Thermo Fisher Scientific Earnings 2020-03-28

Balance Sheet	Income Statement	Cash Flow
Assets, Equity	Rev, G Profit, Net Income	Ops, Inv, Fin

tmo-20200328

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 March 28, 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 March 28, 2020, the Registrant had 394,951,104 shares of Common Stock outstanding.

THERMO FISHER SCIENTIFIC INC.

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTER ENDED MARCH 28, 2020

THERMO FISHER SCIENTIFIC INC.

PART I FINANCIAL INFORMATION

Item 1. Financial Statements

CONSOLIDATED BALANCE SHEET

(Unaudited)


	March 28,		December 31,
(In millions except share and per share amounts)	2020		2019

Assets
Current Assets:
Cash and cash equivalents	$	2,981	$	2,399
Accounts receivable, less allowances of $101 and $102	4,508		4,349
Inventories	3,454		3,370
Contract assets, net	658		603

Other current assets	1,137		1,172

Total current assets	12,738		11,893

Property, Plant and Equipment, Net	4,736		4,749
Acquisition-related Intangible Assets, Net	13,543		14,014
Other Assets	2,057		2,011
Goodwill	25,614		25,714

Total Assets	$	58,688	$	58,381

Liabilities and Shareholders' Equity
Current Liabilities:
Short-term obligations and current maturities of long-term obligations	$	738	$	676
Accounts payable	1,599		1,920
Accrued payroll and employee benefits	755		1,010
Contract liabilities	938		916
Other accrued expenses	1,470		1,675

Total current liabilities	5,500		6,197

Deferred Income Taxes	2,137		2,192
Other Long-term Liabilities	3,261		3,241
Long-term Obligations	19,231		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; 435,242,143 and 434,416,804 shares issued	435		434
Capital in excess of par value	15,186		15,064
Retained earnings	22,791		22,092
Treasury stock at cost, 40,291,039 and 35,676,421 shares	(6,765)		(5,236)
Accumulated other comprehensive items	(3,088)		(2,679)

Total shareholders' equity	28,559		29,675

Total Liabilities and Shareholders' Equity	$	58,688	$	58,381

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

THERMO FISHER SCIENTIFIC INC.

CONSOLIDATED STATEMENT OF INCOME

(Unaudited)


	Three Months Ended
	March 28,		March 30,
(In millions except per share amounts)	2020		2019

Revenues
Product revenues	$	4,630	$	4,720
Service revenues	1,600		1,405

Total revenues	6,230		6,125

Costs and Operating Expenses:
Cost of product revenues	2,340		2,414
Cost of service revenues	1,150		1,004
Selling, general and administrative expenses	1,551		1,528
Research and development expenses	245		248
Restructuring and other costs, net	38		11

Total costs and operating expenses	5,324		5,205

Operating Income	906		920
Interest Income	36		67
Interest Expense	(126)		(189)
Other Income, Net	12		19

Income Before Income Taxes	828		817
Provision for Income Taxes	(40)		(2)

Net Income	$	788	$	815

Earnings per Share
Basic	$	1.99	$	2.04
Diluted	$	1.97	$	2.02

Weighted Average Shares
Basic	397		400
Diluted	400		403

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

THERMO FISHER SCIENTIFIC INC.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(Unaudited)


	Three Months Ended
	March 28,		March 30,
(In millions)	2020		2019

Comprehensive Income
Net Income	$	788	$	815

Other Comprehensive Items:
Currency translation adjustment:
Currency translation adjustment (net of tax provision of $22 and $45)	(357)		(15)

Unrealized gains and losses on hedging instruments:
Unrealized losses on hedging instruments (net of tax benefit of $19 and $0)	(62)		—
Reclassification adjustment for losses included in net income (net of tax benefit of $1 and $1)	1		2
Pension and other postretirement benefit liability adjustments:
Pension and other postretirement benefit liability adjustments arising during the period (net of tax provision of $5 and $0)	5		1
Amortization of net loss included in net periodic pension cost (net of tax benefit of $1 and $1)	4		1

Total other comprehensive items	(409)		(11)

Comprehensive Income	$	379	$	804

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

THERMO FISHER SCIENTIFIC INC.

CONSOLIDATED STATEMENT OF CASH FLOWS

(Unaudited)


	Three Months Ended
	March 28,		March 30,
(In millions)	2020		2019

Operating Activities
Net income	$	788	$	815

Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of property, plant and equipment	149		133
Amortization of acquisition-related intangible assets	425		422
Change in deferred income taxes	(41)		(106)

Stock-based compensation	46		44
Other non-cash expenses, net	64		18
Changes in assets and liabilities, excluding the effects of acquisitions and disposition:
Accounts receivable	(218)		(29)
Inventories	(141)		(140)

Accounts payable	(241)		(129)

Contributions to retirement plans	(32)		(32)
Other	(443)		(347)

Net cash provided by operating activities	356		649

Investing Activities
Acquisitions, net of cash acquired	(4)		(1)

Purchase of property, plant and equipment	(253)		(201)
Proceeds from sale of property, plant and equipment	4		6
Other investing activities, net	(7)		15

Net cash used in investing activities	(260)		(181)

Financing Activities
Net proceeds from issuance of debt	2,185		—
Repayment of debt	(1)		(1)
Proceeds from issuance of commercial paper	382		100
Repayments of commercial paper	(321)		(787)
Purchases of company common stock	(1,500)		(750)
Dividends paid	(76)		(68)

Net proceeds from issuance of company common stock under employee stock plans	48		81
Other financing activities, net	(98)		—

Net cash provided by (used in) financing activities	619		(1,425)

Exchange Rate Effect on Cash	(127)		(32)

Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash	588		(989)
Cash, Cash Equivalents and Restricted Cash at Beginning of Period	2,422		2,117

Cash, Cash Equivalents and Restricted Cash at End of Period	$	3,010	$	1,128

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

THERMO FISHER SCIENTIFIC INC.

CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY

(Unaudited)


	Common Stock					Capital in Excess of Par Value		Retained Earnings	Treasury Stock						Accumulated Other Comprehensive Items	Total Shareholders' Equity
(In millions)	Shares	Amount							Shares		Amount

























	Three Months Ended March 28, 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	1	1		76		—		—	(29)		—		48

Stock-based compensation	—	—		46		—		—	—		—		46
Purchases of company common stock	—	—		—		—		4	(1,500)		—		(1,500)
Dividends declared ($0.22 per share)	—	—		—		(88)		—	—		—		(88)
Net income	—	—		—		788		—	—		—		788
Other comprehensive items	—	—		—		—		—	—		(409)		(409)

Balance at March 28, 2020	435	$	435	$	15,186	$	22,791	40	$	(6,765)	$	(3,088)	$	28,559

	Three Months Ended March 30, 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		106		—		1	(26)		—		81

Stock-based compensation	—	—		44		—		—	—		—		44
Purchases of company common stock	—	—		—		—		3	(750)		—		(750)
Dividends declared ($0.19 per share)	—	—		—		(76)		—	—		—		(76)
Net income	—	—		—		815		—	—		—		815
Other comprehensive items	—	—		—		—		—	—		(11)		(11)

Balance at March 30, 2019	433	$	433	$	14,771	$	19,439	33	$	(4,441)	$	(2,509)	$	27,693

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

THERMO FISHER SCIENTIFIC INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1. Nature of Operations and Summary of Significant Accounting Policies

Nature of Operations

Thermo Fisher Scientific Inc. (the company or Thermo Fisher) enables customers to make the world healthier, cleaner and safer by 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 March 28, 2020, the results of operations for the three-month periods ended March 28, 2020 and March 30, 2019, and the cash flows for the three-month periods ended March 28, 2020 and March 30, 2019. Interim results are not necessarily indicative of results for a full year.

The consolidated balance sheet presented as of December 31, 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 2019 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 2019 describes the significant accounting estimates and policies used in preparation of the consolidated financial statements. There have been no material changes in the company’s significant accounting policies during the three months ended March 28, 2020.

Contract-related Balances

Accounts 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:


	Three Months Ended
	March 28,		March 30,
(In millions)	2020		2019

Beginning Balance	$	102	$	117
Cumulative effect of accounting change	1		—
Provision charged to expense	10		2

Accounts written off	(11)		(5)
Acquisitions, currency translation and other	(1)		—

Ending Balance	$	101	$	114

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

THERMO FISHER SCIENTIFIC INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

becomes unconditional. Noncurrent contract assets are included within other assets 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:


	March 28,		December 31,
(In millions)	2020		2019

Current Contract Assets, Net	$	658	$	603
Noncurrent Contract Assets, Net	17		17
Current Contract Liabilities	938		916
Noncurrent Contract Liabilities	617		594

In the first three months of 2020, the company recognized revenue of $405 million that was included in the contract liabilities balance at December 31, 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:


	Three Months Ended
	March 28,		March 30,
(In millions)	2020		2019

Beginning Balance	$	93	$	92
Provision charged to expense	22		27
Usage	(25)		(28)

Adjustments to previously provided warranties, net	—		(1)
Currency translation	(1)		—

Ending Balance	$	89	$	90

Inventories

The components of inventories are as follows:

March 28,

10-Q	2020-03-28	Filed 2020-05-01
10-K	2019-12-31	Filed 2020-02-26
10-Q	2019-09-28	Filed 2019-11-01
10-Q	2019-06-29	Filed 2019-08-02
10-Q	2019-03-30	Filed 2019-05-03
10-K	2018-12-31	Filed 2019-02-27
10-Q	2018-09-29	Filed 2018-11-02
10-Q	2018-06-30	Filed 2018-08-03
10-Q	2018-03-31	Filed 2018-05-04
10-K	2017-12-31	Filed 2018-02-28
10-Q	2017-09-30	Filed 2017-11-03
10-Q	2017-07-01	Filed 2017-08-04
10-Q	2017-04-01	Filed 2017-05-05
10-K	2016-12-31	Filed 2017-02-28
10-Q	2016-10-01	Filed 2016-11-04
10-Q	2016-07-02	Filed 2016-08-05
10-Q	2016-04-02	Filed 2016-05-06
10-K	2015-12-31	Filed 2016-02-25
10-Q	2015-09-26	Filed 2015-10-30
10-Q	2015-06-27	Filed 2015-07-31
10-Q	2015-03-28	Filed 2015-05-01
10-K	2014-12-31	Filed 2015-02-26
10-Q	2014-09-27	Filed 2014-10-31
10-Q	2014-06-28	Filed 2014-08-01
10-Q	2014-03-29	Filed 2014-05-02
10-K	2013-12-31	Filed 2014-02-27
10-Q	2013-09-28	Filed 2013-11-01
10-Q	2013-06-29	Filed 2013-08-02
10-Q	2013-03-30	Filed 2013-05-03
10-K	2012-12-31	Filed 2013-02-27
10-Q	2012-09-29	Filed 2012-11-02
10-Q	2012-06-30	Filed 2012-08-03
10-Q	2012-03-31	Filed 2012-05-04
10-K	2011-12-31	Filed 2012-02-29
10-Q	2011-10-01	Filed 2011-11-04
10-Q	2011-07-02	Filed 2011-08-05
10-Q	2011-04-02	Filed 2011-05-06
10-Q	2010-10-02	Filed 2010-11-05
10-Q	2010-07-03	Filed 2010-08-04
10-Q	2010-04-03	Filed 2010-05-06
10-K	2009-12-31	Filed 2010-02-26

8-K	2020-05-20	Shareholder Vote
8-K	2020-05-13	Regulation FD
8-K	2020-04-22	Earnings, Exhibits
8-K	2020-04-17	Enter Agreement, Off-BS Arrangement, Exhibits
8-K	2020-04-06	Earnings, Exhibits
8-K	2020-03-30	Enter Agreement, Amend Bylaw, Exhibits
8-K	2020-03-23	Enter Agreement, Exhibits
8-K	2020-03-23	Other Events
8-K	2020-03-03	Enter Agreement, Exhibits
8-K	2020-03-03	Other Events, Exhibits
8-K	2020-01-30	Earnings, Exhibits
8-K	2019-10-23	Earnings, Exhibits
8-K	2019-10-08	Enter Agreement, Exhibits
8-K	2019-09-30	Enter Agreement, Other Events, Exhibits
8-K	2019-09-24	Other Events, Exhibits
8-K	2019-09-12	Other Events
8-K	2019-09-05	Officers
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	2019-02-26	Officers
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

EX-31.1	tmoq1202010qex311.htm
EX-31.2	tmoq1202010qex312.htm
EX-32.1	tmoq1202010qex321.htm
EX-32.2	tmoq1202010qex322.htm


	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	25

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	33

Item 4.	Controls and Procedures	33

	PART II

Item 1.	Legal Proceedings	34

Item 1A.	Risk Factors	34

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	42



Item 6.	Exhibits	42

TMO 10Q Quarterly Report

Thermo Fisher Scientific Earnings 2020-03-28