UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
FORM 10-Q

☒Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the Quarter Ended September 28, 201926, 2020 or
☐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)
Delaware04-2209186
(State of incorporation)(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 classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $1.00 par valueTMONew York Stock Exchange
Floating Rate Notes due 2020TMO /20ANew York Stock Exchange
2.150% Notes due 2022TMO 22ANew York Stock Exchange
0.750% Notes due 2024TMO 24ANew York Stock Exchange
0.125% Notes due 2025TMO 25BNew York Stock Exchange
2.000% Notes due 2025TMO 25New York Stock Exchange
1.400% Notes due 2026TMO 26ANew York Stock Exchange
1.450% Notes due 2027TMO 27New York Stock Exchange
1.750% Notes due 2027TMO 27BNew York Stock Exchange
0.500% Notes due 2028TMO 28ANew York Stock Exchange
1.375% Notes due 2028TMO 28New York Stock Exchange
1.950% Notes due 2029TMO 29New York Stock Exchange
0.875% Notes due 2031TMO 31New York Stock Exchange
2.375% Notes due 2032TMO 32New York Stock Exchange
2.875% Notes due 2037TMO 37New York Stock Exchange
1.500% Notes due 2039TMO 39New York Stock Exchange
1.875% Notes due 2049TMO 49New 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 ☒  No ☐
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months. Yes ☒  No ☐
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“large accelerated filer," "accelerated” “accelerated filer," "smaller” “smaller reporting company"company” and "emerging“emerging growth company"company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☒                                               Accelerated filer ☐                                       Non-accelerated filer ☐
Smaller reporting company ☐                                      Emerging growth company  ☐
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐  No ☒
As of September 28, 2019,26, 2020, the Registrant had 400,991,227396,335,191 shares of Common Stock outstanding.




THERMO FISHER SCIENTIFIC INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 28, 2019
26, 2020
TABLE OF CONTENTS
Page
PART I
TABLE OF CONTENTS
3
Page
PART I
3
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
3025
4037
4137
PART II
4138
4138
4738
4738

2

THERMO FISHER SCIENTIFIC INC.

PART I    FINANCIAL INFORMATION
PART IFINANCIAL INFORMATION
Item 1.Financial Statements
Item 1.    Financial Statements
CONSOLIDATED BALANCE SHEET
(Unaudited)
  September 28,
 December 31,
(In millions except share and per share amounts) 2019
 2018
     
Assets    
Current Assets:    
Cash and cash equivalents $1,273
 $2,103
Accounts receivable, less allowances of $106 and $117 4,384
 4,136
Inventories 3,308
 3,005
Other current assets 1,549
 1,381
     
Total current assets 10,514
 10,625
     
Property, Plant and Equipment, Net 4,420
 4,165
Acquisition-related Intangible Assets, Net 14,311
 14,978
Other Assets 1,860
 1,117
Goodwill 25,624
 25,347
     
Total Assets $56,729
 $56,232
     
Liabilities and Shareholders' Equity    
Current Liabilities:    
Short-term obligations and current maturities of long-term obligations $661
 $1,271
Accounts payable 1,659
 1,615
Accrued payroll and employee benefits 883
 982
Contract liabilities 943
 809
Other accrued expenses 1,698
 1,470
     
Total current liabilities 5,844
 6,147
     
Deferred Income Taxes 2,001
 2,265
Other Long-term Liabilities 3,137
 2,515
Long-term Obligations 16,392
 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; 434,028,435 and 431,566,561 shares issued 434
 432
Capital in excess of par value 14,964
 14,621
Retained earnings 21,165
 18,696
Treasury stock at cost, 33,037,208 and 29,444,882 shares (4,486) (3,665)
Accumulated other comprehensive items (2,722) (2,498)
     
Total shareholders' equity 29,355
 27,586
     
Total Liabilities and Shareholders' Equity $56,729
 $56,232

 September 26,December 31,
(In millions except share and per share amounts)20202019
Assets
Current Assets:
Cash and cash equivalents$7,540 $2,399 
Accounts receivable, less allowances of $117 and $1025,186 4,349 
Inventories3,829 3,370 
Contract assets, net697 603 
Other current assets982 1,172 
Total current assets18,234 11,893 
Property, Plant and Equipment, Net5,180 4,749 
Acquisition-related Intangible Assets, Net12,870 14,014 
Other Assets1,995 2,011 
Goodwill25,782 25,714 
Total Assets$64,061 $58,381 
Liabilities and Shareholders' Equity
Current Liabilities:
Short-term obligations and current maturities of long-term obligations$2 $676 
Accounts payable1,703 1,920 
Accrued payroll and employee benefits1,538 1,010 
Contract liabilities1,047 916 
Other accrued expenses1,938 1,675 
Total current liabilities6,228 6,197 
Deferred Income Taxes1,528 2,192 
Other Long-term Liabilities3,390 3,241 
Long-term Obligations21,091 17,076 
Shareholders' Equity:
Preferred stock, $100 par value, 50,000 shares authorized; NaN issued
Common stock, $1 par value, 1,200,000,000 shares authorized; 436,746,267 and 434,416,804 shares issued437 434 
Capital in excess of par value15,467 15,064 
Retained earnings25,705 22,092 
Treasury stock at cost, 40,411,076 and 35,676,421 shares(6,815)(5,236)
Accumulated other comprehensive items(2,970)(2,679)
Total shareholders' equity31,824 29,675 
Total Liabilities and Shareholders' Equity$64,061 $58,381 
The accompanying notes are an integral part of these consolidated financial statements.

3


THERMO FISHER SCIENTIFIC INC.

CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
Three Months EndedNine Months Ended
September 26,September 28,September 26,September 28,
(In millions except per share amounts)2020201920202019
Revenues
Product revenues$6,782 $4,798 $16,662 $14,345 
Service revenues1,739 1,474 5,006 4,368 
Total revenues8,521 6,272 21,668 18,713 
Costs and Operating Expenses:
Cost of product revenues3,001 2,471 7,732 7,363 
Cost of service revenues1,189 1,038 3,488 3,057 
Selling, general and administrative expenses1,592 1,539 4,853 4,632 
Research and development expenses296 247 805 741 
Restructuring and other costs (income), net17 31 67 (442)
Total costs and operating expenses6,095 5,326 16,945 15,351 
Operating Income2,426 946 4,723 3,362 
Interest Income9 52 53 179 
Interest Expense(144)(164)(407)(534)
Other (Expense) Income, Net(39)(12)(36)25 
Income Before Income Taxes2,252 822 4,333 3,032 
Provision for Income Taxes(319)(62)(456)(338)
Net Income$1,933 $760 $3,877 $2,694 
Earnings per Share
Basic$4.88 $1.89 $9.79 $6.73 
Diluted$4.84 $1.88 $9.71 $6.68 
Weighted Average Shares
Basic396 401 396 400 
Diluted399 404 399 403 
  Three Months Ended Nine Months Ended
  September 28,
 September 29,
 September 28,
 September 29,
(In millions except per share amounts) 2019
 2018
 2019
 2018
         
Revenues        
Product revenues $4,798
 $4,571
 $14,345
 $13,807
Service revenues 1,474
 1,349
 4,368
 4,044
         
Total revenues 6,272
 5,920
 18,713
 17,851
         
Costs and Operating Expenses:        
Cost of product revenues 2,471
 2,357
 7,363
 7,072
Cost of service revenues 1,038
 948
 3,057
 2,846
Selling, general and administrative expenses 1,539
 1,490
 4,632
 4,547
Research and development expenses 247
 240
 741
 716
Restructuring and other costs (income), net 31
 (27) (442) 35
         
Total costs and operating expenses 5,326
 5,008
 15,351
 15,216
         
Operating Income 946
 912
 3,362
 2,635
Other Expense, Net (124) (102) (330) (385)
         
Income Before Income Taxes 822
 810
 3,032
 2,250
Provision for Income Taxes (62) (101) (338) (210)
         
Net Income $760
 $709
 $2,694
 $2,040
         
Earnings per Share        
Basic $1.89
 $1.76
 $6.73
 $5.07
Diluted $1.88
 $1.75
 $6.68
 $5.03
         
Weighted Average Shares        
Basic 401
 402
 400
 402
Diluted 404
 406
 403
 406

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

4

THERMO FISHER SCIENTIFIC INC.

 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(Unaudited)
 Three Months EndedNine Months Ended
 September 26,September 28,September 26,September 28,
(In millions)2020201920202019
Comprehensive Income
Net Income$1,933 $760 $3,877 $2,694 
Other Comprehensive Items:
Currency translation adjustment:
Currency translation adjustment (net of tax (benefit) provision of $(76), $77, $(71) and $92)10 (91)(244)(222)
Reclassification adjustment for losses included in net income0 30 0 30 
Unrealized gains and losses on hedging instruments:
Unrealized losses on hedging instruments (net of tax benefit of $0, $12, $20 and $12)0 (38)(65)(38)
Reclassification adjustment for losses included in net income (net of tax benefit of $2, $1, $4 and $3)6 2 10 7 
Pension and other postretirement benefit liability adjustments:
Pension and other postretirement benefit liability adjustments arising during the period (net of tax benefit (provision) of $1, $(2), $2 and $2)(4)2 (5)(9)
Amortization of net loss included in net periodic pension cost (net of tax benefit of $1, $0, $4 and $2)7 3 13 8 
Total other comprehensive items19 (92)(291)(224)
Comprehensive Income$1,952 $668 $3,586 $2,470 
  Three Months Ended Nine Months Ended
  September 28,
 September 29,
 September 28,
 September 29,
(In millions) 2019
 2018
 2019
 2018
         
Comprehensive Income        
Net Income $760
 $709
 $2,694
 $2,040
         
Other Comprehensive Items:        
Currency translation adjustment:        
Currency translation adjustment (net of tax provision of $77, $13, $92 and $60) (91) (32) (222) (447)
Reclassification adjustment for losses included in net income 30
 —
 30
 —
Unrealized gains and losses on hedging instruments:        
Unrealized losses on hedging instruments (net of tax benefit of $12, $0, $12 and $0) (38) —
 (38) —
Reclassification adjustment for losses included in net income (net of tax benefit of $1, $1, $3 and $3) 2
 2
 7
 6
Pension and other postretirement benefit liability adjustments:        
Pension and other postretirement benefit liability adjustments arising during the period (net of tax provision (benefit) of $2, $0, ($2) and $1) 2
 —
 (9) 3
Amortization of net loss included in net periodic pension cost (net of tax benefit of $0, $0, $2 and $3) 3
 2
 8
 10
         
Total other comprehensive items (92) (28) (224) (428)
         
Comprehensive Income $668
 $681
 $2,470
 $1,612

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

5

THERMO FISHER SCIENTIFIC INC.

CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
 Nine Months Ended Nine Months Ended
 September 28,
 September 29,
 September 26,September 28,
(In millions) 2019
 2018
(In millions)20202019
    
Operating Activities    Operating Activities
Net income $2,694
 $2,040
Net income$3,877 $2,694 
    
Adjustments to reconcile net income to net cash provided by operating activities:    Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of property, plant and equipment 416
 393
Depreciation of property, plant and equipment467 416 
Amortization of acquisition-related intangible assets 1,285
 1,316
Amortization of acquisition-related intangible assets1,256 1,285 
Change in deferred income taxes (356) (317)Change in deferred income taxes(496)(356)
Gain on sales of businesses (486) —
Gain on sales of businesses0 (486)
Non-cash stock-based compensation 138
 137
Stock-based compensationStock-based compensation145 138 
Other non-cash expenses, net 123
 77
Other non-cash expenses, net209 123 
Changes in assets and liabilities, excluding the effects of acquisitions and disposition:    Changes in assets and liabilities, excluding the effects of acquisitions and disposition:
Accounts receivable (321) (64)Accounts receivable(858)(321)
Inventories (449) (333)Inventories(427)(449)
Other assets (186) (185)
Accounts payable 70
 (45)Accounts payable(220)70 
Other liabilities 172
 (199)
Contributions to retirement plans (40) (78)Contributions to retirement plans(45)(40)
OtherOther1,042 (14)
    
Net cash provided by operating activities 3,060
 2,742
Net cash provided by operating activities4,950 3,060 
    
Investing Activities  
  
Investing Activities  
Acquisitions, net of cash acquired (1,687) (59)Acquisitions, net of cash acquired(3)(1,687)
Proceeds from sale of business, net of cash divested 1,128
 —
Proceeds from sale of business, net of cash divested0 1,128 
Purchase of property, plant and equipment (637) (474)Purchase of property, plant and equipment(888)(637)
Proceeds from sale of property, plant and equipment 18
 6
Proceeds from sale of property, plant and equipment7 18 
Other investing activities, net 30
 (5)Other investing activities, net0 30 
    
Net cash used in investing activities (1,148) (532)Net cash used in investing activities(884)(1,148)
    
Financing Activities    Financing Activities
Net proceeds from issuance of debt —
 690
Net proceeds from issuance of debt3,464 0 
Repayment of debt (1,702) (2,048)Repayment of debt(712)(1,702)
Proceeds from issuance of commercial paper 2,581
 3,378
Proceeds from issuance of commercial paper383 2,581 
Repayments of commercial paper (2,578) (3,842)Repayments of commercial paper(387)(2,578)
Purchases of company common stock (750) (250)Purchases of company common stock(1,500)(750)
Dividends paid (221) (198)Dividends paid(250)(221)
Net proceeds from issuance of company common stock under employee stock plans 115
 97
Net proceeds from issuance of company common stock under employee stock plans156 115 
Other financing activities (49) (51)
Other financing activities, netOther financing activities, net(146)(49)
    
Net cash used in financing activities (2,604) (2,224)
Net cash provided by (used in) financing activitiesNet cash provided by (used in) financing activities1,008 (2,604)
    
Exchange Rate Effect on Cash (120) (236)Exchange Rate Effect on Cash74 (120)
    
Decrease in Cash, Cash Equivalents and Restricted Cash (812) (250)
Increase (Decrease) in Cash, Cash Equivalents and Restricted CashIncrease (Decrease) in Cash, Cash Equivalents and Restricted Cash5,148 (812)
Cash, Cash Equivalents and Restricted Cash at Beginning of Period 2,117
 1,361
Cash, Cash Equivalents and Restricted Cash at Beginning of Period2,422 2,117 
    
Cash, Cash Equivalents and Restricted Cash at End of Period $1,305
 $1,111
Cash, Cash Equivalents and Restricted Cash at End of Period$7,570 $1,305 
The accompanying notes are an integral part of these consolidated financial statements.
6

THERMO FISHER SCIENTIFIC INC.

CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(Unaudited)
 Common StockCapital in Excess of Par ValueRetained EarningsTreasury StockAccumulated Other Comprehensive ItemsTotal Shareholders' Equity
(In millions)SharesAmountSharesAmount
Three Months Ended September 26, 2020
Balance at June 27, 2020436 $436 $15,334 $23,860 40 $(6,766)$(2,989)$29,875 
Issuance of shares under employees' and directors' stock plans1 1 81 — 0 (49)— 33 
Stock-based compensation— — 52 — — — — 52 
Dividends declared ($0.22 per share)— — — (88)— — — (88)
Net income— — — 1,933 — — — 1,933 
Other comprehensive items— — — — — — 19 19 
Balance at September 26, 2020437 $437 $15,467 $25,705 40 $(6,815)$(2,970)$31,824 
Three Months Ended September 28, 2019
Balance at June 29, 2019433 $433 $14,887 $20,482 33 $(4,443)$(2,630)$28,729 
Issuance of shares under employees' and directors' stock plans1 1 35 — — (43)— (7)
Stock-based compensation— — 42 — — — — 42 
Dividends declared ($0.19 per share)— — — (77)— — — (77)
Net income— — — 760 — — — 760 
Other comprehensive items— — — — — — (92)(92)
Balance at September 28, 2019434 $434 $14,964 $21,165 33 $(4,486)$(2,722)$29,355 
Nine Months Ended September 26, 2020
Balance at December 31, 2019434 $434 $15,064 $22,092 36 $(5,236)$(2,679)$29,675 
Cumulative effect of accounting change— — — (1)— — — (1)
Issuance of shares under employees' and directors' stock plans3 3 258 — 0 (79)— 182 
Stock-based compensation— — 145 — — — — 145 
Purchases of company common stock— — — — 4 (1,500)— (1,500)
Dividends declared ($0.66 per share)— — — (263)— — — (263)
Net income— — — 3,877 — — — 3,877 
Other comprehensive items— — — — — — (291)(291)
Balance at September 26, 2020437 $437 $15,467 $25,705 40 $(6,815)$(2,970)$31,824 
Nine Months Ended September 28, 2019
Balance at December 31, 2018432 $432 $14,621 $18,696 29 $(3,665)$(2,498)$27,586 
Cumulative effect of accounting changes— — — 4 — — — 4 
Issuance of shares under employees' and directors' stock plans2 2 205 — 1 (71)— 136 
Stock-based compensation— — 138 — — — — 138 
Purchases of company common stock— — — — 3 (750)— (750)
Dividends declared ($0.57 per share)— — — (229)— — — (229)
Net income— — — 2,694 — — — 2,694 
Other comprehensive items— — — — — — (224)(224)
Balance at September 28, 2019434 $434 $14,964 $21,165 33 $(4,486)$(2,722)$29,355 
  Common Stock Capital in Excess of Par Value
 Retained Earnings
 Treasury Stock Accumulated Other Comprehensive Items
 Total Shareholders' Equity
(In millions) Shares
 Amount
   Shares
 Amount
  
                 
  Three Months Ended September 28, 2019
Balance at June 29, 2019 433
 $433
 $14,887
 $20,482
 33
 $(4,443) $(2,630) $28,729
Issuance of shares under employees' and directors' stock plans 1
 1
 35
 —
 —
 (43) —
 (7)
Stock-based compensation —
 —
 42
 —
 —
 —
 —
 42
Dividends declared ($0.19 per share) —
 —
 —
 (77) —
 —
 —
 (77)
Net income —
 —
 —
 760
 —
 —
 —
 760
Other comprehensive items —
 —
 —
 —
 —
 —
 (92) (92)
Balance at September 28, 2019 434
 $434
 $14,964
 $21,165
 33
 $(4,486) $(2,722) $29,355
                 
  Three Months Ended September 29, 2018
Balance at June 30, 2018 430
 $430
 $14,408
 $17,226
 27
 $(3,128) $(2,491) $26,445
Issuance of shares under employees' and directors' stock plans 1
 1
 72
 —
 —
 (36) —
 37
Stock-based compensation —
 —
 46
 —
 —
 —
 —
 46
Purchases of company common stock —
 —
 —
 —
 1
 (250) —
 (250)
Dividends declared ($0.17 per share) —
 —
 —
 (69) —
 —
 —
 (69)
Net income —
 —
 —
 709
 —
 —
 —
 709
Other comprehensive items —
 —
 —
 —
 —
 —
 (28) (28)
Balance at September 29, 2018 431
 $431
 $14,526
 $17,866
 28
 $(3,414) $(2,519) $26,890
                 
  Nine Months Ended September 28, 2019
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 2
 2
 205
 —
 1
 (71) —
 136
Stock-based compensation —
 —
 138
 —
 —
 —
 —
 138
Purchases of company common stock —
 —
 —
 —
 3
 (750) —
 (750)
Dividends declared ($0.57 per share) —
 —
 —
 (229) —
 —
 —
 (229)
Net income —
 —
 —
 2,694
 —
 —
 —
 2,694
Other comprehensive items —
 —
 —
 —
 —
 —
 (224) (224)
Balance at September 28, 2019 434
 $434
 $14,964
 $21,165
 33
 $(4,486) $(2,722) $29,355
                 
  Nine Months Ended September 29, 2018
Balance at December 31, 2017 428
 $428
 $14,177
 $15,914
 27
 $(3,103) $(2,003) $25,413
Cumulative effect of accounting changes —
 —
 —
 118
 —
 —
 (88) 30
Issuance of shares under employees' and directors' stock plans 3
 3
 185
 —
 —
 (61) —
 127
Stock-based compensation —
 —
 137
 —
 —
 —
 —
 137
Purchases of company common stock —
 —
 —
 —
 1
 (250) —
 (250)
Dividends declared ($0.51 per share) —
 —
 —
 (206) —
 —
 —
 (206)
Net income —
 —
 —
 2,040
 —
 —
 —
 2,040
Other comprehensive items —
 —
 —
 —
 —
 —
 (428) (428)
Other —
 —
 27
 —
 —
 —
 —
 27
Balance at September 29, 2018 431
 $431
 $14,526
 $17,866
 28
 $(3,414) $(2,519) $26,890

The accompanying notes are an integral part of these consolidated financial statements.
7

THERMO FISHER SCIENTIFIC INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


Note 1.    Nature of Operations and Summary of Significant Accounting Policies
Note 1.
Nature of Operations and Summary of Significant Accounting Policies
Nature of Operations
Thermo Fisher Scientific Inc. (the company or Thermo Fisher) enables customers to make the world healthier, cleaner and safer by helping them accelerate life sciences research, solve complex analytical challenges, improve patient diagnostics, deliver medicines to market and increase laboratory productivity. Markets served include pharmaceutical and biotech, academic and government, industrial and applied, as well as healthcare and diagnostics.
Interim Financial Statements
The interim 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 28, 2019,26, 2020, the results of operations for the three- and nine-month periods ended September 28, 201926, 2020 and September 29, 2018,28, 2019, and the cash flows for the nine-month periods ended September 28, 201926, 2020 and September 29, 2018.28, 2019. Interim results are not necessarily indicative of results for a full year.
The consolidated balance sheet presented as of December 31, 2018,2019, 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 20182019 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 20182019 describes the significant accounting estimates and policies used in preparation of the consolidated financial statements. Except for the accounting for leases, as noted below, thereThere have been no material changes in the company’s significant accounting policies during the nine months ended September 28, 2019.
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 lease expense for these leases on a straight-line basis over the lease term.
Because most of the company’s leases do not provide an implicit rate, the company estimates incremental borrowing rates based on the information available at the commencement date in determining the present value of lease payments. The company uses the implicit rate when readily determinable. Lease terms may include the effect of options to extend or terminate the lease when it is reasonably certain that 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 non-lease components as a single lease component.
See Note 9 additional information about the company's leases.26, 2020.
Contract-related Balances
Current contractAccounts receivable include amounts that have been billed and are currently due from customers. They are recorded at the invoiced amount and do not bear interest. The company maintains allowances for doubtful accounts for estimates of expected losses resulting from the inability of its customers to pay amounts due. The allowance for doubtful accounts is the company’s best estimate of the amount of probable credit losses in existing accounts receivable. The company determines the allowance based on history of similarly aged receivables, the creditworthiness of the customer, reasons for delinquency, current economic conditions, expectations associated with future events and circumstances where reasonable and supportable forecasts are available and any other information that is relevant to the judgment. Receivables from academic and government customers as well as large, well-capitalized commercial customers have historically experienced less collectability risk. Account balances are charged off against the allowance when the company believes it is probable the receivable will not be recovered. The company does not have any off-balance-sheet credit exposure related to customers.
The changes in the allowance for doubtful accounts are as follows:
Nine Months Ended
September 26,September 28,
(In millions)20202019
Balance at Beginning of Year$102 $117 
Cumulative effect of accounting change1 — 
Provision charged to expense39 19 
Accounts written off(25)(26)
Acquisitions, currency translation and other— (4)
Balance at End of Period$117 $106 
Contract assets include revenues recognized in advance of billings and are recorded net of estimated losses resulting from the inability to invoice customers, which is primarily due to risk associated with the company’s performance. Contract assets are classified as current or noncurrent based on the amount of time expected to lapse until the company's right to consideration
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
becomes unconditional. Noncurrent contract assets are included within other current assets and other assets, respectively, in the accompanying balance sheet. Noncurrent contract liabilities are included within other long-term liabilities in the accompanying balance sheet. Contract assets and liabilities are presented on a net basis in the consolidated balance sheet if they arise from different performance obligations in the same contract. Contract asset and liability balances are as follows:

THERMO FISHER SCIENTIFIC INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

  September 28,
 December 31,
(In millions) 2019
 2018
     
Current Contract Assets, Net $609
 $459
Noncurrent Contract Assets, Net 14
 15
Current Contract Liabilities 943
 809
Noncurrent Contract Liabilities 562
 355

September 26,December 31,
(In millions)20202019
Current Contract Assets, Net$697 $603 
Noncurrent Contract Assets, Net11 17 
Current Contract Liabilities1,047 916 
Noncurrent Contract Liabilities674 594 
In the firstthree and nine months of 2019,ended September 26, 2020, the company recognized revenuerevenues of $654$142 million and $773 million, respectively, that waswere included in the contract liabilities balance at December 31, 2018. Contract assets increased in the first nine months of 2019 due to the timing of billing. Contract liabilities increased during the first nine months of 2019 primarily due to an advance payment from a customer and an acquisition.2019.
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
  September 28,
 September 29,
(In millions) 2019
 2018
     
Beginning Balance $92
 $87
Provision charged to income 80
 89
Usage (83) (80)
Adjustments to previously provided warranties, net (1) (3)
Currency translation (2) (2)
     
Ending Balance $86
 $91

 Nine Months Ended
 September 26,September 28,
(In millions)20202019
Balance at Beginning of Year$93 $92 
Provision charged to expense74 80 
Usage(76)(83)
Adjustments to previously provided warranties, net(2)(1)
Currency translation— (2)
Balance at End of Period$89 $86 
Inventories
The components of inventories are as follows:
  September 28,
 December 31,
(In millions) 2019
 2018
     
Raw Materials $943
 $812
Work in Process 514
 430
Finished Goods 1,851
 1,763
     
Inventories $3,308
 $3,005

September 26,December 31,
(In millions)20202019
Raw Materials$1,247 $971 
Work in Process558 517 
Finished Goods2,024 1,882 
Inventories$3,829 $3,370 
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.
The company’s estimates include, among others, asset reserve requirements as well as the amounts of future cash flows associated with certain assets and businesses that are used in assessing the risk of impairment. Risks and uncertainties associated with the ongoing COVID-19 global pandemic have and will continue to materially adversely affect certain of the company’s businesses, particularly in the Analytical Instruments segment and, to a lesser extent, in some businesses within the other three segments, through at least the fourth quarter of 2020. The extent and duration of such impacts are uncertain and may require changes to estimates. Actual results could differ from those estimates.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Recent Accounting Pronouncements
In January 2020, the FASB issued new guidance to clarify the interaction of the accounting for certain equity securities, equity method investments, and certain forward contracts and purchased options. Among other things, the new guidance clarifies that an entity should consider observable transactions that require it to either apply or discontinue the equity method of accounting for the purposes of applying measurement principles for certain equity securities immediately before applying or discontinuing the equity method. The company adopted this guidance in 2020 using a prospective method. The adoption of this guidance did not have a material impact on the company’s consolidated financial statements.
In December 2019, the FASB issued new guidance to simplify the accounting for income taxes. Among other things, the new guidance requires the effects of enacted changes in tax laws or rates to be reflected in the annual effective tax rate computation in the interim period that includes the enactment date. The company expects to adopt this guidance when it is effective in 2021 using a prospective method. The adoption of this guidance is not expected to have a material impact on the company’s consolidated financial statements; however, the impact in future periods will be dependent on the extent of future events or conditions that would be affected such as enacted changes in tax laws or rates.
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 adoptadopted the guidance when it is effective in 2020 using a retrospective method. The adoption of this guidance isdid not expected to have a material impact on the company’s disclosures.
In August 2018, the FASB issued new guidance to modify the disclosure requirements on fair value measurements. The company expects to adoptadopted the guidance when it is effective in 2020 with some items requiring a prospective method and others

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

requiring a retrospective method. The adoption of this guidance isdid not expected to have a material impact on the company’s disclosures.
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 and 2019, the FASB issued additional guidance and clarification. The company expects to adoptadopted the guidance when it is effective in 2020 using a modified retrospective method. The adoption of this guidance is not expected to have a material impactreduced accounts receivable and retained earnings by $1 million on the company’s consolidated financial statements.January 1, 2020.
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 - 2019, the FASB issued additional guidance and clarification. The guidance became effective for the company in 2019. The company has elected to adopt the guidance using a modified retrospective method, by applying the transition approach as of the beginning of the period of adoption. Comparative periods have not been restated. As permitted upon transition, the company did 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 impacted the company’s Consolidated Balance Sheet as follows:
(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
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, primarily due to expectations of the synergies that will be realized by combining the businesses. These synergies include the elimination of redundant facilities, functions and staffing; use of the company’s existing commercial infrastructure to expand sales of the acquired businesses’ products; and use of the commercial infrastructure of the acquired businesses to cost-effectively expand sales of company products.
Acquisitions have been accounted for using the acquisition method of accounting, and the acquired companies’ results have been included in the accompanying financial statements from their respective dates of acquisition. Acquisition transaction costs are recorded in selling, general and administrative expenses as incurred.
On April 30, 2019,Terminated Acquisition
As previously announced, on March 3, 2020, the company acquired, withinentered into a purchase agreement to acquire all of the Laboratory Productsissued and Services segment, Brammer Biooutstanding shares of QIAGEN N.V. (“QIAGEN”). Following a determination that the number of shares tendered by QIAGEN shareholders did not meet the minimum amount required for approximately $1.67 billionthe transaction to proceed, on August 13, 2020, the company delivered to QIAGEN a written notice terminating the purchase agreement in cash. Brammer Bio is a leading viral vector contract development and manufacturing organization for gene and cell therapies. The acquisition expandsaccordance with the segment's contract manufacturing capabilities. Revenuesterms of Brammer Bio were approximately $140the agreement. In connection with the termination, QIAGEN paid to the company an expense reimbursement payment of $95 million in 2018. The purchase price exceeded the fair valuecash which has been recorded as a reduction of the identifiable net assetsselling, general and accordingly, $938 million was allocated to goodwill, $405 million of which is tax deductible.
In addition, in the nine months ended September 28, 2019 the company acquired, within the Analytical Instruments segment, a Slovakia-based provider of mass spectrometry software used for identification of compounds, for an aggregate purchase price of $14 million.

THERMO FISHER SCIENTIFIC INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

The components of the purchase price and net assets acquired for Brammer Bio are as follows:
(In millions) Brammer Bio
   
Purchase Price  
Cash paid $1,710
Cash acquired (36)
   
  $1,674
   
Net Assets Acquired  
Current assets $52
Property, plant and equipment 147
Definite-lived intangible assets:  
Customer relationships 744
Product technology 65
Tradenames 7
Goodwill 938
Other assets 49
Contract liabilities (109)
Deferred tax liabilities (111)
Other liabilities assumed (108)
   
  $1,674

The weighted-average amortization periods for definite-lived intangible assets acquired in 2019 are 14 years for customer relationships, 13 years for product technology and 2 years for tradenames. The weighted average amortization period for all definite-lived intangible assets acquired in 2019 is 14 years.administrative expenses.
Disposition
On June 28, 2019, the company sold its Anatomical Pathology business to PHC Holdings Corporation for $1.13 billion, net of cash divested. The business was part of the Specialty Diagnostics segment. The sale of this business resulted in a pre-tax gain of approximately $482 million in 2019, included in restructuring and other costs (income) costs,, net. Revenues in 2019, through the date of sale, and the full year 2018 of the business sold were approximately $115 million, and $238 million, respectively, net of retained sales through the company's healthcare market and research and safety market channel businesses. The assets and liabilities of the Anatomical Pathology business were as follows on December 31, 2018:business.
(In millions) December 31, 2018
   
Current Assets $81
Long-term Assets 528
Current Liabilities 34
Long-term Liabilities 24
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THERMO FISHER SCIENTIFIC INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

Note 3.
Note 3.    Revenues
Revenue
Disaggregated RevenueRevenues
RevenueRevenues by type isare as follows:
Three Months Ended Nine Months Ended
September 26,September 28,September 26,September 28,
(In millions)2020201920202019
Revenues
Consumables4,956 3,228 $12,214 $9,726 
Instruments1,826 1,570 4,448 4,619 
Services1,739 1,474 5,006 4,368 
Consolidated revenues$8,521 $6,272 $21,668 $18,713 
  Three Months Ended Nine Months Ended
  September 28,
 September 29,
 September 28,
 September 29,
(In millions) 2019
 2018
 2019
 2018
         
Revenues        
Consumables 3,228
 3,056
 $9,726
 9,345
Instruments 1,570
 1,515
 4,619
 4,462
Services 1,474
 1,349
 4,368
 4,044
         
Consolidated revenues $6,272
 $5,920
 $18,713
 $17,851
RevenueRevenues by geographic region isare as follows:
Three Months EndedNine Months Ended
September 26,September 28,September 26,September 28,
(In millions)2020201920202019
Revenues (a)
North America$4,587 $3,220 $11,418 $9,509 
Europe2,032 1,514 5,464 4,569 
Asia-Pacific1,607 1,349 4,054 4,080 
Other regions295 189 732 555 
Consolidated revenues$8,521 $6,272 $21,668 $18,713 
  Three Months Ended Nine Months Ended
  September 28,
 September 29,
 September 28,
 September 29,
(In millions) 2019
 2018
 2019
 2018
         
Revenues (a)        
North America $3,220
 $3,030
 $9,509
 $8,975
Europe 1,514
 1,454
 4,569
 4,521
Asia-Pacific 1,349
 1,251
 4,080
 3,809
Other regions 189
 185
 555
 546
         
Consolidated revenues $6,272
 $5,920
 $18,713
 $17,851

(a)Revenues are attributed to regions based on customer location.
(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 4 for revenuerevenues 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 28, 201926, 2020 was $6.76$11.16 billion. The company will recognize revenuerevenues for these performance obligations as they are satisfied, approximately 70%72% of which is expected to occur within the next twelve months.

11

THERMO FISHER SCIENTIFIC INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

Note 4.    Business Segment and Geographical Information
Note 4.
Business Segment and Geographical Information
Business Segment Information
Three Months EndedNine Months Ended
September 26,September 28,September 26,September 28,
(In millions)2020201920202019
Revenues
Life Sciences Solutions$3,424 $1,701 $7,800 $5,018 
Analytical Instruments1,336 1,358 3,488 4,004 
Specialty Diagnostics1,430 879 3,376 2,779 
Laboratory Products and Services3,112 2,619 8,629 7,765 
Eliminations(781)(285)(1,625)(853)
Consolidated revenues8,521 6,272 21,668 18,713 
Segment Income (a)
Life Sciences Solutions1,879 586 3,788 1,756 
Analytical Instruments171 311 477 879 
Specialty Diagnostics398 223 848 707 
Laboratory Products and Services355 303 931 933 
Subtotal reportable segments (a)2,803 1,423 6,044 4,275 
Cost of revenues charges, net(1)(5)(5)(16)
Selling, general and administrative credits (charges), net55 (7)7 (54)
Restructuring and other (costs) income, net(17)(31)(67)442 
Amortization of acquisition-related intangible assets(414)(434)(1,256)(1,285)
Consolidated operating income2,426 946 4,723 3,362 
Interest income (b)9 52 53 179 
Interest expense (b)(144)(164)(407)(534)
Other (expense) income, net (b)(39)(12)(36)25 
Income before income taxes$2,252 $822 $4,333 $3,032 
The company’s management evaluates segment operating performance based on(a)Represents operating income before certain charges/creditscharges to cost of revenues and selling, general and administrative expenses, principally associated with acquisition accounting;expenses; 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;net; and amortization of acquisition-related intangible assets. intangibles.
(b)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.does not allocate interest or other expense/income, net to its segments.
Geographical Information
Three Months EndedNine Months Ended
September 26,September 28,September 26,September 28,
(In millions)2020201920202019
Revenues (c)
United States$4,428 $3,096 $10,981 $9,117 
China828 694 1,886 2,072 
Other3,265 2,482 8,801 7,524 
Consolidated revenues$8,521 $6,272 $21,668 $18,713 
(c)     Revenues are attributed to countries based on customer location.
Business Segment Information
12
  Three Months Ended Nine Months Ended
  September 28,
 September 29,
 September 28,
 September 29,
(In millions) 2019
 2018
 2019
 2018
         
Revenues        
Life Sciences Solutions $1,701
 $1,504
 $5,018
 $4,572
Analytical Instruments 1,358
 1,333
 4,004
 3,901
Specialty Diagnostics 879
 894
 2,779
 2,773
Laboratory Products and Services 2,619
 2,470
 7,765
 7,433
Eliminations (285) (281) (853) (828)
         
Consolidated revenues 6,272
 5,920
 18,713
 17,851
         
Segment Income (a)        
Life Sciences Solutions 586
 495
 1,756
 1,534
Analytical Instruments 311
 294
 879
 831
Specialty Diagnostics 223
 223
 707
 719
Laboratory Products and Services 303
 299
 933
 916
         
Subtotal reportable segments (a) 1,423
 1,311
 4,275
 4,000
         
Cost of revenues (charges) credits, net (5) 1
 (16) (7)
Selling, general and administrative (charges) credits, net (7) 4
 (54) (7)
Restructuring and other (costs) income, net (31) 27
 442
 (35)
Amortization of acquisition-related intangible assets (434) (431) (1,285) (1,316)
         
Consolidated operating income 946
 912
 3,362
 2,635
Other expense, net (b) (124) (102) (330) (385)
         
Income before income taxes $822
 $810
 $3,032
 $2,250
(a)Represents operating income before certain charges to cost of revenues and selling, general and administrative expenses; restructuring and other costs/income, 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)

Note 5.    Income Taxes
Geographical Information
  Three Months Ended Nine Months Ended
  September 28,
 September 29,
 September 28,
 September 29,
(In millions) 2019
 2018
 2019
 2018
         
Revenues (c)
        
United States $3,096
 $2,918
 $9,117
 $8,588
China 694
 629
 2,072
 1,818
Other 2,482
 2,373
 7,524
 7,445
         
Consolidated revenues $6,272
 $5,920
 $18,713
 $17,851
(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
  September 28,
 September 29,
 September 28,
 September 29,
(In millions) 2019
 2018
 2019
 2018
         
Interest Income $52
 $41
 $179
 $92
Interest Expense (164) (162) (534) (495)
Other Items, Net (12) 19
 25
 18
         
Other Expense, Net $(124) $(102) $(330) $(385)

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.
In 2019, other items, net in the above table includes $42 million of losses on the early extinguishment of debt (see Note 8). As discussed in Note 15, the company incurred additional losses on the early extinguishment of debt in the fourth quarter of 2019.


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
  September 28,
 September 29,
(In millions) 2019
 2018
     
Statutory Federal Income Tax Rate 21% 21%
     
Provision for Income Taxes at Statutory Rate $637
 $473
     
Increases (Decreases) Resulting From:    
Foreign rate differential (172) (177)
Foreign exchange loss on inter-company debt refinancing (62) —
Income tax credits (242) (183)
Global intangible low-taxed income 160
 124
Foreign-derived intangible income (68) (34)
Withholding taxes 30
 —
Singapore tax holiday (20) (29)
Transition tax and other impacts of U.S. tax reform 8
 117
Provision for (reversal of) tax reserves, net 16
 (49)
Excess tax benefits from stock options and restricted stock units (68) (59)
Basis difference on disposal of business 72
 —
Other, net 47
 27
     
Provision for income taxes $338
 $210

Nine Months Ended
September 26,September 28,
(In millions)20202019
Statutory Federal Income Tax Rate21 %21 %
Provision for Income Taxes at Statutory Rate$910 $637 
Increases (Decreases) Resulting From:
Foreign rate differential(132)(172)
Foreign exchange loss on inter-company debt refinancing— (62)
Income tax credits(333)(242)
Global intangible low-taxed income210 160 
Foreign-derived intangible income(53)(68)
Excess tax benefits from stock options and restricted stock units(94)(68)
Basis difference on disposal of business— 72 
Other, net(52)81 
Provision for Income Taxes$456 $338 
The company has operations and a taxable presence in approximately 50 countries outside the U.S. Some of these countries have lowerThe company's effective income tax ratesrate differs from the U.S. federal statutory rate each year due to certain operations that are subject to tax incentives, state and local taxes, and foreign taxes that are different than the U.S. 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 thefederal statutory tax rates in those countries.rate.
In 2019, the company recorded a $62 million income tax benefit related to a foreign exchange loss for tax purposes on certain intercompany financing arrangements as well as a tax provisionsecond quarter of $191 million related to the gain on sale of the Anatomical Pathology business. In addition,2020, the company implemented foreign tax credit planning in Sweden which resulted in $75$96 million of foreign tax credits, with no related incremental U.S. income tax expense.
During 2019, the company recorded a net tax provision of $1 million to adjust the impacts of U.S. tax reform based on final regulations issued by the U.S. Treasury in 2019. The income tax provision consists of an incremental charge of $8 million offset by a $7 million reduction of related unrecognized tax benefits.
The company has significant operations 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 2019 and 2018, the impact of this tax holiday decreased the annual effective tax rates by 0.6 percentage points and 1.3 percentage points, respectively, and increased diluted earnings per share by approximately $0.05 and $0.07, respectively.
Unrecognized Tax Benefits
As of September 28, 2019,26, 2020, the company had $1.47$1.51 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) 2019
   
Balance at Beginning of Year $1,442
Additions for tax positions of current year 6
Additions for tax positions of prior years 35
Reductions for tax positions of prior years (7)
Settlements (5)
   
Balance at End of Period $1,471


Note 7.(In millions)
Earnings per Share2020
Balance at Beginning of Year$1,552 
Additions for tax positions of current year6 
Reductions for tax positions of prior years(38)
Settlements(7)
Balance at End of Period$1,513 
  Three Months Ended Nine Months Ended
  September 28,
 September 29,
 September 28,
 September 29,
(In millions except per share amounts) 2019
 2018
 2019
 2018
         
Net Income $760
 $709
 $2,694
 $2,040
         
Basic Weighted Average Shares 401
 402
 400
 402
Plus Effect of:        
Stock options and restricted units 3
 4
 3
 4
         
Diluted Weighted Average Shares 404
 406
 403
 406
         
Basic Earnings per Share $1.89
 $1.76
 $6.73
 $5.07
         
Diluted Earnings per Share $1.88
 $1.75
 $6.68
 $5.03
         
Antidilutive Stock Options Excluded from Diluted Weighted Average Shares 1
 2
 1
 2


13

THERMO FISHER SCIENTIFIC INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

Note 6.    Earnings per Share
Note 8.
Three Months EndedNine Months Ended
September 26,September 28,September 26,September 28,
(In millions except per share amounts)2020201920202019
Net Income$1,933 $760 $3,877 $2,694 
Basic Weighted Average Shares396 401 396 400 
Plus Effect of: Stock options and restricted units3 3 3 3 
Diluted Weighted Average Shares399 404 399 403 
Basic Earnings per Share$4.88 $1.89 $9.79 $6.73 
Diluted Earnings per Share$4.84 $1.88 $9.71 $6.68 
Antidilutive Stock Options Excluded from Diluted Weighted Average Shares0 1 1 1 
Debt and Other Financing Arrangements
  Effective Interest Rate at September 28,
 September 28,
 December 31,
(Dollars in millions) 2019
 2019
 2018
       
Commercial Paper 0.84% $683
 $693
Floating Rate 2-Year Senior Notes, Due 7/24/2019 (euro-denominated) 

 —
 574
6.00% 10-Year Senior Notes, Due 3/1/2020 2.99% 750
 750
4.70% 10-Year Senior Notes, Due 5/1/2020 

 —
 300
Floating Rate 2-Year Senior Notes, Due 8/7/2020 (euro-denominated) 0.16% 656
 688
1.50% 5-Year Senior Notes, Due 12/1/2020 (euro-denominated) 1.62% 465
 487
5.00% 10-Year Senior Notes, Due 1/15/2021 3.25% 400
 400
4.50% 10-Year Senior Notes, Due 3/1/2021 5.66% 1,000
 1,000
3.60% 10-Year Senior Notes, Due 8/15/2021 5.19% 1,100
 1,100
3.30% 7-Year Senior Notes, Due 2/15/2022 3.42% 800
 800
2.15% 7-Year Senior Notes, Due 7/21/2022 (euro-denominated) 2.27% 547
 574
3.15% 10-Year Senior Notes, Due 1/15/2023 

 —
 800
3.00% 7-Year Senior Notes, Due 4/15/2023 5.29% 1,000
 1,000
4.15% 10-Year Senior Notes, Due 2/1/2024 4.16% 1,000
 1,000
0.75% 8-Year Senior Notes, Due 9/12/2024 (euro-denominated) 0.93% 1,094
 1,147
2.00% 10-Year Senior Notes, Due 4/15/2025 (euro-denominated) 2.09% 700
 734
3.65% 10-Year Senior Notes, Due 12/15/2025 3.77% 350
 350
1.40% 8.5-Year Senior Notes, Due 1/23/2026 (euro-denominated) 1.53% 766
 802
2.95% 10-Year Senior Notes, Due 9/19/2026 3.19% 1,200
 1,200
1.45% 10-Year Senior Notes, Due 3/16/2027 (euro-denominated) 1.65% 547
 574
3.20% 10-Year Senior Notes, Due 8/15/2027 3.39% 750
 750
1.375% 12-Year Senior Notes, Due 9/12/2028 (euro-denominated) 1.46% 656
 688
1.95% 12-Year Senior Notes, Due 7/24/2029 (euro-denominated) 2.08% 766
 802
2.875% 20-Year Senior Notes, Due 7/24/2037 (euro-denominated) 2.94% 766
 802
5.30% 30-Year Senior Notes, Due 2/1/2044 5.37% 400
 400
4.10% 30-Year Senior Notes, Due 8/15/2047 4.23% 750
 750
Other   20
 21
       
Total Borrowings at Par Value   17,166
 19,186
Fair Value Hedge Accounting Adjustments   (10) (93)
Unamortized Discount, Net   (34) (21)
Unamortized Debt Issuance Costs   (69) (82)
       
Total Borrowings at Carrying Value   17,053
 18,990
Less: Short-term Obligations and Current Maturities   661
 1,271
       
Long-term Obligations   $16,392
 $17,719

14


THERMO FISHER SCIENTIFIC INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Note 7.    Debt and Other Financing Arrangements
Effective Interest Rate at September 26,September 26,December 31,
(Dollars in millions)202020202019
Floating Rate 2-Year Senior Notes, Due 8/7/2020 (euro-denominated)$— $673 
2.15% 7-Year Senior Notes, Due 7/21/2022 (euro-denominated)2.28 %582 561 
3.00% 7-Year Senior Notes, Due 4/15/20231.73 %1,000 1,000 
4.15% 10-Year Senior Notes, Due 2/1/20244.16 %1,000 1,000 
0.75% 8-Year Senior Notes, Due 9/12/2024 (euro-denominated)0.94 %1,163 1,121 
0.125% 5.5-Year Senior Notes, Due 3/1/2025 (euro-denominated)0.41 %930 897 
4.133% 5-Year Senior Notes, Due 3/25/20254.32 %1,100 — 
2.00% 10-Year Senior Notes, Due 4/15/2025 (euro-denominated)2.10 %744 717 
3.65% 10-Year Senior Notes, Due 12/15/20253.77 %350 350 
1.40% 8.5-Year Senior Notes, Due 1/23/2026 (euro-denominated)1.53 %814 785 
2.95% 10-Year Senior Notes, Due 9/19/20263.19 %1,200 1,200 
1.45% 10-Year Senior Notes, Due 3/16/2027 (euro-denominated)1.66 %582 561 
1.75% 7-Year Senior Notes, Due 4/15/2027 (euro-denominated)1.97 %698 — 
3.20% 10-Year Senior Notes, Due 8/15/20273.39 %750 750 
0.50% 8.5-Year Senior Notes, Due 3/1/2028 (euro-denominated)0.78 %930 897 
1.375% 12-Year Senior Notes, Due 9/12/2028 (euro-denominated)1.46 %698 673 
1.95% 12-Year Senior Notes, Due 7/24/2029 (euro-denominated)2.08 %814 785 
2.60% 10-Year Senior Notes, Due 10/1/20292.74 %900 900 
4.497% 10-Year Senior Notes, Due 3/25/20305.31 %1,100 — 
0.875% 12-Year Senior Notes, Due 10/1/2031 (euro-denominated)1.14 %1,047 1,009 
2.375% 12-Year Senior Notes, Due 4/15/2032 (euro-denominated)2.55 %698 — 
2.875% 20-Year Senior Notes, Due 7/24/2037 (euro-denominated)2.94 %814 785 
1.50% 20-Year Senior Notes, Due 10/1/2039 (euro-denominated)1.73 %1,047 1,009 
5.30% 30-Year Senior Notes, Due 2/1/20445.37 %400 400 
4.10% 30-Year Senior Notes, Due 8/15/20474.23 %750 750 
1.875% 30-Year Senior Notes, Due 10/1/2049 (euro-denominated)1.99 %1,163 1,121 
Other8 16 
Total Borrowings at Par Value21,282 17,960 
Fair Value Hedge Accounting Adjustments30 (13)
Unamortized Discount, Net(101)(94)
Unamortized Debt Issuance Costs(118)(101)
Total Borrowings at Carrying Value21,093 17,752 
Less: Short-term Obligations and Current Maturities2 676 
Long-term Obligations$21,091 $17,076 
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 1210 for fair value information pertaining to the company’s long-term obligations.
As discussedIn connection with the termination of the agreement to acquire QIAGEN (Note 2), the company terminated the bridge and term loan commitments which had been available to fund the acquisition. The company had a cash outlay of $51 million in Note 15, early2020 associated with obtaining the bridge and term loan commitments included in other financing activities, net, in the fourth quarteraccompanying statement of 2019,cash flows. In 2020, other expense, net includes $81 million of costs for the company issued new long-term senior notesterminated QIAGEN acquisition, primarily for loan commitment fees and is using the proceeds to redeem the outstanding commercial paper, the 6.00% Senior Notes due 2020, the 1.5% Senior Notes due 2020, the 5.00% Senior Notes due 2021, the 4.50% Senior Notes due 2021, the 3.60% Senior Notes due 2021 and the 3.30% Senior Notes due 2022 included in the table above. Accordingly, all of this debt has been reported as long-term at September 28, 2019.entering into hedging contracts.
15

THERMO FISHER SCIENTIFIC INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

Credit Facilities
The company has a revolving credit facility, as amended, (the Facility) with a bank group that provides for up to $2.50$2.5 billion of unsecured multi-currency revolving credit. The facilityFacility expires in July 2021.2022. The revolving credit 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 this type. The covenants in our revolving credit facility (the Facility)the Facility include a Consolidated Leverage Ratio (total(net 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 3.5:1.0.5.0:1.0, with such ratio stepping down to 4.0 to 1.0 for the two consecutive fiscal quarters starting on the last day of the first fiscal quarter of 2022 and then stepping down to 3.5 to 1.0 for each fiscal quarter ending thereafter. 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 28, 2019,26, 2020, 0 borrowings were outstanding under the Facility, although available capacity was reduced by approximately $80$66 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 28, 2019,26, 2020, there were no outstanding borrowings under these programs were $683 million with a weighted average remaining period to maturity of 41 days.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 September 2019, the company redeemed its 4.70% Senior Notes due 2020 and its 3.15% Senior Notes due 2023. In connection with these redemptions, the company incurred $42 million of losses on the early extinguishment of debt included in Other Expense, Net on the accompanying statement of income.
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.banks. The aggregate amounts of the swaps are equal to the principal amountsamount of the notes and the payment dates of the swaps coincide with the interest payment dates of the notes.note. 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 1210 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 28, 2019:26, 2020:

Aggregate Notional AmountPay Rate as of
(Dollars in millions)Pay RateSeptember 26,
2020		Receive Rate
3.00% Senior Notes due 2023 (a)1,000 1-month LIBOR + 1.7640%1.9164 %3.00 %
THERMO FISHER SCIENTIFIC INC.(a) The payments on $900 million 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 26, 2020 from 1.92% to a weighted average of 1.13%.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

  Aggregate Notional Amount
   Pay Rate as of
  
(Dollars in millions)  Pay Rate September 28,
2019
 Receive Rate
         
4.50% Senior Notes due 2021 (a) 1,000
 1-month LIBOR + 3.4420% 5.5310% 4.50%
3.60% Senior Notes due 2021 (a) 1,100
 1-month LIBOR + 2.5150% 4.5425% 3.60%
3.00% Senior Notes due 2023 (a) 1,000
 1-month LIBOR + 1.7640% 3.7915% 3.00%

(a)The payments on $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 28, 2019 from a weighted average of 4.50% to a weighted average of 1.78%.
The company has entered into $1.8 billion$900 million 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.
As discussed above and in Note 15, early in the fourth quarter of 2019, the company redeemed its 4.50% Senior Notes due 2021 and its 3.60% Senior Notes due 2021 and settled the related interest rate and cross-currency interest rate swaps.

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 lease terms ending in 2020, 2023 and 2024. 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 September 28, 2019, but exclude any amounts for residual value guarantees.
As a lessee, the consolidated statement of income includes pre-tax operating lease costs of $51 million and $149 million and pre-tax variable lease costs of $10 million and $31 million for the three and nine months ended September 28, 2019, respectively. 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 $149 million in the nine months ended September 28, 2019. Operating lease ROU assets of $108 million were obtained in exchange for new operating lease liabilities in the nine months ended September 28, 2019.
The weighted-average remaining operating lease term was 6.3 years and the weighted average discount rate was 4.0% as of September 28, 2019.
ROU assets of $645 million as of September 28, 2019, are classified in other assets in the consolidated balance sheet. Operating lease liabilities of $158 million and $529 million as of September 28, 2019, are classified in other accrued expenses and other long-term liabilities, respectively, in the consolidated balance sheet.
As of September 28, 2019, future payments of operating lease liabilities are as follows:
16

THERMO FISHER SCIENTIFIC INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

(In millions)  
   
Remainder of 2019 $51
2020  180
2021  138
2022  106
2023  76
2024  55
2025 and Thereafter 175
   
Total Lease Payments 781
Less: Imputed Interest 94
   
Total Operating Lease Liability $687

As a lessor, operating leases, sales-type leases
Note 8.    Commitments and direct financing leases are not material.Contingencies
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 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 byinput from environmental specialists and management’s knowledge of and experience with these environmental matters. The company includes in these estimates potential costs for investigation, remediation and operation and maintenance of cleanup sites. At September 28, 2019,26, 2020, the company’s total environmental liability was approximately $63$70 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.

THERMO FISHER SCIENTIFIC INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

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 20182019 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 any, for one or more of the matters described below could have a material adverse effect on the company’s results of operations, financial position and cash flows.
Product Liability, Workers Compensation and Other Personal Injury Matters
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.
17

THERMO FISHER SCIENTIFIC INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Intellectual Property Matters
On June 3, 2013, Unisone Strategic IP filed a complaint against Life Technologies, a subsidiary of the company, 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"“supply centers” installed at customer sites. Plaintiff seekssought damages for alleged willful infringement, attorneys’ fees, costs, and injunctive relief. On August 24, 2017, Unisone filed an appeal fromSeptember 30, 2020, this matter was settled by payment of a decisionnominal amount by the Patent Trialcompany.
Strategic Partnership and Appeal Board (PTAB) that foundLong-term Lease
In May 2020, the challenged patent claims invalid.company entered a strategic partnership with CSL Limited (CSL). Through a long-term lease agreement with CSL, the company will operate a new state-of-the-art biologics manufacturing facility in Lengnau, Switzerland, when construction is completed in mid-2021, to perform pharma services for CSL with capacity to serve other customers as well. The United States Courtcompany made an initial lease payment of Appeals for the Federal Circuit upheld the PTAB’s ruling finding the challenged claims$50 million 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 outcomesecond quarter of the PTAB decision, has resumed 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 11.
Comprehensive Income
Comprehensive income combines net income and2020 (included within other comprehensive items. Other comprehensive items represent certain amounts that are reported as components of shareholders’ equityassets in the accompanying balance sheet.sheet) and expects to make additional fixed lease payments aggregating to $555 million (excluding renewals) from 2021 to 2041, with additional amounts dependent on the extent of revenues from customers of the facility other than CSL.
Loss on Supply Agreement
The Analytical Instruments segment recorded a charge to cost of product revenues for $108 million in the third quarter of 2020 related to an existing supply contract for components of electron microscopy instruments. The agreement requires the company to make future minimum purchases through 2025. The company has developed and launched an alternative product beginning in 2020 and based on the expected demand for the internally developed product vs. the third-party product, the company does not expect to use all of the product it will be required to buy, resulting in a loss on the purchase commitment.

Note 9.    Comprehensive Income
Changes in each component of accumulated other comprehensive items, net of tax, are as follows: 
(In millions)Currency
Translation
Adjustment		Unrealized
Losses on
Hedging
Instruments		Pension and
Other
Postretirement
Benefit
Liability
Adjustment		Total
Balance at December 31, 2019$(2,320)$(71)$(288)$(2,679)
Other comprehensive items before reclassifications(244)(65)(5)(314)
Amounts reclassified from accumulated other comprehensive items0 10 13 23 
Net other comprehensive items(244)(55)8 (291)
Balance at September 26, 2020$(2,564)$(126)$(280)$(2,970)
(In millions) Currency
Translation
Adjustment
 Unrealized
Losses on
Hedging
Instruments
 Pension and
Other
Postretirement
Benefit
Liability
Adjustment
 Total
         
Balance at December 31, 2018 $(2,243) $(52) $(203) $(2,498)
Other comprehensive items before reclassifications (222) (38) (9) (269)
Amounts reclassified from accumulated other comprehensive items 30
 7
 8
 45
         
Net other comprehensive items (192) (31) (1) (224)
         
Balance at September 28, 2019 $(2,435) $(83) $(204) $(2,722)


18

THERMO FISHER SCIENTIFIC INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Note 12.Fair Value Measurements and Fair Value of Financial Instruments
Note 10.    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 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.
The following tables present information about the company’s financial assets and liabilities measured at fair value on a recurring basis as of September 28, 201926, 2020 and December 31, 2018:2019:

September 26,Quoted
Prices in
Active
Markets		Significant
Other
Observable
 Inputs		Significant
Unobservable
Inputs
(In millions)2020(Level 1)(Level 2)(Level 3)
Assets
Cash equivalents$6,021 $6,021 $— $— 
Investments in common stock, mutual funds and other similar instruments22 22 — — 
Warrants9 — 9 — 
Insurance contracts140 — 140 — 
Derivative contracts49 — 49 — 
Total Assets$6,241 $6,043 $198 $— 
Liabilities
Derivative contracts$68 $— $68 $— 
Contingent consideration44 — — 44 
Total Liabilities$112 $— $68 $44 
THERMO FISHER SCIENTIFIC INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

  September 28,
 Quoted
Prices in
Active
Markets
 Significant
Other
Observable
 Inputs
 Significant
Unobservable
Inputs
(In millions) 2019
 (Level 1)
 (Level 2)
 (Level 3)
         
Assets        
Cash equivalents $166
 $166
 $—
 $—
Investments in common stock, mutual funds and other similar instruments 19
 19
 —
 —
Warrants 6
 —
 6
 —
Insurance contracts 130
 —
 130
 —
Derivative contracts 114
 —
 114
 —
         
Total Assets $435
 $185
 $250
 $—
         
Liabilities        
Derivative contracts $44
 $—
 $44
 $—
Contingent consideration 55
 —
 —
 55
         
Total Liabilities $99
 $—
 $44
 $55
  December 31,
 Quoted
Prices in
 Active
Markets
 Significant
Other
Observable
 Inputs
 Significant
 Unobservable
 Inputs
(In millions) 2018
 (Level 1)
 (Level 2)
 (Level 3)
         
Assets        
Cash equivalents $769
 $769
 $—
 $—
Bank time deposits 2
 2
 —
 —
Investments in mutual funds and other similar instruments 10
 10
 —
 —
Warrants 8
 —
 8
 —
Insurance contracts 113
 —
 113
 —
Derivative contracts 31
 —
 31
 —
         
Total Assets $933
 $781
 $152
 $—
         
Liabilities        
Derivative contracts $145
 $—
 $145
 $—
Contingent consideration 37
 —
 —
 37
         
Total Liabilities $182
 $—
 $145
 $37

December 31,Quoted
Prices in
 Active
Markets		Significant
Other
Observable
 Inputs		Significant
 Unobservable
 Inputs
(In millions)2019(Level 1)(Level 2)(Level 3)
Assets
Cash equivalents$1,280 $1,280 $— $— 
Investments in common stock, mutual funds and other similar instruments19 19 — — 
Warrants6 — 6 — 
Insurance contracts131 — 131 — 
Derivative contracts37 — 37 — 
Total Assets$1,473 $1,299 $174 $— 
Liabilities
Derivative contracts$24 $— $24 $— 
Contingent consideration55 — — 55 
Total Liabilities$79 $— $24 $55 
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
19

THERMO FISHER SCIENTIFIC INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
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)

 Three Months Ended Nine Months EndedThree Months EndedNine Months Ended
 September 28,
 September 29,
 September 28,
 September 29,
September 26,September 28,September 26,September 28,
(In millions) 2019
 2018
 2019
 2018
(In millions)2020201920202019
        
Contingent Consideration        Contingent Consideration
Beginning Balance $58
 $40
 $37
 $35
Beginning Balance$53 $58 $55 $37 
Acquisitions (including assumed balances) —
 —
 24
 11
Acquisitions (including assumed balances)— — — 24 
Payments (3) (3) (3) (8)Payments(1)(3)(3)(3)
Change in fair value included in earnings —
 (3) (3) (4)Change in fair value included in earnings(8)— (8)(3)
        
Ending Balance $55
 $34
 $55
 $34
Ending Balance$44 $55 $44 $55 
Derivative Contracts
The following table provides the aggregate notional value of outstanding derivative contracts.
  September 28,
 December 31,
(In millions) 2019
 2018
     
Notional Amount    
Interest rate swaps (described in Note 8) $3,100
 $3,100
Cross-currency interest rate swaps - designated as net investment hedges 1,800
 1,500
Currency exchange contracts 5,693
 3,424
As discussed in Note 15, early in the fourth quarter of 2019, the company settled certain of its interest rate swaps and cross-currency interest rate swaps upon the redemption of the related debt securities.
September 26,December 31,
(In millions)20202019
Notional Amount
Interest rate swaps - fair value hedges (described in Note 7)$1,000 $1,000 
Cross-currency interest rate swaps - designated as net investment hedges900 900 
Cross-currency interest rate swaps1,000 — 
Currency exchange contracts3,893 2,846 
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 – AssetsFair Value – Liabilities
 September 26,December 31,September 26,December 31,
(In millions)2020201920202019
Derivatives Designated as Hedging Instruments
Interest rate swaps (a)$30 $— $— $13 
Cross-currency interest rate swaps (a)9 33 5 — 
Derivatives Not Designated as Hedging Instruments
Currency exchange contracts (b)10 4 54 11 
Cross-currency interest rate swaps (a)— — 9 — 
Total Derivatives$49 $37 $68 $24 
  Fair Value – Assets Fair Value – Liabilities
  September 28,

December 31,
 September 28,
 December 31,
(In millions) 2019

2018
 2019
 2018
         
Derivatives Designated as Hedging Instruments       
Interest rate swaps (a) $—
 $—
 $31
 $129
Cross-currency interest rate swaps (b) 107
 28
 —
 —
Derivatives Not Designated as Hedging Instruments       
Currency exchange contracts (c) 7
 3
 13
 16
         
Total Derivatives $114
 $31
 $44
 $145
(a)    The fair values of the interest rate swaps and cross-currency interest rate swaps are included in the consolidated balance sheet under the caption other assets or other long-term liabilities.
(b)    The fair value of the currency exchange contracts is included in the consolidated balance sheet under the captions other current assets or other accrued expenses.
20

(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 LiabilityCumulative Amount of Fair Value Hedging Adjustment - Increase (Decrease) Included in Carrying Amount of Liability
September 26,December 31,September 26,December 31,
(In millions)2020201920202019
Long-term Obligations$1,024 $980 $30 $(13)
  Carrying Amount of the Hedged Liability Cumulative Amount of Fair Value Hedging Adjustment - Increase (Decrease) Included in Carrying Amount of Liability (d)
  September 28,
 December 31,
 September 28,
 December 31,
(In millions) 2019
 2018
 2019
 2018
         
Long-term Obligations $3,078
 $3,291
 $(10) $(93)
(d)Includes increases in the carrying amount of $20 million and $30 million at September 28, 2019 and December 31, 2018, respectively, on discontinued hedging relationships.
  Gain (Loss) Recognized
  Three Months Ended Nine Months Ended
  September 28,
 September 29,
 September 28,
 September 29,
(In millions) 2019
 2018
 2019
 2018
         
Fair Value Hedging Relationships        
Interest rate swaps        
Hedged long-term obligations - included in other expense, net $(14) $8
 $(95) $60
Derivatives designated as hedging instruments - included in other expense, net 15
 (8) 98
 (57)
Derivatives Designated as Cash Flow Hedges        
Interest rate swaps        
Included in unrealized losses on hedging instruments within other comprehensive items (50) —
 (50) —
Amount reclassified from accumulated other comprehensive items to other expense, net (3) (3) (10) (9)
Financial Instruments Designated as Net Investment Hedges        
Foreign currency-denominated debt        
Included in currency translation adjustment within other comprehensive items 261
 50
 320
 250
Cross-currency interest rate swaps        
Included in currency translation adjustment within other comprehensive items 72
 5
 79
 8
Included in other expense, net 13
 9
 41
 12
Derivatives Not Designated as Hedging Instruments        
Currency exchange contracts        
Included in cost of product revenues 1
 1
 —
 1
Included in other expense, net 43
 (2) 49
 25

 Gain (Loss) Recognized
Three Months EndedNine Months Ended
September 26,September 28,September 26,September 28,
(In millions)2020201920202019
Fair Value Hedging Relationships
Interest rate swaps
Hedged long-term obligations - included in other expense, net$— $(14)$(43)$(95)
Derivatives designated as hedging instruments - included in other expense, net— 15 43 98 
Derivatives Designated as Cash Flow Hedges
Interest rate swaps
Included in unrealized losses on hedging instruments within other comprehensive items— (50)(85)(50)
Amount reclassified from accumulated other comprehensive items to other expense, net(8)(3)(14)(10)
Financial Instruments Designated as Net Investment Hedges
Foreign currency-denominated debt
Included in currency translation adjustment within other comprehensive items(295)261 (276)320 
Cross-currency interest rate swaps
Included in currency translation adjustment within other comprehensive items(30)72 (30)79 
Included in other expense, net2 13 9 41 
Derivatives Not Designated as Hedging Instruments
Currency exchange contracts
Included in cost of product revenues(2)1 (2)— 
Included in other expense, net51 43 7 49 
Cross-currency interest rate swaps
Included in other expense, net1 — (9)— 
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 certain of its cross-currency interest rate swaps have been designated as, and are effective as, economic hedges of part of the net investment in a foreign operation. Accordingly, foreign currency transaction gains or losses due to spot rate fluctuations on the euro-denominated debt instruments and contract fair value changes on the cross-currency
21

THERMO FISHER SCIENTIFIC INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
interest rate swaps, excluding interest accruals, are included in currency translation adjustment within other comprehensive items and shareholders’ equity.

The company also had $1 billion notional value of cross currency swaps which the company terminated in October 2020. These swaps were entered into in anticipation of using U.S. dollars to partially finance the euro purchase price of the terminated QIAGEN acquisition (Note 2). Gains and losses associated with these swaps were recorded in other expense, net.
THERMO FISHER SCIENTIFIC INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

See Note 1 to the consolidated financial statements for 20182019 included in the company's Annual Report on Form 10-K and Note 87 herein for additional information on the company's risk management objectives and strategies.
Cash Flow Hedge Arrangements
In September 2019,March 2020, the company entered into interest rate swap arrangements to mitigate the risk of interest rates rising prior to completion of future debt offerings. Based on the company's conclusion that the debt offerings wereare probable, the swaps hedgedhedge the cash flow risk for each of the interest payments on €1.80 billion plus $900 million aggregate principal amounts of the planned fixed-rate debt issues. One of these hedges was terminated in March 2020, in connection with the debt offering completed in that month. The remaining hedges were terminated in the third quarter of 2019, in connection with the early fourth quarter debt offerings (Note 15).July 2020. The aggregate fair value of the terminated hedges, at that time, $38 million, net of tax, has been classified as a reduction to accumulated other comprehensive items and will be amortized to interest expense over the termsterm of the related debt issuances. The company had a cash outlay of $50outlays aggregating $85 million in 20192020 associated with termination of the arrangements, included in other financing activities, net, in the accompanying statement of cash flows.
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 28, 2019 December 31, 2018September 26, 2020December 31, 2019
 Carrying
 Fair
 Carrying
 Fair
CarryingFairCarryingFair
(In millions) Value
 Value
 Value
 Value
(In millions)ValueValueValueValue
        
Debt Obligations:        Debt Obligations:
Senior notes $16,350
 $17,513
 $18,276
 $18,322
Senior notes$21,085 $23,415 $17,736 $18,650 
Commercial paper 683
 683
 693
 693
Other 20
 20
 21
 21
Other8 8 16 16 
        
 $17,053
 $18,216
 $18,990
 $19,036
$21,093 $23,423 $17,752 $18,666 
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.

Note 13.
Supplemental Cash Flow Information
  Nine Months Ended
  September 28,
 September 29,
(In millions) 2019
 2018
     
Non-cash Investing and Financing Activities    
Declared but unpaid dividends $77
 $69
Issuance of stock upon vesting of restricted stock units 179
 167

Note 11.    Supplemental Cash Flow Information
 Nine Months Ended
 September 26,September 28,
(In millions)20202019
Non-cash Investing and Financing Activities
Declared but unpaid dividends$88 $77 
Issuance of stock upon vesting of restricted stock units209 179 
22

THERMO FISHER SCIENTIFIC INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Cash, cash equivalents and restricted cash is included in the consolidated balance sheet as follows:
  September 28,
 December 31,
(In millions) 2019
 2018
     
Cash and Cash Equivalents $1,273
 $2,103
Restricted Cash Included in Other Current Assets 31
 12
Restricted Cash Included in Other Assets 1
 2
     
Cash, Cash Equivalents and Restricted Cash $1,305
 $2,117

 September 26,December 31,
(In millions)20202019
Cash and Cash Equivalents$7,540 $2,399 
Restricted Cash Included in Other Current Assets29 21 
Restricted Cash Included in Other Assets1 2 
Cash, Cash Equivalents and Restricted Cash$7,570 $2,422 
Amounts included in restricted cash represent funds held as collateral for bank guarantees and incoming cash in China awaiting government administrative clearance.


THERMO FISHER SCIENTIFIC INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

Note 14.
Restructuring and Other Costs (Income), Net
Note 12.    Restructuring and other costs (income)Other Costs (Income), net, inNet
In the first nine months of 2019 primarily included2020 the gain on the sale of the company's Anatomical Pathology business, and, to a lesser extent,company recorded transaction/integration costs (including reimbursement thereof) related to recent/terminated acquisitions, and a divestiture; sales of inventories revalued at the date of acquisition; and continuing charges for headcount reductions and facility consolidations in an effort to streamline operations, includingand, to a lesser extent, impairment of acquired technology in development and non-cash charges for writedowns of fixed assets to estimated disposal value in connection with the closure and consolidation of commercial production operations within several facilities in the U.S. and Europe. In the first nine months of 2019,2020, severance actions associated with facility consolidations and cost reduction measures affected approximatelyless than 1% of the company’s workforce.
As of November 1, 2019,October 30, 2020, the company has identified restructuring actions that will result in additional charges of approximately $80$45 million, primarily in 20192020 and 2020,2021, and expects to identify additional actions during 20192020 which will be recorded when specified criteria are met, such as communication of benefit arrangements or when the costs have been incurred.
During the third quarter of 2019,2020, the company recorded net restructuring and other costs (income) by segment as follows:
(In millions) Cost of
Revenues
 Selling,
General and
Administrative
Expenses
 Restructuring
and Other
Costs (Income), Net
 Total
(In millions)Cost of
Revenues		Selling,
General and
Administrative
Expenses		Restructuring
and Other
Costs, Net		Total
        
Life Sciences Solutions $5
 $—
 $3
 $8
Life Sciences Solutions$— $(8)$10 $2 
Analytical Instruments —
 —
 1
 1
Analytical Instruments— — 3 3 
Specialty Diagnostics —
 —
 23
 23
Specialty Diagnostics— (50)2 (48)
Laboratory Products and Services —
 8
 4
 12
Laboratory Products and Services1 — 1 2 
Corporate —
 (1) —
 (1)Corporate— 3 1 4 
        
 $5
 $7
 $31
 $43
$1 $(55)$17 $(37)
During the first nine months of 2019,2020, the company recorded net restructuring and other costs (income) by segment as follows:
(In millions)Cost of
Revenues		Selling,
General and
Administrative
Expenses		Restructuring
and Other
Costs, Net		Total
Life Sciences Solutions$— $(8)$11 $3 
Analytical Instruments— — 22 22 
Specialty Diagnostics— (4)8 4 
Laboratory Products and Services5 2 20 27 
Corporate— 3 6 9 
$5 $(7)$67 $65 
(In millions) Cost of
Revenues
 Selling,
General and
Administrative
Expenses
 Restructuring
and Other
Costs (Income), Net
 Total
         
Life Sciences Solutions $16
 $—
 $14
 $30
Analytical Instruments —
 24
 10
 34
Specialty Diagnostics —
 4
 (480) (476)
Laboratory Products and Services —
 27
 12
 39
Corporate —
 (1) 2
 1
         
  $16
 $54
 $(442) $(372)
23


THERMO FISHER SCIENTIFIC INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
The principal components of net restructuring and other costs (income) by segment are as follows:
Life Sciences Solutions
In the first nine months of 2019,2020, the Life Sciences Solutions segment recorded $30$3 million of net restructuring and other costs, principally charges to cost of revenues of $16 million for the sales of inventory revalued at the date of acquisition.charges. The segment also recorded $14$11 million of restructuring and other costs, net, primarily charges for the impairment of acquired technology in development,development. The segment also recorded $8 million of credits to selling, general, and severance and other costs associated with facility consolidationsadministrative expense for changes in the U.S. and Europe.estimates of contingent acquisition consideration.
Analytical Instruments
In the first nine months of 2019,2020, the Analytical Instruments segment recorded $34$22 million of net restructuring and other charges, including $24 million of charges to selling, general, and administrative expense, principally transaction costs related to the acquisition of Gatan, subsequently terminated. The segment also recorded $10 million of restructuring and other costs, primarily for employee severance and other costs associated with facility consolidationsheadcount reductions in Europe, China, and the U.S., and, Europe.

THERMO FISHER SCIENTIFIC INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

to a lesser extent, abandoned facility costs.
Specialty Diagnostics
In the first nine months of 2019,2020, the Specialty Diagnostics segment recorded $476$4 million of net restructuring and other income, primarily a gain on the divestiture of its Anatomical Pathology business (see Note 2). The segment also recorded $4 million of charges, to selling, general, and administrative expenseprincipally charges for third-party transaction costs in connection with the sale of the Anatomical Pathology business.(including reimbursement thereof) for a terminated acquisition.
Laboratory Products and Services
In the first nine months of 2019,2020, the Laboratory Products and Services segment recorded $39$27 million of net restructuring and other charges. The segment recorded $27 million of charges, to selling, general, and administrative expense, principally transaction costs related to the acquisition and integration of Brammer Bio. The segment also recorded $12 million of restructuring and other costs, primarily for employee severance at businesses streamlining operations and employee compensation due at Brammer Bio onfor writedowns of fixed assets to estimated disposal value in connection with the dateconsolidation of acquisition.commercial production operations in the U.S.
Corporate
In the first nine months of 2019,2020, the company recorded $1$9 million of net restructuring and other costs for severance at its corporate operations partially offset by income from favorable results ofand, to a lesser extent, charges to selling, general, and administrative expense for product liability litigation.
The following table summarizes the cash components ofchanges in the company’s accrued restructuring plans. The non-cash components and otherbalance. Other amounts reported as restructuring and other costs, (income), net, in the accompanying statement of income have been summarized in the notes to the tables.table. 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, 2018 $34
 $42
 $4
 $80
Cumulative effect of accounting change (b) —
 (28) —
 (28)
Costs incurred in 2019 (d) 25
 3
 9
 37
Reserves reversed (c) (3) (1) —
 (4)
Payments (29) (8) (8) (45)
Currency translation (1) —
 —
 (1)
         
Balance at September 28, 2019 $26
 $8
 $5
 $39
(a)(In millions)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.Total (a)
Balance at December 31, 2019$34 
Net restructuring charges incurred in 2020 (b)Impact of adopting new lease accounting guidance on January 1, 2019.
43 
(c)PaymentsRepresents reductions in cost of plans.
(46)
(d)Currency translation
Excludes $486 million net gain on the sale of businesses;1 
Balance at September 26, 2020$6 million of impairment of acquired in-process research and development;32 $3 million of compensation due to employees on the date of acquisition; and $2 million of other non-cash charges, net.
(a)The movements in the restructuring liability principally consist of severance and other costs such as relocation and moving expenses associated with facility consolidations, as well as employee retention costs which are accrued ratably over the period through which employees must work to qualify for a payment.
(b)Excludes $24 million of charges for impairment of acquired technology in development, fixed asset writedowns and costs associated with environmental remediation at abandoned / previously owned facilities.
The company expects to pay accrued restructuring costs primarily through 2019.2021.


THERMO FISHER SCIENTIFIC INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

Note 15.
Subsequent Events
Debt Issuances and Redemptions
Early in the fourth quarter of 2019, the company issued the following senior notes:
(In millions) Principal Value Issued
   
0.125% 5.5-Year Senior Notes, Due 3/1/2025 (euro-denominated) €800
0.500% 8.5-Year Senior Notes, Due 3/1/2028 (euro-denominated) €800
2.600% 10-Year Senior Notes, Due 10/1/2029 $900
0.875% 12-Year Senior Notes, Due 10/1/2031 (euro-denominated) €900
1.500% 20-Year Senior Notes, Due 10/1/2039 (euro-denominated) €900
1.875% 30-Year Senior Notes, Due 10/1/2049 (euro-denominated) €1,000

Net proceeds from the issuance of the notes in the table above was approximately $5.6 billion, after deducting underwriting discounts and estimated offering expenses. The company is using the proceeds to repay commercial paper obligations and to redeem the following senior notes:
24
(In millions) Principal Value Redeemed
   
6.00% 10-Year Senior Notes, Due 3/1/2020 $750
1.50% 5-Year Senior Notes, Due 12/1/2020 (euro-denominated) €425
5.00% 10-Year Senior Notes, Due 1/15/2021 $400
4.50% 10-Year Senior Notes, Due 3/1/2021 $1,000
3.60% 10-Year Senior Notes, Due 8/15/2021 $1,100
3.30% 7-Year Senior Notes, Due 2/15/2022 $800

In connection with the redemptions, the company paid $21 million upon the termination of the fixed to floating rate swap arrangements on the redeemed senior notes and received $47 million upon termination of the related cross-currency interest rate swap arrangements (see Note 8).
The company incurred approximately $142 million of losses on the early extinguishment of debt in October 2019 due to the redemptions and related interest rate swap terminations discussed above.


29


THERMO FISHER SCIENTIFIC INC.

Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations
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,revenues, 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; the expected impact of the COVID-19 pandemic on the company’s business; 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,"“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 importantImportant factors that could cause theactual results of the company to differ materially from those indicated by such forward-looking statements including those detailedare set forth under the caption “Risk Factors” in the company’s Annual Report on Form 10-K for the year ended December 31, 2019 (which is on file with the SEC), as updated i) by the company’s Quarterly Report on Form 10-Q for the quarter ended June 27, 2020 (which is on file with the SEC), and ii) under the heading "Risk Factors"“Risk Factors” in Part II, Item 1A of this report on Form 10-Q. Important factors that could cause actual results to differ materially from those indicated by forward-looking statements include risks and uncertainties relating to: the duration and severity of the COVID-19 pandemic; the need to develop new products and adapt to significant technological change; implementation of strategies for improving growth; general economic conditions and related uncertainties, dependence on customers' capital spending policies and government funding policies; the effect of economic and political conditions and exchange rate fluctuations on international operations; use and protection of intellectual property; the effect of changes in governmental regulations; and the effect of laws and regulations governing government contracts, as well as the possibility that expected benefits related to recent or pending acquisitions may not materialize as expected.

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(Note 4): Life Sciences Solutions, Analytical Instruments, Specialty Diagnostics and Laboratory Products and Services.
The company has mobilized to support the global novel strain of coronavirus (COVID-19) response with products and services that help analyze, diagnose and protect from the virus. However, as the pandemic spread from China to countries worldwide, the company saw a significant reduction in customer activity in several businesses by late March and continuing into the fourth quarter of 2020 that will materially adversely affect primarily the results of the Analytical Instruments segment and, to a lesser extent, some businesses within the company’s other three segments, at least through the fourth quarter of 2020. The extent and duration of the negative impacts are uncertain and dependent in part on customers continuing to return to work and economic activity ramping up. The company believes the impacted businesses’ long-term prospects remain excellent given the company’s attractive markets served, its industry-leading position and proven growth strategy. Several of the company’s businesses have had a significant increase in revenues due to sales of product and services addressing diagnosis and treatment of COVID-19, including test kits and, to a lesser extent, products and services for therapy and vaccine development and manufacturing. While these positive impacts are expected to continue into the fourth quarter of 2020, the duration and extent of future revenues from such sales are uncertain and dependent primarily on customer testing demand.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Recent Acquisitions and DivestitureDivestitures
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 October 25, 2018, the company acquired, within the Life Sciences Solutions segment, Becton Dickinson and Company's Advanced Bioprocessing business for $477 million in cash. 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.
On April 30, 2019, the company acquired, within the Laboratory Products and Services segment, Brammer Bio for approximately $1.7$1.67 billion in cash. Brammer Bio is a leading viral vector contract development and manufacturing organization for gene and cell therapies. The acquisition expands the segment'ssegment’s contract manufacturing capabilities. Revenues of Brammer Bio werereported revenues of approximately $140 million in 2018.
On June 28, 2019, the company sold its Anatomical Pathology business to PHC Holdings Corporation for $1.13 billion, net of cash divested. The business was part of the Specialty Diagnostics segment. The sale of this business resulted in a pre-tax gain of approximately $482 million, included in restructuring and other (income) costs, net. Revenues in 2019, through the date of sale, and the full year 2018 of the business sold were approximately $115 million and $238 million, respectively, net of retained sales through the company's healthcare market and research and safety market channel businesses.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

Overview of Results of Operations and Liquidity
 Three Months Ended Nine Months EndedThree Months EndedNine Months Ended
 September 28, September 29, September 28, September 29,September 26,September 28,September 26,September 28,
(Dollars in millions) 2019 2018 2019 2018(Dollars in millions)2020201920202019
                
Revenues                Revenues
Life Sciences Solutions $1,701
 27.1 % $1,504
 25.4 % $5,018
 26.8 % $4,572
 25.6 %Life Sciences Solutions$3,424 40.2 %$1,701 27.1 %$7,800 36.0 %$5,018 26.8 %
Analytical Instruments 1,358
 21.7 % 1,333
 22.5 % 4,004
 21.4 % 3,901
 21.9 %Analytical Instruments1,336 15.7 %1,358 21.7 %3,488 16.1 %4,004 21.4 %
Specialty Diagnostics 879
 14.0 % 894
 15.1 % 2,779
 14.9 % 2,773
 15.5 %Specialty Diagnostics1,430 16.8 %879 14.0 %3,376 15.6 %2,779 14.9 %
Laboratory Products and Services 2,619
 41.8 % 2,470
 41.7 % 7,765
 41.5 % 7,433
 41.6 %Laboratory Products and Services3,112 36.5 %2,619 41.8 %8,629 39.8 %7,765 41.5 %
Eliminations (285) (4.6)% (281) (4.7)% (853) (4.6)% (828) (4.6)%Eliminations(781)(9.2)%(285)(4.6)%(1,625)(7.5)%(853)(4.6)%
                
 $6,272
 100 % $5,920
 100 % $18,713
 100 % $17,851
 100 % $8,521 100 %$6,272 100 %$21,668 100 %$18,713 100 %
Sales in the third quarter of 20192020 were $6.27$8.52 billion, an increase of $352 million$2.25 billion from 2018. Sales increased $27 million due to acquisitions, net of a divestiture.2019. The unfavorablefavorable effects of currency translation resulted in a decreasean increase in revenues of $83$80 million in the third quarter of 2019.2020. Sales increased $32 million due to an acquisition. Aside from the effects of acquisitions and currency translation and acquisitions, revenues increased $408 million (7%$2.14 billion (34%) primarily due to increased demand in the quarter compared to the 20182019 quarter. Sales were particularly strong in diagnostic and healthcare markets, primarily due to demand for products supporting customers diagnosing the COVID-19 virus, as well as to customers in pharma and biotech markets where demand was strong for products and services and pandemic-related demand for therapies and vaccines also contributed to growth. Sales to academic and government customers grew modestly. Sales to customers in each of the company's primary endindustrial markets grew except for salesdecreased primarily due to industrial customers which were flat. Saleslower demand from weakened economic conditions related to customers in the biotech and pharmaceutical industry remained particularly strong.COVID-19. Sales growth was strong in Europe, Asia and North America.each of the company’s primary geographic areas during the third quarter of 2020.
In the third quarter of 2019,2020, total company operating income and operating income margin were $946 million$2.43 billion and 28.5%, respectively, compared with $0.95 billion and 15.1%, respectively, compared with $912 million and 15.4%, respectively, in 2018.2019. The increase in operating income was primarily due to profit on higher sales and, to a lesser extent, productivity improvements, net of inflationary cost increases. These increases weresales mix, offset in part by strategic growth investments reversal of a litigation accrual in the 2018 period and, to a lesser extent, unfavorable sales mix.2020. 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.experience, as well as incentive compensation and recognition for employees. 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. Productivity improvements are calculated net of inflationary cost increases.
The company's effective tax rate was 7.6%14.2% for the third quarter of 2019.2020. The company expects its effective tax rate for all of 20192020 will be between 8%10% and 11%12% 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
26

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Overview of Results of Operations and Liquidity (continued)
financial reporting purposes and are expected to total $725$1.20 to $775 million$1.23 billion in 2019. The company's2020. In the third quarter of 2019, the company’s effective tax rate was 12.5% for the third quarter of 2018 including a net tax provision of $47 million to adjust the impacts of U.S. tax reform.7.6%.
Net income increased to $760 million$1.93 billion in the third quarter of 2020 from $0.76 billion in the third quarter of 2019, from $709 million in the third quarter of 2018, primarily due to the increase in operating income and decrease in income tax provision in the 20192020 period (both discussed(discussed above), offset in part by $42 million of losses on the early extinguishment of debtincrease in the third quarter of 2019.income tax provision.
During the first nine months of 2019,2020, the company’s cash flow from operations totaled $3.06$4.95 billion compared with $2.74$3.06 billion for 2018.2019. The increase primarily resulted from higher cash provided by income and, to a lesser extent, lower investment in working capital in 2019 as well as higher income before amortization and depreciation.2020.
As of September 28, 2019,26, 2020, the company’s short-term debt totaled $661 million consisting principally of senior notes due within the next twelve months.$2 million. The company has a revolving credit facility with a bank group that provides up to $2.50$2.5 billion of unsecured multi-currency revolving credit.credit (Note 7). 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 28, 2019,26, 2020, no borrowings were outstanding under the company’s revolving credit facility, although available capacity was reduced by approximately $80$66 million as a result of outstanding letters of credit. The company completed a refinancing of $5.6 billion of debt early in the fourth quarter as discussed in Note 15.

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AND RESULTS OF OPERATIONS
Overview of Results of Operations and Liquidity (continued)

The company believes that its existing cash and cash equivalents of $1.27$7.54 billion as of September 28, 201926, 2020 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, revenuerevenues and expenses and related disclosure of contingent liabilities. On an on-going basis, management evaluates its estimates, including those related to intangible assets and goodwill, income taxes and contingencies and litigation, and pension costs.litigation. 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 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 2018,2019, describe the significant accounting estimates and policies used in preparation of the consolidated financial statements. While thereThere have been no significant changes in the company's critical accounting policies during the first nine months of 2019, as described in Note 1, the company changed the manner in which it accounts for leases under guidance that became effective January 1, 2019.2020.

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THERMO FISHER SCIENTIFIC INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
Third Quarter 20192020 Compared With Third Quarter 20182019
  Three Months Ended        
(In millions) September 28,
2019
 September 29,
2018
 
Total
Change

 
Currency
Translation / Other *

 Acquisitions/ Divestitures
 Operations
             
Revenues            
Life Sciences Solutions $1,701
 $1,504
 $197
 $(21) $24
 $194
Analytical Instruments 1,358
 1,333
 25
 (19) —
 44
Specialty Diagnostics 879
 894
 (15) (11) (63) 59
Laboratory Products and Services 2,619
 2,470
 149
 (69) 68
 150
Eliminations (285) (281) (4) 37
 (2) (39)
             
Consolidated Revenues $6,272
 $5,920
 $352
 $(83) $27
 $408
* Currency Translation/Other for the Laboratory Products and Services segment includes a reduction of revenue of $35 million for the impact of a change in the method of reporting certain intersegment sales with no impact on consolidated results.
Three Months Ended
(In millions)September 26,
2020		September 28,
2019		Total
Change		Currency
Translation		Acquisitions/ DivestituresOperations
Revenues
Life Sciences Solutions$3,424 $1,701 $1,723 $20 $— $1,703 
Analytical Instruments1,336 1,358 (22)19 — (41)
Specialty Diagnostics1,430 879 551 10 — 541 
Laboratory Products and Services3,112 2,619 493 33 32 428 
Eliminations(781)(285)(496)(2)— (494)
Consolidated Revenues$8,521 $6,272 $2,249 $80 $32 $2,137 
Sales in the third quarter of 20192020 were $6.27$8.52 billion, an increase of $352 million$2.25 billion from the third quarter of 2018. Sales increased $27 million due to acquisitions, net of a divestiture.2019. The unfavorablefavorable effects of currency translation resulted in a decreasean increase in revenues of $83$80 million in 2019.2020. Sales increased $32 million due to an acquisition. Aside from the effects of acquisitions/divestitures and currency translation and acquisitions, revenues increased $408 million (7%$2.14 billion (34%) primarily due to increased demand in the quarter compared to the 20182019 quarter. Sales were particularly strong in diagnostic and healthcare markets, primarily due to demand for products supporting customers diagnosing the COVID-19 virus, as well as to customers in pharma and biotech markets where demand was strong for products and services and pandemic-related demand for therapies and vaccines also contributed to growth. Sales to academic and government customers grew modestly. Sales to customers in each of the company's primary endindustrial markets grew except for salesdecreased primarily due to industrial customers which were flat. Saleslower demand from weakened economic conditions related to customers in the biotech and pharmaceutical industry remained particularly strong.COVID-19. Sales growth was strong in Europe, Asia and North America.each of the company’s primary geographic areas during the third quarter of 2020.
In the third quarter of 2019,2020, total company operating income and operating income margin were $946 million$2.43 billion and 28.5%, respectively, compared with $0.95 billion and 15.1%, respectively, compared with $912 million and 15.4%, respectively, in 2018.2019. The increase in operating income was primarily due to profit on higher sales and, to a lesser extent, productivity improvements, net of inflationary cost increases. These increases weresales mix, offset in part by strategic growth investments reversalin 2020.
In the third quarter of a litigation accrual2020, the company recorded restructuring and other income, net, of $37 million, including $55 million of net credits to selling, general and administrative expenses, principally third-party transaction and integration-related costs (including reimbursement thereof) for recent and terminated acquisitions and changes in estimates of contingent acquisition consideration. In addition, the 2018 periodcompany recorded $17 million of restructuring and other charges, net, for impairment of acquired technology in development, and, to a lesser extent, unfavorable sales mix.employee severance and other costs associated with facility consolidations/abandonments in efforts to streamline operations. See Note 12 for restructuring charges expected in future periods.
In the third quarter of 2019, the company recorded restructuring and other costs, net, of $43 million, including $19 million of net charges associated with sales of businesses in prior periods, including post-closing adjustments. The company recorded

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations (continued)

$5 $5 million of charges to cost of revenues for the sale of inventories revalued at the date of acquisition. The company also recorded $7 million of charges to selling, general and administrative expenses, principally transaction and integration-related costs for recent acquisitions. In addition, the company recorded $12 million of cash restructuring charges, 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 quarter of 2018, the company recorded restructuring and other income, net, of $32 million, including $4 million of net credits to selling, general and administrative expenses, primarily income from favorable results of product liability litigation, offset in part by third-party transaction/integration costs related to recent and pending acquisitions. The company recorded $24 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.
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 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.
28
  Three Months Ended
  September 28,
 September 29,
  
(Dollars in millions) 2019
 2018
 Change
       
Revenues      
Life Sciences Solutions $1,701
 $1,504
 13 %
Analytical Instruments 1,358
 1,333
 2 %
Specialty Diagnostics 879
 894
 (2)%
Laboratory Products and Services 2,619
 2,470
 6 %
Eliminations (285) (281) 1 %
       
Consolidated Revenues $6,272
 $5,920
 6 %
       
Segment Income      
Life Sciences Solutions $586
 $495
 18 %
Analytical Instruments 311
 294
 6 %
Specialty Diagnostics 223
 223
 — %
Laboratory Products and Services 303
 299
 1 %
       
Subtotal Reportable Segments 1,423
 1,311
 9 %
       
Cost of Revenues Charges (Credits), Net (5) 1
  
Selling, General and Administrative Charges (Credits), Net (7) 4
  
Restructuring and Other Costs (Income), Net (31) 27
  
Amortization of Acquisition-related Intangible Assets (434) (431)  
       
Consolidated Operating Income $946
 $912
 4 %
       
Reportable Segments Operating Income Margin 22.7% 22.1%  
       
Consolidated Operating Income Margin 15.1% 15.4%  


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THERMO FISHER SCIENTIFIC INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations (continued)

Three Months Ended
September 26,September 28,
(Dollars in millions)20202019Change
Revenues
Life Sciences Solutions$3,424 $1,701 101 %
Analytical Instruments1,336 1,358 (2)%
Specialty Diagnostics1,430 879 63 %
Laboratory Products and Services3,112 2,619 19 %
Eliminations(781)(285)174 %
Consolidated Revenues$8,521 $6,272 36 %
Segment Income
Life Sciences Solutions$1,879 $586 221 %
Analytical Instruments171 311 (45)%
Specialty Diagnostics398 223 78 %
Laboratory Products and Services355 303 17 %
Subtotal Reportable Segments2,803 1,423 97 %
Cost of Revenues Charges, Net(1)(5)
Selling, General and Administrative (Credits) Charges, Net55 (7)
Restructuring and Other Costs, Net(17)(31)
Amortization of Acquisition-related Intangible Assets(414)(434)
Consolidated Operating Income$2,426 $946 156 %
Reportable Segments Income Margin32.9 %22.7 %
Consolidated Operating Income Margin28.5 %15.1 %
Income from the company’s reportable segments increased 9%97% to $1.42$2.80 billion in the third quarter of 20192020 due primarily to profit on higher sales and, to a lesser extent, productivity improvements, net of inflationary cost increases,sales mix, offset in part by strategic growth investments and, to a lesser extent, unfavorable sales mix.investments.
Life Sciences Solutions
 Three Months EndedThree Months Ended
 September 28,
 September 29,
  September 26,September 28,
(Dollars in millions) 2019
 2018
 Change
(Dollars in millions)20202019Change
      
Revenues $1,701
 $1,504
 13%Revenues$3,424 $1,701 101 %
      
Operating Income Margin 34.5% 32.9% 1.6 pt
Operating Income Margin54.9 %34.5 %20.4 pt
Sales in the Life Sciences Solutions segment increased $197 million$1.72 billion to $1.70$3.42 billion in the third quarter of 2019.2020. Sales increased $194 million (13%) due to higher revenues at existing businesses and $24 million due to an acquisition. The unfavorable effects of currency translation resulted in a decrease in revenues of $21 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 bioproduction and biosciences products.
Operating income margin was 34.5% in the third quarter of 2019 compared to 32.9% in the third quarter of 2018. The increase resulted primarily from profit on higher sales, offset in part by strategic growth investments and, to a lesser extent, unfavorable sales mix.
Analytical Instruments
  Three Months Ended
  September 28,
 September 29,
  
(Dollars in millions) 2019
 2018
 Change
       
Revenues $1,358
 $1,333
 2%
       
Operating Income Margin 23.0% 22.0% 1 pt
Sales in the Analytical Instruments segment increased $25 million to $1.36$1.70 billion in the third quarter of 2019. Sales increased $44 million (3%(100%) due to higher revenues at existing businesses. The unfavorablefavorable effects of currency translation resulted in a decreasean increase in revenues of $19$20 million. The increase in revenuerevenues at existing businesses was primarily driven by demand for testing to diagnose COVID-19 with higher sales of genetic sciences products and, to a lesser extent, bioscience products. Sales also grew due to increasedhigher demand for chromatography and mass spectrometrybioproduction products.
Operating income margin was 23.0%54.9% in the third quarter of 20192020 compared to 22.0%34.5% in the third quarter of 2018.2019. The increase resulted primarily from profit on higher sales and, productivity improvements, net of inflationary cost increases,to a lesser extent, sales mix, offset in part by unfavorable sales mix and, to a lesser extent, strategic growth investments.
Specialty Diagnostics
29
  Three Months Ended
  September 28,
 September 29,
  
(Dollars in millions) 2019
 2018
 Change
       
Revenues $879
 $894
 (2)%
       
Operating Income Margin 25.3% 25.0% 0.3 pt
Sales in the Specialty Diagnostics segment decreased $15 million to $879 million in the third quarter of 2019. The divestiture of Anatomical Pathology business resulted in a decrease in sales of $63 million. The unfavorable effects of currency translation resulted in a decrease in revenues of $11 million. These decreases were offset in part by $59 million (7%) of higher revenues at existing businesses. The increase in revenue at existing businesses was due to higher demand in each of the

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations (continued)

Analytical Instruments
segment's principal
Three Months Ended
September 26,September 28,
(Dollars in millions)20202019Change
Revenues$1,336 $1,358 (2)%
Operating Income Margin12.8 %23.0 %-10.2 pt
Sales in the Analytical Instruments segment decreased $22 million to $1.34 billion in the third quarter of 2020. Sales decreased $41 million (-3%) due to lower revenues at existing businesses. The favorable effects of currency translation resulted in an increase in revenues of $19 million. The decrease in revenues at existing businesses was primarily the result of weakened economic conditions due to COVID-19 and lower sales to academic customers due to pandemic-related conditions. The contraction in sales to these customers improved significantly from the decrease reported in the second quarter of 2020.
Operating income margin was 12.8% in the third quarter of 2020 compared to 23.0% in the third quarter of 2019. The decrease was primarily due to a $108 million charge related to a long-term supply contract (discussed in Note 8) and, to a lesser extent, sales mix and strategic growth investments, offset in part by productivity improvements.
Specialty Diagnostics
Three Months Ended
September 26,September 28,
(Dollars in millions)20202019Change
Revenues$1,430 $879 63 %
Operating Income Margin27.9 %25.3 %2.6 pt
Sales in the Specialty Diagnostics segment increased $551 million to $1.43 billion in the third quarter of 2020. Sales increased $541 million (62%) due to higher revenues at existing businesses. The favorable effects of currency translation resulted in an increase in revenues of $10 million. The increase in revenues at existing businesses was due to higher demand primarily driven by products addressing treatment of COVID-19, with particular strength in sales of products sold through the segment's healthcare market channel business, as well as immunodiagnosticand to a lesser extent, microbiology and clinical diagnostics products.
Operating income margin was 27.9% in the third quarter of 2020 and 25.3% in the third quarter of 2019 and 25.0% in the third quarter of 2018.2019. The increase was primarily due to profit on higher sales, and productivity improvements, net of inflationary cost increases, offset in part by sales mix and, to a lesser extent, strategic growth investments and unfavorable sales mix.investments.
Laboratory Products and Services
 Three Months EndedThree Months Ended
 September 28,
 September 29,
  September 26,September 28,
(Dollars in millions) 2019
 2018
 Change
(Dollars in millions)20202019Change
      
Revenues $2,619
 $2,470
 6%Revenues$3,112 $2,619 19 %
      
Operating Income Margin 11.6% 12.1% -0.5 pt
Operating Income Margin11.4 %11.6 %-0.2 pt
Sales in the Laboratory Products and Services segment increased $149$493 million to $2.62$3.11 billion in the third quarter of 2019.2020. Sales increased $150$428 million (6%(16%) due to higher revenues at existing businesses and $68$32 million due to an acquisition. The unfavorablefavorable effects of currency translation resulted in a decreasean increase in revenues of $34$33 million. Revenues decreased $35 million due primarily to a change in the method of reporting certain intersegment sales with no impact to consolidated results. The increase in revenuerevenues at existing businesses was primarily due to increased demand for products sold through itssales in the segment's research and safety market channel business, and service offerings of the segment's pharma services business and laboratory products business.
Operating income margin was 11.4% in the third quarter of 2020 and 11.6% in the third quarter of 2019 and 12.1% in the third quarter of 2018.2019. The decrease was primarily due to sales mix and strategic growth investments, and, to a lesser extent, unfavorable sales mix offset in part by profit on higher sales and, to a lesser extent, productivity improvements, netimprovements.
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AND RESULTS OF OPERATIONS
Results of inflationary cost increases.Operations (continued)
Other Expense, Net
The company reported other expense, net of $124 million and $102$39 million in the third quarter of 2019 and 2018, respectively (Note 5). In2020 compared to $12 million in the third quarter of 2019. In 2020, other expense, net includes $37 million of costs for the terminated QIAGEN acquisition, primarily for amortization of loan commitment fees. In 2019, the company recordedother expense, net includes $42 million of losses on the early extinguishment of debt). An increase in interest income of$11 million in 2019 was offset in part by an increase in interest expense of $2 million. The company expects to incur an additional $142 million of losses on the early extinguishment of debt in the fourth quarter of 2019 (see Note 15).debt.
Provision for Income Taxes
The company's effective tax rate was 7.6%14.2% for the third quarter of 2019.2020. The company expects its effective tax rate for all of 20192020 will be between 8%10% and 11%12% 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 $725$1.20 to $775 million$1.23 billion in 2019. The company's2020. In the third quarter of 2019, the company’s effective tax rate was 12.5% for the third quarter of 2018 including a net tax provision of $47 million to adjust the impacts of U.S. tax reform.7.6%.
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.

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THERMO FISHER SCIENTIFIC INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations (continued)

First Nine Months of 20192020 Compared With First Nine Months of 20182019
  Nine Months Ended        
(In millions) September 28,
2019
 September 29,
2018
 
Total
Change

 
Currency
Translation / Other *

 Acquisitions/ Divestitures
 Operations
             
Revenues            
Life Sciences Solutions $5,018
 $4,572
 $446
 $(108) $83
 $471
Analytical Instruments 4,004
 3,901
 103
 (85) —
 188
Specialty Diagnostics 2,779
 2,773
 6
 (58) (63) 127
Laboratory Products and Services 7,765
 7,433
 332
 (189) 94
 427
Eliminations (853) (828) (25) 45
 (2) (68)
             
Consolidated Revenues $18,713
 $17,851
 $862
 $(395) $112
 $1,145
* Currency Translation/Other for the Laboratory Products and Services segment includes a reduction of revenue of $35 million for the impact of a change in the method of reporting certain intersegment sales with no impact on consolidated results.
Nine Months Ended
(In millions)September 26,
2020		September 28,
2019		Total
Change		Currency
Translation		Acquisitions/ DivestituresOperations
Revenues
Life Sciences Solutions$7,800 $5,018 $2,782 $(44)$— $2,826 
Analytical Instruments3,488 4,004 (516)(5)— (511)
Specialty Diagnostics3,376 2,779 597 (6)(121)724 
Laboratory Products and Services8,629 7,765 864 (14)179 699 
Eliminations(1,625)(853)(772)2 15 (789)
Consolidated Revenues$21,668 $18,713 $2,955 $(67)$73 $2,949 
Sales in the first nine months of 20192020 were $18.71$21.67 billion, an increase of $862 million$2.96 billion from the first nine months of 2018.2019. Sales increased $112$73 million due to acquisitions, net of a divestiture. The unfavorable effects of currency translation resulted in a decrease in revenues of $395$67 million in 2019.2020. Aside from the effects of currency translation and acquisitions,acquisitions/divestiture, revenues increased $1.15$2.95 billion (6%(16%) primarily due to increased demand. Sales were particularly strong in diagnostic and healthcare markets, primarily due to demand for products supporting customers diagnosing the COVID-19 virus, as well as to customers in eachpharma and biotech markets where demand was strong for products and services and pandemic-related demand for therapies and vaccines also contributed to growth. Sales to academic and government customers decreased due primarily to closure of academic labs during the company's primary end markets grew with particular strength in salesglobal pandemic. Sales to customers in the biotech and pharmaceutical industry.industrial markets decreased primarily due to lower demand from weakened economic conditions related to COVID-19. Sales growth was particularly strong in each ofNorth America and Europe while sales grew modestly in the company's primary geographic areas, particularly Asia.Asia-Pacific region.
In the first nine months of 2019,2020, total company operating income and operating income margin were $3.36$4.72 billion and 18.0%21.8%, respectively, compared with $2.64$3.36 billion and 14.8%18.0%, respectively, in the first nine months of 2018.2019. The increase in operating income was primarily due to profit on higher sales and, to a lesser extent, sales mix, offset in part by the gain on the sale of the Anatomical Pathology business included in the 2019 period and, to a lesser extent, productivity improvements, net of inflationary cost increases. These increases were offset in part by strategic growth investments unfavorable sales mixin 2020.
In the first nine months of 2020, the company recorded restructuring and unfavorable foreign currency exchange.other costs, net, of $65 million (Note 12). The company recorded $5 million of charges to cost of revenues for accelerated depreciation on fixed assets to be disposed of in connection with the consolidation of commercial production operations in the U.S., as well as charges to conform the accounting policies of a recently acquired business with the company’s accounting policies. The company recorded $7 million of net credits to selling, general and administrative expenses, principally transaction and integration-related costs (and reimbursement thereof) for recent and terminated acquisitions, as well as income for changes in estimates of contingent acquisition consideration. In addition, the company recorded $43 million of cash restructuring charges, net, primarily for employee severance and abandoned facilities costs associated with the closure and consolidation of facilities in Europe, and the U.S. The company also recorded $24 million of charges for impairment of acquired technology in development, writedowns of fixed assets to estimated disposal value in connection with the consolidation of commercial production operations in the U.S. and, to a lesser extent, environmental remediation charges for abandoned and previously owned facilities.
In the first nine months of 2019, the company recorded restructuring and other income, net, of $372 million, including $482 million of net gains on the sale of businesses, principally the Anatomical Pathology business (see Note 2).business. The company also recorded $16 million of charges to cost of revenues for the sale of inventories revalued at the date of acquisition, and $54 million of net charges to selling, general and administrative expenses, principally transaction and integration-related costs related to acquisitions and a divestiture. In addition, the company recorded $33 million of cash restructuring charges, 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).Europe.
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 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.

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THERMO FISHER SCIENTIFIC INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations (continued)

Segment Results
 Nine Months EndedNine Months Ended
 September 28,
 September 29,
  September 26,September 28,
(Dollars in millions) 2019
 2018
 Change
(Dollars in millions)20202019Change
      
Revenues      Revenues
Life Sciences Solutions $5,018
 $4,572
 10 %Life Sciences Solutions$7,800 $5,018 55 %
Analytical Instruments 4,004
 3,901
 3 %Analytical Instruments3,488 4,004 (13)%
Specialty Diagnostics 2,779
 2,773
 — %Specialty Diagnostics3,376 2,779 21 %
Laboratory Products and Services 7,765
 7,433
 4 %Laboratory Products and Services8,629 7,765 11 %
Eliminations (853) (828) 3 %Eliminations(1,625)(853)91 %
      
Consolidated Revenues $18,713
 $17,851
 5 %Consolidated Revenues$21,668 $18,713 16 %
      
Segment Income      Segment Income
Life Sciences Solutions $1,756
 $1,534
 14 %Life Sciences Solutions$3,788 $1,756 116 %
Analytical Instruments 879
 831
 6 %Analytical Instruments477 879 (46)%
Specialty Diagnostics 707
 719
 (2)%Specialty Diagnostics848 707 20 %
Laboratory Products and Services 933
 916
 2 %Laboratory Products and Services931 933 — %
      
Subtotal Reportable Segments 4,275
 4,000
 7 %Subtotal Reportable Segments6,044 4,275 41 %
      
Cost of Revenues Charges (16) (7)  Cost of Revenues Charges(5)(16)
Selling, General and Administrative Charges, Net (54) (7)  Selling, General and Administrative Charges, Net7 (54)
Restructuring and Other Income (Costs), Net 442
 (35)  Restructuring and Other Income (Costs), Net(67)442 
Amortization of Acquisition-related Intangible Assets (1,285) (1,316)  Amortization of Acquisition-related Intangible Assets(1,256)(1,285)
      
Consolidated Operating Income $3,362
 $2,635
 28 %Consolidated Operating Income$4,723 $3,362 40 %
      
Reportable Segments Operating Income Margin 22.8% 22.4%  
Reportable Segments Income MarginReportable Segments Income Margin27.9 %22.8 %
      
Consolidated Operating Income Margin 18.0% 14.8%  Consolidated Operating Income Margin21.8 %18.0 %
Income from the company’s reportable segments increased 7%41% to $4.28$6.04 billion in the first nine months of 20192020 due primarily to profit on higher sales and, to a lesser extent, productivity improvements, net of inflationary cost increases,sales mix, offset in part by strategic growth investments, unfavorable sales mix and unfavorable foreign currency exchange.investments.
Life Sciences Solutions
 Nine Months EndedNine Months Ended
 September 28,
 September 29,
  September 26,September 28,
(Dollars in millions) 2019
 2018
 Change
(Dollars in millions)20202019Change
      
Revenues $5,018
 $4,572
 10%Revenues$7,800 $5,018 55 %
      
Operating Income Margin 35.0% 33.5% 1.5 pt
Operating Income Margin48.6 %35.0 %13.6 pt
Sales in the Life Sciences Solutions segment increased $446 million$2.78 billion to $5.02$7.80 billion in the first nine months of 2019.2020. Sales increased $471 million (10%$2.83 billion (56%) due to higher revenues at existing businesses and $83 million due to an acquisition.businesses. The unfavorable effects of currency translation resulted in a decrease in revenues of $108$44 million. The increase in revenuerevenues at existing businesses was primarily due to increased demand in each of the segment's principal businesses with particular strength in sales of bioproduction and biosciences products.

driven by
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THERMO FISHER SCIENTIFIC INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations (continued)

demand for testing to diagnose COVID-19 with higher sales of genetic sciences products and, to a lesser extent, bioscience products. Sales also grew due to higher demand for bioproduction products.
Operating income margin was 48.6% in the first nine months of 2020 compared to 35.0% in the first nine months of 2019 compared to 33.5% in the first nine months of 2018.2019. The increase resulted primarily from profit on higher sales and, to a lesser extent, sales mix, offset in part by strategic growth investments and, to a lesser extent, unfavorable sales mix and unfavorable foreign currency exchange.investments.
Analytical Instruments
 Nine Months EndedNine Months Ended
 September 28,
 September 29,
  September 26,September 28,
(Dollars in millions) 2019
 2018
 Change
(Dollars in millions)20202019Change
      
Revenues $4,004
 $3,901
 3%Revenues$3,488 $4,004 (13)%
      
Operating Income Margin 22.0% 21.3% 0.7 pt
Operating Income Margin13.7 %22.0 %-8.3 pt
Sales in the Analytical Instruments segment increased $103decreased $516 million to $4.00$3.49 billion in the first nine months of 2020. Sales decreased $511 million (-13%) due to lower revenues at existing businesses. The unfavorable effects of currency translation resulted in a decrease in revenues of $5 million. The decrease in revenues at existing businesses was primarily the result of reduced demand from industrial customers following business slowing and closures due to COVID-19 and lower sales to academic customers due to pandemic-related closures.
Operating income margin was 13.7% in the first nine months of 2020 compared to 22.0% in the first nine months of 2019. The decrease was primarily due to the decrease in sales, a $108 million charge related to a long-term supply contract (discussed in Note 8), sales mix and, to a lesser extent, strategic growth investments, offset in part by productivity improvements.
Specialty Diagnostics
Nine Months Ended
September 26,September 28,
(Dollars in millions)20202019Change
Revenues$3,376 $2,779 21 %
Operating Income Margin25.1 %25.5 %-0.4 pt
Sales in the Specialty Diagnostics segment increased $597 million to $3.38 billion in the first nine months of 2020. Sales increased $188$724 million (5%(26%) due to higher revenues at existing businesses. The unfavorable effects of currency translation resulted in a decrease in revenues of $85$6 million and the divestiture of the Anatomical Pathology business decreased revenues by $121 million. The increase in revenuerevenues at existing businesses was due to increasedhigher demand forprimarily driven by products sold by eachaddressing treatment of the segment's primary businessesCOVID-19, with particular strength in chromatography and mass spectrometry instruments.
Operating income margin was 22.0% in the first nine monthssales of 2019 compared to 21.3% in the first nine months of 2018. 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 unfavorable sales mix and strategic growth investments.
Specialty Diagnostics
  Nine Months Ended
  September 28,
 September 29,
  
(Dollars in millions) 2019
 2018
 Change
       
Revenues $2,779
 $2,773
 —%
       
Operating Income Margin 25.5% 25.9% -0.4 pt
Sales in the Specialty Diagnostics segment increased $6 million to $2.78 billion in the first nine months of 2019. Sales increased $127 million (5%) due to higher revenues at existing businesses. The unfavorable effects of currency translation resulted in a decrease in revenues of $58 million and the divestiture of Anatomical Pathology business decreased revenue by $63 million. The increase in revenue at existing businesses was due to increased demand for products sold through the segment's healthcare market channel as well asbusiness, and to a lesser extent, microbiology and clinical diagnostic and immunodiagnosticdiagnostics products.
Operating income margin was 25.1% in the first nine months of 2020 compared to 25.5% in the first nine months of 2019 compared to 25.9% in the first nine months of 2018.2019. The decrease was primarily due to sales mix and, to a lesser extent, strategic growth investments, offset in part by profit on higher sales and, to a lesser extent, productivity improvements, net of inflationary cost increases.
Laboratory Products and Servicessales.
34
  Nine Months Ended
  September 28,
 September 29,
  
(Dollars in millions) 2019
 2018
 Change
       
Revenues $7,765
 $7,433
 4%
       
Operating Income Margin 12.0% 12.3% -0.3 pt
Sales in the Laboratory Products and Services segment increased $332 million to $7.77 billion in 2019. Sales increased $427 million (6%) due to higher revenues at existing businesses and $94 million due to an acquisition. The unfavorable effects of currency translation resulted in a decrease in revenues of $154 million. Revenues decreased $35 million due primarily to a change in the method of reporting certain intersegment sales with no impact to consolidated results. The increase in revenue at

38


THERMO FISHER SCIENTIFIC INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations (continued)

Laboratory Products and Services
Nine Months Ended
September 26,September 28,
(Dollars in millions)20202019Change
Revenues$8,629 $7,765 11 %
Operating Income Margin10.8 %12.0 %-1.2 pt
Sales in the Laboratory Products and Services segment increased $864 million to $8.63 billion in 2020. Sales increased $699 million (9%) due to higher revenues at existing businesses and $179 million due to acquisitions. The unfavorable effects of currency translation resulted in a decrease in revenues of $14 million. The increase in revenues at existing businesses was primarily due to increased demand in each of the segment's principal businesses with particular strength in service offerings of its pharma services business andfor products sold through its research and safety market channel business and, to a lesser extent, service offerings of the segment's pharma services business.
Operating income margin was 10.8% in the first nine months of 2020 compared to 12.0% in the first nine months of 2019 compared to 12.3% in the first nine months of 2018.2019. The decrease was primarily due to sales mix and strategic growth investments, and unfavorable sales mix offset in part by productivity improvements, net of inflationary cost increases, and profit on higher sales.sales and, to a lesser extent, productivity improvements.
Other Income/Expense, Net
The company reported other expense,(expense) income, net of $330$(36) million and $385$25 million in the first nine months of 2020 and 2019, respectively. In 2020, other expense, net includes $81 million of costs for the terminated QIAGEN acquisition, primarily for amortization of loan commitment fees and 2018, respectively (Note 5). An increase in interest income of $87 million was offset in part by an increase in interest expense of $39 million.entering into currency hedging contracts. In 2019, the company recorded $42 million of losses on the early extinguishment of debt.The company expects to incur an additional $142 million of losses on the early extinguishment of debt in the fourth quarter of 2019 (see Note 15).
Provision for Income Taxes
The company recorded a $456 million provision for income taxes in the first nine months of 2020. In the second quarter of 2020, the company implemented foreign tax credit planning in Sweden which resulted in $96 million of foreign tax credits, with no related incremental U.S. income tax expense. The company recorded a $338 million provision for income taxes in the first nine months of 2019 including $191 million related to the gain on the sale of the Anatomical Pathology business. In addition, in 2019, the company recorded a $62 million income tax benefit related to a foreign exchange loss for tax purposes on certain intercompany financing arrangements and implemented foreign tax credit planning in Sweden which resulted in $75 million of foreign tax credits, with no related incremental U.S. income tax expense.
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 profit computations and foreign taxes.
Recent Accounting Pronouncements
A description of recently issued accounting standards is included under the heading “"Recent Accounting Pronouncements"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 heading “"Product Liability, Workers Compensation and Other Personal Injury Matters""Intellectual Property Matters" and "Commercial Matters"” in Note 108 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 $4.67$12.01 billion at September 28, 2019,26, 2020, compared with $4.48$5.70 billion at December 31, 2018.2019. Included in working capital were cash and cash equivalents of $1.27$7.54 billion at September 28, 201926, 2020 and $2.10$2.40 billion at December 31, 2018.
First Nine Months of 2019
Cash provided by operating activities2019. The increase in cash was $3.06 billion during the first nine months of 2019. Cash provided by income was offsetdue in part by investments in working capital. Increases in accounts receivable and inventories used cash of $321 million and $449 million, respectively, primarily to support growth in sales. An increase in other assets used cash of $186 million primarily due to the timingissuance of customer billings. Other liabilities increased by $172 million primarily due to advance payments from customers. Cash payments for income taxes increased to $589 million during the first nine months of 2019, compared with $449 millionlong-term senior notes in the first nine months of 2018. The company made cash contributions to its pensionMarch and postretirement benefit plans totaling $40 million during the first nine months of 2019. Payments for restructuring actions, principally severance costs and lease and other expenses of real estate consolidation, used cash of $45 million during the first nine months of 2019.
During the first nine months of 2019, the company’s investing activities used $1.15 billion of cash. Acquisitions used cash of $1.69 billion. Proceeds from the sale of the Anatomical Pathology business provided $1.13 billion. The company's investing

April 2020.
39
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THERMO FISHER SCIENTIFIC INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Liquidity and Capital Resources (continued)

First Nine Months of 2020
Cash provided by operating activities also includedwas $4.95 billion during the first nine months of 2020. Cash provided by income was offset in part by investments in working capital. Increases in accounts receivable and inventories used cash of $858 million and $427 million, respectively, primarily to support growth in sales. Changes in other assets and other liabilities provided cash of $1.04 billion primarily due to the timing of payments for compensation and income taxes. Cash payments for income taxes increased to $656 million during the first nine months of 2020, compared with $589 million in the first nine months of 2019. The company made cash contributions to its pension and postretirement benefit plans totaling $45 million during the first nine months of 2020. Payments for restructuring actions, principally severance costs and expenses of real estate consolidation, used cash of $46 million during the first nine months of 2020.
During the first nine months of 2020, the company’s investing activities used $884 million of cash, principally for the purchase of $637 million of property, plant and equipment. On September 30, 2019, the company acquired an active pharmaceutical ingredient manufacturing site in Cork, Ireland for approximately €90 million in cash.
The company’s financing activities used $2.60provided $1.01 billion of cash during the first nine months of 2019.2020. Issuance of senior notes provided cash of $3.46 billion. Repayment of senior notes used cash of $1.70 billion. A net increase in commercial paper obligations provided cash of $3$712 million. The company’s financing activities also included the repurchase of $750 million$1.50 billion of the company's common stock and the payment of $221$250 million in cash dividends, offset in part by $115$156 million of net proceeds from employee stock option exercises. On September 7, 2018,November 8, 2019, the Board of Directors authorized the repurchase of up to $2.00$2.50 billion of the company’s common stock. Early in the fourth quarter of 2019, the company repurchased $750 million of the company's common stock. At November 1, 2019,October 30, 2020, authorization remained for $500 million$1.00 billion of future repurchases of the company’s common stock. As discussed in Note 15, early in the fourth quarter of 2019, the company issued new senior notes for net proceeds of $5.6 billion and is using those proceeds to redeem existing debt.
The company's commitments for purchases of property, plant and equipment, contractual obligations and other commercial commitments did not change materially between December 31, 20182019 and September 28, 2019.26, 2020 except for the long-term lease with CSL Limited discussed in Note 8. The company expects that for all of 2019,2020, expenditures for property, plant and equipment, net of disposals, will approximate $925 and $975 million.be approximately $1.5 billion.
As of September 28, 2019,26, 2020, the company’s short-term debt totaled $661 million consisting principally of senior notes due within the next twelve months.$2 million. The company has a revolving credit facility with a bank group that provides up to $2.50$2.5 billion of unsecured multi-currency revolving credit.credit (Note 7). 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 28, 2019,26, 2020, no borrowings were outstanding under the company’s revolving credit facility, although available capacity was reduced by approximately $80$66 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 $1.27$7.54 billion as of September 28, 201926, 2020 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.
First Nine Months of 20182019
Cash provided by operating activities was $2.74$3.06 billion during the first nine 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$321 million and $333$449 million, respectively, primarily to support growth in sales. An increaseChanges in other assets and other liabilities used cash of $185$14 million primarily due to the timing of customer billings and income tax refunds. Other liabilities decreased by $199 million primarily due to the timing of payments for income taxes and, to a lesser extent, incentive compensation.billings. Cash payments for income taxes totaled $449$589 million. The company made cash contributions to its pension and postretirement benefit plans totaling $78$40 million during the first nine months of 2018.2019. Payments for restructuring actions, principally severance costs and lease and other expenses of real estate consolidation, used cash of $62$45 million during the first nine months of 2018.2019.
During the first nine months of 2018,2019, the company’s investing activities used $532 million$1.15 billion of cash. Acquisitions used cash of $59 million.$1.69 billion. Proceeds from the sale of the Anatomical Pathology business provided $1.13 billion. The company’scompany's investing activities also included the purchase of $474$637 million of property, plant and equipment.
The company’s financing activities used $2.22$2.60 billion of cash during the first nine months of 2018.2019. Repayment of senior notes used cash of $2.05$1.70 billion. New long-term borrowings provided cash of $690 million. A net decreaseincrease in commercial paper obligations usedprovided cash of $464$3 million. The company’s
36

THERMO FISHER SCIENTIFIC INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Liquidity and Capital Resources (continued)
financing activities also included the repurchase of $750 million of the company’s common stock and the payment of $198$221 million in cash dividends, offset in part by $97$115 million of net proceeds from employee stock option exercises.

Item 3.Quantitative and Qualitative Disclosures About Market Risk
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 2018.discussed in the company’s Annual Report on Form 10-K for the year ended December 31, 2019.

40


THERMO FISHER SCIENTIFIC INC.


Item 4.Controls and Procedures
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 28, 2019,26, 2020, that have materially affected or are reasonably likely to materially affect the company’s internal control over financial reporting.


37
PART IIOTHER INFORMATION

THERMO FISHER SCIENTIFIC INC.
PART II    OTHER INFORMATION

Item 1.Legal Proceedings
Item 1.    Legal Proceedings
There are various lawsuits and claims against the company involving product liability, intellectual property, employment and commercial issues. See "Note 10“Note 8 to our Consolidated Financial Statements – Commitments and Contingencies."”
On June 3, 2013, Unisone Strategic IP filed a complaint against Life Technologies, a subsidiary of the company, 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 sought damages for alleged willful infringement, attorneys’ fees, costs, and injunctive relief. On September 30, 2020, this matter was settled by payment of a nominal amount by the company.


Item 1A.
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 30.
We must develop new products, adaptThe risks that we believe are material 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 for product development. We sell our products in several industries thatinvestors 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. Our growth depends in part on the growth of the markets which we serve. Any decline or 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;
developing new applications for our technologies;
expanding our service offerings;
continuing key customer initiatives;

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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 resultdiscussed in the expected growth ofcompany’s Annual Report on Form 10-K for the year ended December 31, 2019, as updated by our business.
Our business is affected by general economic conditions and related uncertainties affecting marketsQuarterly Report on Form 10-Q for the quarter ended June 27, 2020, under the caption “Risk Factors,” which are on file with the SEC. Except as set forth herein, there have been no material changes during the three months ended September 26, 2020 to our previously reported Risk Factors. As discussed 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 ofNote 2, the company andhas terminated its customers, distributors, and suppliers, havingagreement to acquire QIAGEN, therefore 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.
Economic, political, foreign currency and other risks associated with international sales and operations could adversely affect our resultsthe then pending acquisition of operations. International markets contribute a substantial portion of our revenues, and we intend to continue expanding our presenceQIAGEN included in these regions. The exposure to fluctuations in currency exchange rates takesthe company’s Quarterly Report on different forms. International revenues and costsForm 10-Q for the quarter ended June 27, 2020 are subjectno longer material risks 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 months of 2019, currency translation had an unfavorable effect of $395 million on revenues due to the 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;
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;

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Risk Factors (continued)


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

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Risk Factors (continued)


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 $25.62 billion and $1.25 billion, respectively, as of September 28, 2019. In addition, we have definite-lived intangible assets totaling $13.06 billion as of September 28, 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 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.

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

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Risk Factors (continued)


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 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 business partners) and to manage or support a variety of critical business processes and activities (such as interacting with suppliers, selling our products and services, fulfilling orders and billing, collecting and making payments, shipping products, providing services and support to customers, tracking customer activity, fulfilling contractual obligations and otherwise 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 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

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Risk Factors (continued)


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 28, 2019, we had approximately $17.05 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.
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.

Item 2.Unregistered Sales of Equity Securities and Use of Proceeds
Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds
Issuer Purchases of Equity Securities
There was no share repurchase activity for the company's third quarter of 2019. 2020. On September 7, 2018,November 8, 2019, the Board of Directors authorized the repurchase of up to $2.00$2.50 billion of the company’s common stock. At September 28, 2019, $1.2526, 2020, $1.00 billion was available for future repurchases of the company’s common stock under this authorization. Early in the fourth quarter of 2019, the company repurchased $750 million of the company's common stock, leaving $500 million remaining under this authorization.


Item 6.    Exhibits
Item 6.Exhibits
See Exhibit Index on page 4940.


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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:October 30, 2020THERMO FISHER SCIENTIFIC INC.
Date:November 1, 2019THERMO 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


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EXHIBIT INDEX


Exhibit

Number
Description of Exhibit
4.131.1
Eighteenth Supplemental Indenture, dated as of September 30, 2019, between the Company, as issuer, and The Bank of New York Mellon Trust Company, N.A., as trustee (filed as Exhibit 4.2 to the Registrant’s Current Report on Form 8-K filed September 30, 2019 [File No. 1-8002] and incorporated in this document by reference).
4.2
Nineteenth Supplemental Indenture, dated as of October 8, 2019, between the Company, as issuer, and the Bank of New York Mellon Trust Company, N.A., as trustee (filed as Exhibit 4.2 to the Registrant’s Current Report on Form 8-K filed October 8, 2019 [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.
31.2
32.1
32.2
101.INSXBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCHXBRL Taxonomy Extension Schema Document.
101.CALXBRL Taxonomy Calculation Linkbase Document.
101.DEFXBRL Taxonomy Definition Linkbase Document.
101.LABXBRL Taxonomy Label Linkbase Document.
101.PREXBRL Taxonomy Presentation Linkbase Document.
104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
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"“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.

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