10-Q 1 q2201710q.htm THERMO FISHER SCIENTIFIC INC., FORM 10-Q, DATED JULY 1, 2017 Document


UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

ý Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the Quarter Ended
July 1, 2017
¨ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number 1-8002
THERMO FISHER SCIENTIFIC INC.
(Exact name of Registrant as specified in its charter)
Delaware
04-2209186
(State of incorporation or organization)
(I.R.S. Employer Identification No.)
 
 
168 Third Avenue
 
Waltham, Massachusetts
02451
(Address of principal executive offices)
(Zip Code)

Registrant’s telephone number, including area code: (781) 622-1000
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes ý  No o
Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files). Yes ý  No o
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer ý                                              Accelerated filer o                                       Non-accelerated filer o
Smaller reporting company o                                      Emerging growth company  o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  o
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o  No ý
Indicate the number of shares outstanding of each of the issuer’s classes of Common Stock, as of the latest practicable date.
 
Class
 
Outstanding at July 1, 2017
 
 
Common Stock, $1.00 par value
 
390,119,503
 





THERMO FISHER SCIENTIFIC INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED JULY 1, 2017

2


THERMO FISHER SCIENTIFIC INC.

PART I
FINANCIAL INFORMATION
Item 1.
Financial Statements
CONSOLIDATED BALANCE SHEET
(Unaudited)
 
 
July 1,

 
December 31,

(In millions except share and per share amounts)
 
2017

 
2016

 
 
 
 
 
Assets
 
 
 
 
Current Assets:
 
 
 
 
Cash and cash equivalents
 
$
611.0

 
$
786.2

Accounts receivable, less allowances of $87.6 and $77.3
 
3,258.3

 
3,048.5

Inventories
 
2,422.2

 
2,213.3

Refundable income taxes
 
414.9

 
378.3

Other current assets
 
746.1

 
594.7

 
 
 
 
 
Total current assets
 
7,452.5

 
7,021.0

 
 
 
 
 
Property, Plant and Equipment, Net
 
2,599.7

 
2,577.8

Acquisition-related Intangible Assets, Net
 
13,575.6

 
13,969.0

Other Assets
 
1,040.4

 
1,011.9

Goodwill
 
21,845.5

 
21,327.8

 
 
 
 
 
Total Assets
 
$
46,513.7

 
$
45,907.5

 
 
 
 
 
Liabilities and Shareholders' Equity
 
 
 
 
Current Liabilities:
 
 
 
 
Short-term obligations and current maturities of long-term obligations
 
$
1,540.4

 
$
1,255.5

Accounts payable
 
982.2

 
926.2

Accrued payroll and employee benefits
 
612.6

 
708.7

Accrued income taxes
 
89.9

 
165.4

Deferred revenue
 
542.1

 
485.9

Other accrued expenses
 
1,308.6

 
1,324.1

 
 
 
 
 
Total current liabilities
 
5,075.8

 
4,865.8

 
 
 
 
 
Deferred Income Taxes
 
2,320.4

 
2,557.4

Other Long-term Liabilities
 
1,470.2

 
1,572.6

Long-term Obligations
 
15,255.7

 
15,372.4

 
 
 
 
 
Shareholders' Equity:
 
 
 
 
Preferred stock, $100 par value, 50,000 shares authorized; none issued
 


 


Common stock, $1 par value, 1,200,000,000 shares authorized; 416,944,144 and 415,138,564 shares issued
 
416.9

 
415.1

Capital in excess of par value
 
12,328.2

 
12,139.6

Retained earnings
 
14,972.3

 
13,926.9

Treasury stock at cost, 26,824,641 and 21,690,679 shares
 
(3,069.7
)
 
(2,306.0
)
Accumulated other comprehensive items
 
(2,256.1
)
 
(2,636.3
)
 
 
 
 
 
Total shareholders' equity
 
22,391.6

 
21,539.3

 
 
 
 
 
Total Liabilities and Shareholders' Equity
 
$
46,513.7

 
$
45,907.5


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

3



THERMO FISHER SCIENTIFIC INC.

CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
 
 
Three Months Ended
 
Six Months Ended
 
 
July 1,

 
July 2,

 
July 1,

 
July 2,

(In millions except per share amounts)
 
2017

 
2016

 
2017

 
2016

 
 
 
 
 
 
 
 
 
Revenues
 
 
 
 
 
 
 
 
Product revenues
 
$
4,298.1

 
$
3,896.1

 
$
8,400.2

 
$
7,586.5

Service revenues
 
691.9

 
639.1

 
1,354.8

 
1,243.5

 
 
 
 
 
 
 
 
 
Total revenues
 
4,990.0

 
4,535.2

 
9,755.0

 
8,830.0

 
 
 
 
 
 
 
 
 
Costs and Operating Expenses:
 
 
 
 
 
 
 
 
Cost of product revenues
 
2,244.4

 
2,039.3

 
4,374.0

 
3,972.9

Cost of service revenues
 
462.5

 
417.4

 
905.4

 
820.7

Selling, general and administrative expenses
 
1,287.5

 
1,223.1

 
2,618.7

 
2,436.0

Research and development expenses
 
221.6

 
182.4

 
437.0

 
358.9

Restructuring and other costs, net
 
22.5

 
35.4

 
46.0

 
86.0

 
 
 
 
 
 
 
 
 
Total costs and operating expenses
 
4,238.5

 
3,897.6

 
8,381.1

 
7,674.5

 
 
 
 
 
 
 
 
 
Operating Income
 
751.5

 
637.6

 
1,373.9

 
1,155.5

Other Expense, Net
 
(125.9
)
 
(116.5
)
 
(245.4
)
 
(211.4
)
 
 
 
 
 
 
 
 
 
Income from Continuing Operations Before Income Taxes
 
625.6

 
521.1

 
1,128.5

 
944.1

(Provision for) Benefit from Income Taxes
 
(13.4
)
 
(4.3
)
 
35.1

 
(25.0
)
 
 
 
 
 
 
 
 
 
Income from Continuing Operations
 
612.2

 
516.8

 
1,163.6

 
919.1

Loss from Discontinued Operations (net of income tax benefit of $0.3, $0.1, $0.3 and $0.2)
 
(0.6
)
 
(0.2
)
 
(0.6
)
 
(0.3
)
 
 
 
 
 
 
 
 
 
Net Income
 
$
611.6

 
$
516.6

 
$
1,163.0

 
$
918.8

 
 
 
 
 
 
 
 
 
Earnings per Share from Continuing Operations
 
 
 
 
 
 
 
 
Basic
 
$
1.57

 
$
1.31

 
$
2.98

 
$
2.33

Diluted
 
$
1.56

 
$
1.30

 
$
2.96

 
$
2.31

 
 
 
 
 
 
 
 
 
Earnings per Share
 
 
 
 
 
 
 
 
Basic
 
$
1.57

 
$
1.31

 
$
2.98

 
$
2.33

Diluted
 
$
1.56

 
$
1.30

 
$
2.95

 
$
2.31

 
 
 
 
 
 
 
 
 
Weighted Average Shares
 
 
 
 
 
 
 
 
Basic
 
390.0

 
393.9

 
390.5

 
394.9

Diluted
 
393.3

 
396.7

 
393.7

 
397.7

 
 
 
 
 
 
 
 
 
Cash Dividends Declared per Common Share
 
$
0.15

 
$
0.15

 
$
0.30

 
$
0.30


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 Ended
 
Six Months Ended
 
 
July 1,

 
July 2,

 
July 1,

 
July 2,

(In millions)
 
2017

 
2016

 
2017

 
2016

 
 
 
 
 
 
 
 
 
Comprehensive Income
 
 
 
 
 
 
 
 
Net Income
 
$
611.6

 
$
516.6

 
$
1,163.0

 
$
918.8

 
 
 
 
 
 
 
 
 
Other Comprehensive Items:
 
 
 
 
 
 
 
 
Currency translation adjustment
 
219.5

 
(220.7
)
 
379.5

 
(50.8
)
Unrealized gains and losses on available-for-sale investments:
 
 
 
 
 
 
 
 
Unrealized holding gains (losses) arising during the period (net of tax provision (benefit) of $0.1, $0.1, $0.4 and ($0.3))
 
0.8

 

 
1.9

 
(1.5
)
Reclassification adjustment for (gains) losses included in net income (net of tax (provision) benefit of ($0.6), $0.0, ($0.6) and $0.0)
 
(1.0
)
 

 
(1.0
)
 

Unrealized gains and losses on hedging instruments:
 
 
 
 
 
 
 
 
Unrealized losses on hedging instruments (net of tax benefit of $22.4)
 

 

 

 
(36.6
)
Reclassification adjustment for losses included in net income (net of tax benefit of $1.2, $0.9, $2.3 and $1.4)
 
1.9

 
1.7

 
3.7

 
2.5

Pension and other postretirement benefit liability adjustments:
 
 
 
 
 
 
 
 
Pension and other postretirement benefit liability adjustments arising during the period (net of tax benefit (provision) of $2.9, ($1.0), $3.6 and $0.1)
 
(7.1
)
 
2.3

 
(9.1
)
 
(1.1
)
Amortization of net loss and prior service benefit included in net periodic pension cost (net of tax benefit of $1.4, $0.6, $2.1 and $0.9)
 
3.3

 
1.3

 
5.2

 
2.7

 
 
 
 
 
 
 
 
 
Total other comprehensive items
 
217.4

 
(215.4
)
 
380.2

 
(84.8
)
 
 
 
 
 
 
 
 
 
Comprehensive Income
 
$
829.0

 
$
301.2

 
$
1,543.2

 
$
834.0


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


5


THERMO FISHER SCIENTIFIC INC.

CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
 
 
Six Months Ended
 
 
July 1,

 
July 2,

(In millions)
 
2017

 
2016

 
 
 
 
 
Operating Activities
 
 
 
 
Net income
 
$
1,163.0

 
$
918.8

Loss from discontinued operations
 
0.6

 
0.3

 
 
 
 
 
Income from continuing operations
 
1,163.6

 
919.1

 
 
 
 
 
Adjustments to reconcile income from continuing operations to net cash provided by operating activities:
 
 
 
 
Depreciation and amortization
 
942.7

 
851.2

Change in deferred income taxes
 
(298.8
)
 
(304.5
)
Non-cash stock-based compensation
 
71.2

 
67.1

Non-cash charges for sale of inventories revalued at the date of acquisition
 
31.1

 
22.4

Other non-cash expenses, net
 
45.3

 
31.7

Changes in assets and liabilities, excluding the effects of acquisitions and dispositions:
 
 
 
 
Accounts receivable
 
(126.6
)
 
(95.0
)
Inventories
 
(146.1
)
 
(25.9
)
Other assets
 
(178.4
)
 
(85.4
)
Accounts payable
 
49.0

 
39.9

Other liabilities
 
(160.7
)
 
(144.1
)
Contributions to retirement plans
 
(181.3
)
 
(26.3
)
 
 
 
 
 
Net cash provided by continuing operations
 
1,211.0

 
1,250.2

Net cash used in discontinued operations
 
(1.1
)
 
(1.9
)
 
 
 
 
 
Net cash provided by operating activities
 
1,209.9

 
1,248.3

 
 
 
 
 
Investing Activities
 
 

 
 

Acquisitions, net of cash acquired
 
(307.0
)
 
(1,033.0
)
Purchase of property, plant and equipment
 
(181.4
)
 
(229.9
)
Proceeds from sale of property, plant and equipment
 
2.3

 
21.7

Proceeds from sale of investments
 
16.5

 
7.9

Other investing activities, net
 
(7.7
)
 
(2.0
)
 
 
 
 
 
Net cash used in investing activities
 
$
(477.3
)
 
$
(1,235.3
)


6


THERMO FISHER SCIENTIFIC INC.

CONSOLIDATED STATEMENT OF CASH FLOWS (Continued)
(Unaudited)
 
 
Six Months Ended
 
 
July 1,

 
July 2,

(In millions)
 
2017

 
2016

 
 
 
 
 
Financing Activities
 
 
 
 
Net proceeds from issuance of debt
 
$
518.9

 
$
1,985.6

Repayment of debt
 
(1,328.9
)
 
(1,638.0
)
Net proceeds from issuance of commercial paper
 
4,487.1

 
3,509.5

Repayments of commercial paper
 
(3,990.7
)
 
(2,573.4
)
Purchases of company common stock
 
(750.0
)
 
(1,000.0
)
Dividends paid
 
(117.8
)
 
(119.4
)
Net proceeds from issuance of company common stock under employee stock plans
 
99.1

 
78.4

Other financing activities, net
 

 
(13.6
)
 
 
 
 
 
Net cash (used in) provided by financing activities
 
(1,082.3
)
 
229.1

 
 
 
 
 
Exchange Rate Effect on Cash
 
168.2

 
(18.6
)
 
 
 
 
 
(Decrease) Increase in Cash, Cash Equivalents and Restricted Cash
 
(181.5
)
 
223.5

Cash, Cash Equivalents and Restricted Cash at Beginning of Period
 
810.8

 
466.3

 
 
 
 
 
Cash, Cash Equivalents and Restricted Cash at End of Period
 
$
629.3

 
$
689.8

 
 
 
 
 
See Note 12 for supplemental cash flow information.

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


7


THERMO FISHER SCIENTIFIC INC.

CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(Unaudited)
 
 
Common Stock
 
Capital in Excess of Par Value

 
Retained Earnings

 
Treasury Stock
 
Accumulated Other Comprehensive Items

 
Total Shareholders' Equity

(In millions)
 
Shares

 
Amount

 
 
 
Shares

 
Amount

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2015
 
411.9

 
$
411.9

 
$
11,801.2

 
$
12,142.3

 
12.3

 
$
(1,007.9
)
 
$
(1,997.3
)
 
$
21,350.2

Issuance of shares under employees' and directors' stock plans
 
2.1

 
2.1

 
104.6

 

 
0.1

 
(19.5
)
 

 
87.2

Stock-based compensation
 

 

 
67.1

 

 

 

 

 
67.1

Tax benefit related to employees' and directors' stock plans
 

 

 
44.0

 

 

 

 

 
44.0

Purchases of company common stock
 

 

 

 

 
7.3

 
(1,000.0
)
 

 
(1,000.0
)
Dividends declared
 

 

 

 
(118.6
)
 

 

 

 
(118.6
)
Net income
 

 

 

 
918.8

 

 

 

 
918.8

Other comprehensive items
 

 

 

 

 

 

 
(84.8
)
 
(84.8
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at July 2, 2016
 
414.0

 
$
414.0

 
$
12,016.9

 
$
12,942.5

 
19.7

 
$
(2,027.4
)
 
$
(2,082.1
)
 
$
21,263.9

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2016
 
415.1

 
$
415.1

 
$
12,139.6

 
$
13,926.9

 
21.7

 
$
(2,306.0
)
 
$
(2,636.3
)
 
$
21,539.3

Issuance of shares under employees' and directors' stock plans
 
1.8

 
1.8

 
120.4

 

 
0.1

 
(13.7
)
 

 
108.5

Stock-based compensation
 

 

 
71.2

 

 

 

 

 
71.2

Purchases of company common stock
 

 

 

 

 
5.0

 
(750.0
)
 

 
(750.0
)
Dividends declared
 

 

 

 
(117.6
)
 

 

 

 
(117.6
)
Net income
 

 

 

 
1,163.0

 

 

 

 
1,163.0

Other comprehensive items
 

 

 

 

 

 

 
380.2

 
380.2

Other
 

 

 
(3.0
)
 

 

 

 

 
(3.0
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at July 1, 2017
 
416.9

 
$
416.9

 
$
12,328.2

 
$
14,972.3

 
26.8

 
$
(3,069.7
)
 
$
(2,256.1
)
 
$
22,391.6


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

8


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


Note 1.
Nature of Operations and Summary of Significant Accounting Policies
Nature of Operations
Thermo Fisher Scientific Inc. (the company or Thermo Fisher) enables customers to make the world healthier, cleaner and safer by providing analytical instruments, equipment, reagents and consumables, software and services for research, manufacturing, analysis, discovery and diagnostics. 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 July 1, 2017, the results of operations for the three- and six-month periods ended July 1, 2017 and July 2, 2016, and the cash flows for the six-month periods ended July 1, 2017 and July 2, 2016. Interim results are not necessarily indicative of results for a full year.
The consolidated balance sheet presented as of December 31, 2016, 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 2016 financial statements and notes included in the company’s Current Report on Form 8-K filed with the Securities and Exchange Commission (SEC) on May 5, 2017.
Note 1 to the consolidated financial statements for 2016 describes the significant accounting estimates and policies used in preparation of the consolidated financial statements. Except for the accounting for tax benefits from stock-based compensation as noted below under the caption Recent Accounting Pronouncements, there have been no material changes in the company’s significant accounting policies during the six months ended July 1, 2017.
Inventories
The components of inventories are as follows:
 
 
July 1,

 
December 31,

(In millions)
 
2017

 
2016

 
 
 
 
 
Raw Materials
 
$
528.9

 
$
466.3

Work in Process
 
367.8

 
327.9

Finished Goods
 
1,525.5

 
1,419.1

 
 
 
 
 
Inventories
 
$
2,422.2

 
$
2,213.3

Property, Plant and Equipment
Property, plant and equipment consists of the following:
 
 
July 1,

 
December 31,

(In millions)
 
2017

 
2016

 
 
 
 
 
Land
 
$
311.5

 
$
305.6

Buildings and Improvements
 
1,204.7

 
1,154.2

Machinery, Equipment and Leasehold Improvements
 
3,171.8

 
2,955.7

 
 
 
 
 
Property, Plant and Equipment, at Cost
 
4,688.0

 
4,415.5

Less: Accumulated Depreciation and Amortization
 
2,088.3

 
1,837.7

 
 
 
 
 
Property, Plant and Equipment, Net
 
$
2,599.7

 
$
2,577.8


9


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

Acquisition-related Intangible Assets
Acquisition-related intangible assets are as follows:
 
 
Balance at July 1, 2017
 
Balance at December 31, 2016
(In millions)
 
Gross

 
Accumulated Amortization

 
Net

 
Gross

 
Accumulated Amortization

 
Net

 
 
 
 
 
 
 
 
 
 
 
 
 
Definite Lived:
 
 
 
 
 
 
 
 
 
 
 
 
Customer relationships
 
$
13,547.7

 
$
(5,339.3
)
 
$
8,208.4

 
$
13,167.3

 
$
(4,821.4
)
 
$
8,345.9

Product technology
 
5,937.6

 
(2,523.7
)
 
3,413.9

 
5,679.7

 
(2,204.2
)
 
3,475.5

Tradenames
 
1,407.9

 
(731.6
)
 
676.3

 
1,452.2

 
(646.0
)
 
806.2

Other
 
34.3

 
(34.1
)
 
0.2

 
33.0

 
(33.0
)
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
20,927.5

 
(8,628.7
)
 
12,298.8

 
20,332.2

 
(7,704.6
)
 
12,627.6

Indefinite Lived:
 
 
 
 
 
 
 
 
 
 
 
 
Tradenames
 
1,234.8

 

 
1,234.8

 
1,234.8

 

 
1,234.8

In-process research and development
 
42.0

 

 
42.0

 
106.6

 

 
106.6

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1,276.8

 

 
1,276.8

 
1,341.4

 

 
1,341.4

 
 
 
 
 
 
 
 
 
 
 
 
 
Acquisition-related Intangible Assets
 
$
22,204.3

 
$
(8,628.7
)
 
$
13,575.6

 
$
21,673.6

 
$
(7,704.6
)
 
$
13,969.0

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:
 
 
Six Months Ended
 
 
July 1,

 
July 2,

(In millions)
 
2017

 
2016

 
 
 
 
 
Beginning Balance
 
$
77.9

 
$
55.8

Provision charged to income
 
54.5

 
45.2

Usage
 
(50.9
)
 
(42.4
)
Acquisitions
 
0.5

 
1.1

Adjustments to previously provided warranties, net
 
(1.4
)
 
(1.0
)
Currency translation
 
2.4

 
(0.2
)
 
 
 
 
 
Ending Balance
 
$
83.0

 
$
58.5

Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. In addition, significant estimates were made in estimating future cash flows to assess potential impairment of assets and in determining the fair value of acquired intangible assets (Note 2) and the ultimate loss from abandoning leases at facilities being exited (Note 13). Actual results could differ from those estimates.
Recent Accounting Pronouncements
In March 2017, the FASB issued new guidance intended to improve the presentation of net periodic pension cost and net periodic postretirement benefit cost. The new guidance requires the service cost component of net periodic cost be reported in the same line item(s) as other employee compensation costs and all other components of the net periodic cost be reported in the

10


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

income statement below operating income. The guidance is effective for the company in 2018. The adoption of this guidance is not expected to have a material impact on the company’s consolidated financial statements.
In January 2017, the FASB issued new guidance that eliminates the requirement to calculate the implied fair value of goodwill to measure a goodwill impairment charge. Instead, the new guidance will require entities to record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value. The guidance is effective for the company in 2020. Early adoption is permitted. The adoption of this guidance is not expected to have a material impact on the company’s consolidated financial statements.
In January 2017, the FASB issued new guidance clarifying the definition of a business and providing criteria to determine when an integrated set of assets and activities is not defined as a business. The new guidance requires such integrated sets to be defined as an asset (and not a business) if substantially all of the fair value of the gross assets acquired or disposed is concentrated in a single identifiable asset or a group of similar identifiable assets. The guidance is effective for the company in 2018. Early adoption is permitted. The adoption of this guidance is not expected to have a material impact on the company’s consolidated financial statements.
In November 2016, the FASB issued new guidance intended to reduce diversity in practice in the classification and presentation of changes in restricted cash on the statement of cash flows. The company adopted this guidance on January 1, 2017 and applied the changes to the statement of cash flows retrospectively, as required. The table below summarizes the impact of adopting this and related guidance on the company’s consolidated statement of cash flows for the six months ended July 2, 2016.
In October 2016, the FASB issued new guidance eliminating the deferral of the tax effects of intra-entity asset transfers. The guidance is effective for the company in 2018. The impact of this guidance will be dependent on the extent of future asset transfers which usually occur in connection with planning around acquisitions and other business structuring activities.
In August 2016, the FASB issued new guidance intended to reduce diversity in practice in how certain transactions are classified on the statement of cash flows. The company adopted this guidance on January 1, 2017 and applied the changes to the statement of cash flows retrospectively, as required. The table below summarizes the impact of adopting this and related guidance on the company’s consolidated statement of cash flows for the six months ended July 2, 2016.
In March 2016, the FASB issued new guidance which affects the accounting for stock-based compensation. The new guidance simplifies the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The company adopted this guidance on January 1, 2017 and applied the changes to the statement of cash flows retrospectively. The table below summarizes the impact of adopting this and related guidance on the company’s consolidated statement of cash flows. Adoption of this guidance decreased the company's tax provision in the first six months of 2017 by $35 million and increased diluted earnings per share for the same period by $0.09. The impact in future periods will be dependent upon changes in the company's stock price, the volume of employee stock option exercises and the timing of service- and performance-based restricted unit vesting.
The guidance issued in November 2016, August 2016 and the provisions of the guidance issued in March 2016 which affected classification on the statement of cash flows were applied retrospectively. As a result of adoption of this guidance, the accompanying statement of cash flows for the first six months of 2016 reflect the following changes from previously reported amounts:
 
 
Six Months Ended

(In millions)
 
July 2, 2016

 
 
 
Increase in Net Cash Provided by Operating Activities
 
$
69.7

Decrease in Net Cash Used in Investing Activities
 
12.7

Decrease in Net Cash Provided by Financing Activities
 
(69.7
)
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. The guidance is effective for the company in 2019 and must be adopted using a modified retrospective method. Early adoption is permitted. The company is currently evaluating

11


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

the impact this guidance will have on its consolidated financial statements, however, assets and liabilities will increase upon adoption for right-of-use assets and lease liabilities. The company’s future commitments under lease obligations are summarized in Note 10 to the consolidated financial statements for 2016 included in the company’s Annual Report on Form  10-K, filed with the SEC.
In January 2016, the FASB issued new guidance which affects the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. This guidance retains the current accounting for classifying and measuring investments in debt securities and loans, but requires equity investments to be measured at fair value with subsequent changes recognized in net income, except for those accounted for under the equity method or requiring consolidation. The guidance also changes the accounting for investments without a readily determinable fair value and that do not qualify for the practical expedient permitted by the guidance to estimate fair value. A policy election can be made for these investments whereby estimated fair value may be measured at cost and adjusted in subsequent periods for any impairment or changes in observable prices of identical or similar investments. The guidance is effective for the company in 2018. Early adoption is permitted. The adoption of this guidance is not expected to have a material impact on the company’s consolidated financial statements.
In July 2015, the FASB issued new guidance which requires an entity to measure inventory at the lower of cost and net realizable value. Net realizable value is defined as the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. This guidance does not apply to inventory that is measured using last-in, first-out (LIFO). The guidance was effective for the company in 2017. Adoption of this guidance did not have a material impact on the company’s consolidated financial statements.
In May 2014, the FASB issued new revenue recognition guidance which provides a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and will supersede most current revenue recognition guidance. The new standard also requires significantly expanded disclosures regarding the qualitative and quantitative information of an entity's nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. During 2016, the FASB issued additional guidance and clarification. The guidance is currently effective for the company in 2018. The company expects to adopt this guidance through application of the modified retrospective method.
The company is continuing to evaluate the standard’s impact on its consolidated financial statements by surveying operating sites, reviewing unique customer contract terms, and developing processes to manage the changes in the revenue recognition guidance and gather information for the required disclosures. The company expects this undertaking will be complete in the second half of 2017.
Applying the new guidance to the majority of the company’s revenue arrangements based on its most commonly used customer terms and conditions and routine sales transactions, which generally consist of a single performance obligation to transfer promised goods or services, is not expected to have a material impact to the company’s consolidated financial statements. While the timing of revenue recognition for some of the company’s other sales transactions will be affected by the new guidance, the impact is not expected to be material.

Note 2.
Acquisitions
The company’s acquisitions have historically been made at prices above the determined fair value of the acquired identifiable net assets, resulting in goodwill, due to expectations of the synergies that will be realized by combining the businesses. These synergies include the elimination of redundant facilities, functions and staffing; use of the company’s existing commercial infrastructure to expand sales of the acquired businesses’ products; and use of the commercial infrastructure of the acquired businesses to cost-effectively expand sales of company products.
Acquisitions have been accounted for using the purchase method of accounting, and the acquired companies’ results have been included in the accompanying financial statements from their respective dates of acquisition. Acquisition transaction costs are recorded in selling, general and administrative expenses as incurred.
Pending Acquisition
In May 2017, the company entered into a purchase agreement and commenced a tender offer to acquire, within the Laboratory Products and Services segment, all of the issued and outstanding shares of Patheon N.V., a leading global provider of high-quality drug development and delivery solutions to the pharmaceutical and biopharma sectors, for $35.00 per share in cash, or approximately $5.2 billion, plus the assumption of approximately $2.0 billion of net debt. The transaction, which is

12


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

expected to be completed by the end of 2017, is subject to the satisfaction of customary closing conditions, including the receipt of applicable regulatory approvals, and completion of the tender offer. The company expects to finance the purchase price, including the repayment of indebtedness of Patheon, with issuances of debt, including the senior notes issued in July 2017 (Note 14), and up to $2.0 billion from the future issuance of equity. The company is currently evaluating alternatives for future debt and permanent equity financings and the timing of such transactions is subject to market and other conditions. The company also has available, but does not expect to utilize, up to $4.3 billion of financing under a 364-day unsecured committed bridge credit facility (Note 8).
Patheon provides comprehensive, integrated and highly customizable solutions as well as the expertise to help biopharmaceutical companies of all sizes satisfy complex development and manufacturing needs. The acquisition will provide entry into the contract development and manufacturing organization market and add a complementary service to the company's existing portfolio. Patheon's revenues totaled approximately $1.9 billion for the year ended October 31, 2016.
Completed Acquisitions
On March 2, 2017, the company acquired, within the Analytical Instruments segment, Core Informatics, a North America-based provider of cloud-based platforms supporting scientific data management, for a total purchase price of $94 million, net of cash acquired. The acquisition enhanced the company's existing informatics solutions. Revenues of Core Informatics were approximately $10 million in 2016. The purchase price exceeded the fair market value of the identifiable net assets and, accordingly, $63 million was allocated to goodwill, $50 million of which is tax deductible.
On February 14, 2017, the company acquired, within the Life Sciences Solutions segment, Finesse Solutions, Inc., a North America-based developer of scalable control automation systems and software for bioproduction, for a total purchase price of $221 million, net of cash acquired. The acquisition expanded the company's bioproduction offerings. Revenues of Finesse Solutions were approximately $50 million in 2016. The purchase price exceeded the fair market value of the identifiable net assets and, accordingly, $134 million was allocated to goodwill, none of which is tax deductible.
The components of the purchase price and net assets acquired for 2017 acquisitions are as follows:
(In millions)
 
Core Informatics

 
Finesse Solutions

 
Total

 
 
 
 
 
 
 
Purchase Price
 
 
 
 
 
 
Cash paid
 
$
94.6

 
$
223.1

 
$
317.7

Purchase price payable
 
9.1

 

 
9.1

Cash acquired
 
(10.1
)
 
(2.1
)
 
(12.2
)
 
 
 
 
 
 
 
 
 
$
93.6

 
$
221.0

 
$
314.6

 
 
 
 
 
 
 
Net Assets Acquired
 
 
 
 
 
 
Current assets
 
$
2.0

 
$
19.4

 
$
21.4

Property, plant and equipment
 
0.2

 
1.6

 
1.8

Definite-lived intangible assets:
 
 
 
 
 
 
Customer relationships
 
6.3

 
67.7

 
74.0

Product technology
 
29.1

 
32.0

 
61.1

Tradenames and other
 
2.7

 
2.2

 
4.9

Indefinite-lived intangible assets:
 
 
 
 
 
 
In-process research and development
 

 
1.6

 
1.6

Goodwill
 
62.5

 
134.4

 
196.9

Other assets
 
0.1

 
0.3

 
0.4

Liabilities assumed
 
(9.3
)
 
(38.2
)
 
(47.5
)
 
 
 
 
 
 
 
 
 
$
93.6

 
$
221.0

 
$
314.6

The weighted-average amortization periods for definite-lived intangible assets acquired in 2017 are 12 years for customer relationships, 10 years for product technology and 3 years for tradenames and other. The weighted average amortization period for all definite-lived intangible assets acquired in 2017 is 11 years.

13


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

During the second quarter of 2017, the company finalized the purchase price allocation for the 2016 acquisition of FEI Company. As a result, the company reduced the preliminary values established for tradenames by $88 million and deferred tax liabilities by $18 million and increased goodwill by $70 million. The effect on the income statement of the change was not material.
Unaudited Pro Forma Information
Had the 2016 acquisitions of FEI Company and Affymetrix, Inc. been completed as of the beginning of 2015, the company’s pro forma results for 2016 would have been as follows:
(In millions except per share amounts)
 
Three Months Ended 
 July 2, 2016

 
Six Months Ended 
 July 2, 2016

 
 
 
 
 
Revenues
 
$
4,793.8

 
$
9,398.8

 
 
 
 
 
Net Income
 
$
509.2

 
$
886.0

 
 
 
 
 
Earnings per Share:
 
 
 
 
Basic
 
$
1.29

 
$
2.24

Diluted
 
$
1.28

 
$
2.23

These pro forma results of operations have been prepared for comparative purposes only, and they do not purport to be indicative of the results of operations that actually would have resulted had the acquisitions occurred on the date indicated or that may result in the future.
The company’s results would not have been materially different from its pro forma results had the company’s other 2016 or 2017 acquisitions occurred at the beginning of 2015 or 2016, respectively.
Revenues and operating income of the FEI acquisition in the first six months of 2017 were $596 million and $26 million, respectively. Operating results include significant acquisition-related and restructuring costs related to synergy planning.

Note 3.
Business Segment Information
The company’s financial performance is reported in four segments. A description of each segment follows.
Life Sciences Solutions: provides an extensive portfolio of reagents, instruments and consumables used in biological and medical research, discovery and production of new drugs and vaccines as well as diagnosis of disease. These products and services are used by customers in pharmaceutical, biotechnology, agricultural, clinical, academic, and government markets.
Analytical Instruments: provides a broad offering of instruments, consumables, software and services that are used for a range of applications in the laboratory, on the production line and in the field. These products and services are used by customers in pharmaceutical, biotechnology, academic, government, environmental and other research and industrial markets, as well as the clinical laboratory.
Specialty Diagnostics: provides a wide range of diagnostic test kits, reagents, culture media, instruments and associated products used to increase the speed and accuracy of diagnoses. These products are used by customers in healthcare, clinical, pharmaceutical, industrial and food safety laboratories.
Laboratory Products and Services: provides virtually everything needed for the laboratory, including a combination of self-manufactured and sourced products and an extensive service offering. These products and services are used by customers in pharmaceutical, biotechnology, academic, government and other research and industrial markets, as well as the clinical laboratory.
In January 2017, in connection with a change in management responsibility for certain product lines, the company transferred its plastics for cell culture and vaccines/biologics; sample preparation and analysis; and production chemicals product lines to the Life Sciences Solutions segment from the Laboratory Products and Services segment and transferred its biochemical product line from the Life Sciences Solutions segment to the Laboratory Products and Services segment. These moves are consistent with the company’s historical practice of moving a product line between segments when a shift in strategic

14


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

focus of either the product line or a segment more closely aligns the product line with a segment different than that in which it had previously been reported. Prior period segment information has been reclassified to reflect these transfers.
The company’s management evaluates segment operating performance based on operating income before certain charges/credits to cost of revenues and selling, general and administrative expenses, principally associated with acquisition accounting; restructuring and other costs/income including costs arising from facility consolidations such as severance and abandoned lease expense and gains and losses from the sale of real estate and product lines as well as from significant litigation-related matters; and amortization of acquisition-related intangible assets. The company uses this measure because it helps management understand and evaluate the segments’ core operating results and facilitates comparison of performance for determining compensation.
Business Segment Information
 
 
Three Months Ended
 
Six Months Ended
 
 
July 1,

 
July 2,

 
July 1,

 
July 2,

(In millions)
 
2017

 
2016

 
2017

 
2016

 
 
 
 
 
 
 
 
 
Revenues
 
 
 
 
 
 
 
 
Life Sciences Solutions
 
$
1,404.6

 
$
1,367.9

 
$
2,768.1

 
$
2,585.6

Analytical Instruments
 
1,165.8

 
793.9

 
2,217.8

 
1,553.2

Specialty Diagnostics
 
861.8

 
851.3

 
1,728.2

 
1,705.9

Laboratory Products and Services
 
1,792.5

 
1,719.7

 
3,491.5

 
3,368.5

Eliminations
 
(234.7
)
 
(197.6
)
 
(450.6
)
 
(383.2
)
 
 
 
 
 
 
 
 
 
Consolidated revenues
 
4,990.0

 
4,535.2

 
9,755.0

 
8,830.0

 
 
 
 
 
 
 
 
 
Segment Income (a)
 
 
 
 
 
 
 
 
Life Sciences Solutions
 
448.1

 
389.6

 
882.0

 
740.9

Analytical Instruments
 
232.6

 
144.9

 
424.4

 
256.6

Specialty Diagnostics
 
235.0

 
237.9

 
468.9

 
468.0

Laboratory Products and Services
 
246.7

 
259.8

 
462.9

 
496.7

 
 
 
 
 
 
 
 
 
Subtotal reportable segments (a)
 
1,162.4

 
1,032.2

 
2,238.2

 
1,962.2

 
 
 
 
 
 
 
 
 
Cost of revenues charges
 
(0.7
)
 
(17.4
)
 
(31.6
)
 
(28.0
)
Selling, general and administrative charges, net
 
(6.8
)
 
(3.8
)
 
(38.3
)
 
(32.7
)
Restructuring and other costs, net
 
(22.5
)
 
(35.4
)
 
(46.0
)
 
(86.0
)
Amortization of acquisition-related intangible assets
 
(380.9
)
 
(338.0
)
 
(748.4
)
 
(660.0
)
 
 
 
 
 
 
 
 
 
Consolidated operating income
 
751.5

 
637.6

 
1,373.9

 
1,155.5

Other expense, net (b)
 
(125.9
)
 
(116.5
)
 
(245.4
)
 
(211.4
)
 
 
 
 
 
 
 
 
 
Income from continuing operations before income taxes
 
$
625.6

 
$
521.1

 
$
1,128.5

 
$
944.1

 
 
 
 
 
 
 
 
 
Depreciation
 
 
 
 
 
 
 
 
Life Sciences Solutions
 
$
32.5

 
$
37.6

 
$
65.2

 
$
74.6

Analytical Instruments
 
17.2

 
9.9

 
34.1

 
19.5

Specialty Diagnostics
 
18.1

 
18.2

 
35.3

 
36.2

Laboratory Products and Services
 
29.5

 
31.4

 
59.7

 
60.9

 
 
 
 
 
 
 
 
 
Consolidated depreciation
 
$
97.3

 
$
97.1

 
$
194.3

 
$
191.2

(a)
Represents operating income before certain charges to cost of revenues and selling, general and administrative expenses; restructuring and other costs, net; and amortization of acquisition-related intangibles.
(b)
The company does not allocate other expense, net to its segments.

15


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

Note 4.
Other Expense, Net
The components of other expense, net, in the accompanying statement of income are as follows:
 
 
Three Months Ended
 
Six Months Ended
 
 
July 1,

 
July 2,

 
July 1,

 
July 2,

(In millions)
 
2017

 
2016

 
2017

 
2016

 
 
 
 
 
 
 
 
 
Interest Income
 
$
17.8

 
$
13.2

 
$
36.3

 
$
24.0

Interest Expense
 
(133.6
)
 
(118.8
)
 
(269.0
)
 
(225.0
)
Other Items, Net
 
(10.1
)
 
(10.9
)
 
(12.7
)
 
(10.4
)
 
 
 
 
 
 
 
 
 
Other Expense, Net
 
$
(125.9
)
 
$
(116.5
)
 
$
(245.4
)
 
$
(211.4
)

Note 5.
 Stock-based Compensation Expense
The components of stock-based compensation expense are primarily included in selling, general and administrative expenses and are as follows:
 
 
Three Months Ended
 
Six Months Ended
 
 
July 1,

 
July 2,

 
July 1,

 
July 2,

(In millions)
 
2017

 
2016

 
2017

 
2016

 
 
 
 
 
 
 
 
 
Stock Option Awards
 
$
11.2

 
$
10.0

 
$
21.4

 
$
20.6

Restricted Unit Awards
 
27.0

 
23.7

 
49.8

 
46.5

 
 
 
 
 
 
 
 
 
Total Stock-based Compensation Expense
 
$
38.2

 
$
33.7

 
$
71.2

 
$
67.1

During the first six months of 2017, the company made equity compensation grants to employees consisting of 0.7 million service- and performance-based restricted stock units and options to purchase 1.8 million shares.
As of July 1, 2017, there was $93 million of total unrecognized compensation cost related to unvested stock options granted. The cost is expected to be recognized through 2021 with a weighted average amortization period of 2.6 years.
As of July 1, 2017, there was $168 million of total unrecognized compensation cost related to unvested restricted stock unit awards. The cost is expected to be recognized through 2020 with a weighted average amortization period of 2.2 years.


16


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 of 35% to income from continuing operations before provision for income taxes due to the following:
 
 
Six Months Ended
 
 
July 1,

 
July 2,

(In millions)
 
2017

 
2016

 
 
 
 
 
Provision for Income Taxes at Statutory Rate
 
$
395.0

 
$
330.4

 
 
 
 
 
Increases (Decreases) Resulting From:
 
 
 
 
Foreign rate differential
 
(189.7
)
 
(108.3
)
Income tax credits
 
(114.1
)
 
(187.6
)
Manufacturing deduction
 
(17.4
)
 
(15.7
)
Singapore tax holiday
 
(10.4
)
 
(8.6
)
Impact of change in tax laws and apportionment on deferred taxes
 
(62.9
)
 
8.8

Nondeductible expenses
 
5.7

 
3.9

Excess tax benefits from stock options and restricted stock units
 
(35.2
)
 

Tax return reassessments and settlements
 
(0.9
)
 
1.0

State income taxes, net of federal tax
 
0.5

 
(3.6
)
Other, net
 
(5.7
)
 
4.7

 
 
 
 
 
(Benefit from) Provision for income taxes
 
$
(35.1
)
 
$
25.0

The company has operations and a taxable presence in approximately 50 countries outside the U.S. All of these countries except one have a lower tax rate than the U.S. The countries in which the company has a material presence that have significantly lower tax rates than the U.S. include Germany, the Netherlands, Singapore, Sweden, Switzerland and the United Kingdom. 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.
In 2017, the company continued to implement tax planning initiatives related to non U.S. subsidiaries. The company implemented foreign tax credit planning in Sweden which resulted in $20 million of foreign tax credits, with no related incremental U.S. income tax expense.
The company receives a tax deduction upon exercise of non-qualified stock options by employees, or the vesting of restricted stock units held by employees, for the difference between the exercise price and the market price of the underlying common stock on the date of exercise. Prior to 2017, the amount of the tax deduction in excess of compensation cost recognized was allocated to capital in excess of par value. Beginning in 2017, these excess tax benefits reduce the tax provision as described in Note 1. In the first six months of 2017, the company's tax provision was reduced by $35 million of such benefits.
The company has significant activities in Singapore and has received considerable tax incentives. The local taxing authority granted the company pioneer company status which provides an incentive encouraging companies to undertake activities that have the effect of promoting economic or technological development in Singapore. This incentive equates to a tax exemption on earnings associated with most of the company’s manufacturing activities in Singapore and continues through December 31, 2026. In 2017 and 2016, the impact of this tax holiday decreased the annual effective tax rates by 0.9% and 0.9%, respectively, and increased diluted earnings per share by approximately $0.03 and $0.02, respectively. In connection with the March 2017 extension of this agreement until 2026, the company recorded a benefit in Q1 2017 of approximately $65 million ($0.16 per diluted share) for the effect on deferred tax balances of the extended tax holiday.
The company’s unrecognized tax benefits decreased to $790 million at July 1, 2017, from $802 million at December 31, 2016. An adjustment to a prior year amended tax filing resulted in a decrease of $13 million.


17


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

Note 7.
Earnings per Share
 
 
Three Months Ended
 
Six Months Ended
 
 
July 1,

 
July 2,

 
July 1,

 
July 2,

(In millions except per share amounts)
 
2017

 
2016

 
2017

 
2016

 
 
 
 
 
 
 
 
 
Income from Continuing Operations
 
$
612.2

 
$
516.8

 
$
1,163.6

 
$
919.1

Loss from Discontinued Operations
 
(0.6
)
 
(0.2
)
 
(0.6
)
 
(0.3
)
 
 
 
 
 
 
 
 
 
Net Income
 
$
611.6

 
$
516.6

 
$
1,163.0

 
$
918.8

 
 
 
 
 
 
 
 
 
Basic Weighted Average Shares
 
390.0

 
393.9

 
390.5

 
394.9

Plus Effect of:
 
 
 
 
 
 
 
 
Stock options and restricted units
 
3.3

 
2.8

 
3.2

 
2.8

 
 
 
 
 
 
 
 
 
Diluted Weighted Average Shares
 
393.3

 
396.7

 
393.7

 
397.7

 
 
 
 
 
 
 
 
 
Basic Earnings per Share:
 
 
 
 
 
 
 
 
Continuing operations
 
$
1.57

 
$
1.31

 
$
2.98

 
$
2.33

Discontinued operations
 

 

 

 

 
 
 
 
 
 
 
 
 
Basic Earnings per Share
 
$
1.57

 
$
1.31

 
$
2.98

 
$
2.33

 
 
 
 
 
 
 
 
 
Diluted Earnings per Share:
 
 
 
 
 
 
 
 
Continuing operations
 
$
1.56

 
$
1.30

 
$
2.96

 
$
2.31

Discontinued operations
 

 

 

 

 
 
 
 
 
 
 
 
 
Diluted Earnings per Share
 
$
1.56

 
$
1.30

 
$
2.95

 
$
2.31

Options to purchase 1.9 million, 1.8 million, 2.2 million and 2.7 million shares of common stock were not included in the computation of diluted earnings per share for the second quarter of 2017 and 2016 and the first six months of 2017 and 2016, respectively, because their effect would have been antidilutive.

18



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

Note 8.
Debt and Other Financing Arrangements
 
 
Effective Interest Rate at July 1,

 
July 1,

 
December 31,

(Dollars in millions)
 
2017

 
2017

 
2016

 
 
 
 
 
 
 
Commercial Paper
 
0.27
%