIONS~~

~~Results~~In the first quarter of ~~Operations (continued)~~

2019, the company recorded restructuring and other costs, net, of $28 million, including $6 million of charges to cost of revenues for the sale of inventories revalued at the date of acquisition. The company recorded $11 million of charges to selling, general and administrative expenses for third-party transaction costs related to recently announced acquisitions and divestiture. The company also recorded $11 million of restructuring and other costs, net, primarily for employee severance and abandoned facilities costs associated with the closure and consolidation of facilities in the U.S. and Europe. See Note 14 for restructuring charges expected in future periods.

In the ~~third~~first quarter of 2018, the company recorded restructuring and other ~~income,~~costs, net, of ~~$32~~$56 million, including $4$3 million of ~~net credits~~charges to cost of revenues primarily for the sale of inventories revalued at the date of acquisition. The company recorded $8 million of charges to selling, general and administrative expenses, primarily ~~income from favorable results of product liability litigation, offset in part by~~for third-party transaction/integration costs related to ~~recent and pending acquisitions.~~the acquisition of Patheon. The company recorded ~~$24~~$35 million of cash restructuring costs, including severance and abandoned facilities costs associated with the closure and consolidation of facilities in the U.S. and Europe. The company also recorded ~~$51 million of other income, net, principally for the favorable resolution of a litigation matter (see Notes 9 and 13).~~

In the third quarter of 2017, the company recorded restructuring and other costs, net, of $131 million, including $45 million of charges to cost of revenues primarily to conform the accounting policies of Patheon to the company's accounting policies and for the sale of inventories revalued at the date of acquisition. The company recorded $37 million of charges to selling, general and administrative expenses, primarily for third-party transaction costs related to the acquisition of Patheon and charges to confirm the accounting policies of Patheon to the company's accounting policies, offset in part by income associated with favorable results of product liability litigation. The company recorded $26 million of cash restructuring costs, primarily to achieve acquisition synergies, including severance and abandoned facilities costs associated with the closure and consolidation of facilities in the U.S. and Europe. The company’s other businesses incurred costs for continued headcount reductions and facility consolidations in an effort to streamline operations including severance at several businesses and abandoned facility expenses at businesses that have been or are being consolidated in the U.S., Europe and Asia. The company also recorded $23$10 million of other charges, net, principally for litigation-related matters, and ~~compensation due at Patheon on the date of acquisition.~~

As of November 2, 2018, the company has identified restructuring actions that will result in additional charges of approximately $95 million in 2018 and 2019, and expects to identify additional actions during 2018 which will be recorded when specified criteria are met, such as communication of benefit arrangements and abandonment of leased facilities.hurricane response costs.

Segment Results

The company’s management evaluates segment operating performance using operating income before certain charges/credits to cost of revenues and selling, general and administrative expenses, principally associated with acquisition-related activities; restructuring and other costs/income including costs arising from facility consolidations such as severance and abandoned lease expense and gains and losses from the sale of real estate and product lines; and amortization of ~~acquisition-related~~acquisition-

THERMO FISHER SCIENTIFIC INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

Results of Operations (continued)

related intangible assets. The company uses this measure because it helps management understand and evaluate the segments’ core operating results and facilitate comparison of performance for determining compensation (Note 4). Accordingly, the following segment data is reported on this basis.



	Three Months Ended
	March 30,			March 31,
(Dollars in millions)	2019			2018			Change

Revenues
Life Sciences Solutions	$	1,607		$	1,499		7	%
Analytical Instruments	1,322			1,257			5	%
Specialty Diagnostics	957			947			1	%
Laboratory Products and Services	2,513			2,413			4	%
Eliminations	(274		)	(263		)	4	%

Consolidated Revenues	$	6,125		$	5,853		5	%

Segment Income
Life Sciences Solutions	$	561		$	517		9	%
Analytical Instruments	282			246			15	%
Specialty Diagnostics	242			243			—	%
Laboratory Products and Services	285			280			2	%

Subtotal Reportable Segments	1,370			1,286			7	%

Cost of Revenues Charges, Net	(6		)	(3		)
Selling, General and Administrative Charges, Net	(11		)	(8		)
Restructuring and Other Costs, Net	(11		)	(45		)
Amortization of Acquisition-related Intangible Assets	(422		)	(444		)

Consolidated Operating Income	$	920		$	786		17	%

Reportable Segments Operating Income Margin	22.4		%	22.0		%

Consolidated Operating Income Margin	15.0		%	13.4		%

Income from the company’s reportable segments increased 7% to $1.37 billion in the first quarter of 2019 due primarily to profit on higher sales and, to a lesser extent, productivity improvements, net of inflationary cost increases, offset in part by strategic growth investments, unfavorable foreign currency exchange and unfavorable sales mix.

Life Sciences Solutions



	Three Months Ended
	March 30,			March 31,
(Dollars in millions)	2019			2018			Change

Revenues	$	1,607		$	1,499		7	%

Operating Income Margin	34.9		%	34.5		%	0.4 pt

Sales in the Life Sciences Solutions segment increased $108 million to $1.61 billion in the first quarter of 2019. Sales increased $125 million (8%) due to higher revenues at existing businesses and $31 million due to an acquisition. The unfavorable effects of currency translation resulted in a decrease in revenues of $48 million. The increase in revenue at existing businesses was primarily due to increased demand in each of the segment's principal businesses with particular strength in sales of biosciences and bioproduction products.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

Results of Operations (continued)

Three Months Ended
September 29,
September 30,

(Dollars in millions) 2018
2017
Change

Revenues
Life Sciences Solutions $ 1,504
$ 1,382
9 %
Analytical Instruments 1,333
1,189
12 %
Specialty Diagnostics 894
844
6 %
Laboratory Products and Services 2,470
1,933
28 %
Eliminations (281 ) (232 ) 21 %

Consolidated Revenues $ 5,920
$ 5,116
16 %

Segment Income
Life Sciences Solutions $ 495
$ 452
10 %
Analytical Instruments 294
257
14 %
Specialty Diagnostics 223
218
2 %
Laboratory Products and Services 299
243
23 %

Subtotal Reportable Segments 1,311
1,170
12 %

Cost of Revenues (Credits) Charges, Net 1
(45 )
Selling, General and Administrative (Credits) Charges, Net 4
(37 )
Restructuring and Other (Income) Costs, Net 27
(49 )
Amortization of Acquisition-related Intangible Assets (431 ) (405 )

Consolidated Operating Income $ 912
$ 634
44 %

Reportable Segments Operating Income Margin 22.1 % 22.9 %

Consolidated Operating Income Margin 15.4 % 12.4 %

~~Income from the company’s reportable segments increased 12% to $1.31 billion~~Operating income margin was 34.9% in the ~~third~~first quarter of ~~2018 due~~2019 compared to 34.5% in the first quarter of 2018. The increase resulted primarily tofrom profit on higher sales offset in part by strategic growth investments, ~~and~~ unfavorable sales ~~mix. The reportable segments' operating income margin decreased due~~mix and, to ~~the dilutive effect of the Patheon acquisition offset in part by operational improvements.~~a lesser extent, unfavorable foreign currency exchange.

~~Life Sciences Solutions~~Analytical Instruments


	Three Months Ended								Three Months Ended
	September 29,			September 30,					March 30,			March 31,
(Dollars in millions)	2018			2017			Change		2019			2018			Change

Revenues	$	1,504		$	1,382		9	%	$	1,322		$	1,257		5	%

Operating Income Margin	32.9		%	32.7		%	0.2 pt		21.3		%	19.6		%	1.7 pt

Sales in the ~~Life Sciences Solutions~~Analytical Instruments segment increased ~~$122~~$65 million to ~~$1.50~~$1.32 billion in the ~~third~~first quarter of ~~2018.~~2019. Sales increased ~~$134~~$103 million ~~(10%~~(8%) due to higher revenues at existing ~~businesses and $3 million due to an acquisition.~~businesses. The unfavorable effects of currency translation resulted in a decrease in revenues of ~~$15~~$38 million. The increase in revenue at existing businesses was due to increased demand for products sold by each of the segment's primary businesses.

Operating income margin was 21.3% in the first quarter of 2019 compared to 19.6% in the first quarter of 2018. The increase resulted primarily from profit on higher sales and, to a lesser extent, productivity improvements, net of inflationary cost increases and favorable foreign currency exchange offset in part by strategic growth investments and unfavorable sales mix.

Specialty Diagnostics



	Three Months Ended
	March 30,			March 31,
(Dollars in millions)	2019			2018			Change

Revenues	$	957		$	947		1	%

Operating Income Margin	25.3		%	25.6		%	-0.3 pt

Sales in the Specialty Diagnostics segment increased $10 million to $957 million in the first quarter of 2019. Sales increased $37 million (4%) due to higher revenues at existing businesses. The unfavorable effects of currency translation resulted in a decrease in revenues of $27 million. The increase in revenue at existing businesses was due to higher demand in each of the segment's principal businesses with particular strength in sales of clinical diagnostic products and immunodiagnostic products.

Operating income margin was 25.3% in the first quarter of 2019 and 25.6% in the first quarter of 2018. The decrease was primarily due to strategic growth investments offset in part by profit on higher sales and favorable sales mix.

Laboratory Products and Services



	Three Months Ended
	March 30,			March 31,
(Dollars in millions)	2019			2018			Change

Revenues	$	2,513		$	2,413		4	%

Operating Income Margin	11.3		%	11.6		%	-0.3 pt

Sales in the Laboratory Products and Services segment increased $100 million to $2.51 billion in the first quarter of 2019. Sales increased $172 million (7%) due to higher revenues at existing businesses. The unfavorable effects of currency translation resulted in a decrease in revenues of $72 million. The increase in revenue at existing businesses was primarily due to increased demand in each of the segment's principal businesses ~~particularly for bioprocess production~~with particular strength in service offerings of its pharma services business and products ~~biosciences products~~sold through its research and ~~to a lesser extent, clinical next-generation sequencing products and genetic sciences products.~~

Operating income margin was 32.9% in the third quarter of 2018 compared to 32.7% in the third quarter of 2017. The increase resulted primarily from profit on higher sales offset in part by unfavorable sales mix and strategic growth investments.safety market channel business.

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AND RESULTS OF OPERATIONS

Results of Operations (continued)

~~Analytical Instruments~~

Three Months Ended
September 29,
September 30,

(Dollars in millions) 2018
2017
Change

Revenues $ 1,333
$ 1,189
12 %

Operating Income Margin 22.0 % 21.6 % 0.4 pt

Sales in the Analytical Instruments segment increased $144 million to $1.33 billion in the third quarter of 2018. Sales increased $147 million (12%) due to higher revenues at existing businesses and $10 million due to acquisitions. The unfavorable effects of currency translation resulted in a decrease in revenues of $13 million. The increase in revenue at existing businesses was due to increased demand for products sold by each of the segment's primary businesses.

Operating income margin was ~~22.0%~~11.3% in the ~~third~~first quarter of ~~2018 compared to 21.6%~~2019 and 11.6% in the ~~third~~first quarter of ~~2017. The increase resulted primarily from profit on higher sales offset in part by strategic growth investments and unfavorable sales mix.~~

~~Specialty Diagnostics~~

Three Months Ended
September 29,
September 30,

(Dollars in millions) 2018
2017
Change

Revenues $ 894
$ 844
6 %

Operating Income Margin 25.0 % 25.9 % -0.9 pt

~~Sales in the Specialty Diagnostics segment increased $50 million to $894 million in the third quarter of~~ 2018. Sales increased $56 million (7%) due to higher revenues at existing businesses. The unfavorable effects of currency translation resulted in a decrease in revenues of $6 million. The increase in revenue at existing businesses was due to higher demand in each of the segment's principal businesses with particular strength in sales of products sold through the segment’s healthcare market channel and, to a lesser extent, clinical diagnostic products and immunodiagnostic products.

~~Operating income margin was 25.0% in the third quarter of 2018 and 25.9% in the third quarter of 2017.~~ The decrease was primarily due to strategic growth investments and ~~to a lesser extent, unfavorable sales mix. These decreases were offset in part by profit on higher sales.~~

~~Laboratory Products and Services~~

Three Months Ended
September 29,
September 30,

(Dollars in millions) 2018
2017
Change

Revenues $ 2,470
$ 1,933
28 %

Operating Income Margin 12.1 % 12.6 % -0.5 pt

Sales in the Laboratory Products and Services segment increased $537 million to $2.47 billion in the third quarter of 2018. Sales increased $339 million due to an acquisition and $214 million (11%) due to higher revenues at existing businesses. The unfavorable effects of currency translation resulted in a decrease in revenues of $16 million. The increase in revenue at existing businesses was primarily due to increased demand in each of the segment's principal businesses with particular strength in products sold through its research and safety market channel business and service offerings of its clinical trials business.

~~Operating income margin was 12.1% in the third quarter of 2018 and 12.6% in the third quarter of 2017. The decrease was primarily due to~~ unfavorable sales mix ~~and, to a lesser extent, strategic investments~~ offset in part by profit on higher sales and ~~to a lesser extent,~~ productivity improvements, net of inflationary cost increases.

~~THERMO FISHER SCIENTIFIC INC.~~

~~MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION~~

~~AND RESULTS OF OPERATIONS~~

~~Results of Operations (continued)~~

Other Expense, Net

The company reported other expense, net, of ~~$102~~$103 million and ~~$154~~$152 million in the ~~third~~first quarter of ~~2018~~2019 and ~~2017,~~2018, respectively (Note 5). ~~In the third quarter~~An increasein interest income of ~~2017, other~~ $47 million in 2019 was offset in part by an increase in interest expense ~~net included $29~~of $26 million ~~of charges related to the amortization of fees paid to obtain bridge financing commitments related to the acquisition of Patheon.~~.

Provision for Income Taxes

The company has operations and a taxable presence in approximately 50 countries outside the U.S. Some of these countries have lower tax rates than the U.S. The company’s ability to obtain a benefit from lower tax rates outside the U.S. is dependent on its relative levels of income in countries outside the U.S. and on the statutory tax rates in those countries. Based on the dispersion of the company’s non-U.S. income tax provision among many countries, the company believes that a change in the statutory tax rate in any individual country is not likely to materially affect the company’s income tax provision or net income, aside from any resulting one-time adjustment to the company’s deferred tax balances to reflect a new rate.

~~First Nine Months of 2018 Compared With First Nine Months of 2017~~

Nine Months Ended
(In millions) September 29,
2018
September 30,
2017

Total
Change

Currency
Translation

Acquisitions
Operations

Revenues
Life Sciences Solutions $ 4,572
$ 4,150
$ 422
$ 77
$ 6
$ 339
Analytical Instruments 3,901
3,407
494
66
32
396
Specialty Diagnostics 2,773
2,572
201
53
8
140
Laboratory Products and Services 7,433
5,424
2,009
81
1,457
471
Eliminations (828 ) (682 ) (146 ) (10 ) (13 ) (123 )

Consolidated Revenues $ 17,851
$ 14,871
$ 2,980
$ 267
$ 1,490
$ 1,223

Sales in the first nine months of 2018 were $17.85 billion, an increase of $2.98 billion from the first nine months of 2017. Sales increased $1.49 billion due to acquisitions. The favorable effects of currency translation resulted in an increase in revenues of $267 million in 2018. Aside from the effects of currency translation and acquisitions, revenues increased $1.22 billion (8%) primarily due to increased demand. Sales to customers in each of the company's primary end markets grew. Sales growth was strong in each of the company's primary geographic areas, particularly Asia.

In the first nine months of 2018, total company operating income and operating income margin were $2.64 billion and 14.8%, respectively, compared with $2.00 billion and 13.5%, respectively, in the first nine months of 2017. The increase in operating income was primarily due to profit on higher sales, the effects of acquisitions and, to a lesser extent, favorable foreign currency exchange and productivity improvements, net of inflationary cost increases, offset in part by an increase in strategic growth investments, amortization of acquisition-related intangible assets, due to recent acquisitions, and unfavorable sales mix.

~~THERMO FISHER SCIENTIFIC INC.~~

~~MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION~~

~~AND RESULTS OF OPERATIONS~~

~~Results of Operations (continued)~~

In the first nine months of 2018, the company recorded restructuring and other costs, net, of $49 million, including $7 million of charges to cost of revenues primarily for the sale of inventories revalued at the date of acquisition. The company recorded $7 million of net charges to selling, general and administrative expenses, primarily for third-party transaction and integration costs associated with recent and pending acquisitions, offset in part by income from the favorable results of product liability litigation. In addition, the company recorded $75 million of cash restructuring costs in its continuing effort to streamline operations, including severance at several businesses and abandoned facility expenses at businesses that have been or are being consolidated in the U.S., Europe and Asia. The company also recorded $40 million of other income, net, principally for resolution of a litigation matter (see Notes 9 and 13).

~~In the first nine months of 2017, the company recorded restructuring and other costs, net, of~~ ~~$247 million, including~~ ~~$77 million~~ of charges to cost of revenues primarily for the sale of inventories revalued at the date of acquisition, and, to a lesser extent, to conform the accounting policies of Patheon to the company's accounting policies. The company recorded ~~$75 million~~ of charges to selling, general and administrative expenses, primarily for third-party transaction and integration costs associated with recent acquisitions and changes in estimates of acquisition contingent consideration. In addition, the company recorded $66 million of cash restructuring costs, primarily to achieve acquisition synergies, including severance and abandoned facilities costs associated with the closure and consolidation of facilities in the U.S and Europe. The company’s other businesses incurred costs for continued headcount reductions and facility consolidations in an effort to streamline operations including severance at several businesses and abandoned facility expenses at businesses that have been or are being consolidated in the U.S., Europe and Asia. The company also recorded $30 million of other costs, net, principally charges for litigation-related matters, and compensation due at Patheon on the date of the acquisition.

~~Segment Results~~

Nine Months Ended
September 29,
September 30,

(Dollars in millions) 2018
2017
Change

Revenues
Life Sciences Solutions $ 4,572
$ 4,150
10 %
Analytical Instruments 3,901
3,407
14 %
Specialty Diagnostics 2,773
2,572
8 %
Laboratory Products and Services 7,433
5,424
37 %
Eliminations (828 ) (682 ) 21 %

Consolidated Revenues $ 17,851
$ 14,871
20 %

Segment Income
Life Sciences Solutions $ 1,534
$ 1,333
15 %
Analytical Instruments 831
681
22 %
Specialty Diagnostics 719
685
5 %
Laboratory Products and Services 916
704
30 %

Subtotal Reportable Segments 4,000
3,403
18 %

Cost of Revenues Charges (7 ) (77 )
Selling, General and Administrative Charges, Net (7 ) (75 )
Restructuring and Other Costs, Net (35 ) (95 )
Amortization of Acquisition-related Intangible Assets (1,316 ) (1,153 )

Consolidated Operating Income $ 2,635
$ 2,003
32 %

Reportable Segments Operating Income Margin 22.4 % 22.9 %

Consolidated Operating Income Margin 14.8 % 13.5 %

~~THERMO FISHER SCIENTIFIC INC.~~

~~MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION~~

~~AND RESULTS OF OPERATIONS~~

~~Results of Operations (continued)~~

Income from the company’s reportable segments increased 18% to $4.00 billion in the first nine months of 2018 due primarily to profit on higher sales and, to a lesser extent, the effects of acquisitions, favorable foreign currency exchange and productivity improvements, net of inflationary cost increases, offset in part by strategic growth investments and unfavorable sales mix.

~~Life Sciences Solutions~~

Nine Months Ended
September 29,
September 30,

(Dollars in millions) 2018
2017
Change

Revenues $ 4,572
$ 4,150
10 %

Operating Income Margin 33.5 % 32.1 % 1.4 pt

Sales in the Life Sciences Solutions segment increased $422 million to $4.57 billion in the first nine months of 2018. Sales increased $339 million (8%) due to higher revenues at existing businesses, $77 million due to the favorable effects of currency translation and $6 million due to an acquisition. The increase in revenue at existing businesses was primarily due to increased demand at each of the segment's primary businesses, with particular strength from sales of biosciences products and bioprocess production products.

Operating income margin was 33.5% in the first nine months of 2018 compared to 32.1% in the first nine months of 2017. The increase resulted primarily from profit on higher sales and, to a lesser extent, productivity improvements, net of inflationary cost increases. These increases were offset in part by strategic growth investments and unfavorable sales mix.

~~Analytical Instruments~~

Nine Months Ended
September 29,
September 30,

(Dollars in millions) 2018
2017
Change

Revenues $ 3,901
$ 3,407
14 %

Operating Income Margin 21.3 % 20.0 % 1.3 pt

Sales in the Analytical Instruments segment increased $494 million to $3.90 billion in the first nine months of 2018. Sales increased $396 million (12%) due to higher revenues at existing businesses, $66 million due to the favorable effects of currency translation and $32 million due to acquisitions. The increase in revenue at existing businesses was primarily due to increased demand at each of the segment's businesses, particularly for products sold by the segment's chromatography and mass spectrometry business and electron microscopy business.

Operating income margin was 21.3% in the first nine months of 2018 compared to 20.0% in the first nine months of 2017. The increase resulted primarily from profit on higher sales offset in part by strategic growth investments.

~~Specialty Diagnostics~~

Nine Months Ended
September 29,
September 30,

(Dollars in millions) 2018
2017
Change

Revenues $ 2,773
$ 2,572
8 %

Operating Income Margin 25.9 % 26.7 % -0.8 pt

Sales in the Specialty Diagnostics segment increased $201 million to $2.77 billion in the first nine months of 2018. Sales increased $140 million (5%) due to higher revenues at existing businesses, $53 million due to the favorable effects of currency translation and $8 million due to an acquisition. The increase in revenue at existing businesses was due to broad based higher

~~THERMO FISHER SCIENTIFIC INC.~~

~~MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION~~

~~AND RESULTS OF OPERATIONS~~

~~Results of Operations (continued)~~

~~demand in each of the segment's primary businesses with particular strength in sales of products sold through the segment’s healthcare market channel.~~

Operating income margin was 25.9% in the first nine months of 2018 compared to 26.7% in the first nine months of 2017. The decrease resulted primarily from strategic growth investments and, to a lesser extent, unfavorable sales mix, offset in part by profit on higher sales and, to a lesser extent, favorable foreign currency exchange.

~~Laboratory Products and Services~~

Nine Months Ended
September 29,
September 30,

(Dollars in millions) 2018
2017
Change

Revenues $ 7,433
$ 5,424
37 %

Operating Income Margin 12.3 % 13.0 % -0.7 pt

Sales in the Laboratory Products and Services segment increased $2.01 billion to $7.43 billion in 2018. Sales increased $1.46 billion due to an acquisition, $471 million (9%) due to higher revenues at existing businesses and $81 million due to the favorable effects of currency translation. The increase in revenue at existing businesses was primarily due to increased demand in each of the segment's principal businesses with particular strength in its research and safety market channel business and, to a lesser extent, its clinical trials business.

Operating income margin was 12.3% in the first nine months of 2018 compared to 13.0% in the first nine months of 2017. The decrease was primarily due to unfavorable sales mix and, to a lesser extent, strategic growth investments, offset in part by profit on higher sales.

~~Other Expense, Net~~

The company reported other expense, net, of $385 million and $394 million in the first nine months of 2018 and 2017, respectively (Note 5). Interest expense increased $69 million primarily due to an increase in outstanding debt. ~~This increase was offset in part by higher interest income in 2018.~~ ~~In 2017, other expense, net included $32 million of charges related to the amortization of fees paid to obtain bridge financing commitments related to the acquisition of Patheon.~~

~~Provision for Income Taxes~~

The company recorded a $210 million provision for income taxes in the first nine months of 2018. In 2018, the company recorded a net tax provision of $68 million to adjust the estimated initial impacts of U.S. tax reform recorded in 2017, consisting of an incremental provision of $117 million offset in part by a $49 million reduction of related unrecognized tax benefits established in 2017. These adjustments were required based on new U.S. Treasury guidance and further analysis of available tax accounting methods and elections, legislative updates, regulations, earnings and profits computations and taxpools.

The company recorded a benefit from income taxes in the first nine months of 2017. In 2017, the company refinanced certain long term inter-company debt which resulted in an income tax benefit of $237 million related to a foreign exchange loss recognized for income tax purposes. As a result of this foreign exchange loss, the company reduced its forecasted benefit from foreign tax credits by $100 million as this loss reduced expected U.S. taxes that these credits would have offset for 2017. In addition, in 2017 the company recorded a $65 million favorable adjustment to deferred tax balances due to extension of a tax holiday agreement in Singapore. The company implemented foreign tax credit planning in Sweden which resulted in $20 million of foreign tax credits, with no related incremental U.S. income tax expense.

Recent Accounting Pronouncements

A description of recently issued accounting standards is included under the heading "Recent Accounting Pronouncements" in Note 1.

Contingent Liabilities

The company is contingently liable with respect to certain legal proceedings and related matters. An unfavorable outcome that differs materially from current accrual estimates, if any, for one or more of the matters described under the headings "Product Liability, Workers Compensation and Other Personal Injury Matters," "Intellectual Property Matters" and

~~THERMO FISHER SCIENTIFIC INC.~~

~~MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION~~

~~AND RESULTS OF OPERATIONS~~

~~Results of Operations (continued)~~

"Commercial Matters" in Note 910 could have a material adverse effect on the company’s financial position as well as its results of operations and cash flows.

Liquidity and Capital Resources

Consolidated working capital (current assets less current liabilities) was ~~$4.37~~$4.04 billion at ~~September 29, 2018,~~March 30, 2019, compared with ~~$2.37~~$4.48 billion at December 31, ~~2017.~~2018. Included in working capital were cash and cash equivalents of ~~$1.10~~$1.11 billion at ~~September 29, 2018~~March 30, 2019 and ~~$1.34~~$2.10 billion at December 31, ~~2017.~~2018.

First ~~Nine~~Three Months of ~~2018~~2019

Cash provided by operating activities was ~~$2.74 billion~~$649 million during the first ~~nine~~three months of ~~2018.~~2019. Cash provided by income was offset in part by investments in working capital. Increases in accounts receivable and inventories used cash of ~~$64~~$29 million and ~~$333~~$140 million, respectively, primarily to support growth in sales. An increase in other assets used cash of ~~$137~~$117 million primarily due to the timing of customer billings and income tax refunds. Other liabilities decreased by ~~$247~~$230 million primarily due to the timing of payments for ~~income taxes and, to a lesser extent,~~ incentive compensation. Cash payments for income taxes decreased to ~~$449~~$221 million during the first ~~nine~~three months of ~~2018,~~2019, compared with ~~$504~~$331 million in the first ~~nine~~three months of ~~2017.~~2018. The company made cash contributions to its pension and postretirement benefit plans totaling ~~$78~~$32 million during the first ~~nine~~three months of ~~2018.~~ 2019.

THERMO FISHER SCIENTIFIC INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

Liquidity and Capital Resources (continued)

Payments for restructuring actions, principally severance costs and lease and other expenses of real estate consolidation, used cash of ~~$62~~$14 million during the first ~~nine~~three months of ~~2018.~~2019.

During the first ~~nine~~three months of ~~2018,~~2019, the company’s investing activities used ~~$532~~$181 million of ~~cash. Acquisitions used~~ cash ~~of $59 million. The company’s investing activities also included~~including the purchase of ~~$474~~$201 million of property, plant and equipment. ~~In October 2018,~~On April 30, 2019, the company completed the acquisition of ~~the Advanced Bioprocessing business~~Brammer Bio for ~~$477 million~~approximately $1.7 billion in cash (Note 2). The acquisition was funded with a combination of existing cash balances and short-term borrowings. The company also expects to fund the acquisition of Gatan ~~(Note 2)~~ with a combination of ~~new debt financing~~existing cash balances and ~~cash.~~short-term borrowings.

The company’s financing activities used ~~$2.22~~$1.43 billion of cash during the first ~~nine~~three months of ~~2018. Repayment of senior notes used cash of $2.05 billion. New long-term borrowings provided cash of $690 million.~~2019. A net decrease in commercial paper obligations used cash of ~~$464~~$687 million. The company’s financing activities also included the repurchase of $750 million of the company's common stock and the payment of ~~$198~~$68 million in cash dividends, offset in part by ~~$97~~$81 million of net proceeds from employee stock option exercises. On July 7, 2016, the Board of Directors authorized the repurchase of up to $1.50 billion of the company’s common stock. In October 2018, the company repurchased $250 million of the company's common stock, depleting the 2016 authorization. On September 7, 2018, the Board of Directors authorized the repurchase of up to $2.00 billion of the company’s common stock. At ~~November 2, 2018, $2.00~~May 3, 2019, authorization remained for $1.25 billion ~~was available for~~of future repurchases of the company’s common stock.

The company's commitments for purchases of property, plant and equipment, contractual obligations and other commercial commitments did not change materially between December 31, ~~2017~~2018 and ~~September 29, 2018, except for changes in debt (discussed above) and the agreement to acquire Gatan (Note 2).~~March 30, 2019. The company expects that for all of ~~2018,~~2019, expenditures for property, plant and equipment, net of disposals, will approximate ~~$700 to $730~~$925 and $975 million.

As of ~~September 29, 2018,~~March 30, 2019, the company’s short-term debt totaled ~~$1.01~~$1.34 billion including ~~$0.43 billion of commercial paper obligations and $0.58~~$1.33 billion of senior notes due within the next twelve months. The company has a revolving credit facility with a bank group that provides up to $2.50 billion of unsecured multi-currency revolving credit. If the company borrows under this facility, it intends to leave undrawn an amount equivalent to outstanding commercial paper to provide a source of funds in the event that commercial paper markets are not available. As of ~~September 29, 2018,~~March 30, 2019, no borrowings were outstanding under the company’s revolving credit facility, although available capacity was reduced by approximately ~~$83~~$87 million as a result of outstanding letters of credit.

Approximately half of the company’s cash balances and cash flows from operations are from outside the U.S. The company uses its non-U.S. cash for needs outside of the U.S. including acquisitions and repayment of acquisition-related intercompany debt to the U.S. In addition, the company also transfers cash to the U.S. using non-taxable returns of capital as well as dividends where the related U.S. dividend received deduction or foreign tax credit equals any tax cost arising from the dividends. As a result of using such means of transferring cash to the U.S., the company does not expect any material adverse liquidity effects from its significant non-U.S. cash balances for the foreseeable future.

The company believes that its existing cash and cash equivalents of ~~$1.10~~$1.11 billion as of ~~September 29, 2018~~March 30, 2019 and its future cash flow from operations together with available borrowing capacity under its revolving credit agreement will be sufficient to meet the cash requirements of its existing businesses for the foreseeable future, including at least the next 24 months.

~~THERMO FISHER SCIENTIFIC INC.~~

~~MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION~~

~~AND RESULTS OF OPERATIONS~~

~~Liquidity and Capital Resources (continued)~~

First ~~Nine~~Three Months of ~~2017~~2018

Cash provided by operating activities was ~~$2.14 billion~~$78 million during the first ~~nine~~three months of ~~2017.~~2018. Cash provided by income was offset in part by investments in working capital. Increases in accounts receivable and inventories used cash of ~~$161~~$71 million and ~~$208~~$124 million, respectively, primarily to support growth in sales. An increase in other assets used cash of ~~$233~~$241 million primarily due to the timing of income tax ~~refunds.~~refunds and customer billings. Other liabilities decreased by $471 million primarily due to the timing of payments for incentive compensation and income taxes. Cash payments for income taxes totaled ~~$504~~$331 million. The company made cash contributions to its pension and postretirement benefit plans totaling ~~$184~~$24 million during the first ~~nine~~three months of ~~2017.~~2018. Payments for restructuring actions, principally severance costs and lease and other expenses of real estate consolidation, used cash of ~~$71~~$23 million during the first ~~nine~~three months of ~~2017.~~2018.

During the first ~~nine~~three months of ~~2017,~~2018, the company’s investing activities used ~~$7.45 billion~~$179 million of cash. Acquisitions used cash of ~~$7.16 billion.~~$57 million. The company’s investing activities also included the purchase of ~~$293~~$118 million of property, plant and equipment.

The company’s financing activities ~~provided $5.00 billion~~used $342 million of cash during the first ~~nine~~three months of ~~2017. Issuance~~2018. Repayment of ~~debt provided~~senior notes used cash of ~~$6.46 billion and an~~$453 million. A net increase in commercial paper obligations provided cash of ~~$221~~$182 million. ~~The company also issued 10 million shares of its common stock for net proceeds of $1.69 billion. Repayment of debt used cash of $2.55 billion.~~ The company’s financing activities also included the ~~repurchase of $750 million of the company's common stock and the~~ payment of ~~$177~~$60 million in cash dividends, offset in part by ~~$108~~$39 million of net proceeds from employee stock option exercises.

THERMO FISHER SCIENTIFIC INC.


Item 3.	Quantitative and Qualitative Disclosures About Market Risk

The company's exposure to market risk from changes in interest rates and currency exchange rates has not changed materially from its exposure at year-end ~~2017.~~2018.


Item 4.	Controls and Procedures

Management’s Evaluation of Disclosure Controls and Procedures

The company’s management, with the participation of the company’s chief executive officer and chief financial officer, has evaluated the effectiveness of the company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. Based on such evaluation, the company’s chief executive officer and chief financial officer concluded that, as of the end of such period, the company’s disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control over Financial Reporting

There have been no changes in the company’s internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) during the fiscal quarter ended ~~September 29, 2018,~~March 30, 2019, that have materially affected or are reasonably likely to materially affect the company’s internal control over financial reporting.


PART II	OTHER INFORMATION


Item 1.	Legal Proceedings

There are various lawsuits and claims against the company involving product liability, intellectual property, employment and commercial issues. See "Note 910 to our Consolidated Financial Statements – Commitments and Contingencies."


Item 1A.	Risk Factors

Set forth below are the risks that we believe are material to our investors. This section contains forward-looking statements. You should refer to the explanation of the qualifications and limitations on forward-looking statements beginning on page 3427.

We must develop new products, adapt to rapid and significant technological change and respond to introductions of new products by competitors to remain competitive. Our growth strategy includes significant investment in and expenditures

~~THERMO FISHER SCIENTIFIC INC.~~

~~Risk Factors (continued)~~

for product development. We sell our products in several industries that are characterized by rapid and significant technological changes, frequent new product and service introductions and enhancements and evolving industry standards. Competitive factors include technological innovation, price, service and delivery, breadth of product line, customer support, e-business capabilities and the ability to meet the special requirements of customers. Our competitors may adapt more quickly to new technologies and changes in customers’ requirements than we can. Without the timely introduction of new products, services and enhancements, our products and services will likely become technologically obsolete over time, in which case our revenue and operating results would suffer.

Many of our existing products and those under development are technologically innovative and require significant planning, design, development and testing at the technological, product and manufacturing-process levels. Our customers use many of our products to develop, test and manufacture their own products. As a result, we must anticipate industry trends and develop products in advance of the commercialization of our customers’ products. If we fail to adequately predict our customers’ needs and future activities, we may invest heavily in research and development of products and services that do not lead to significant revenue.

It may be difficult for us to implement our strategies for improving internal growth. ~~Some~~Our growth depends in part on the growth of the markets in which we ~~compete have been flat~~serve. Any decline or ~~declining over the past several years.~~lower than expected growth in our served markets could diminish demand for our products and services, which would adversely affect our results of operations and financial condition. To address this issue, we are pursuing a number of strategies to improve our internal growth, including:

strengthening our presence in selected geographic markets;

allocating research and development funding to products with higher growth prospects;

THERMO FISHER SCIENTIFIC INC.

Risk Factors (continued)

developing new applications for our technologies;

expanding our service offerings;

continuing key customer initiatives;

combining sales and marketing operations in appropriate markets to compete more effectively;

finding new markets for our products; and

continuing the development of commercial tools and infrastructure to increase and support cross-selling opportunities of products and services to take advantage of our depth in product offerings.

We may not be able to successfully implement these strategies, and these strategies may not result in the expected growth of our business.

Our business is affected by general economic conditions and related uncertainties affecting markets in which we operate. Our business is affected by general economic conditions, both inside and outside the U.S. If the global economy and financial markets, or economic conditions in Europe, the U.S. or other key markets, are unstable, it could adversely affect the business, results of operations and financial condition of the company and its customers, distributors, and suppliers, having the effect of

reducing demand for some of our products;

increasing the rate of order cancellations or delays;

increasing the risk of excess and obsolete inventories;

increasing pressure on the prices for our products and services;

causing supply interruptions which could disrupt our ability to produce our products; and

creating longer sales cycles and greater difficulty in collecting sales proceeds.

Demand for some of our products depends on capital spending policies of our customers and on government funding policies. Our customers include pharmaceutical and chemical companies, laboratories, universities, healthcare providers, government agencies and public and private research institutions. Many factors, including public policy spending priorities, available resources and product and economic cycles, have a significant effect on the capital spending policies of these entities.

Spending by some of these customers fluctuates based on budget allocations and the timely passage of the annual federal budget. An impasse in federal government budget decisions could lead to substantial delays or reductions in federal spending.

~~As a multinational corporation, we are exposed to fluctuations in~~Economic, political, foreign currency ~~exchange rates, which~~and other risks associated with international sales and operations could adversely affect our ~~cash flows and~~ results of operations. International markets contribute a substantial portion of our revenues, and we

~~THERMO FISHER SCIENTIFIC INC.~~

~~Risk Factors (continued)~~

intend to continue expanding our presence in these regions. The exposure to fluctuations in currency exchange rates takes on different forms. International revenues and costs are subject to the risk that fluctuations in exchange rates could adversely affect our reported revenues and profitability when translated into U.S. dollars for financial reporting purposes. These fluctuations could also adversely affect the demand for products and services provided by us. As a multinational corporation, our businesses occasionally invoice third-party customers in currencies other than the one in which they primarily do business (the "functional currency"). Movements in the invoiced currency relative to the functional currency could adversely impact our cash flows and our results of operations. As our international sales grow, exposure to fluctuations in currency exchange rates could have a larger effect on our financial results. In the first ~~nine~~three months of ~~2018,~~2019, currency translation had ~~a favorable~~an unfavorable effect of ~~$267~~$180 million on revenues due to the ~~weakening~~strengthening of the U.S. dollar relative to other currencies in which the company sells products and services.

In addition, many of our employees, contract manufacturers, suppliers, job functions, outsourcing activities and manufacturing facilities are located outside the United States. Accordingly, our future results could be harmed by a variety of factors, including:

interruption to transportation flows for delivery of parts to us and finished goods to our customers;

changes in a specific country's or region's political, economic or other conditions;

changes in diplomatic and trade relationships, including new tariffs, trade protection measures, import or export licensing requirements, trade embargoes and sanctions and other trade barriers;

THERMO FISHER SCIENTIFIC INC.

Risk Factors (continued)

tariffs imposed by the U.S. on goods from other countries and tariffs imposed by other countries on U.S. goods, including the tariffs recently adopted by the U.S. government on various imports from China and by the Chinese government on certain U.S. goods;

negative consequences from changes in tax laws;

difficulty in staffing and managing widespread operations;

differing labor regulations;

differing protection of intellectual property;

unexpected changes in regulatory requirements; and

geopolitical uncertainty or turmoil, including terrorism and war.

Significant developments stemming from the U.S. administration or the U.K.’s referendum on membership in the EU could have an adverse effect on us. The U.S. administration has called for substantial changes to trade agreements and is imposing significant increases on tariffs on goods imported into the United States. The administration has also indicated an intention to request Congress to make significant changes, replacement or elimination of the Patient Protection and Affordable Care Act, and government negotiation/regulation of drug prices paid by government programs. Changes in U.S. social, political, regulatory and economic conditions or laws and policies governing the health care system and drug prices, foreign trade, manufacturing, and development and investment in the territories and countries where we or our customers operate could adversely affect our operating results and our business.

Additionally, on June 23, 2016, the United Kingdom held a referendum and voted in favor of leaving the European Union, or EU. This referendum has created political and economic uncertainty, particularly in the United Kingdom and the EU, and this uncertainty may last for years. Our business could be affected during this period of uncertainty, and perhaps longer, by the impact of the United Kingdom’s referendum. In addition, our business could be negatively affected by new trade agreements between the United Kingdom and other countries, including the United States, and by the possible imposition of trade or other regulatory barriers in the United Kingdom. These possible negative impacts, and others resulting from the United Kingdom’s actual or threatened withdrawal from the EU, may adversely affect our operating results and our customers’ businesses.

Our inability to protect our intellectual property could have a material adverse effect on our business. In addition, third parties may claim that we infringe their intellectual property, and we could suffer significant litigation or licensing expense as a result. We place considerable emphasis on obtaining patent and trade secret protection for significant new technologies, products and processes because of the length of time and expense associated with bringing new products through the development process and into the marketplace. Our success depends in part on our ability to develop patentable products and obtain and enforce patent protection for our products both in the United States and in other countries. We own numerous U.S. and foreign patents, and we intend to file additional applications, as appropriate, for patents covering our products. Patents may not be issued for any pending or future patent applications owned by or licensed to us, and the claims allowed under any issued patents may not be sufficiently broad to protect our technology. Any issued patents owned by or licensed to us may be challenged, invalidated or circumvented, and the rights under these patents may not provide us with competitive advantages. In addition, competitors may design around our technology or develop competing technologies. Intellectual property rights may also be unavailable or limited in some foreign countries, which could make it easier for competitors to capture increased market position. We could incur substantial costs to defend ourselves in suits brought against us or in suits in which we may assert our patent rights against others. An unfavorable outcome of any such litigation could materially adversely affect our business and results of operations.

We also rely on trade secrets and proprietary know-how with which we seek to protect our products, in part, by confidentiality agreements with our collaborators, employees and consultants. These agreements may be breached and we may not have adequate remedies for any breach. In addition, our trade secrets may otherwise become known or be independently developed by our competitors.

Third parties may assert claims against us to the effect that we are infringing on their intellectual property rights. Our Life Technologies subsidiary is party to certain lawsuits in which plaintiffs claim we infringe their intellectual property (Note 9). We could incur substantial costs and diversion of management resources in defending these claims, which could have a material adverse effect on our business, financial condition and results of operations. In addition, parties making these claims could secure a judgment awarding substantial damages, as well as injunctive or other equitable relief, which could effectively block our ability to make, use, sell, distribute, or market our products and services in the United States or abroad. In the event that a claim relating to intellectual property is asserted against us, or third parties not affiliated with us hold pending or issued patents that relate to our products or technology, we may seek licenses to such intellectual property or challenge those patents. However, we may be unable to obtain these licenses on commercially reasonable terms, if at all, and our challenge of the patents may be unsuccessful. Our failure to obtain the necessary licenses or other rights could prevent the sale, manufacture, or

~~THERMO FISHER SCIENTIFIC INC.~~

~~Risk Factors (continued)~~

distribution of our products and, therefore, could have a material adverse effect on our business, financial condition and results of operations.

THERMO FISHER SCIENTIFIC INC.

Risk Factors (continued)

Changes in governmental regulations may reduce demand for our products or increase our expenses. We compete in many markets in which we and our customers must comply with federal, state, local and international regulations, such as environmental, health and safety and food and drug regulations. We develop, configure and market our products to meet customer needs created by those regulations. Any significant change in regulations could reduce demand for our products or increase our expenses. For example, many of our instruments are marketed to the pharmaceutical industry for use in discovering and developing drugs. Changes in the U.S. Food and Drug Administration’s regulation of the drug discovery and development process could have an adverse effect on the demand for these products.

Our pharma services offerings are highly complex, and if we are unable to provide quality and timely offerings to our customers, our business could suffer. Our pharma services offerings are highly exacting and complex, due in part to strict quality and regulatory requirements. Our operating results in this business depend on our ability to execute and, when necessary, improve our quality management strategy and systems, and our ability to effectively train and maintain our employee base with respect to quality management. A failure of our quality control systems could result in problems with facility operations or preparation or provision of products. In each case, such problems could arise for a variety of reasons, including equipment malfunction, failure to follow specific protocols and procedures, problems with raw materials or environmental factors and damage to, or loss of, manufacturing operations. Such problems could affect production of a particular batch or series of batches of products, requiring the destruction of such products or a halt of facility production altogether.

In addition, our failure to meet required quality standards may result in our failure to timely deliver products to our customers, which in turn could damage our reputation for quality and service. Any such failure could, among other things, lead to increased costs, lost revenue, reimbursement to customers for lost drug product, registered intermediates, registered starting materials, and active pharmaceutical ingredients, other customer claims, damage to and possibly termination of existing customer relationships, time and expense spent investigating the cause and, depending on the cause, similar losses with respect to other batches or products. Production problems in our drug and biologic manufacturing operations could be particularly significant because the cost of raw materials for such manufacturing is often high. If problems in preparation or manufacture of a product or failures to meet required quality standards for that product are not discovered before such product is released to the market, we may be subject to adverse regulatory actions, including product recalls, product seizures, injunctions to halt manufacture and distribution, restrictions on our operations, civil sanctions, including monetary sanctions, and criminal actions. In addition, such problems or failures could subject us to litigation claims, including claims from our customers for reimbursement for the cost of lost or damaged active pharmaceutical ingredients, the cost of which could be significant.

We are subject to product and other liability risks for which we may not have adequate insurance coverage. We may be named as a defendant in product liability lawsuits, which may allege that products or services we have provided from our pharma services offerings have resulted or could result in an unsafe condition or injury to consumers. Additionally, products currently or previously sold by our environmental and process instruments and radiation measurement and security instruments businesses include fixed and portable instruments used for chemical, radiation and trace explosives detection. These products are used in airports, embassies, cargo facilities, border crossings and other high-threat facilities for the detection and prevention of terrorist acts. If any of these products were to malfunction, it is possible that explosive or radioactive material could fail to be detected by our product, which could lead to product liability claims. There are also many other factors beyond our control that could lead to liability claims, such as the reliability and competence of the customers’ operators and the training of such operators.

Any such product liability claims brought against us could be significant and any adverse determination may result in liabilities in excess of our insurance coverage. Although we carry product liability insurance, we cannot be certain that our current insurance will be sufficient to cover these claims or that it can be maintained on acceptable terms, if at all.

Our inability to complete any pending acquisitions or to successfully integrate any new or previous acquisitions could have a material adverse effect on our business. Our business strategy includes the acquisition of technologies and businesses that complement or augment our existing products and services. Certain acquisitions may be difficult to complete for a number of reasons, including the need for antitrust and/or other regulatory approvals. Any acquisition we may complete may be made at a substantial premium over the fair value of the net identifiable assets of the acquired company. Further, we may not be able to integrate acquired businesses successfully into our existing businesses, make such businesses profitable, or realize anticipated cost savings or synergies, if any, from these acquisitions, which could adversely affect our business.

Moreover, we have acquired many companies and businesses. As a result of these acquisitions, we recorded significant goodwill and indefinite-lived intangible assets (primarily tradenames) on our balance sheet, which amount to approximately ~~$25.14~~$25.24 billion and ~~$1.27~~$1.26 billion, respectively, as of ~~September 29, 2018.~~March 30, 2019. In addition, we have definite-lived intangible assets

~~THERMO FISHER SCIENTIFIC INC.~~

~~Risk Factors (continued)~~

totaling ~~$13.95~~$13.23 billion as of ~~September 29, 2018.~~March 30, 2019. We assess the realizability of goodwill and indefinite-lived intangible assets annually as well as whenever events or changes in circumstances indicate that these assets may be impaired. We assess the

THERMO FISHER SCIENTIFIC INC.

Risk Factors (continued)

realizability of definite-lived intangible assets whenever events or changes in circumstances indicate that these assets may be impaired. These events or circumstances would generally include operating losses or a significant decline in earnings associated with the acquired business or asset. Our ability to realize the value of the goodwill and intangible assets will depend on the future cash flows of these businesses. These cash flows in turn depend in part on how well we have integrated these businesses. If we are not able to realize the value of the goodwill and intangible assets, we may be required to incur material charges relating to the impairment of those assets.

We are subject to laws and regulations governing government contracts, and failure to address these laws and regulations or comply with government contracts could harm our business by leading to a reduction in revenue associated with these customers. We have agreements relating to the sale of our products to government entities and, as a result, we are subject to various statutes and regulations that apply to companies doing business with the government. The laws governing government contracts differ from the laws governing private contracts and government contracts may contain pricing terms and conditions that are not applicable to private contracts. We are also subject to investigation for compliance with the regulations governing government contracts. A failure to comply with these regulations could result in suspension of these contracts, criminal, civil and administrative penalties or debarment.

Because we compete directly with certain of our larger customers and product suppliers, our results of operations could be adversely affected in the short term if these customers or suppliers abruptly discontinue or significantly modify their relationship with us. Our largest customer in the laboratory products business is also a significant competitor. Our business may be harmed in the short term if our competitive relationship in the marketplace with certain of our large customers results in a discontinuation of their purchases from us. In addition, we manufacture products that compete directly with products that we source from third-party suppliers. We also source competitive products from multiple suppliers. Our business could be adversely affected in the short term if any of our large third-party suppliers abruptly discontinues selling products to us.

Because we rely heavily on third-party package-delivery services, a significant disruption in these services or significant increases in prices may disrupt our ability to ship products, increase our costs and lower our profitability. We ship a significant portion of our products to our customers through independent package delivery companies, such as Federal Express in the U.S. and DHL in Europe. We also maintain a small fleet of vehicles dedicated to the delivery of our products and ship our products through other carriers, including national and regional trucking firms, overnight carrier services and the U.S. Postal Service. If one or more of these third-party package-delivery providers were to experience a major work stoppage, preventing our products from being delivered in a timely fashion or causing us to incur additional shipping costs we could not pass on to our customers, our costs could increase and our relationships with certain of our customers could be adversely affected. In addition, if one or more of these third-party package-delivery providers were to increase prices, and we were not able to find comparable alternatives or make adjustments in our delivery network, our profitability could be adversely affected.

We are required to comply with a wide variety of laws and regulations, and are subject to regulation by various federal, state and foreign agencies. We are subject to various local, state, federal, foreign and transnational laws and regulations, which include the operating and security standards of the U.S. Federal Drug Administration (the FDA), the U.S. Drug Enforcement Agency (the DEA), various state boards of pharmacy, state health departments, the U.S. Department of Health and Human Services (the DHHS), the European Medicines Agency (the EMA), in Europe, the EU member states and other comparable agencies and, in the future, any changes to such laws and regulations could adversely affect us. In particular, we are subject to laws and regulations concerning current good manufacturing practices and drug safety. Our subsidiaries may be required to register for permits and/or licenses with, and may be required to comply with the laws and regulations of the DEA, the FDA, the DHHS, foreign agencies including the EMA, and other various state boards of pharmacy, state health departments and/or comparable state agencies as well as certain accrediting bodies depending upon the type of operations and location of product distribution, manufacturing and sale.

The manufacture, distribution and marketing of many of our products and services, including medical devices and pharma services, are subject to extensive ongoing regulation by the FDA, the DEA, the EMA, and other equivalent local, state, federal and non-U.S. regulatory authorities. In addition, we are subject to inspections by these regulatory authorities. Failure by us or by our customers to comply with the requirements of these regulatory authorities, including without limitation, remediating any inspectional observations to the satisfaction of these regulatory authorities, could result in warning letters, product recalls or seizures, monetary sanctions, injunctions to halt manufacture and distribution, restrictions on our operations, civil or criminal sanctions, or withdrawal of existing or denial of pending approvals, including those relating to products or facilities. In addition, such a failure could expose us to contractual or product liability claims, contractual claims from our customers, including claims for reimbursement for lost or damaged active pharmaceutical ingredients, as well as ongoing remediation and

~~THERMO FISHER SCIENTIFIC INC.~~

~~Risk Factors (continued)~~

increased compliance costs, any or all of which could be significant. We are the sole manufacturer of a number of

THERMO FISHER SCIENTIFIC INC.

Risk Factors (continued)

pharmaceuticals for many of our customers and a negative regulatory event could impact our customers' ability to provide products to their customers.

We are also subject to a variety of federal, state, local and international laws and regulations that govern, among other things, the importation and exportation of products, the handling, transportation and manufacture of substances that could be classified as hazardous, and our business practices in the U.S. and abroad such as anti-corruption, anti-competition and privacy and data protection laws. Any noncompliance by us with applicable laws and regulations or the failure to maintain, renew or obtain necessary permits and licenses could result in criminal, civil and administrative penalties and could have an adverse effect on our results of operations.

Our business could be adversely affected by disruptions at our sites. We rely upon our manufacturing operations to produce many of the products we sell and our warehouse facilities to store products, pending sale. Any significant disruption of those operations for any reason, such as strikes or other labor unrest, power interruptions, fire, hurricanes or other events beyond our control could adversely affect our sales and customer relationships and therefore adversely affect our business. We have significant operations in California, near major earthquake faults, which make us susceptible to earthquake risk. Although most of our raw materials are available from a number of potential suppliers, our operations also depend upon our ability to obtain raw materials at reasonable prices. If we are unable to obtain the materials we need at a reasonable price, we may not be able to produce certain of our products or we may not be able to produce certain of these products at a marketable price, which could have an adverse effect on our results of operations.

Fluctuations in our effective tax rate may adversely affect our results of operations and cash flows. As a global company, we are subject to taxation in numerous countries, states and other jurisdictions. In preparing our financial statements, we record the amount of tax that is payable in each of the countries, states and other jurisdictions in which we operate. Our future effective tax rate, however, may be lower or higher than experienced in the past due to numerous factors, including a change in the mix of our profitability from country to country, changes in accounting for income taxes and recently enacted and future changes in tax laws in jurisdictions in which we operate. Any of these factors could cause us to experience an effective tax rate significantly different from previous periods or our current expectations, which could have an adverse effect on our business, results of operations and cash flows.

We may incur unexpected costs from increases in fuel and raw material prices, which could reduce our earnings and cash flow. Our primary commodity exposures are for fuel, petroleum-based resins and steel. While we may seek to minimize the impact of price increases through higher prices to customers and various cost-saving measures, our earnings and cash flows could be adversely affected in the event these measures are insufficient to cover our costs.

A significant disruption in, or breach in security of, our information technology systems or violation of data privacy laws could adversely affect our business. As a part of our ongoing effort to upgrade our current information systems, we periodically implement new enterprise resource planning software and other software applications to manage certain of our business operations. As we implement and add functionality, problems could arise that we have not foreseen. Such problems could disrupt our ability to provide quotes, take customer orders and otherwise run our business in a timely manner. When we upgrade or change systems, we may suffer interruptions in service, loss of data or reduced functionality. In addition, if our new systems fail to provide accurate pricing and cost data our results of operations and cash flows could be adversely affected.

We also rely on our information technology ~~infrastructure, among~~systems to process, transmit and store electronic information (including sensitive data such as confidential business information and personally identifiable data relating to employees, customers and other ~~functions,~~business partners) and to ~~interact~~manage or support a variety of critical business processes and activities (such as interacting with suppliers, ~~sell~~selling our products and services, ~~fulfill~~fulfilling orders and ~~bill, collect~~billing, collecting and ~~make~~making payments, ~~ship~~shipping products, ~~provide~~providing services and support to customers, ~~track customers, fulfill~~tracking customer activity, fulfilling contractual obligations and otherwise ~~conduct business.~~conducting business). Our systems may be vulnerable to damage or interruption from natural disasters, power loss, telecommunication failures, terrorist attacks, computer hackers, computer viruses, ransomware, phishing, computer denial-of-service attacks, unauthorized access to customer or employee data or company trade secrets, and other attempts to harm our systems. Certain of our systems are not redundant, and our disaster recovery planning is not sufficient for every eventuality. Despite any precautions we may take, such problems could result in, among other consequences, interruptions in our services, which could harm our reputation and financial results. Any of the cyber-attacks, breaches or other disruptions or damage described above, if significant, could materially interrupt our operations, delay production and shipments, result in theft of our and our customers’ intellectual property and trade secrets, damage customer, business partner and employee relationships and our reputation or result in defective products or services, legal claims and proceedings, liability and penalties under privacy laws and increased cost for security and remediation, each of which could adversely affect our business and financial results.

If we are unable to maintain reliable information technology systems and appropriate controls with respect to global data privacy and security requirements and prevent data breaches, we may suffer regulatory consequences in addition to business

THERMO FISHER SCIENTIFIC INC.

Risk Factors (continued)

consequences. As a global organization, we are subject to data privacy and security laws, regulations, and customer-imposed controls in numerous jurisdictions as a result of having access to and processing confidential, personal and/or sensitive data in the course of our business. For example, in the United States, individual states regulate data breach and security requirements and multiple governmental bodies assert authority over aspects of the protection of personal privacy. European laws require us to have an approved legal mechanism to transfer personal data out of Europe, and the recently-enacted EU General Data Protection Regulation, which took effect in May 2018, imposes significantly stricter requirements in how we collect and process personal data. Several countries, such as China and Russia, have passed laws that require personal data relating to their citizens to be maintained on local servers and impose additional data transfer restrictions. Government enforcement actions can be costly and interrupt the regular operation of our business, and data breaches or violations of data privacy laws can result in fines, reputational damage and civil lawsuits, any of which may adversely affect our business, reputation and financial statements.

Our debt may restrict our investment opportunities or limit our activities. As of ~~September 29, 2018,~~March 30, 2019, we had approximately ~~$18.77~~$18.15 billion in outstanding indebtedness. In addition, we have availability to borrow under a revolving credit facility that provides for up to $2.50 billion of unsecured multi-currency revolving credit. We may also obtain additional long-term debt and lines of credit to meet future financing needs, which would have the effect of increasing our total leverage.

~~THERMO FISHER SCIENTIFIC INC.~~

~~Risk Factors (continued)~~

Our leverage could have negative consequences, including increasing our vulnerability to adverse economic and industry conditions, limiting our ability to obtain additional financing and limiting our ability to acquire new products and technologies through strategic acquisitions.

Our ability to make scheduled payments, refinance our obligations or obtain additional financing will depend on our future operating performance and on economic, financial, competitive and other factors beyond our control. Our business may not generate sufficient cash flow to meet our obligations. If we are unable to service our debt, refinance our existing debt or obtain additional financing, we may be forced to delay strategic acquisitions, capital expenditures or research and development expenditures.

Additionally, the agreements governing our debt require that we maintain certain financial ratios, and contain affirmative and negative covenants that restrict our activities by, among other limitations, limiting our ability to incur additional indebtedness, merge or consolidate with other entities, make investments, create liens, sell assets and enter into transactions with affiliates. The covenants in our revolving credit facility (the Facility) include a Consolidated Leverage Ratio (total debt-to-Consolidated EBITDA) and a Consolidated Interest Coverage Ratio (Consolidated EBITDA to Consolidated 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 maximum Consolidated Leverage Ratio of 3.5:1.0. The company has also agreed that so long as any lender has any commitment under the Facility or 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 3.0:1.0 as of the last day of any fiscal quarter.

Our ability to comply with these financial restrictions and covenants is dependent on our future performance, which is subject to prevailing economic conditions and other factors, including factors that are beyond our control such as foreign exchange rates and interest rates. Our failure to comply with any of these restrictions or covenants may result in an event of default under the applicable debt instrument, which could permit acceleration of the debt under that instrument and require us to prepay that debt before its scheduled due date. Also, an acceleration of the debt under certain of our debt instruments would trigger an event of default under other of our debt instruments.

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THERMO FISHER SCIENTIFIC INC.


Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

A summary of the share repurchase activity for the company's ~~third~~first quarter of ~~2018~~2019 follows:

Period Total Number of Shares Purchased
Average Price Paid per Share
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)

Maximum Dollar Amount of Shares That May Yet Be Purchased Under the Plans or Programs (1)
(in millions)

Fiscal July (Jul. 1 - Aug. 4) 1,147,558
$ 217.85
1,147,558
$ 250.0
Fiscal August (Aug. 5 - Sep. 1) —

—
250.0
Fiscal September (Sep. 2 - Sep. 29) —

—
2,250.0

Total Third Quarter 1,147,558
$ 217.85
1,147,558
$ 2,250.0



Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)	Maximum Dollar Amount of Shares That May Yet Be Purchased Under the Plans or Programs (1) (in millions)

Fiscal January (Jan. 1 - Feb. 2)	3,329,466	$	225.26	3,329,466	$	1,250
Fiscal February (Feb. 3 - Mar. 2)	—			—	1,250
Fiscal March (Mar. 3 - Mar. 30)	—			—	1,250

Total First Quarter	3,329,466	$	225.26	3,329,466	$	1,250

~~(1)~~

(1)

On July 7, 2016, the Board of Directors authorized the repurchase of up to $1.50 billion of the company’s common stock. All of the shares of common stock repurchased by the company during the third quarter of 2018 were purchased under this program. In addition, in October 2018, the company repurchased $250 million of the company's common stock, depleting the 2016 authorization. On September 7, 2018, the Board of Directors authorized the repurchase of up to $2.00 billion of the company’s common stock. All of the shares of common stock repurchased by the company during the first quarter of 2019 were purchased under this program.


Item 6.	Exhibits

See Exhibit Index on page 5443.

5241

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



Date:	~~November 2, 2018~~May 3, 2019	THERMO FISHER SCIENTIFIC INC.



		/s/ Stephen Williamson
		Stephen Williamson
		Senior Vice President and Chief Financial Officer



		/s/ Peter E. Hornstra
		Peter E. Hornstra
		Vice President and Chief Accounting Officer

5342

THERMO FISHER SCIENTIFIC INC.

EXHIBIT INDEX



Exhibit Number		Description of Exhibit
~~4.1~~10.1		~~Second Supplemental Indenture, dated as~~Form of ~~August 8, 2018, among Thermo Fisher Scientific (Finance I) B.V., as issuer, the Company, as guarantor, and The Bank~~Performance Restricted Stock Unit Agreement effective February 26, 2019.*
10.2		Form of ~~New York Mellon Trust Company, N.A., as trustee~~Performance Restricted Stock Unit Agreement for Marc Casper effective February 26, 2019 ~~(filed as Exhibit 4.2 to the Registrant’s Current Report on Form 8-K filed August 8, 2018 [File No. 1-8002] and incorporated in this document by reference)~~.*
31.1		Certification of Chief Executive Officer required by Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of ~~2002~~2002..
31.2		Certification of Chief Financial Officer required by Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1		Certification of Chief Executive Officer required by Exchange Act Rules 13a-14(b) and 15d-14(b), as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**
32.2		Certification of Chief Financial Officer required by Exchange Act Rules 13a-14(b) and 15d-14(b), as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**
101.INS		XBRL Instance Document.
101.SCH		XBRL Taxonomy Extension Schema Document.
101.CAL		XBRL Taxonomy Calculation Linkbase Document.
101.DEF		XBRL Taxonomy Definition Linkbase Document.
101.LAB		XBRL Taxonomy Label Linkbase Document.
101.PRE		XBRL Taxonomy Presentation Linkbase Document.
		The Registrant agrees, pursuant to Item 601(b)(4)(iii)(A) of Regulation S-K, to furnish to the Commission, upon request, a copy of each instrument with respect to long-term debt of the Registrant or its consolidated subsidiaries.

_______________________

*Indicates management contract or compensatory plan, contract or arrangement.

** Certification is not deemed "filed" for purposes of Section 18 of the Exchange Act or otherwise subject to the liability of that section. Such certification is not deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act except to the extent that the registrant specifically incorporates it by reference.

Attached as Exhibit 101 to this report are the following formatted in XBRL (Extensible Business Reporting Language): (i) Consolidated Balance Sheet at ~~September 29, 2018~~March 30, 2019 and December 31, ~~2017,~~2018, (ii) Consolidated Statement of Income for the three ~~and nine~~ months ended ~~September 29,~~March 30, 2019 and March 31, 2018, ~~and September 30, 2017,~~ (iii) Consolidated Statement of Comprehensive Income for the three ~~and nine~~ months ended ~~September 29,~~March 30, 2019 and March 31, 2018, ~~and September 30, 2017,~~ (iv) Consolidated Statement of Cash Flows for the ~~nine~~three months ended ~~September 29, 2018~~March 30, 2019 and ~~September 30, 2017,~~March 31, 2018, (v) Consolidated Statement of Shareholders’ Equity for the three ~~and nine~~ months ended ~~September 29,~~March 30, 2019 and March 31, 2018 ~~and September 30, 2017~~ and (vi) Notes to Consolidated Financial Statements.

5443



	TABLE OF CONTENTS
		Page
	PART I

Item 1.	Financial Statements (Unaudited)	3

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3427

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4534

Item 4.	Controls and Procedures	4534

	PART II

Item 1.	Legal Proceedings	4534

Item 1A.	Risk Factors	4534

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	5241

Item 6.	Exhibits	5241



	September 29,		January 1,
(In millions)	2018		2018

Current Contract Assets, Net	$	462	$	396
Current Contract Liabilities	797		805
Noncurrent Contract Liabilities	349		302



(In millions)	December 31, 2017 as Reported			Impact of Adopting New Revenue Guidance			Impact of Adopting New Equity Investment Guidance			Impact of Adopting New Intra-entity Tax Guidance			Impact of Adopting New Hedge Accounting Guidance			Impact of Adopting New Tax Effects on Items in AOCI Guidance			January 1, 2018 as Adopted

Accounts Receivable, Less Allowances	$	3,879		$	(8	)	$	—		$	—		$	—		$	—		$	3,871
Inventories	2,971			(252		)	—			—			—			—			2,719
Other Current Assets	804			296			—			—			—			—			1,100
Other Assets	1,227			—			—			(77		)	—			—			1,150
Contract Liabilities	—			805			—			—			—			—			805
Deferred Revenue	719			(719		)	—			—			—			—			—
Other Accrued Expenses	1,848			(153		)	—			—			—			—			1,695
Deferred Income Taxes	2,766			—			—			(57		)	—			2			2,711
Other Long-term Liabilities	2,569			54			—			—			—			—			2,623
Long-term Obligations	18,873			—			—			—			(3		)	—			18,870
Retained Earnings	15,914			49			(1		)	(20		)	3			87			16,032
Accumulated Other Comprehensive Items	(2,003		)	—			1			—			—			(89		)	(2,091		)



(In millions)	Cost of Revenues (Credits) Charges, Net			Selling, General and Administrative (Credits) Charges, Net			Restructuring and Other (Income) Costs, Net			Total

Life Sciences Solutions	$	—		$	(2	)	$	(47	)	$	(49	)
Analytical Instruments	—			4			18			22
Specialty Diagnostics	—			—			1			1
Laboratory Products and Services	(1		)	5			1			5
Corporate	—			(11		)	—			(11		)

	$	(1	)	$	(4	)	$	(27	)	$	(32	)