UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the Quarter Ended June 27, 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)

Delaware	04-2209186
(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 class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $1.00 par value	TMO	New York Stock Exchange
Floating Rate Notes due 2020	TMO /20A	New York Stock Exchange
2.150% Notes due 2022	TMO 22A	New York Stock Exchange
0.750% Notes due 2024	TMO 24A	New York Stock Exchange
0.125% Notes due 2025	TMO 25B	New York Stock Exchange
2.000% Notes due 2025	TMO 25	New York Stock Exchange
1.400% Notes due 2026	TMO 26A	New York Stock Exchange
1.450% Notes due 2027	TMO 27	New York Stock Exchange
1.750% Notes due 2027	TMO 27B	New York Stock Exchange
0.500% Notes due 2028	TMO 28A	New York Stock Exchange
1.375% Notes due 2028	TMO 28	New York Stock Exchange
1.950% Notes due 2029	TMO 29	New York Stock Exchange
0.875% Notes due 2031	TMO 31	New York Stock Exchange
2.375% Notes due 2032	TMO 32	New York Stock Exchange
2.875% Notes due 2037	TMO 37	New York Stock Exchange
1.500% Notes due 2039	TMO 39	New York Stock Exchange
1.875% Notes due 2049	TMO 49	New York Stock Exchange

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes ☒  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 accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth 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 June 27, 2020, the Registrant had 395,589,400 shares of Common Stock outstanding.

THERMO FISHER SCIENTIFIC INC.

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTER ENDED JUNE 27, 2020

	TABLE OF CONTENTS
		Page
	PART I
Item 1.	Financial Statements (Unaudited)	3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	37
Item 4.	Controls and Procedures	38
	PART II
Item 1.	Legal Proceedings	38
Item 1A.	Risk Factors	38
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	46
Item 6.	Exhibits	46

2

THERMO FISHER SCIENTIFIC INC.

PART I FINANCIAL INFORMATION

Item 1. Financial Statements

CONSOLIDATED BALANCE SHEET

(Unaudited)

	June 27,		December 31,
(In millions except share and per share amounts)	2020		2019
Assets
Current Assets:
Cash and cash equivalents	$	5,818	$	2,399
Accounts receivable, less allowances of $113 and $102	4,478		4,349
Inventories	3,648		3,370
Contract assets, net	686		603
Other current assets	1,145		1,172
Total current assets	15,775		11,893
Property, Plant and Equipment, Net	4,887		4,749
Acquisition-related Intangible Assets, Net	13,170		14,014
Other Assets	2,061		2,011
Goodwill	25,700		25,714
Total Assets	$	61,593	$	58,381
Liabilities and Shareholders' Equity
Current Liabilities:
Short-term obligations and current maturities of long-term obligations	$	675	$	676
Accounts payable	1,385		1,920
Accrued payroll and employee benefits	1,184		1,010
Contract liabilities	975		916
Other accrued expenses	1,794		1,675
Total current liabilities	6,013		6,197
Deferred Income Taxes	1,750		2,192
Other Long-term Liabilities	3,317		3,241
Long-term Obligations	20,638		17,076
Shareholders' Equity:
Preferred stock, $100 par value, 50,000 shares authorized; none issued
Common stock, $1 par value, 1,200,000,000 shares authorized; 435,885,737 and 434,416,804 shares issued	436		434
Capital in excess of par value	15,334		15,064
Retained earnings	23,860		22,092
Treasury stock at cost, 40,296,337 and 35,676,421 shares	(6,766)		(5,236)
Accumulated other comprehensive items	(2,989)		(2,679)
Total shareholders' equity	29,875		29,675
Total Liabilities and Shareholders' Equity	$	61,593	$	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 Ended				Six Months Ended
	June 27,		June 29,		June 27,		June 29,
(In millions except per share amounts)	2020		2019		2020		2019
Revenues
Product revenues	$	5,250	$	4,827	$	9,880	$	9,547
Service revenues	1,667		1,489		3,267		2,894
Total revenues	6,917		6,316		13,147		12,441
Costs and Operating Expenses:
Cost of product revenues	2,391		2,478		4,731		4,892
Cost of service revenues	1,149		1,015		2,299		2,019
Selling, general and administrative expenses	1,710		1,565		3,261		3,093
Research and development expenses	264		246		509		494
Restructuring and other costs (income), net	12		(484)		50		(473)
Total costs and operating expenses	5,526		4,820		10,850		10,025
Operating Income	1,391		1,496		2,297		2,416
Interest Income	8		60		44		127
Interest Expense	(137)		(181)		(263)		(370)
Other (Expense) Income, Net	(9)		18		3		37
Income Before Income Taxes	1,253		1,393		2,081		2,210
Provision for Income Taxes	(97)		(274)		(137)		(276)
Net Income	$	1,156	$	1,119	$	1,944	$	1,934
Earnings per Share
Basic	$	2.92	$	2.80	$	4.91	$	4.84
Diluted	$	2.90	$	2.77	$	4.87	$	4.80
Weighted Average Shares
Basic	395		400		396		400
Diluted	398		403		399		403

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
	June 27,		June 29,		June 27,		June 29,
(In millions)	2020		2019		2020		2019
Comprehensive Income
Net Income	$	1,156	$	1,119	$	1,944	$	1,934
Other Comprehensive Items:
Currency translation adjustment:
Currency translation adjustment (net of tax (benefit) provision of $(17), $(30), $5 and $15)	103		(116)		(254)		(131)
Unrealized gains and losses on hedging instruments:
Unrealized losses on hedging instruments (net of tax benefit of $1, $0, $20 and $0)	(3)		—		(65)		—
Reclassification adjustment for losses included in net income (net of tax benefit of $1, $1, $2 and $2)	3		3		4		5
Pension and other postretirement benefit liability adjustments:
Pension and other postretirement benefit liability adjustments arising during the period (net of tax benefit of $6, $4, $1 and $4)	(6)		(12)		(1)		(11)
Amortization of net loss included in net periodic pension cost (net of tax benefit of $2, $1, $3 and $2)	2		4		6		5
Total other comprehensive items	99		(121)		(310)		(132)
Comprehensive Income	$	1,255	$	998	$	1,634	$	1,802

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
	June 27,		June 29,
(In millions)	2020		2019
Operating Activities
Net income	$	1,944	$	1,934
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of property, plant and equipment	306		275
Amortization of acquisition-related intangible assets	842		851
Change in deferred income taxes	(318)		(392)
Gain on sales of businesses	—		(505)
Stock-based compensation	93		96
Other non-cash expenses, net	109		48
Changes in assets and liabilities, excluding the effects of acquisitions and disposition:
Accounts receivable	(195)		5
Inventories	(309)		(273)
Accounts payable	(497)		(202)
Contributions to retirement plans	(36)		(34)
Other	303		140
Net cash provided by operating activities	2,242		1,943
Investing Activities
Acquisitions, net of cash acquired	(3)		(1,686)
Proceeds from sale of business, net of cash divested	—		1,126
Purchase of property, plant and equipment	(522)		(421)
Proceeds from sale of property, plant and equipment	6		12
Other investing activities, net	—		19
Net cash used in investing activities	(519)		(950)
Financing Activities
Net proceeds from issuance of debt	3,464		—
Repayment of debt	(2)		(3)
Proceeds from issuance of commercial paper	383		1,895
Repayments of commercial paper	(387)		(1,855)
Purchases of company common stock	(1,500)		(750)
Dividends paid	(163)		(144)
Net proceeds from issuance of company common stock under employee stock plans	125		122
Other financing activities, net	(121)		—
Net cash provided by (used in) financing activities	1,799		(735)
Exchange Rate Effect on Cash	(107)		(61)
Increase in Cash, Cash Equivalents and Restricted Cash	3,415		197
Cash, Cash Equivalents and Restricted Cash at Beginning of Period	2,422		2,117
Cash, Cash Equivalents and Restricted Cash at End of Period	$	5,837	$	2,314

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

6

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
	Three Months Ended June 27, 2020
Balance at March 28, 2020	435	$	435	$	15,186	$	22,791	40	$	(6,765)	$	(3,088)	$	28,559
Issuance of shares under employees' and directors' stock plans	1	1		101		—		—	(1)		—		101
Stock-based compensation	—	—		47		—		—	—		—		47
Dividends declared ($0.22 per share)	—	—		—		(87)		—	—		—		(87)
Net income	—	—		—		1,156		—	—		—		1,156
Other comprehensive items	—	—		—		—		—	—		99		99
Balance at June 27, 2020	436	$	436	$	15,334	$	23,860	40	$	(6,766)	$	(2,989)	$	29,875
	Three Months Ended June 29, 2019
Balance at March 30, 2019	433	$	433	$	14,771	$	19,439	33	$	(4,441)	$	(2,509)	$	27,693
Issuance of shares under employees' and directors' stock plans	—	—		64		—		—	(2)		—		62
Stock-based compensation	—	—		52		—		—	—		—		52
Dividends declared ($0.19 per share)	—	—		—		(76)		—	—		—		(76)
Net income	—	—		—		1,119		—	—		—		1,119
Other comprehensive items	—	—		—		—		—	—		(121)		(121)
Balance at June 29, 2019	433	$	433	$	14,887	$	20,482	33	$	(4,443)	$	(2,630)	$	28,729
	Six Months Ended June 27, 2020
Balance at December 31, 2019	434	$	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 plans	2	2		177		—		—	(30)		—		149
Stock-based compensation	—	—		93		—		—	—		—		93
Purchases of company common stock	—	—		—		—		4	(1,500)		—		(1,500)
Dividends declared ($0.44 per share)	—	—		—		(175)		—	—		—		(175)
Net income	—	—		—		1,944		—	—		—		1,944
Other comprehensive items	—	—		—		—		—	—		(310)		(310)
Balance at June 27, 2020	436	$	436	$	15,334	$	23,860	40	$	(6,766)	$	(2,989)	$	29,875
	Six Months Ended June 29, 2019
Balance at December 31, 2018	432	$	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 plans	1	1		170		—		1	(28)		—		143
Stock-based compensation	—	—		96		—		—	—		—		96
Purchases of company common stock	—	—		—		—		3	(750)		—		(750)
Dividends declared ($0.38 per share)	—	—		—		(152)		—	—		—		(