THERMO FISHER SCIENTIFIC Forward-looking statements, within the meaning of Section 21E of the Securities Exchange Act of 1934 are made throughout this Management's Discussion and Analysis of Financial Condition and Results of Operations. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements, including without limitation statements regarding: projections of revenue, expenses, earnings, margins, tax rates, tax provisions, cash flows, pension and benefit obligations and funding requirements, our liquidity position; cost reductions, restructuring activities, new product and service developments, competitive strengths or market position, acquisitions or divestitures; growth, declines and other trends in markets we sell into; new or modified laws, regulations and accounting pronouncements; outstanding claims, legal proceedings, tax audits and assessments and other contingent liabilities; foreign currency exchange rates and fluctuations in those rates; general economic and capital markets conditions; the timing of any of the foregoing; assumptions underlying any of the foregoing; and any other statements that address events or developments thatThermo Fisher intends or believes will or may occur in the future. Without limiting the foregoing, the words "believes," "anticipates," "plans," "expects," "seeks," "estimates," and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements are accompanied by such words. While the company may elect to update forward-looking statements in the future, it specifically disclaims any obligation to do so, even if the company's estimates change, and readers should not rely on those forward-looking statements as representing the company's views as of any date subsequent to the date of the filing of this Quarterly Report. A number of important factors could cause the results of the company to differ materially from those indicated by such forward-looking statements, including those detailed under the heading "Risk Factors" in Part II, Item 1A of this report on Form 10-Q.
Overview
The company develops, manufactures and sells a broad range of products that are sold worldwide. The company expands the product lines and services it offers by developing and commercializing its own technologies and by making strategic acquisitions of complementary businesses. The company's operations fall into four segments (Note 4): Life Sciences Solutions, Analytical Instruments,Specialty Diagnostics and Laboratory Products and Services. The company has mobilized to support the global novel strain of coronavirus (COVID-19) response with products and services that help analyze, diagnose and protect from the virus. However, as the pandemic spread fromChina to countries worldwide, the company saw a significant reduction in customer activity by late March and into the second quarter of 2020 that will materially adversely affect the company's results at least through the second quarter of 2020. The extent and duration of the impacts are uncertain and dependent in part on customers returning to work and economic activity ramping up. The company believes its long-term prospects remain excellent given the attractive markets served, its industry-leading position and proven growth strategy. Recent and Pending Acquisitions and Divestiture The company's strategy is to augment internal growth at existing businesses with complementary acquisitions. The company's principal recent and pending acquisitions and divestitures are described below. OnMarch 3, 2020 , the company entered into a purchase agreement to acquire all of the issued and outstanding shares of QIAGEN N.V. at a price of €39.00 per share or approximately$11.5 billion (based on exchange rates at the time of the announcement), which includes the assumption of approximately$1.4 billion of net debt. QIAGEN is a leading provider of life science and molecular diagnostic solutions that will expand the company's capabilities in these fields. QIAGEN reported 2019 revenues of$1.5 billion . The company will commence a tender offer to acquire all of the ordinary shares of QIAGEN. The transaction is expected to close during the first half of 2021, subject to the satisfaction of customary closing conditions including receipt of applicable regulatory approvals, the adoption of certain resolutions relating to the transaction at an Extraordinary General Meeting of QIAGEN's shareholders, and completion of the tender offer. The company intends to finance the purchase price, including the repayment of indebtedness of QIAGEN, with cash on hand and the net proceeds from issuances of debt. The company is currently evaluating future debt financings and the timing of such transactions is subject to market and other conditions. The company also has available, but does not currently expect to utilize, up to €9.25 billion of committed financing (Note 7). 25 --------------------------------------------------------------------------------THERMO FISHER SCIENTIFIC INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OnApril 30, 2019 , the company acquired, within the Laboratory Products and Services segment,Brammer Bio for approximately$1.67 billion in cash.Brammer Bio is a leading viral vector contract development and manufacturing organization for gene and cell therapies. The acquisition expands the segment's contract manufacturing capabilities.Brammer Bio reported revenues of approximately$140 million in 2018. OnJune 28, 2019 , the company sold its Anatomical Pathology business toPHC Holdings Corporation for$1.13 billion , net of cash divested. The business was part of theSpecialty Diagnostics segment. Revenues in 2019, through the date of sale, and the full year 2018 of the business sold were approximately$115 million and$238 million , respectively, net of retained sales through the company's healthcare market and research and safety market channel businesses.
Overview of Results of Operations and Liquidity
Three Months Ended
March 28, March 30,
(Dollars in millions) 2020 2019
Revenues
Life Sciences Solutions $ 1,774 28.5 % $ 1,607 26.2 %
Analytical Instruments 1,101 17.7 % 1,322 21.6 %
Specialty Diagnostics 958 15.4 % 957 15.6 %
Laboratory Products and Services 2,730 43.8 % 2,513 41.0 %
Eliminations (333) (5.4) % (274) (4.4) %
$ 6,230 100 % $ 6,125 100 %
Sales in the first quarter of 2020 were $6.23 billion , an increase of $105
million from 2019. Sales increased $35 million due to acquisitions, net of a
divestiture. The unfavorable effects of currency translation resulted in a
decrease in revenues of $65 million in the first quarter of 2020. Aside from the
effects of acquisitions/divestiture and currency translation, revenues increased
$135 million (2%) primarily due to increased demand in the quarter compared to
the 2019 quarter. Sales were particularly strong to customers in diagnostic and
healthcare markets, driven in part by demand for products supporting those
diagnosing and treating the COVID-19 virus, as well as to customers in pharma
and biotech end markets. Sales to academic and government customers decreased
due primarily to closure of academic labs, initially in China and then globally
as the quarter progressed. Sales to customers in industrial markets decreased
primarily due to lower demand in China from business slowing and closures
related to COVID-19 as well as strong comparative sales in the first quarter of
2019. The first quarter of 2020 had one less selling day than the first quarter
of 2019 which reduced revenues by nearly 1%. Sales growth was particularly
strong in Europe and, to a lesser extent, North America while sales decreased in
the Asia-Pacific region .
In the first quarter of 2020, total company operating income and operating
income margin were $906 million and 14.5%, respectively, compared with $920
million and 15.0%, respectively, in 2019. The decrease in operating income was
primarily due to strategic growth investments and, to a lesser extent, sales mix
and dilution following the June 2019 divestiture of the Anatomical Pathology
business. These decreases were offset in part by productivity improvements and
profit on higher sales. The company's references to strategic growth investments
generally refer to targeted spending for enhancing commercial capabilities,
including expansion of geographic sales reach and e-commerce platforms,
marketing initiatives, expanded service and operational infrastructure, focused
research projects and other expenditures to enhance the customer experience. The
company's references throughout this discussion to productivity improvements
generally refer to improved cost efficiencies from its Practical Process
Improvement (PPI) business system, reduced costs resulting from global sourcing
initiatives, a lower cost structure following restructuring actions, including
headcount reductions and consolidation of facilities, and low cost region
manufacturing. The company has begun implementing additional cost reduction
measures in response to impacts of COVID-19 on the business. Productivity
improvements are calculated net of inflationary cost increases.
The company's effective tax rate was 4.8% for the first quarter of 2020. The
company expects its effective tax rate for all of 2020 will be between 7% and 9%
based on currently forecasted rates of profitability in the countries in which
the company conducts business and expected generation of foreign tax credits.
Due primarily to the non-deductibility of intangible asset amortization for tax
purposes, the company's cash payments for income taxes are higher than its
income tax expense for
26
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THERMO FISHER SCIENTIFIC INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Overview of Results of Operations and Liquidity (continued)
financial reporting purposes and are expected to total $450 to $500 million in
2020. In the first quarter of 2019, the company recorded a $2 million provision
for income taxes, net of a $62 million income tax benefit related to a foreign
exchange loss for tax purposes on certain intercompany financing arrangements.
In addition, the company recorded a net tax benefit of $27 million in the first
quarter of 2019, to adjust the impacts of U.S. tax reform based on final
regulations issued by the U.S. Treasury in January 2019 .
Net income decreased to $788 million in the first quarter of 2020 from $815
million in the first quarter of 2019, primarily due to the increase in income
tax provision (discussed above), a decrease in interest income, and the decrease
in operating income in the 2020 period (discussed above), offset in part by a
decrease in interest expense.
During the first three months of 2020, the company's cash flow from operations
totaled $356 million compared with $649 million for 2019. The decrease primarily
resulted from higher investment in working capital in 2020.
As of March 28, 2020 , the company's short-term debt totaled $738 million
consisting principally of senior notes due in August 2020 . The company has a
revolving credit facility with a bank group that provides up to $2.50 billion of
unsecured multi-currency revolving credit. If the company borrows under this
facility, it intends to leave undrawn an amount equivalent to outstanding
commercial paper to provide a source of funds in the event that commercial paper
markets are not available. As of March 28, 2020 , no borrowings were outstanding
under the company's revolving credit facility, although available capacity was
reduced by approximately $71 million as a result of outstanding letters of
credit.
The company believes that its existing cash and cash equivalents of $2.98
billion as of March 28, 2020 , debt proceeds of $1.3 billion in April 2020 and
its future cash flow from operations together with available borrowing capacity
under its revolving credit agreement and bridge loan agreement will be
sufficient to meet the cash requirements of its existing businesses and funding
of the QIAGEN acquisition for the foreseeable future, including at least the
next 24 months.
Critical Accounting Policies and Estimates
The company's discussion and analysis of its financial condition and results of
operations is based upon its financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States of
America . The preparation of these financial statements requires management to
make estimates and assumptions that affect the reported amounts of assets,
liabilities, revenue and expenses and related disclosure of contingent
liabilities. On an on-going basis, management evaluates its estimates, including
those related to intangible assets and goodwill, income taxes and contingencies
and litigation. Management believes the most complex and sensitive judgments,
because of their significance to the consolidated financial statements, result
primarily from the need to make estimates about the effects of matters that are
inherently uncertain. Management bases its estimates on historical experience,
current market and economic conditions and other assumptions that management
believes are reasonable. The results of these estimates form the basis for
judgments about the carrying value of assets and liabilities where the values
are not readily apparent from other sources. Actual results may differ from
these estimates under different assumptions or conditions. Management's
Discussion and Analysis and Note 1 to the Consolidated Financial Statements of
the company's Form 10-K for 2019, describe the significant accounting estimates
and policies used in preparation of the consolidated financial statements. There
have been no significant changes in the company's critical accounting policies
during the first three months of 2020.
27
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THERMO FISHER SCIENTIFIC INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
First Quarter 2020 Compared With First Quarter 2019
Three Months Ended
March 28, March 30, Total Currency Acquisitions/
(In millions) 2020 2019 Change Translation Divestitures Operations
Revenues
Life Sciences Solutions
- $ 187
Analytical Instruments 1,101 1,322 (221) (14) - (207)
Specialty Diagnostics 958 957 1 (9) (63) 73
Laboratory Products and
Services 2,730 2,513 217 (25) 92 150
Eliminations (333) (274) (59) 3 6 (68)
Consolidated Revenues $ 6,230 $ 6,125 $ 105 $ (65) $ 35 $ 135
Sales in the first quarter of 2020 were $6.23 billion , an increase of $105
million from the first quarter of 2019. Sales increased $35 million due to
acquisitions, net of a divestiture. The unfavorable effects of currency
translation resulted in a decrease in revenues of $65 million in 2020. Aside
from the effects of acquisitions/divestitures and currency translation, revenues
increased $135 million (2%) primarily due to increased demand in the quarter
compared to the 2019 quarter. Sales were particularly strong to customers in
diagnostic and healthcare markets, driven in part by demand for products
supporting those diagnosing and treating the COVID-19 virus, as well as to
customers in pharma and biotech end markets. Sales to academic and government
customers decreased due primarily to closure of academic labs, initially in
China and then globally as the quarter progressed. Sales to customers in
industrial markets decreased primarily due to lower demand in China from
business slowing and closures related to COVID-19 as well as strong comparative
sales in the first quarter of 2019. The first quarter of 2020 had one less
selling day than the first quarter of 2019 which reduced revenues by nearly 1%.
Sales growth was particularly strong in Europe and, to a lesser extent, North
America while sales decreased in the Asia-Pacific region .
In the first quarter of 2020, total company operating income and operating
income margin were $906 million and 14.5%, respectively, compared with $920
million and 15.0%, respectively, in 2019. The decrease in operating income was
primarily due to strategic growth investments and, to a lesser extent, sales mix
and dilution following the June 2019 divestiture of the Anatomical Pathology
business. These decreases were offset in part by productivity improvements and
profit on higher sales.
In the first quarter of 2020, the company recorded restructuring and other
costs, net, of $46 million . The company recorded $2 million of charges to cost
of revenues to conform the accounting policies of a recently acquired business
to the company's accounting policies. The company also recorded $6 million of
charges to selling, general and administrative expenses, principally third-party
transaction and integration-related costs for recent and pending acquisitions.
In addition, the company recorded $38 million restructuring and other charges,
net, primarily for employee severance and other costs associated with facility
consolidations in efforts to streamline operations. See Note 12 for
restructuring charges expected in future periods.
In the first quarter of 2019, the company recorded restructuring and other
income, net, of $28 million , including $6 million of charges to cost of revenues
for the sale of inventories revalued at the date of acquisition. The company
recorded $11 million of charges to selling, general and administrative expenses,
for third-party transaction costs related to recent acquisitions and a
divestiture. The company recorded $11 million of cash restructuring costs,
including severance and abandoned facilities costs associated with the closure
and consolidation of facilities in the U.S. and Europe .
Segment Results
The company's management evaluates segment operating performance using operating
income before certain charges/credits to cost of revenues and selling, general
and administrative expenses, principally associated with acquisition-related
activities; restructuring and other costs/income including costs arising from
facility consolidations such as severance and abandoned lease expense and gains
and losses from the sale of real estate and product lines; and amortization of
acquisition-related intangible assets. The company uses this measure because it
helps management understand and evaluate the segments' core operating results
and facilitate comparison of performance for determining compensation (Note 4).
Accordingly, the following segment data is reported on this basis.
28
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THERMO FISHER SCIENTIFIC INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONSResults of Operations (continued)
Three Months Ended
March 28, March 30,
(Dollars in millions) 2020 2019 Change
Revenues
Life Sciences Solutions $ 1,774 $ 1,607 10 %
Analytical Instruments 1,101 1,322 (17) %
Specialty Diagnostics 958 957 - %
Laboratory Products and Services 2,730 2,513 9 %
Eliminations (333) (274) 22 %
Consolidated Revenues $ 6,230 $ 6,125 2 %
Segment Income
Life Sciences Solutions $ 675 $ 561 20 %
Analytical Instruments 171 282 (39) %
Specialty Diagnostics 236 242 (2) %
Laboratory Products and Services 295 285 4 %
Subtotal Reportable Segments 1,377 1,370 1 %
Cost of Revenues Charges, Net (2) (6)
Selling, General and Administrative Charges, Net (6) (11)
Restructuring and Other Costs, Net (38)
(11)
Amortization of Acquisition-related Intangible Assets (425)
(422)
Consolidated Operating Income$ 906 $
920 (2) %
Reportable Segments Operating Income Margin 22.1 %
22.4 %
Consolidated Operating Income Margin 14.5 %
15.0 %
Income from the company's reportable segments increased 1% to$1.38 billion in the first quarter of 2020 due primarily to productivity improvements and profit on higher sales, offset in part by strategic growth investments and, to a lesser extent, sales mix. Life Sciences Solutions Three Months Ended March 28, March 30, (Dollars in millions) 2020 2019 Change Revenues$ 1,774 $ 1,607 10 % Operating Income Margin 38.0 % 34.9 % 3.1 pt Sales in the Life Sciences Solutions segment increased$167 million to$1.77 billion in the first quarter of 2020. Sales increased$187 million (12%) due to higher revenues at existing businesses. The unfavorable effects of currency translation resulted in a decrease in revenues of$20 million . The increase in revenue at existing businesses was primarily due to increased 29 --------------------------------------------------------------------------------THERMO FISHER SCIENTIFIC INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations (continued) demand in each of the segment's principal businesses with particular strength in sales of genetic sciences, driven primarily by products addressing diagnosis of COVID-19 and, to a lesser extent, bioproduction products. Operating income margin was 38.0% in the first quarter of 2020 compared to 34.9% in the first quarter of 2019. The increase resulted primarily from profit on higher sales, offset in part by strategic growth investments and, to a lesser extent, sales mix. Analytical Instruments Three Months Ended March 28, March 30, (Dollars in millions) 2020 2019 Change Revenues$ 1,101 $ 1,322 (17) % Operating Income Margin 15.5 % 21.3 % -5.8 pt Sales in the Analytical Instruments segment decreased$221 million to$1.10 billion in the first quarter of 2020. Sales decreased$207 million (-16%) due to lower revenues at existing businesses. The unfavorable effects of currency translation resulted in a decrease in revenues of$14 million . The decrease in revenue at existing businesses was primarily the result of reduced demand from industrial customers inChina following business slowing and closures due to COVID-19 and strong comparative results in the first quarter of 2019. Operating income margin was 15.5% in the first quarter of 2020 compared to 21.3% in the first quarter of 2019. The decrease was primarily due to the decrease in sales and, to a lesser extent, sales mix, offset in part by productivity improvements.Specialty Diagnostics Three Months Ended March 28, March 30, (Dollars in millions) 2020 2019 Change Revenues$ 958 $ 957 - % Operating Income Margin 24.7 % 25.3 % -0.6 pt Sales in theSpecialty Diagnostics segment increased$1 million to$958 million in the first quarter of 2020. Sales increased$73 million (8%) due to higher revenues at existing businesses. The divestiture of Anatomical Pathology business resulted in a decrease in sales of$63 million . The unfavorable effects of currency translation resulted in a decrease in revenues of$9 million . The increase in revenue at existing businesses was due to higher demand in part driven by products addressing treatment of COVID-19, with particular strength in sales of products sold through the segment's healthcare market channel business, and to a lesser extent, clinical diagnostics and transplant diagnostic products. Operating income margin was 24.7% in the first quarter of 2020 and 25.3% in the first quarter of 2019. The decrease was primarily due to sales mix, strategic growth investments and dilution from the 2019 divestiture, offset in part by profit on higher sales and productivity improvements. 30 --------------------------------------------------------------------------------THERMO FISHER SCIENTIFIC INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations (continued) Laboratory Products and Services Three Months Ended March 28, March 30, (Dollars in millions) 2020 2019 Change Revenues$ 2,730 $ 2,513 9 % Operating Income Margin 10.8 % 11.3 % -0.5 pt Sales in the Laboratory Products and Services segment increased$217 million to$2.73 billion in the first quarter of 2020. Sales increased$150 million (6%) due to higher revenues at existing businesses and$92 million due to acquisitions. The unfavorable effects of currency translation resulted in a decrease in revenues of$25 million . The increase in revenue at existing businesses was primarily due to increased demand for service offerings of the segment's pharma services business and to a lesser extent, products sold through its research and safety market channel business. Operating income margin was 10.8% in the first quarter of 2020 and 11.3% in the first quarter of 2019. The decrease was primarily due to sales mix and strategic growth investments, offset in part by profit on higher sales and, to a lesser extent, productivity improvements. Other Income, Net The company reported other income, net, of$12 million and$19 million in the first quarter of 2020 and 2019, respectively. Provision for Income Taxes The company's effective tax rate was 4.8% for the first quarter of 2020. The company expects its effective tax rate for all of 2020 will be between 7% and 9% based on currently forecasted rates of profitability in the countries in which the company conducts business and expected generation of foreign tax credits. Due primarily to the non-deductibility of intangible asset amortization for tax purposes, the company's cash payments for income taxes are higher than its income tax expense for financial reporting purposes and are expected to total$450 to$500 million in 2020. In the first quarter of 2019, the company recorded a$2 million provision for income taxes, net of a$62 million income tax benefit related to a foreign exchange loss for tax purposes on certain intercompany financing arrangements. In addition, the company recorded a net tax benefit of$27 million in the first quarter of 2019, to adjust the impacts ofU.S. tax reform based on final regulations issued by theU.S. Treasury inJanuary 2019 . The company has operations and a taxable presence in approximately 50 countries outside theU.S. Some of these countries have lower tax rates than theU.S. The company's ability to obtain a benefit from lower tax rates outside theU.S. is dependent on its relative levels of income in countries outside theU.S. and on the statutory tax rates in those countries. Based on the dispersion of the company's non-U.S. income tax provision among many countries, the company believes that a change in the statutory tax rate in any individual country is not likely to materially affect the company's income tax provision or net income, aside from any resulting one-time adjustment to the company's deferred tax balances to reflect a new rate. Recent Accounting Pronouncements A description of recently issued accounting standards is included under the heading "Recent Accounting Pronouncements" in Note 1. Contingent Liabilities The company is contingently liable with respect to certain legal proceedings and related matters. An unfavorable outcome that differs materially from current accrual estimates, if any, for one or more of the matters described under the headings "Product Liability, Workers Compensation and Other Personal Injury Matters" and "Intellectual Property Matters" in Note 8 could have a material adverse effect on the company's financial position as well as its results of operations and cash flows 31
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THERMO FISHER SCIENTIFIC INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
Consolidated working capital (current assets less current liabilities) was $7.24
billion at March 28, 2020 , compared with $5.70 billion at December 31, 2019 .
Included in working capital were cash and cash equivalents of $2.98 billion at
March 28, 2020 and $2.40 billion at December 31, 2019 .
First Three Months of 2020
Cash provided by operating activities was $356 million during the first three
months of 2020. Cash provided by income was offset in part by investments in
working capital. Increases in accounts receivable and inventories used cash of
$218 million and $141 million , respectively, primarily to support growth in
sales. Changes in other assets and other liabilities used cash of $443 million
primarily due to the timing of payments for incentive compensation and customer
billings. Cash payments for income taxes decreased to $100 million during the
first three months of 2020, compared with $221 million in the first three months
of 2019. The company made cash contributions to its pension and postretirement
benefit plans totaling $32 million during the first three months of 2020.
Payments for restructuring actions, principally severance costs and expenses of
real estate consolidation, used cash of $15 million during the first three
months of 2020.
During the first three months of 2020, the company's investing activities used
$260 million of cash, principally for the purchase of property, plant and
equipment.
The company's financing activities provided $619 million of cash during the
first three months of 2020. Issuance of senior notes provided cash of $2.19
billion . A net increase in commercial paper obligations provided cash of $61
million . The company's financing activities also included the repurchase of
$1.50 billion of the company's common stock and the payment of $76 million in
cash dividends, offset in part by $48 million of net proceeds from employee
stock option exercises. On November 8, 2019 , the Board of Directors authorized
the repurchase of up to $2.50 billion of the company's common stock. At May 1,
2020 , authorization remained for $1.00 billion of future repurchases of the
company's common stock. As discussed in Note 13, early in the second quarter of
2020, the company issued new senior notes for net proceeds of $1.3 billion .
The company's commitments for purchases of property, plant and equipment,
contractual obligations and other commercial commitments did not change
materially between December 31, 2019 and March 28, 2020 except for the agreement
to acquire QIAGEN, discussed in Note 2. The company expects that for all of
2020, expenditures for property, plant and equipment, net of disposals, will be
between $900 million and $1.0 billion .
As of March 28, 2020 , the company's short-term debt totaled $738 million
consisting principally of senior notes due in August 2020 . The company has a
revolving credit facility with a bank group that provides up to $2.50 billion of
unsecured multi-currency revolving credit. If the company borrows under this
facility, it intends to leave undrawn an amount equivalent to outstanding
commercial paper to provide a source of funds in the event that commercial paper
markets are not available. As of March 28, 2020 , no borrowings were outstanding
under the company's revolving credit facility, although available capacity was
reduced by approximately $71 million as a result of outstanding letters of
credit.
Approximately half of the company's cash balances and cash flows from operations
are from outside the U.S. The company uses its non-U.S. cash for needs outside
of the U.S. including acquisitions and repayment of acquisition-related
intercompany debt to the U.S. In addition, the company also transfers cash to
the U.S. using non-taxable returns of capital as well as dividends where the
related U.S. dividend received deduction or foreign tax credit equals any tax
cost arising from the dividends. As a result of using such means of transferring
cash to the U.S. , the company does not expect any material adverse liquidity
effects from its significant non-U.S. cash balances for the foreseeable future.
The company believes that its existing cash and cash equivalents of $2.98
billion as of March 28, 2020 , debt proceeds of $1.3 billion in April 2020 and
its future cash flow from operations together with available borrowing capacity
under its revolving credit agreement and bridge loan agreement will be
sufficient to meet the cash requirements of its existing businesses and funding
of the QIAGEN acquisition for the foreseeable future, including at least the
next 24 months.
First Three Months of 2019
Cash provided by operating activities was $649 million during the first three
months of 2019. Cash provided by income was offset in part by investments in
working capital. Increases in accounts receivable and inventories used cash of
$29 million and $140 million , respectively, primarily to support growth in
sales. Changes in other assets and other liabilities used cash of $347 million
primarily due to the timing of payments for incentive compensation, customer
billings and income tax refunds. Cash payments for income taxes totaled $221
million . The company made cash contributions to its pension and postretirement
32
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THERMO FISHER SCIENTIFIC INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Liquidity and Capital Resources (continued)
benefit plans totaling $32 million during the first three months of 2019.
Payments for restructuring actions, principally severance costs and expenses of
real estate consolidation, used cash of $14 million during the first three
months of 2019.
During the first three months of 2019, the company's investing activities used
$181 million of cash including the purchase of $201 million of property, plant
and equipment.
The company's financing activities used $1.43 billion of cash during the first
three months of 2019. A net decrease in commercial paper obligations used cash
of $687 million . The company's financing activities also included the repurchase
of $750 million of the company's common stock and the payment of $68 million in
cash dividends, offset in part by $81 million of net proceeds from employee
stock option exercises.
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