Debt and Other Financing Arrangements

6 Months Ended

Jun. 27, 2020

Debt and Other Financing Arrangements [Text Block]

Note 7. Debt and Other Financing Arrangements


	Effective Interest Rate at June 27,		June 27,		December 31,
(Dollars in millions)	2020		2020		2019



Floating Rate 2-Year Senior Notes, Due 8/7/2020 (euro-denominated)	0.04	%	$	673	$	673
2.15% 7-Year Senior Notes, Due 7/21/2022 (euro-denominated)	2.27	%	561		561
3.00% 7-Year Senior Notes, Due 4/15/2023	1.87	%	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	%	1,122		1,121
0.125% 5.5-Year Senior Notes, Due 3/1/2025 (euro-denominated)	0.41	%	898		897
4.133% 5-Year Senior Notes, Due 3/25/2025	4.32	%	1,100		—
2.00% 10-Year Senior Notes, Due 4/15/2025 (euro-denominated)	2.10	%	719		717
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		785
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		561
1.75% 7-Year Senior Notes, Due 4/15/2027 (euro-denominated)	1.97	%	673		—
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	%	898		897
1.375% 12-Year Senior Notes, Due 9/12/2028 (euro-denominated)	1.46	%	673		673
1.95% 12-Year Senior Notes, Due 7/24/2029 (euro-denominated)	2.08	%	785		785
2.60% 10-Year Senior Notes, Due 10/1/2029	2.74	%	900		900
4.497% 10-Year Senior Notes, Due 3/25/2030	5.31	%	1,100		—
0.875% 12-Year Senior Notes, Due 10/1/2031 (euro-denominated)	1.13	%	1,009		1,009
2.375% 12-Year Senior Notes, Due 4/15/2032 (euro-denominated)	2.55	%	673		—
2.875% 20-Year Senior Notes, Due 7/24/2037 (euro-denominated)	2.94	%	785		785
1.50% 20-Year Senior Notes, Due 10/1/2039 (euro-denominated)	1.73	%	1,009		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	%	1,122		1,121
Other			9		16

Total Borrowings at Par Value			21,505		17,960
Fair Value Hedge Accounting Adjustments			30		(13)
Unamortized Discount, Net			(101)		(94)
Unamortized Debt Issuance Costs			(121)		(101)

Total Borrowings at Carrying Value			21,313		17,752
Less: Short-term Obligations and Current Maturities			675		676

Long-term Obligations			$	20,638	$	17,076

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 10 for fair value information pertaining to the company’s long-term obligations.

In connection with the agreement to acquire QIAGEN (Note 2), the company has available up to €6.25 billion of committed bridge financing. 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 issued senior notes in March and April 2020 to partly fund the acquisition and for general corporate purposes. The company has also entered into a €3.0 billion senior unsecured one-year term loan to be drawn at the closing of the QIAGEN acquisition. As of June 27, 2020, no borrowings were outstanding under the term loan. Loans under the term loan facility will be available in euros and/or dollars. The term loan agreement calls for (i) each Eurocurrency Rate Loan at a rate based on the EURIBO rate (for euro loans) or LIBO rate (for dollar loans) for the applicable interest period and (ii) each Base Rate Loan denominated in dollars at a rate based on the Base

Rate. The term loan agreement contains affirmative, negative and financial covenants, and events of default customary for financings of this type. The financial covenants are consistent with those in the revolving credit facility described below. The company is currently evaluating future debt financings and the timing of such transactions is subject to market and other conditions. The company had a cash outlay of $49 million in 2020 associated with obtaining the bridge commitment included in other financing activities, net, in the accompanying statement of cash flows. In 2020, other income, net includes $44 million of costs for the QIAGEN acquisition, primarily for entering into hedging contracts and amortization of bridge loan commitment fees.

Credit Facilities

The company has a revolving credit facility, as amended, (the Facility) with a bank group that provides for up to $2.5 billion of unsecured multi-currency revolving credit. The Facility expires in July 2022. The revolving credit 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 the Facility include a Consolidated Leverage Ratio (net 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 5.0:1.0, with such ratio stepping down to 4.0 to 1.0 for the two consecutive fiscal quarters starting on the earlier of (a) the last day of the first fiscal quarter of 2022 and (b) the third full fiscal quarter ending after the QIAGEN acquisition closing date, and then stepping down to 3.5 to 1.0 for each fiscal quarter ending thereafter. 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 June 27, 2020, no borrowings were outstanding under the Facility, although available capacity was reduced by approximately $68 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 June 27, 2020, 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 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 and related Cross-currency 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 10 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 June 27, 2020:

Aggregate Notional Amount

Pay Rate as of

(Dollars in millions)

Pay Rate

June 27,
2020

Receive Rate

3.00% Senior Notes due 2023 (a)

1,000

1-month LIBOR + 1.7640%

1.9488

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 June 27, 2020 from 1.95% to a weighted average of 1.34%.

The company has 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.