Company Quick10K Filing
Quick10K
Thermo Fisher Scientific
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$269.00 400 $107,590
10-Q 2019-06-29 Quarter: 2019-06-29
10-Q 2019-03-30 Quarter: 2019-03-30
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-29 Quarter: 2018-09-29
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-07-01 Quarter: 2017-07-01
10-Q 2017-04-01 Quarter: 2017-04-01
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-10-01 Quarter: 2016-10-01
10-Q 2016-07-02 Quarter: 2016-07-02
10-Q 2016-04-02 Quarter: 2016-04-02
10-K 2015-12-31 Annual: 2015-12-31
10-Q 2015-09-26 Quarter: 2015-09-26
10-Q 2015-06-27 Quarter: 2015-06-27
10-Q 2015-03-28 Quarter: 2015-03-28
10-K 2014-12-31 Annual: 2014-12-31
10-Q 2014-09-27 Quarter: 2014-09-27
10-Q 2014-06-28 Quarter: 2014-06-28
10-Q 2014-03-29 Quarter: 2014-03-29
10-K 2013-12-31 Annual: 2013-12-31
8-K 2019-07-24 Earnings, Exhibits
8-K 2019-06-26 Other Events
8-K 2019-05-22 Shareholder Vote
8-K 2019-04-24 Earnings, Exhibits
8-K 2019-01-30 Earnings, Exhibits
8-K 2018-10-24 Earnings, Exhibits
8-K 2018-09-06 Officers
8-K 2018-08-08 Enter Agreement, Exhibits
8-K 2018-08-06 Other Events, Exhibits
8-K 2018-07-25 Earnings, Exhibits
8-K 2018-05-23 Shareholder Vote
8-K 2018-04-25 Earnings, Exhibits
8-K 2018-02-27 Officers
8-K 2018-01-31 Earnings, Exhibits
MT Arcelormittal 19,060
PCG Pacific Gas & Electric 10,240
AZZ AZZ 1,260
GPRK Geopark 949
RYB RYB Education 211
KEG Key Energy Services 63
GULF Crimson Exploration 21
NSYS Nortech Systems 10
ACBM Acro Biomedical 0
WSCI WSI Industries 0
TMO 2019-06-29
Part I Financial Information
Item 1. Financial Statements
Note 1. Nature of Operations and Summary of Significant Accounting Policies
Note 2. Acquisitions and Dispositions
Note 3. Revenue
Note 4. Business Segment and Geographical Information
Note 5. Other Expense, Net
Note 6. Income Taxes
Note 7. Earnings per Share
Note 8. Debt and Other Financing Arrangements
Note 9. Leases
Note 10. Commitments and Contingencies
Note 11. Comprehensive Income
Note 12. Fair Value Measurements and Fair Value of Financial Instruments
Note 13. Supplemental Cash Flow Information
Note 14. Restructuring and Other Costs (Income), Net
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 6. Exhibits
EX-10.1 tmoq2201910qex101.htm
EX-10.2 tmoq2201910qex102.htm
EX-31.1 tmoq2201910qex311.htm
EX-31.2 tmoq2201910qex312.htm
EX-32.1 tmoq2201910qex321.htm
EX-32.2 tmoq2201910qex322.htm

Thermo Fisher Scientific Earnings 2019-06-29

TMO 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

Q2 2019 10Q
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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 29, 2019 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
1.500% Notes due 2020
 
TMO 20A
 
New York Stock Exchange
2.150% Notes due 2022
 
TMO 22A
 
New York Stock Exchange
0.750% Notes due 2024
 
TMO 24A
 
New York Stock Exchange
2.000% Notes due 2025
 
TMO 25
 
New York Stock Exchange
1.400% Notes due 2026
 
TMO 26A
 
New York Stock Exchange
1.450% Notes due 2027
 
TMO 27
 
New York Stock Exchange
1.375% Notes due 2028
 
TMO 28
 
New York Stock Exchange
1.950% Notes due 2029
 
TMO 29
 
New York Stock Exchange
2.875% Notes due 2037
 
TMO 37
 
New York Stock Exchange
 
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes   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 29, 2019, the Registrant had 400,475,744 shares of Common Stock outstanding.




THERMO FISHER SCIENTIFIC INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED JUNE 29, 2019
 
TABLE OF CONTENTS
 
 
 
Page
 
PART I
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PART II
 
 
 
 
 
 
 
 
 
 
 
 
 

2


THERMO FISHER SCIENTIFIC INC.

PART I
FINANCIAL INFORMATION
Item 1.
Financial Statements
CONSOLIDATED BALANCE SHEET
(Unaudited)
 
 
June 29,

 
December 31,

(In millions except share and per share amounts)
 
2019

 
2018

 
 
 
 
 
Assets
 
 
 
 
Current Assets:
 
 
 
 
Cash and cash equivalents
 
$
2,288

 
$
2,103

Accounts receivable, less allowances of $113 and $117
 
4,129

 
4,136

Inventories
 
3,209

 
3,005

Other current assets
 
1,597

 
1,381

 
 
 
 
 
Total current assets
 
11,223

 
10,625

 
 
 
 
 
Property, Plant and Equipment, Net
 
4,394

 
4,165

Acquisition-related Intangible Assets, Net
 
14,863

 
14,978

Other Assets
 
1,733

 
1,117

Goodwill
 
25,757

 
25,347

 
 
 
 
 
Total Assets
 
$
57,970

 
$
56,232

 
 
 
 
 
Liabilities and Shareholders' Equity
 
 
 
 
Current Liabilities:
 
 
 
 
Short-term obligations and current maturities of long-term obligations
 
$
2,377

 
$
1,271

Accounts payable
 
1,391

 
1,615

Accrued payroll and employee benefits
 
809

 
982

Contract liabilities
 
1,062

 
809

Other accrued expenses
 
1,870

 
1,470

 
 
 
 
 
Total current liabilities
 
7,509

 
6,147

 
 
 
 
 
Deferred Income Taxes
 
1,936

 
2,265

Other Long-term Liabilities
 
3,133

 
2,515

Long-term Obligations
 
16,663

 
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; 433,358,204 and 431,566,561 shares issued
 
433

 
432

Capital in excess of par value
 
14,887

 
14,621

Retained earnings
 
20,482

 
18,696

Treasury stock at cost, 32,882,460 and 29,444,882 shares
 
(4,443
)
 
(3,665
)
Accumulated other comprehensive items
 
(2,630
)
 
(2,498
)
 
 
 
 
 
Total shareholders' equity
 
28,729

 
27,586

 
 
 
 
 
Total Liabilities and Shareholders' Equity
 
$
57,970

 
$
56,232


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 29,

 
June 30,

 
June 29,

 
June 30,

(In millions except per share amounts)
 
2019

 
2018

 
2019

 
2018

 
 
 
 
 
 
 
 
 
Revenues
 
 
 
 
 
 
 
 
Product revenues
 
$
4,827

 
$
4,708

 
$
9,547

 
$
9,236

Service revenues
 
1,489

 
1,370

 
2,894

 
2,695

 
 
 
 
 
 
 
 
 
Total revenues
 
6,316

 
6,078

 
12,441

 
11,931

 
 
 
 
 
 
 
 
 
Costs and Operating Expenses:
 
 
 
 
 
 
 
 
Cost of product revenues
 
2,478

 
2,390

 
4,892

 
4,715

Cost of service revenues
 
1,015

 
950

 
2,019

 
1,898

Selling, general and administrative expenses
 
1,565

 
1,542

 
3,093

 
3,057

Research and development expenses
 
246

 
242

 
494

 
476

Restructuring and other (income) costs, net
 
(484
)
 
17

 
(473
)
 
62

 
 
 
 
 
 
 
 
 
Total costs and operating expenses
 
4,820

 
5,141

 
10,025

 
10,208

 
 
 
 
 
 
 
 
 
Operating Income
 
1,496

 
937

 
2,416

 
1,723

Other Expense, Net
 
(103
)
 
(131
)
 
(206
)
 
(283
)
 
 
 
 
 
 
 
 
 
Income Before Income Taxes
 
1,393

 
806

 
2,210

 
1,440

Provision for Income Taxes
 
(274
)
 
(54
)
 
(276
)
 
(109
)
 
 
 
 
 
 
 
 
 
Net Income
 
$
1,119

 
$
752

 
$
1,934

 
$
1,331

 
 
 
 
 
 
 
 
 
Earnings per Share
 
 
 
 
 
 
 
 
Basic
 
$
2.80

 
$
1.87

 
$
4.84

 
$
3.31

Diluted
 
$
2.77

 
$
1.85

 
$
4.80

 
$
3.28

 
 
 
 
 
 
 
 
 
Weighted Average Shares
 
 
 
 
 
 
 
 
Basic
 
400

 
403

 
400

 
402

Diluted
 
403

 
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 Ended
 
Six Months Ended
 
 
June 29,

 
June 30,

 
June 29,

 
June 30,

(In millions)
 
2019

 
2018

 
2019

 
2018

 
 
 
 
 
 
 
 
 
Comprehensive Income
 
 
 
 
 
 
 
 
Net Income
 
$
1,119

 
$
752

 
$
1,934

 
$
1,331

 
 
 
 
 
 
 
 
 
Other Comprehensive Items:
 
 
 
 
 
 
 
 
Currency translation adjustment (net of tax provision (benefit) of ($30), $94, $15 and $47)
 
(116
)
 
(462
)
 
(131
)
 
(415
)
Unrealized gains and losses on hedging instruments:
 
 
 
 
 
 
 
 
Reclassification adjustment for losses included in net income (net of tax benefit of $1, $1, $2 and $2)
 
3

 
2

 
5

 
4

Pension and other postretirement benefit liability adjustments:
 
 
 
 
 
 
 
 
Pension and other postretirement benefit liability adjustments arising during the period (net of tax provision (benefit) of ($4), $2, ($4) and $1)
 
(12
)
 
5

 
(11
)
 
3

Amortization of net loss included in net periodic pension cost (net of tax benefit of $1, $2, $2 and $3)
 
4

 
6

 
5

 
8

 
 
 
 
 
 
 
 
 
Total other comprehensive items
 
(121
)
 
(449
)
 
(132
)
 
(400
)
 
 
 
 
 
 
 
 
 
Comprehensive Income
 
$
998

 
$
303

 
$
1,802

 
$
931


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 29,

 
June 30,

(In millions)
 
2019

 
2018

 
 
 
 
 
Operating Activities
 
 
 
 
Net income
 
$
1,934

 
$
1,331

 
 
 
 
 
Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
Depreciation of property, plant and equipment
 
275

 
261

Amortization of acquisition-related intangible assets
 
851

 
885

Change in deferred income taxes
 
(392
)
 
(99
)
Gain on sale of business
 
(505
)
 

Non-cash stock-based compensation
 
96

 
91

Other non-cash expenses, net
 
48

 
63

Changes in assets and liabilities, excluding the effects of acquisitions and disposition:
 
 
 
 
Accounts receivable
 
5

 
(97
)
Inventories
 
(273
)
 
(195
)
Other assets
 
(179
)
 
(296
)
Accounts payable
 
(202
)
 
(20
)
Other liabilities
 
319

 
(359
)
Contributions to retirement plans
 
(34
)
 
(43
)
 
 
 
 
 
Net cash provided by operating activities
 
1,943

 
1,522

 
 
 
 
 
Investing Activities
 
 

 
 

Acquisitions, net of cash acquired
 
(1,686
)
 
(59
)
Proceeds from sale of business, net of cash divested
 
1,126

 

Purchase of property, plant and equipment
 
(421
)
 
(301
)
Proceeds from sale of property, plant and equipment
 
12

 
3

Other investing activities, net
 
19

 
(7
)
 
 
 
 
 
Net cash used in investing activities
 
(950
)
 
(364
)
 
 
 
 
 
Financing Activities
 
 
 
 
Repayment of debt
 
(3
)
 
(1,353
)
Proceeds from issuance of commercial paper
 
1,895

 
2,761

Repayments of commercial paper
 
(1,855
)
 
(2,655
)
Purchases of company common stock
 
(750
)
 

Dividends paid
 
(144
)
 
(129
)
Net proceeds from issuance of company common stock under employee stock plans
 
122

 
78

Other financing activities
 

 
(50
)
 
 
 
 
 
Net cash used in financing activities
 
(735
)
 
(1,348
)
 
 
 
 
 
Exchange Rate Effect on Cash
 
(61
)
 
(215
)
 
 
 
 
 
Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash
 
197

 
(405
)
Cash, Cash Equivalents and Restricted Cash at Beginning of Period
 
2,117

 
1,361

 
 
 
 
 
Cash, Cash Equivalents and Restricted Cash at End of Period
 
$
2,314

 
$
956

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 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

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended June 30, 2018
Balance at March 31, 2018
 
429

 
$
429

 
$
14,319

 
$
16,542

 
27

 
$
(3,125
)
 
$
(2,042
)
 
$
26,123

Issuance of shares under employees' and directors' stock plans
 
1

 
1

 
41

 

 

 
(3
)
 

 
39

Stock-based compensation
 

 

 
48

 

 

 

 

 
48

Dividends declared ($0.17 per share)
 

 

 

 
(68
)
 

 

 

 
(68
)
Net income
 

 

 

 
752

 

 

 

 
752

Other comprehensive items
 

 

 

 

 

 

 
(449
)
 
(449
)
Balance at June 30, 2018
 
430

 
$
430

 
$
14,408

 
$
17,226

 
27

 
$
(3,128
)
 
$
(2,491
)
 
$
26,445

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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 change
 

 

 

 
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
)
 

 

 

 
(152
)
Net income
 

 

 

 
1,934

 

 

 

 
1,934

Other comprehensive items
 

 

 

 

 

 

 
(132
)
 
(132
)
Balance at June 29, 2019
 
433

 
$
433

 
$
14,887

 
$
20,482

 
33

 
$
(4,443
)
 
$
(2,630
)
 
$
28,729

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Six Months Ended June 30, 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
 
2

 
2

 
113

 

 

 
(25
)
 

 
90

Stock-based compensation
 

 

 
91

 

 

 

 

 
91

Dividends declared ($0.34 per share)
 

 

 

 
(137
)
 

 

 

 
(137
)
Net income
 

 

 

 
1,331

 

 

 

 
1,331

Other comprehensive items
 

 

 

 

 

 

 
(400
)
 
(400
)
Other
 

 

 
27

 

 

 

 

 
27

Balance at June 30, 2018
 
430

 
$
430

 
$
14,408

 
$
17,226

 
27

 
$
(3,128
)
 
$
(2,491
)
 
$
26,445

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
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 June 29, 2019, the results of operations for the three- and six-month periods ended June 29, 2019 and June 30, 2018, and the cash flows for the six-month periods ended June 29, 2019 and June 30, 2018. Interim results are not necessarily indicative of results for a full year.
The consolidated balance sheet presented as of December 31, 2018, has been derived from the audited consolidated financial statements as of that date. The consolidated financial statements and notes are presented as permitted by Form 10-Q and do not contain all information that is included in the annual financial statements and notes thereto of the company. The consolidated financial statements and notes included in this report should be read in conjunction with the 2018 financial statements and notes included in the company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (SEC).
Note 1 to the consolidated financial statements for 2018 describes the significant accounting estimates and policies used in preparation of the consolidated financial statements. Except for the accounting for leases, as noted below, there have been no material changes in the company’s significant accounting policies during the six months ended June 29, 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.
Contract-related Balances
Current contract assets and 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 asset and liability balances are as follows:

8


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

 
 
June 29,

 
December 31,

(In millions)
 
2019

 
2018

 
 
 
 
 
Current Contract Assets, Net
 
$
646

 
$
459

Noncurrent Contract Assets, Net
 
13

 
15

Current Contract Liabilities
 
1,062

 
809

Noncurrent Contract Liabilities
 
532

 
355


In the first six months of 2019, the company recognized revenue of $532 million that was included in the contract liabilities balance at December 31, 2018. Contract assets increased in the first six months of 2019 due to the timing of billing. Contract liabilities increased during the first six months of 2019 primarily due to an advance payment from a customer and an acquisition.
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
 
 
June 29,

 
June 30,

(In millions)
 
2019

 
2018

 
 
 
 
 
Beginning Balance
 
$
92

 
$
87

Provision charged to income
 
53

 
58

Usage
 
(55
)
 
(53
)
Adjustments to previously provided warranties, net
 
(1
)
 
(2
)
Currency translation
 

 
(2
)
 
 
 
 
 
Ending Balance
 
$
89

 
$
88


Inventories
The components of inventories are as follows:
 
 
June 29,

 
December 31,

(In millions)
 
2019

 
2018

 
 
 
 
 
Raw Materials
 
$
923

 
$
812

Work in Process
 
495

 
430