Debt and Other Financing Arrangements

12 Months Ended

Dec. 31, 2019

Debt and Other Financing Arrangements [Text Block]

Note 10. Debt and Other Financing Arrangements


	Effective Interest Rate at December 31,		December 31,		December 31,
(Dollars in millions)	2019		2019		2018

Commercial Paper			$	—	$	693

Floating Rate 2-Year Senior Notes, Due 7/24/2019 (euro-denominated)			—		574
6.00% 10-Year Senior Notes, Due 3/1/2020			—		750
4.70% 10-Year Senior Notes, Due 5/1/2020			—		300
Floating Rate 2-Year Senior Notes, Due 8/7/2020 (euro-denominated)	0.17	%	673		688
1.50% 5-Year Senior Notes, Due 12/1/2020 (euro-denominated)			—		487
5.00% 10-Year Senior Notes, Due 1/15/2021			—		400
4.50% 10-Year Senior Notes, Due 3/1/2021			—		1,000
3.60% 10-Year Senior Notes, Due 8/15/2021			—		1,100
3.30% 7-Year Senior Notes, Due 2/15/2022			—		800
2.15% 7-Year Senior Notes, Due 7/21/2022 (euro-denominated)	2.28	%	561		574
3.15% 10-Year Senior Notes, Due 1/15/2023			—		800
3.00% 7-Year Senior Notes, Due 4/15/2023	5.02	%	1,000		1,000
4.15% 10-Year Senior Notes, Due 2/1/2024	4.16	%	1,000		1,000
0.75% 8-Year Senior Notes, Due 9/12/2024 (euro-denominated)	0.94	%	1,121		1,147
0.125% 5.5-Year Senior Notes, Due 3/1/2025 (euro-denominated)	0.41	%	897		—
2.00% 10-Year Senior Notes, Due 4/15/2025 (euro-denominated)	2.10	%	717		734
3.65% 10-Year Senior Notes, Due 12/15/2025	3.77	%	350		350
1.40% 8.5-Year Senior Notes, Due 1/23/2026 (euro-denominated)	1.53	%	785		802
2.95% 10-Year Senior Notes, Due 9/19/2026	3.19	%	1,200		1,200
1.45% 10-Year Senior Notes, Due 3/16/2027 (euro-denominated)	1.65	%	561		574
3.20% 10-Year Senior Notes, Due 8/15/2027	3.39	%	750		750
0.50% 8.5-Year Senior Notes, Due 3/1/2028 (euro-denominated)	0.77	%	897		—
1.375% 12-Year Senior Notes, Due 9/12/2028 (euro-denominated)	1.46	%	673		688
1.95% 12-Year Senior Notes, Due 7/24/2029 (euro-denominated)	2.08	%	785		802
2.60% 10-Year Senior Notes, Due 10/1/2029	2.74	%	900		—
0.875% 12-Year Senior Notes, Due 10/1/2031 (euro-denominated)	1.13	%	1,009		—
2.875% 20-Year Senior Notes, Due 7/24/2037 (euro-denominated)	2.94	%	785		802
1.50% 20-Year Senior Notes, Due 10/1/2039 (euro-denominated)	1.73	%	1,009		—
5.30% 30-Year Senior Notes, Due 2/1/2044	5.37	%	400		400
4.10% 30-Year Senior Notes, Due 8/15/2047	4.23	%	750		750
1.875% 30-Year Senior Notes, Due 10/1/2049 (euro-denominated)	1.98	%	1,121		—
Other			16		21

Total Borrowings at Par Value			17,960		19,186
Fair Value Hedge Accounting Adjustments			(13)		(93)
Unamortized Discount, Net			(94)		(21)
Unamortized Debt Issuance Costs			(101)		(82)

Total Borrowings at Carrying Value			17,752		18,990
Less: Short-term Obligations and Current Maturities			676		1,271

Long-term Obligations			$	17,076	$	17,719

The effective interest rates for the fixed-rate debt include the stated interest on the notes, the accretion of any discount or amortization of any premium, the amortization of any debt issuance costs and, if applicable, adjustments related to hedging.

See Note 14 for fair value information pertaining to the company’s long-term obligations.

As of December 31, 2019, the annual repayment requirements for debt obligations are as follows:


(In millions)

2020	$	676
2021	4
2022	564
2023	1,001
2024	2,122
2025 and Thereafter	13,593

	$	17,960

As of December 31, 2018, short-term obligations and current maturities of long-term obligations in the accompanying balance sheet included $693 million of commercial paper, short-term bank borrowings and borrowings under lines of credit of certain of the company’s subsidiaries. The weighted average interest rate for short-term borrowings was 0.74% at December 31, 2018. No such borrowings were outstanding at December 31, 2019. In addition to available borrowings under the company’s revolving credit agreements, discussed below, the company had unused lines of credit of $62 million as of December 31, 2019. These unused lines of credit generally provide for short-term unsecured borrowings at various interest rates.

Credit Facilities

The company has a revolving credit facility with a bank group that provides for up to $2.50 billion of unsecured multi-currency revolving credit. The facility expires in July 2021. The agreement calls for interest at either a LIBOR-based rate, a EURIBOR-based rate (for funds drawn in euro) or a rate based on the prime lending rate of the agent bank, at the company’s option. The agreement contains affirmative, negative and financial covenants, and events of default customary for facilities of this type. The covenants in our revolving credit facility (the Facility) include a Consolidated Leverage Ratio (total debt-to-Consolidated EBITDA) and a Consolidated Interest Coverage Ratio (Consolidated EBITDA to Consolidated Interest Expense), as such terms are defined in the Facility. Specifically, the company has agreed that, so long as any lender has any commitment under the Facility, any letter of credit is outstanding under the Facility, or any loan or other obligation is outstanding under the Facility, it will maintain a maximum Consolidated Leverage Ratio of 3.5:1.0. The company has also agreed that so long as any lender has any commitment under the Facility or any letter of credit is outstanding under the Facility, or any loan or other obligation is outstanding under the Facility, it will maintain a minimum Consolidated Interest Coverage Ratio of 3.0:1.0 as of the last day of any fiscal quarter. As of December 31, 2019, no borrowings were outstanding under the Facility, although available capacity was reduced by approximately $72 million as a result of outstanding letters of credit.

Commercial Paper Programs

The company has commercial paper programs pursuant to which it may issue and sell unsecured, short-term promissory notes (CP Notes). Under the U.S. program, a) maturities may not exceed 397 days from the date of issue and b) the CP Notes are issued on a private placement basis under customary terms in the commercial paper market and are not redeemable prior to maturity nor subject to voluntary prepayment. Under the euro program, maturities may not exceed 183 days and may be denominated in euro, U.S. dollars, Japanese yen, British pounds sterling, Swiss franc, Canadian dollars or other currencies. Under both programs, the CP Notes are issued at a discount from par (or premium to par, in the case of negative interest rates), or, alternatively, are sold at par and bear varying interest rates on a fixed or floating basis. As of December 31, 2019, there were no outstanding borrowings under these programs.

Senior Notes

Interest on the floating rate senior notes is payable quarterly. Interest is payable annually on the other euro-denominated senior notes and semi-annually on all other senior notes. Each of the notes may be redeemed at a redemption price of 100% of the principal amount plus a specified make-whole premium and accrued interest. The company is subject to certain affirmative and negative covenants under the indentures governing the senior notes, the most restrictive of which limits the ability of the company to pledge principal properties as security under borrowing arrangements.

In 2019, the company refinanced certain of its debt by issuing new senior notes and using the proceeds to redeem some of its existing senior notes. In connection with these redemptions, the company incurred $184 million of losses on the early extinguishment of debt included in Other Expense, Net on the accompanying statement of income. Upon redemption of the senior notes, the company terminated the related fixed to floating rate interest rate swap arrangements and paid $17 million, included in other financing activities, net, in the accompanying statement of cash flows. The company also terminated related

cross-currency interest rate swap arrangements and received $44 million, included in other investing activities, net, in the accompanying statement of cash flows.

In 2018, Thermo Fisher Scientific (Finance I) B.V., a wholly-owned finance subsidiary of the company, issued the Floating Rate Senior Notes due 2020 included in the table above. This subsidiary has no independent function other than financing activities. The Floating Rate Senior Notes due 2020 are fully and unconditionally guaranteed by the company and no other subsidiaries of the company have guaranteed the obligations.

Interest Rate Swap Arrangements

The company has entered into LIBOR-based interest rate swap arrangements with various banks. The aggregate amounts of the swaps are equal to the principal amount of the notes and the payment dates of the swaps coincide with the interest payment dates of the note. The swap contracts provide for the company to pay a variable interest rate and receive a fixed rate. The variable interest rates reset monthly. The swaps have been accounted for as fair value hedges of the notes. See Note 14 for additional information on the interest rate swap arrangements and related cross-currency interest rate swap arrangements. The following table summarizes the outstanding interest rate swap arrangements on the company's senior notes at December 31, 2019:


	Aggregate Notional Amount				Pay Rate as of
(Dollars in millions)				Pay Rate			December 31, 2019			Receive Rate

3.00% Senior Notes due 2023 (a)	$	1,000	1-month LIBOR + 1.7640%		3.5038	%		3.00	%

(a) The payments on $900 million notional value of these interest rate swaps are offset in part by cross-currency interest rate swaps which effectively reduced the pay rate as of December 31, 2019 from a weighted average of 3.50% to a weighted average of 1.14%.

The company entered into $900 million notional value of cross-currency interest rate swaps, which effectively convert a portion of the semi-annual payments related to the variable rate, U.S. dollar denominated, LIBOR-based interest rate swaps to payments on variable rate, euro denominated, EURIBOR-based cross-currency interest rate swaps.