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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 quarterly period ended October 1, 2022 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 |
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 (or for such shorter period that the registrant was required to file such reports), 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 (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). 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 ☐
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. ☐
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 October 1, 2022, the Registrant had 392,195,557 shares of Common Stock outstanding.
THERMO FISHER SCIENTIFIC INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED OCTOBER 1, 2022 | | | | | | | | |
TABLE OF CONTENTS |
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PART I |
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PART II |
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THERMO FISHER SCIENTIFIC INC.
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited) | | | | | | | | | | | | | | |
| | October 1, | | December 31, |
(In millions except share and per share amounts) | | 2022 | | 2021 |
Assets | | | | |
Current assets: | | | | |
Cash and cash equivalents | | $ | 2,919 | | | $ | 4,477 | |
Accounts receivable, less allowances of $185 and $150 | | 7,671 | | | 7,977 | |
Inventories | | 5,722 | | | 5,051 | |
Contract assets, net | | 1,248 | | | 968 | |
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Other current assets | | 1,739 | | | 1,640 | |
Total current assets | | 19,299 | | | 20,113 | |
Property, plant and equipment, net | | 8,628 | | | 8,333 | |
Acquisition-related intangible assets, net | | 17,813 | | | 20,113 | |
Other assets | | 4,308 | | | 4,640 | |
Goodwill | | 40,488 | | | 41,924 | |
Total assets | | $ | 90,536 | | | $ | 95,123 | |
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Liabilities, redeemable noncontrolling interest and equity | | | | |
Current liabilities: | | | | |
Short-term obligations and current maturities of long-term obligations | | $ | 1,010 | | | $ | 2,537 | |
Accounts payable | | 2,471 | | | 2,867 | |
Accrued payroll and employee benefits | | 1,864 | | | 2,427 | |
Contract liabilities | | 2,567 | | | 2,655 | |
Other accrued expenses | | 3,206 | | | 2,950 | |
Total current liabilities | | 11,118 | | | 13,436 | |
Deferred income taxes | | 3,140 | | | 3,837 | |
Other long-term liabilities | | 4,401 | | | 4,540 | |
Long-term obligations | | 28,150 | | | 32,333 | |
Redeemable noncontrolling interest | | 119 | | | 122 | |
Equity: | | | | |
Thermo Fisher Scientific Inc. shareholders’ equity: | | | | |
Preferred stock, $100 par value, 50,000 shares authorized; none issued | | — | | | — | |
Common stock, $1 par value, 1,200,000,000 shares authorized; 440,352,770 and 439,154,741 shares issued | | 440 | | | 439 | |
Capital in excess of par value | | 16,596 | | | 16,174 | |
Retained earnings | | 40,452 | | | 35,431 | |
Treasury stock at cost, 48,157,213 and 44,720,112 shares | | (11,011) | | | (8,922) | |
Accumulated other comprehensive items | | (2,928) | | | (2,329) | |
Total Thermo Fisher Scientific Inc. shareholders’ equity | | 43,549 | | | 40,793 | |
Noncontrolling interests | | 59 | | | 62 | |
Total equity | | 43,608 | | | 40,855 | |
Total liabilities, redeemable noncontrolling interest and equity | | $ | 90,536 | | | $ | 95,123 | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
THERMO FISHER SCIENTIFIC INC.
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(Unaudited) | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended | | Nine months ended |
| | October 1, | | October 2, | | October 1, | | October 2, |
(In millions except per share amounts) | | 2022 | | 2021 | | 2022 | | 2021 |
Revenues | | | | | | | | |
Product revenues | | $ | 6,583 | | | $ | 7,360 | | | $ | 21,603 | | | $ | 22,430 | |
Service revenues | | 4,094 | | | 1,970 | | | 11,862 | | | 6,079 | |
Total revenues | | 10,677 | | | 9,330 | | | 33,465 | | | 28,509 | |
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Costs and operating expenses: | | | | | | | | |
Cost of product revenues | | 3,494 | | | 3,298 | | | 10,565 | | | 9,977 | |
Cost of service revenues | | 2,881 | | | 1,381 | | | 8,535 | | | 4,148 | |
Selling, general and administrative expenses | | 2,208 | | | 2,004 | | | 6,694 | | | 5,729 | |
Research and development expenses | | 351 | | | 351 | | | 1,080 | | | 1,014 | |
Restructuring and other costs | | 33 | | | 18 | | | 59 | | | 151 | |
Total costs and operating expenses | | 8,967 | | | 7,052 | | | 26,933 | | | 21,019 | |
Operating income | | 1,710 | | | 2,278 | | | 6,532 | | | 7,490 | |
Interest income | | 68 | | | 9 | | | 122 | | | 32 | |
Interest expense | | (173) | | | (128) | | | (457) | | | (375) | |
Other income/(expense) | | (4) | | | 18 | | | (139) | | | (168) | |
Income before income taxes | | 1,601 | | | 2,177 | | | 6,058 | | | 6,979 | |
Provision for income taxes | | (31) | | | (271) | | | (530) | | | (906) | |
Equity in earnings/(losses) of unconsolidated entities | | (72) | | | (3) | | | (142) | | | (4) | |
Net income | | 1,498 | | | 1,903 | | | 5,386 | | | 6,069 | |
Less: net income attributable to noncontrolling interests and redeemable noncontrolling interest | | 3 | | | 1 | | | 12 | | | 2 | |
Net income attributable to Thermo Fisher Scientific Inc. | | $ | 1,495 | | | $ | 1,902 | | | $ | 5,374 | | | $ | 6,067 | |
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Earnings per share attributable to Thermo Fisher Scientific Inc. | | | | | | | | |
Basic | | $ | 3.82 | | | $ | 4.83 | | | $ | 13.72 | | | $ | 15.41 | |
Diluted | | $ | 3.79 | | | $ | 4.79 | | | $ | 13.62 | | | $ | 15.29 | |
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Weighted average shares | | | | | | | | |
Basic | | 392 | | | 394 | | | 392 | | | 394 | |
Diluted | | 395 | | | 397 | | | 395 | | | 397 | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
THERMO FISHER SCIENTIFIC INC.
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(Unaudited) | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended | | Nine months ended |
| | October 1, | | October 2, | | October 1, | | October 2, |
(In millions) | | 2022 | | 2021 | | 2022 | | 2021 |
Comprehensive income | | | | | | | | |
Net income | | $ | 1,498 | | | $ | 1,903 | | | $ | 5,386 | | | $ | 6,069 | |
Other comprehensive items: | | | | | | | | |
Currency translation adjustment: | | | | | | | | |
Currency translation adjustment (net of tax provision (benefit) of $157, $74, $419 and $169) | | (216) | | | (32) | | | (632) | | | 121 | |
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Unrealized gains and losses on hedging instruments: | | | | | | | | |
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Reclassification adjustment for losses included in net income (net of tax benefit of $0, $0, $1 and $5) | | 1 | | | 2 | | | 2 | | | 16 | |
Pension and other postretirement benefit liability adjustments: | | | | | | | | |
Pension and other postretirement benefit liability adjustments arising during the period (net of tax (provision) benefit of $(3), $(1), $(6) and $(3)) | | 4 | | | 3 | | | 13 | | | 7 | |
Amortization of net loss included in net periodic pension cost (net of tax benefit of $0, $2, $2 and $4) | | 4 | | | 3 | | | 8 | | | 9 | |
Total other comprehensive items | | (207) | | | (24) | | | (609) | | | 153 | |
Comprehensive income | | 1,291 | | | 1,879 | | | 4,777 | | | 6,222 | |
Less: comprehensive income/(loss) attributable to noncontrolling interests and redeemable noncontrolling interest | | — | | | 1 | | | 2 | | | 2 | |
Comprehensive income attributable to Thermo Fisher Scientific Inc. | | $ | 1,291 | | | $ | 1,878 | | | $ | 4,775 | | | $ | 6,220 | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
THERMO FISHER SCIENTIFIC INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited) | | | | | | | | | | | | | | |
| | Nine months ended |
| | October 1, | | October 2, |
(In millions) | | 2022 | | 2021 |
Operating activities | | | | |
Net income | | $ | 5,386 | | | $ | 6,069 | |
Adjustments to reconcile net income to net cash provided by operating activities: | | | | |
Depreciation of property, plant and equipment | | 730 | | | 614 | |
Amortization of acquisition-related intangible assets | | 1,803 | | | 1,295 | |
Change in deferred income taxes | | (862) | | | (455) | |
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Loss on early extinguishment of debt | | 26 | | | 197 | |
Stock-based compensation | | 232 | | | 153 | |
Other non-cash expenses, net | | 443 | | | 192 | |
Changes in assets and liabilities, excluding the effects of acquisitions | | (2,091) | | | (1,210) | |
Net cash provided by operating activities | | 5,667 | | | 6,855 | |
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Investing activities | | | | |
Acquisitions, net of cash acquired | | (39) | | | (1,519) | |
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Purchase of property, plant and equipment | | (1,693) | | | (1,692) | |
Proceeds from sale of property, plant and equipment | | 18 | | | 9 | |
Other investing activities, net | | 80 | | | (38) | |
Net cash used in investing activities | | (1,634) | | | (3,240) | |
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Financing activities | | | | |
Net proceeds from issuance of debt | | — | | | 3,122 | |
Repayment of debt | | (375) | | | (2,803) | |
Proceeds from issuance of commercial paper | | 1,231 | | | — | |
Repayments of commercial paper | | (3,690) | | | — | |
Purchases of company common stock | | (2,000) | | | (2,000) | |
Dividends paid | | (338) | | | (292) | |
Net proceeds from issuance of company common stock under employee stock plans | | 57 | | | 101 | |
Other financing activities, net | | (86) | | | (14) | |
Net cash used in financing activities | | (5,201) | | | (1,886) | |
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Exchange rate effect on cash | | (389) | | | (17) | |
(Decrease) increase in cash, cash equivalents and restricted cash | | (1,557) | | | 1,712 | |
Cash, cash equivalents and restricted cash at beginning of period | | 4,491 | | | 10,336 | |
Cash, cash equivalents and restricted cash at end of period | | $ | 2,934 | | | $ | 12,048 | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
THERMO FISHER SCIENTIFIC INC.
CONDENSED CONSOLIDATED STATEMENT OF REDEEMABLE NONCONTROLLING INTEREST AND EQUITY
(Unaudited)
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| | Redeemable Noncontrolling Interest | | | Common Stock | | Capital in Excess of Par Value | | Retained Earnings | | Treasury Stock | | Accumulated Other Comprehensive Items | | Total Thermo Fisher Scientific Inc. Shareholders’ Equity | | Noncontrolling Interests | | Total Equity |
(In millions) | | | | Shares | | Amount | | | | Shares | | Amount | | | | |
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| | | | | Three months ended October 1, 2022 |
Balance at July 2, 2022 | | $ | 117 | | | | 440 | | | $ | 440 | | | $ | 16,467 | | | $ | 39,074 | | | 48 | | | $ | (10,964) | | | $ | (2,724) | | | $ | 42,293 | | | $ | 61 | | | $ | 42,354 | |
Issuance of shares under employees' and directors' stock plans | | — | | | | — | | | — | | | 52 | | | — | | | — | | | (47) | | | — | | | 5 | | | — | | | 5 | |
Stock-based compensation | | — | | | | — | | | — | | | 77 | | | — | | | — | | | — | | | — | | | 77 | | | — | | | 77 | |
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Dividends declared ($0.30 per share) | | — | | | | — | | | — | | | — | | | (117) | | | — | | | — | | | — | | | (117) | | | — | | | (117) | |
Net income | | 5 | | | | — | | | — | | | — | | | 1,495 | | | — | | | — | | | — | | | 1,495 | | | (2) | | | 1,493 | |
Other comprehensive items | | (3) | | | | — | | | — | | | — | | | — | | | — | | | — | | | (204) | | | (204) | | | — | | | (204) | |
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Balance at October 1, 2022 | | $ | 119 | | | | 440 | | | $ | 440 | | | $ | 16,596 | | | $ | 40,452 | | | 48 | | | $ | (11,011) | | | $ | (2,928) | | | $ | 43,549 | | | $ | 59 | | | $ | 43,608 | |
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| | | | | Three months ended October 2, 2021 |
Balance at July 3, 2021 | | $ | — | | | | 438 | | | $ | 438 | | | $ | 15,826 | | | $ | 32,076 | | | 45 | | | $ | (8,856) | | | $ | (2,630) | | | $ | 36,854 | | | $ | 47 | | | $ | 36,901 | |
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Issuance of shares under employees' and directors' stock plans | | — | | | | 1 | | | 1 | | | 83 | | | — | | | — | | | (55) | | | — | | | 29 | | | — | | | 29 | |
Stock-based compensation | | — | | | | — | | | — | | | 51 | | | — | | | — | | | — | | | — | | | 51 | | | — | | | 51 | |
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Dividends declared ($0.26 per share) | | — | | | | — | | | — | | | — | | | (102) | | | — | | | — | | | — | | | (102) | | | — | | | (102) | |
Net income | | — | | | | — | | | — | | | — | | | 1,902 | | | — | | | — | | | — | | | 1,902 | | | 1 | | | 1,903 | |
Other comprehensive items | | — | | | | — | | | — | | | — | | | — | | | — | | | — | | | (24) | | | (24) | | | — | | | (24) | |
Contributions from (distributions to) noncontrolling interests | | — | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (1) | | | (1) | |
Balance at October 2, 2021 | | $ | — | | | | 439 | | | $ | 439 | | | $ | 15,960 | | | $ | 33,876 | | | 45 | | | $ | (8,911) | | | $ | (2,654) | | | $ | 38,710 | | | $ | 47 | | | $ | 38,757 | |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
THERMO FISHER SCIENTIFIC INC.
CONDENSED CONSOLIDATED STATEMENT OF REDEEMABLE NONCONTROLLING INTEREST AND EQUITY (Continued)
(Unaudited)
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| | Redeemable Noncontrolling Interest | | | Common Stock | | Capital in Excess of Par Value | | Retained Earnings | | Treasury Stock | | Accumulated Other Comprehensive Items | | Total Thermo Fisher Scientific Inc. Shareholders’ Equity | | Noncontrolling Interests | | Total Equity |
(In millions) | | | | Shares | | Amount | | | | Shares | | Amount | | | | |
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| | | | | Nine months ended October 1, 2022 |
Balance at December 31, 2021 | | $ | 122 | | | | 439 | | | $ | 439 | | | $ | 16,174 | | | $ | 35,431 | | | 45 | | | $ | (8,922) | | | $ | (2,329) | | | $ | 40,793 | | | $ | 62 | | | $ | 40,855 | |
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Issuance of shares under employees' and directors' stock plans | | — | | | | 1 | | | 1 | | | 190 | | | — | | | — | | | (89) | | | — | | | 102 | | | — | | | 102 | |
Stock-based compensation | | — | | | | — | | | — | | | 232 | | | — | | | — | | | — | | | — | | | 232 | | | — | | | 232 | |
Purchases of company common stock | | — | | | | — | | | — | | | — | | | — | | | 3 | | | (2,000) | | | — | | | (2,000) | | | — | | | (2,000) | |
Dividends declared ($0.90 per share) | | — | | | | — | | | — | | | — | | | (353) | | | — | | | — | | | — | | | (353) | | | — | | | (353) | |
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Net income | | 14 | | | | — | | | — | | | — | | | 5,374 | | | — | | | — | | | — | | | 5,374 | | | (2) | | | 5,372 | |
Other comprehensive items | | (10) | | | | — | | | — | | | — | | | — | | | — | | | — | | | (599) | | | (599) | | | — | | | (599) | |
Contributions from (distributions to) noncontrolling interests | | (7) | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (1) | | | (1) | |
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Balance at October 1, 2022 | | $ | 119 | | | | 440 | | | $ | 440 | | | $ | 16,596 | | | $ | 40,452 | | | 48 | | | $ | (11,011) | | | $ | (2,928) | | | $ | 43,549 | | | $ | 59 | | | $ | 43,608 | |
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| | | | | Nine months ended October 2, 2021 |
Balance at December 31, 2020 | | $ | — | | | | 437 | | | $ | 437 | | | $ | 15,579 | | | $ | 28,116 | | | 40 | | | $ | (6,818) | | | $ | (2,807) | | | $ | 34,507 | | | $ | 10 | | | $ | 34,517 | |
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Issuance of shares under employees' and directors' stock plans | | — | | | | 2 | | | 2 | | | 228 | | | — | | | 1 | | | (93) | | | — | | | 137 | | | — | | | 137 | |
Stock-based compensation | | — | | | | — | | | — | | | 153 | | | — | | | — | | | — | | | — | | | 153 | | | — | | | 153 | |
Purchases of company common stock | | — | | | | — | | | — | | | — | | | — | | | 4 | | | (2,000) | | | — | | | (2,000) | | | — | | | (2,000) | |
Dividends declared ($0.78 per share) | | — | | | | — | | | — | | | — | | | (307) | | | — | | | — | | | — | | | (307) | | | — | | | (307) | |
Net income | | — | | | | — | | | — | | | — | | | 6,067 | | | — | | | — | | | — | | | 6,067 | | | 2 | | | 6,069 | |
Other comprehensive items | | — | | | | — | | | — | | | — | | | — | | | — | | | — | | | 153 | | | 153 | | | — | | | 153 | |
Contributions from (distributions to) noncontrolling interests | | — | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 35 | | | 35 | |
Balance at October 2, 2021 | | $ | — | | | | 439 | | | $ | 439 | | | $ | 15,960 | | | $ | 33,876 | | | 45 | | | $ | (8,911) | | | $ | (2,654) | | | $ | 38,710 | | | $ | 47 | | | $ | 38,757 | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
THERMO FISHER SCIENTIFIC INC.
NOTES TO CONDENSED 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, increase laboratory productivity, and improve patient health through diagnostics and the development and manufacture of life-changing therapies. Markets served include pharmaceutical and biotech, academic and government, industrial and applied, as well as healthcare and diagnostics.
Interim Financial Statements
The interim condensed 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 October 1, 2022, the results of operations for the three- and nine-month periods ended October 1, 2022 and October 2, 2021, and the cash flows for the nine-month periods ended October 1, 2022 and October 2, 2021. Interim results are not necessarily indicative of results for a full year.
The condensed consolidated balance sheet presented as of December 31, 2021 has been derived from the audited consolidated financial statements as of that date. The condensed 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 condensed consolidated financial statements and notes included in this report should be read in conjunction with the 2021 financial statements and notes included in the company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (SEC). Certain reclassifications of prior year amounts have been made to conform to the current year presentation.
Note 1 to the consolidated financial statements for 2021 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 nine months ended October 1, 2022.
Inventories
The components of inventories are as follows: | | | | | | | | | | | | | | |
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(In millions) | | October 1, 2022 | | December 31, 2021 |
Raw materials | | $ | 2,405 | | | $ | 1,922 | |
Work in process | | 677 | | | 676 | |
Finished goods | | 2,640 | | | 2,453 | |
Inventories | | $ | 5,722 | | | $ | 5,051 | |
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.
The company’s estimates include, among others, asset reserve requirements as well as the amounts of future cash flows associated with certain assets and businesses that are used in assessing the risk of impairment. The negative impacts associated with the ongoing COVID-19 global pandemic significantly lessened in 2021 and 2022. The extent and duration of negative impacts in the future, which may include inflationary pressures and supply chain disruptions, are uncertain and may require changes to estimates. Actual results could differ from those estimates.
THERMO FISHER SCIENTIFIC INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Recent Accounting Pronouncements
In November 2021, the FASB issued new guidance to require entities to disclose information about certain types of government assistance they receive, including cash grants and tax credits. Among other things, the new guidance requires expanded disclosure regarding the qualitative and quantitative characteristics of the nature, amount, timing, and significant terms and conditions of transactions with a government arising from a grant or other forms of assistance accounted for under a contribution model. The company will adopt this guidance in the fourth quarter of 2022 using a prospective method. The adoption of this guidance is not expected to have a material impact on the company’s disclosures; however, the impact in future periods will be dependent on the extent of transactions of this nature entered into by the company.
In September 2022, the FASB issued new guidance to require entities to disclose information about supplier finance programs. Among other things, the new guidance requires expanded disclosure about key program terms, payment terms, and amounts outstanding for obligations under these programs for each period presented. The company will adopt some aspects of this guidance in 2023 using a retrospective method and other aspects in 2024 using a prospective method. The adoption of this guidance is not expected to have a material impact on the company’s disclosures; however, the impact in future periods will be dependent on the extent of arrangements of this nature entered into by the company.
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, primarily due to expectations of the synergies that will be realized by combining the businesses and the benefits that will be gained from the assembled workforces. 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 services; and use of the commercial infrastructure of the acquired businesses to cost-effectively expand sales of company products and services.
Acquisitions have been accounted for using the acquisition method of accounting, and the acquired companies’ results have been included in the accompanying financial statements from their respective dates of acquisition.
Pending Acquisition
The company has entered into an agreement to acquire The Binding Site Group for £2.25 billion, payable as €2.59 billion in cash. The Binding Site Group provides specialty diagnostic assays and instruments to improve the diagnosis and management of blood cancers and immune system disorders. The transaction is subject to customary closing conditions, including regulatory approvals. Upon completion, The Binding Site Group will become part of the Specialty Diagnostics segment.
2022
In 2022, the company acquired, within the Analytical Instruments segment, a U.S.-based developer of Fourier-transform infrared gas analysis technologies.
2021
The preliminary allocations of the purchase price for the acquisitions of PPD, Inc. and PeproTech, Inc. were based on estimates of the fair values of the net assets acquired and are subject to adjustment upon finalization, largely with respect to acquired intangible assets, lease assets and liabilities, and the related deferred taxes. Measurements of these items inherently require significant estimates and assumptions. During the first nine months of 2022, the company adjusted the preliminary allocations of PPD and PeproTech, which among others increased goodwill ($122 million) and other liabilities assumed ($35 million), and decreased definite-lived intangible assets ($43 million), property, plant and equipment ($39 million), other current assets ($38 million), contract liabilities ($29 million), equity method investments ($23 million), and the fair value of assumed contingent consideration ($18 million). The adjustments to depreciation and amortization expenses recorded during the first nine months of 2022 were not material.
THERMO FISHER SCIENTIFIC INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Note 3. Revenues and Contract-related Balances
Disaggregated Revenues
Revenues by type are as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended | | Nine months ended |
| | | | | | | | |
(In millions) | | October 1, 2022 | | October 2, 2021 | | October 1, 2022 | | October 2, 2021 |
Revenues | | | | | | | | |
Consumables | | $ | 4,651 | | | $ | 5,544 | | | $ | 15,754 | | | $ | 16,880 | |
Instruments | | 1,932 | | | |