Thermo Fisher Scientific Inc 10-Q for FY2022 Q3

Thermo Fisher Scientific Inc. (TMO)

10-Q 2022-11-04 For: 2022-10-01

Added on April 07, 2026

About this 10-Q

Thermo Fisher Scientific Inc filed this 10-Q on November 4, 2022, covering the quarter ended October 1, 2022 (FY2022 Q3).

Headline figures

Quarter ended October 1, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $10.68B; up 14.4% from $9.33B a year earlier
Net income: $1.5B; down 21.3% from net income of $1.9B a year earlier
Diluted EPS: $3.79; down 20.9% from $4.79 a year earlier

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Delaware			04-2209186
(State of incorporation)			(I.R.S. Employer Identification No.)


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	23

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	32

Item 4.	Controls and Procedures	32

PART II

Item 1.	Legal Proceedings	33

Item 1A.	Risk Factors	33

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	33



Item 6.	Exhibits	33


	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

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

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


	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

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

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

Weighted average shares
Basic	392		394		392		394
Diluted	395		397		395		397


	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

Unrealized gains and losses on hedging instruments:

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


	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

			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

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)

Balance at October 1, 2022	$	119	440	$	440	$	16,596	$	40,452	48	$	(11,011)	$	(2,928)	$	43,549	$	59	$	43,608

			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

Issuance of shares under employees' and directors' stock plans	—		1	1		83		—		—	(55)		—		29		—		29
Stock-based compensation	—		—	—		51		—		—	—		—		51		—		51

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




(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


(In millions)	2022
Balance at beginning of year	$	1,124


Additions for tax positions of current year	104
Additions for tax positions of prior years	24
Reductions for tax positions of prior years	(659)


Closure of tax years	(2)
Settlements	(32)
Balance at end of period	$	559


	Effective interest rate at October 1,		October 1,		December 31,
(Dollars in millions)	2022		2022		2021
Commercial Paper			$	—	$	2,522

Floating Rate (SOFR + 0.35%) 1.5-Year Senior Notes, Due 4/18/2023			1,000		1,000
Floating Rate (SOFR + 0.39%) 2-Year Senior Notes, Due 10/18/2023			500		500
0.797% 2-Year Senior Notes, Due 10/18/2023	1.04	%	1,350		1,350
Floating Rate (EURIBOR + 0.20%) 2-Year Senior Notes Due 11/18/2023 (euro-denominated)	0.39	%	1,666		1,933
0.000% 2-Year Senior Notes Due 11/18/2023 (euro-denominated)	0.05	%	540		625
0.75% 8-Year Senior Notes, Due 9/12/2024 (euro-denominated)	0.92	%	980		1,137
1.215% 3-Year Senior Notes, Due 10/18/2024	1.42	%	2,500		2,500
Floating Rate (SOFR + 0.53%) 3-Year Senior Notes, Due 10/18/2024			500		500
0.125% 5.5-Year Senior Notes, Due 3/1/2025 (euro-denominated)	0.39	%	784		910
2.00% 10-Year Senior Notes, Due 4/15/2025 (euro-denominated)	2.09	%	627		728
0.000% 4-Year Senior Notes, Due 11/18/2025 (euro-denominated)	0.13	%	540		625
3.65% 10-Year Senior Notes, Due 12/15/2025			—		350
1.40% 8.5-Year Senior Notes, Due 1/23/2026 (euro-denominated)	1.52	%	686		796
1.45% 10-Year Senior Notes, Due 3/16/2027 (euro-denominated)	1.64	%	490		568
1.75% 7-Year Senior Notes, Due 4/15/2027 (euro-denominated)	1.95	%	588		682
0.50% 8.5-Year Senior Notes, Due 3/1/2028 (euro-denominated)	0.76	%	784		910
1.375% 12-Year Senior Notes, Due 9/12/2028 (euro-denominated)	1.46	%	588		682
1.75% 7-Year Senior Notes, Due 10/15/2028	1.89	%	700		700
1.95% 12-Year Senior Notes, Due 7/24/2029 (euro-denominated)	2.07	%	686		796
2.60% 10-Year Senior Notes, Due 10/1/2029	2.74	%	900		900
0.80% 9-Year Senior Notes, Due 10/18/2030 (euro-denominated)	0.87	%	1,715		1,990
0.875% 12-Year Senior Notes, Due 10/1/2031 (euro-denominated)	1.12	%	882		1,023
2.00% 10-Year Senior Notes, Due 10/15/2031	2.23	%	1,200		1,200
2.375% 12-Year Senior Notes, Due 4/15/2032 (euro-denominated)	2.53	%	588		682
1.125% 12-Year Senior Notes, Due 10/18/2033 (euro-denominated)	1.19	%	1,470		1,706
2.875% 20-Year Senior Notes, Due 7/24/2037 (euro-denominated)	2.94	%	686		796


(In millions)	Principal Value Issued
0.853% 3-Year Senior Notes, Due 10/20/2025 (yen-denominated)	¥	22,300
1.054% 5-Year Senior Notes, Due 10/20/2027 (yen-denominated)	¥	28,900
1.279% 7-Year Senior Notes, Due 10/19/2029 (yen-denominated)	¥	4,700
1.490% 10-Year Senior Notes, Due 10/20/2032 (yen-denominated)	¥	6,300
2.069% 20-Year Senior Notes, Due 10/20/2042 (yen-denominated)	¥	14,600
2.382% 30-Year Senior Notes, Due 10/18/2052 (yen-denominated)	¥	33,300


(In millions)	Currency translation adjustment		Unrealized losses on hedging instruments		Pension and other postretirement benefit liability adjustment		Total
Balance at December 31, 2021	$	(2,065)	$	(35)	$	(229)	$	(2,329)
Other comprehensive items before reclassifications	(632)		—		13		(619)
Amounts reclassified from accumulated other comprehensive items	10		2		8		20
Net other comprehensive items	(622)		2		21		(599)
Balance at October 1, 2022	$	(2,687)	$	(33)	$	(208)	$	(2,928)


	October 1,		Quoted prices in active markets		Significant other observable inputs		Significant unobservable inputs
(In millions)	2022		(Level 1)		(Level 2)		(Level 3)
Assets
Cash equivalents	$	1,395	$	1,395	$	—	$	—
Investments	48		48		—		—
Warrants	12		—		12		—
Insurance contracts	152		—		152		—
Derivative contracts	167		—		167		—
Total assets	$	1,774	$	1,443	$	331	$	—

Liabilities
Derivative contracts	$	2	$	—	$	2	$	—
Contingent consideration	168		—		—		168
Total liabilities	$	170	$	—	$	2	$	168


	Fair value – assets				Fair value – liabilities
	October 1,		December 31,		October 1,		December 31,
(In millions)	2022		2021		2022		2021
Derivatives designated as hedging instruments

Cross-currency interest rate swaps (a)	$	145	$	25	$	—	$	—
Derivatives not designated as hedging instruments
Currency exchange contracts (b)	22		11		2		1

Total derivatives	$	167	$	36	$	2	$	1


	Gain (loss) recognized
	Three months ended				Nine months ended
	October 1,		October 2,		October 1,		October 2,
(In millions)	2022		2021		2022		2021
Fair value hedging relationships
Interest rate swaps
Hedged long-term obligations - included in other income/(expense)	$	—	$	—	$	—	$	25
Derivatives designated as hedging instruments - included in other income/(expense)	—		—		—		(3)
Derivatives designated as cash flow hedges
Interest rate swaps

Amount reclassified from accumulated other comprehensive items to other income/(expense)	(1)		(2)		(3)		(21)


	October 1, 2022				December 31, 2021
	Carrying		Fair		Carrying		Fair
(In millions)	value		value		value		value
Senior notes	$	28,869	$	25,036	$	32,072	$	33,449

Commercial paper	—		—		2,522		2,522
Other	72		72		76		76
	$	28,941	$	25,108	$	34,670	$	36,047


	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)

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

Investing activities
Acquisitions, net of cash acquired	(39)		(1,519)

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)

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)

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


	Three months ended				Nine months ended
	October 1,		October 2,		October 1,		October 2,
(In millions)	2022		2021		2022		2021
Revenues
Life Sciences Solutions	$	2,962	$	3,721	$	10,485	$	11,481
Analytical Instruments	1,621		1,476		4,746		4,344
Specialty Diagnostics	1,065		1,362		3,648		4,212
Laboratory Products and Biopharma Services	5,585		3,487		16,564		10,667
Eliminations	(556)		(716)		(1,978)		(2,195)
Consolidated revenues	10,677		9,330		33,465		28,509

Segment Income
Life Sciences Solutions	1,039		1,821		4,542		5,818
Analytical Instruments	386		264		1,031		816
Specialty Diagnostics	220		310		816		983
Laboratory Products and Biopharma Services	725		383		2,036		1,360
Subtotal reportable segments	2,370		2,778		8,425		8,977
Cost of revenues adjustments	(22)		—		(41)		(8)
Selling, general and administrative expenses adjustments	(11)		(59)		10		(33)
Restructuring and other costs	(33)		(18)		(59)		(151)
Amortization of acquisition-related intangible assets	(594)		(423)		(1,803)		(1,295)
Consolidated 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)
Consolidated income before taxes	$	1,601	$	2,177	$	6,058	$	6,979


	Nine months ended


(In millions)	October 1, 2022			October 2, 2021
Statutory federal income tax rate	21		%	21		%
Provision for income taxes at statutory rate	$	1,272		$	1,466
Increases (decreases) resulting from:
Foreign rate differential	(285)			(159)
Income tax credits	(118)			(205)
Global intangible low-taxed income	126			45
Foreign-derived intangible income	(102)			(114)
Excess tax benefits from stock options and restricted stock units	(63)			(96)
Provision for (reversal of) tax reserves, net	(543)			22
Intra-entity transfers	(18)			(258)

Valuation allowances	240			18
Withholding taxes	48			106

Tax return reassessments and settlements	(94)			1
State income taxes, net of federal tax	133			115
Other, net	(66)			(35)
Provision for income taxes	$	530		$	906


	Nine months ended


(In millions)	October 1, 2022		October 2, 2021
Non-cash investing and financing activities
Acquired but unpaid property, plant and equipment	$	213	$	257

Fair value of acquisition contingent consideration	—		179

Declared but unpaid dividends	119		104
Issuance of stock upon vesting of restricted stock units	225		237


(In millions)	Total (a)
Balance at December 31, 2021	$	17
Net restructuring charges incurred in 2022 (b)	31
Payments	(30)
Currency translation	(1)
Balance at October 1, 2022	$	17


	Three months ended												Organic* (non-GAAP measure)
(Dollars in millions)	October 1, 2022			October 2, 2021			Total Change		Currency Translation		Acquisitions/ Divestitures
Revenues	$	2,962		$	3,721		(20)	%	(4)	%	1	%	(17)	%
Segment income	1,039			1,821			(43)	%
Segment income margin	35.1		%	48.9		%	-13.8 pt


(a) Adjusted results in 2022 and 2021 exclude charges for the sale of inventories revalued at the date of acquisition. Adjusted results in the third quarter of 2022 also exclude $22 million of charges for inventory write-downs associated with large-scale abandonment of product lines.
(b) Adjusted results exclude certain third-party expenses, principally transaction/integration costs related to recent acquisitions, charges/credits for changes in estimates of contingent acquisition consideration and charges associated with product liability litigation.
(c) Adjusted results exclude restructuring and other costs consisting principally of severance, impairment of long-lived assets, abandoned facility and other expenses of headcount reductions within several businesses and real estate consolidations. Adjusted results in the third quarter of 2021 also exclude $4 million of credits for the settlement of environmental-related matters, offset in part by $3 million of net charges for pre-acquisition related matters. Adjusted results in the first nine months of 2021 also exclude $13 million of charges for compensation due to employees at recently acquired businesses at the date of acquisition and $110 million of charges for impairment of acquired technology.
(d) Adjusted results exclude net gains/losses on investments. Adjusted results in the first nine months of 2022 and 2021 also exclude $26 million and $197 million, respectively, of losses on the early extinguishment of debt. Adjusted results in the third quarter of and first nine months of 2021 also exclude $20 million and $26 million, respectively, of amortization of bridge loan commitment fees related to a pending acquisition.
(e) Adjusted provision for income taxes in 2022 and 2021 excludes incremental tax impacts for the reconciling items between GAAP and adjusted net income, incremental tax impacts as a result of tax rate/law changes and the tax impacts from audit settlements (including a $658 million benefit from an audit settlement in the third quarter of 2022). Adjusted results in the third quarter of 2022 also exclude a $423 million charge for the impact of deferred tax realizability assessments as a result of audit settlements.


Exhibit Number						Description of Exhibit
31.1						Certification of Chief Executive Officer required by Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2						Certification of Chief Financial Officer required by Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1						Certification of Chief Executive Officer required by Exchange Act Rules 13a-14(b) and 15d-14(b), as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**
32.2						Certification of Chief Financial Officer required by Exchange Act Rules 13a-14(b) and 15d-14(b), as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**
101.INS						XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH						XBRL Taxonomy Extension Schema Document.
101.CAL						XBRL Taxonomy Calculation Linkbase Document.
101.DEF						XBRL Taxonomy Definition Linkbase Document.
101.LAB						XBRL Taxonomy Label Linkbase Document.
101.PRE						XBRL Taxonomy Presentation Linkbase Document.
104						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
						The Registrant agrees, pursuant to Item 601(b)(4)(iii)(A) of Regulation S-K, to furnish to the Commission, upon request, a copy of each instrument with respect to long-term debt of the Registrant or its consolidated subsidiaries.




Date:	November 4, 2022	THERMO FISHER SCIENTIFIC INC.



		/s/ Stephen Williamson
		Stephen Williamson
		Senior Vice President and Chief Financial Officer



		/s/ Joseph R. Holmes
		Joseph R. Holmes
		Vice President and Chief Accounting Officer


			/s/ Marc N. Casper
			Marc N. Casper Chairman, President and Chief Executive Officer


			/s/ Stephen Williamson
			Stephen Williamson Senior Vice President and Chief Financial Officer