WALTHAM, Mass., Feb. 2 /PRNewswire-FirstCall/ -- Thermo Electron
Corporation (NYSE: TMO) today reported revenue growth of 21% to $741 million
in the fourth quarter of 2005, compared with $613 million in the 2004 quarter.
Acquisitions contributed 19% of the growth (net of divestitures) and currency
translation reduced revenues by 4%. GAAP diluted earnings per share (EPS) were
$.34 in the 2005 quarter, compared with $.74 in the year-ago period (which
included tax benefits related to divested businesses). GAAP operating income
in the fourth quarter of 2005 rose 34%, and GAAP operating margin for the
period was 11.9%, versus 10.8% in the 2004 quarter.
Adjusted EPS grew 29% to $.49 in the fourth quarter of 2005, compared with
$.38 in the 2004 quarter. Adjusted operating income increased 48% in the 2005
quarter, and adjusted operating margin rose 290 basis points to 16.0%, versus
13.1% in the period last year.
For the full year 2005, Thermo Electron reported 19% revenue growth to
$2.63 billion, compared with $2.21 billion in 2004. Acquisitions contributed
15% of the growth (net of divestitures) and currency translation did not have
a material impact. GAAP diluted EPS was $1.36 in 2005, versus $2.17 in 2004
(which included tax benefits and large gains from the sale of discontinued
operations). GAAP operating income in 2005 grew 11%, and GAAP operating margin
was 10.0% in 2005, versus 10.8% in 2004.
Full-year adjusted EPS grew 24% to $1.55 in 2005, compared with $1.25 in
2004. Adjusted operating income increased 33% in 2005, and adjusted operating
margin rose 140 basis points year over year, to 14.1% from 12.7% in 2004.
Adjusted EPS, adjusted operating income and adjusted operating margin are
non-GAAP measures that exclude certain items detailed at the end of this press
release under the heading "Use of Non-GAAP Financial Measures."
Fourth Quarter Highlights
* Revenues grew 21%
* Adjusted EPS increased 29%
* Adjusted operating margin expanded 290 basis points
* Cash flow from continuing operations rose 42%
* Customer demonstration centers opened in China and India
* Measurement and Control results boosted by strong industrial demand
"We were able to cap 2005 with a terrific fourth quarter that furthered
our trend of improving revenues, adjusted EPS and cash flow," said Marijn E.
Dekkers, Thermo Electron president and chief executive officer. "We
experienced very strong growth from our industrial markets, especially in
commodity materials and environmental monitoring. In addition, growth from our
life sciences customers continued at a good pace. We are also very pleased
that we significantly expanded our adjusted operating margin, which is being
driven by new products, pricing initiatives, productivity programs and
acquisition synergies.
"Our aggressive growth investments were key contributors to our excellent
performance in 2005. We introduced a number of important new products for a
range of applications -- most notably in mass spectrometry. We spent nearly $1
billion on strategic acquisitions that are now well-integrated and
contributing to growth. We also continued to extend our global reach with the
recent opening of customer demonstration centers in China and India. All of
this led to Thermo's success in 2005, and gives us great momentum going into
2006.
"Our outlook for the year is excellent, as we recently announced. To
reiterate, our goal is to achieve adjusted EPS of $1.75 to $1.80 in 2006
(excluding $.10 per share of stock option expensing that will take effect
during the year), leading to a 13 to 16% increase over our strong 2005
results. We expect to generate revenues in the range of $2.78 to $2.83 billion
in 2006, for a 6 to 8% increase over last year."
Life and Laboratory Sciences
The Life and Laboratory Sciences segment reported that revenues grew 24%
in the fourth quarter of 2005 to $563 million, compared with $455 million in
2004. GAAP operating income for the segment increased 16% in the quarter, and
GAAP operating margin was 14.3%, versus 15.3% in the year-ago period. Adjusted
operating income grew 30% in the 2005 quarter, and adjusted operating margin
increased to 18.7%, compared with 17.8% in 2004.
Measurement and Control
Revenues in the Measurement and Control segment increased 12% to $177
million in the fourth quarter of 2005, compared with $158 million in the 2004
quarter. GAAP operating income for the segment rose 57% in the 2005 period,
and GAAP operating margin was 10.8%, compared with 7.7% a year ago. Adjusted
operating income rose 64% in the 2005 quarter, and adjusted operating margin
increased to 13.6%, from 9.3% in 2004.
Use of Non-GAAP Financial Measures
In addition to the financial measures prepared in accordance with
generally accepted accounting principles (GAAP), we use certain non-GAAP
financial measures, including adjusted EPS, adjusted operating income and
adjusted operating margin, which exclude restructuring and other costs/income
and amortization of acquisition-related intangible assets. Adjusted EPS and
adjusted operating income also exclude certain other gains and losses, tax
provisions/benefits related to the previous items, benefits from tax credit
carryforwards and the impact of significant tax audits or events. We exclude
the above items because they are outside of our normal operations and/or, in
certain cases, are difficult to forecast accurately for future periods. We
believe that the inclusion of such measures helps investors to gain a better
understanding of our core operating results and future prospects, consistent
with how management measures and forecasts the company's performance,
especially when comparing such results to previous periods or forecasts.
For example:
We exclude costs and tax effects associated with restructuring activities,
such as reducing overhead and consolidating facilities in connection with our
Kendro acquisition. We believe that the costs related to these restructuring
activities are not indicative of our normal operating costs.
We exclude charges and tax effects related to the sale of inventories
revalued at the date of acquisition, as we believe these charges are not
indicative of our normal operating costs.
We exclude the expense and tax effects associated with the amortization of
acquisition-related intangible assets because a significant portion of the
purchase price for acquisitions may be allocated to intangible assets that
have lives of 5 to 10 years. Our adjusted EPS estimate for 2006 excludes
approximately $.40 of expense for the amortization of acquisition-related
intangible assets for acquisitions completed to date. Exclusion of the
amortization expense allows comparisons of operating results that are
consistent over time for both our newly acquired and long-held businesses and
with both acquisitive and non-acquisitive peer companies.
We also exclude certain gains/losses and related tax effects, benefits
from tax credit carryforwards and the impact of significant tax audits or
events, which are either isolated or cannot be expected to occur again with
any regularity or predictability and that we believe are not indicative of our
normal operating gains and losses. We exclude gains/losses from the sale of
our equity interests in Newport Corporation and Thoratec Corporation, as well
as other items such as the sale of a business or real estate, the early
retirement of debt and discontinued operations. (We sold our remaining shares
of Newport and Thoratec during the second quarter of 2005.)
Thermo's management uses these non-GAAP measures, in addition to GAAP
financial measures, as the basis for measuring the company's core operating
performance and comparing such performance to that of prior periods and to the
performance of our competitors. Such measures are also used by management in
their financial and operating decision-making and for compensation purposes.
The non-GAAP financial measures of Thermo's results of operations included
in this press release are not meant to be considered superior to or a
substitute for Thermo's results of operations prepared in accordance with
GAAP. Reconciliations of such non-GAAP financial measures to the most directly
comparable GAAP financial measures are set forth in the accompanying tables.
Thermo's earnings guidance, however, is only provided on an adjusted basis. It
is not feasible to provide GAAP EPS guidance because the items excluded, other
than the amortization expense, are difficult to predict and estimate and are
primarily dependent on future events, such as the impact of accounting
principles not yet adopted and decisions concerning the location and timing of
facility consolidations.
Conference Call
Thermo Electron will hold its earnings conference call today, February 2,
at 9:00 a.m. Eastern time. To listen, dial 888-872-9028 within the U.S. or
973-633-6740 outside the U.S., and use passcode 6449364. You may also listen
to the call live on the Web by visiting http://www.thermo.com. Click on "About
Thermo," then "Investors." An audio archive of the call will be available in
that section of our Website until Monday, March 6, 2006. You will also find
this press release, including the accompanying reconciliation of non-GAAP
financial measures, under the heading "Press Releases," and related
information under the heading "Financial Reports," in the Investors section of
our Website.
About Thermo Electron
Thermo Electron Corporation is the world leader in analytical instruments.
Our instrument solutions enable our customers to make the world a healthier,
cleaner and safer place. Thermo's Life and Laboratory Sciences segment
provides analytical instruments, scientific equipment, services and software
solutions for life science, drug discovery, clinical, environmental and
industrial laboratories. Thermo's Measurement and Control segment is dedicated
to providing analytical instruments used in a variety of manufacturing
processes and in-the-field applications, including those associated with
safety and homeland security. For more information, visit
http://www.thermo.com.
The following constitutes a "Safe Harbor" statement under the Private
Securities Litigation Reform Act of 1995: This press release contains forward-
looking statements that involve a number of risks and uncertainties. Important
factors that could cause actual results to differ materially from those
indicated by such forward-looking statements are set forth under the heading
"Forward-Looking Statements" in the company's Quarterly Report on Form 10-Q
for the fiscal quarter ended October 1, 2005. These include risks and
uncertainties relating to: the need to develop new products and adapt to
significant technological change; dependence on customers that operate in
cyclical industries; general worldwide economic conditions and related
uncertainties; the effect of changes in governmental regulations; dependence
on customers' capital spending policies and government funding policies; use
and protection of intellectual property; exposure to product liability claims
in excess of insurance coverage; retention of contingent liabilities from
businesses we sold; realization of potential future savings from new
productivity initiatives; implementation of our branding strategy;
implementation of strategies for improving internal growth; the effect of
exchange rate fluctuations on international operations; identification,
completion and integration of new acquisitions and potential impairment of
goodwill from previous acquisitions. We undertake no obligation to publicly
update any forward-looking statement, whether as a result of new information,
future events or otherwise.
Media Contact Information: Investor Contact Information:
Lori Gorski Kenneth J. Apicerno
Phone: 781-622-1242 Phone: 781-622-1111
E-mail: lori.gorski@thermo.com E-mail: ken.apicerno@thermo.com
Website: http://www.thermo.com
Consolidated Statement of Income (unaudited) (a)
Three Months Ended
December % of December % of
31, Revenues 31, Revenues
(In thousands except per share 2005 2004
amounts)
Revenues $740,787 $613,339
Costs and Operating Expenses:
Cost of revenues (c) 398,227 53.8% 329,560 53.7%
Selling, general and
administrative expenses 185,821 25.1% 168,664 27.5%
Amortization of acquisition-
related intangible assets 25,548 3.5% 7,302 1.2%
Research and development
expenses 38,231 5.2% 34,945 5.7%
Restructuring and other costs,
net (d) 4,473 0.6% 6,821 1.1%
652,300 88.1% 547,292 89.2%
Operating Income 88,487 11.9% 66,047 10.8%
Interest Income 3,444 2,976
Interest Expense (7,966) (2,879)
Other Income, Net 876 5,870
Income from Continuing Operations
Before Income Taxes 84,841 72,014
(Provision for) Benefit from
Income Taxes (29,480) 13,468
Income from Continuing Operations 55,361 85,482
Gain on Disposal of Discontinued
Operations (net of income tax
provision of $613 in 2005;
includes income tax benefit of
$32,406 in 2004) 1,044 35,617
Net Income $56,405 7.6% $121,099 19.7%
Earnings per Share from Continuing
Operations:
Basic $.34 $.53
Diluted $.34 $.52
Earnings per Share:
Basic $.35 $.76
Diluted $.34 $.74
Weighted Average Shares:
Basic 162,341 160,239
Diluted 166,312 164,477
Reconciliation of Adjusted
Operating Income and Adjusted
Operating Margin
GAAP Operating Income (a) $88,487 11.9% $66,047 10.8%
Cost of Revenues Charges (c) 166 0.0% 280 0.0%
Restructuring and Other Costs,
Net (d) 4,473 0.6% 6,821 1.1%
Amortization of
Acquisition-related Intangible
Assets 25,548 3.5% 7,302 1.2%
Adjusted Operating Income (b) $118,674 16.0% $80,450 13.1%
Reconciliation of Adjusted Net
Income
GAAP Net Income (a) 56,405 7.6% 121,099 19.7%
Cost of Revenues Charges (c) 166 0.0% 280 0.0%
Restructuring and Other Costs,
Net (d) 4,473 0.6% 6,821 1.1%
Amortization of
Acquisition-related Intangible
Assets 25,548 3.5% 7,302 1.2%
Provision for Income Taxes (e) (5,056) -0.7% (37,665) -6.1%
Discontinued Operations,
Net of Tax (1,044) -0.1% (35,617) -5.8%
Adjusted Net Income (b) 80,492 10.9% 62,220 10.1%
Reconciliation of Adjusted Earnings
per Share
GAAP EPS (a) $0.34 $0.74
Cost of Revenues Charges, Net of
Tax (c) - -
Restructuring and Other Costs, Net
of Tax (d) 0.02 0.03
Amortization of Acquisition-related
Intangible Assets, Net of Tax 0.11 0.03
Provision for Income Taxes (e) 0.03 (0.20)
Discontinued Operations, Net of Tax (0.01) (0.22)
Adjusted EPS (b) $0.49 $0.38
(a) "GAAP" (reported) results were determined in accordance with U.S.
generally accepted accounting principles (GAAP).
(b) Adjusted results are non-GAAP measures and exclude certain charges to
cost of revenues (see note (c) for details); amortization of
acquisition-related intangible assets; restructuring and other costs,
net (see note (d) for details); the tax consequences of the preceding
items (see note (e) for details); and results of discontinued
operations.
(c) Reported results in 2005 and 2004 include $166 and $280 of charges for
accelerated depreciation on manufacturing equipment being abandoned
due to facility consolidations.
(d) Reported results in 2005 and 2004 include restructuring and other
costs, net consisting principally of severance, abandoned facility and
other expenses of real estate consolidation, net of net gains on the
sale of abandoned facilities.
(e) Reported provision for income taxes includes $9,215 and $3,883 of
incremental tax benefit in 2005 and 2004, respectively, for the items
in (b) through (d); $4,159 in 2005 of tax provision for the estimated
effect of tax audits of prior years in a non-U.S. country and $33,782
in 2004 of tax benefits that the company determined were realizable
upon completion of tax audits.
Segment Data (f)(g)(h)
Three Months Ended
December % of December % of
31, Revenues 31, Revenues
(In thousands except per share 2005 2004
amounts)
Life and Laboratory Sciences
Revenues $563,339 $454,994
Reconciliation of Adjusted
Operating Income and Adjusted
Operating Margin
GAAP Operating Income 80,605 14.3% 69,757 15.3%
Cost of Revenues Charges (i) - 0.0% 280 0.1%
Restructuring and Other Costs,
Net (j) 595 0.1% 4,285 1.0%
Amortization of
Acquisition-related Intangible
Assets 24,045 4.3% 6,541 1.4%
Adjusted Operating Income $105,245 18.7% $80,863 17.8%
Measurement and Control
Revenues $177,448 $158,345
Reconciliation of Adjusted
Operating Income and Adjusted
Operating Margin
GAAP Operating Income 19,182 10.8% 12,245 7.7%
Cost of Revenues Charges (i) 166 0.1% - 0.0%
Restructuring and Other Costs, Net
(j) 3,223 1.8% 1,714 1.1%
Amortization of
Acquisition-related Intangible
Assets 1,501 0.9% 760 0.5%
Adjusted Operating Income $24,072 13.6% $14,719 9.3%
(f) GAAP operating income and GAAP operating margin were determined in
accordance with U.S. generally accepted accounting principles.
(g) Adjusted operating income and adjusted operating margin are non-GAAP
measures and exclude the items in notes (c) and (d) and amortization
of acquisition-related intangible assets.
(h) Depreciation expense in 2005 was $8,136 at Life and Laboratory
Sciences, $2,546 at Measurement and Control and $12,380 Consolidated.
Depreciation expense in 2004 was $7,642 at Life and Laboratory
Sciences, $2,972 at Measurement and Control and $11,446 Consolidated.
(i) Includes items described in note (c).
(j) Includes items described in note (d).
Consolidated Statement of Income (a)
Year Ended
December % of December % of
31, Revenues 31, Revenues
(In thousands except per share 2005 2004
amounts)
Revenues $2,633,027 $2,205,995
Costs and Operating Expenses:
Cost of revenues (c) 1,438,079 54.6% 1,191,516 54.0%
Selling, general and
administrative expenses 684,146 26.0% 603,627 27.4%
Amortization of acquisition-
related intangible assets 77,640 3.0% 22,831 1.0%
Research and development
expenses 152,775 5.8% 134,680 6.1%
Restructuring and other costs,
net (d) 16,900 0.6% 15,829 0.7%
2,369,540 90.0% 1,968,483 89.2%
Operating Income 263,487 10.0% 237,512 10.8%
Interest Income 11,569 9,021
Interest Expense (26,715) (10,979)
Other Income, Net (e) 37,557 23,665
Income from Continuing Operations
Before Income Taxes 285,898 259,219
Provision for Income Taxes (87,597) (40,852)
Income from Continuing Operations 198,301 218,367
Income from Discontinued Operations
(includes income tax
benefit of $36,321 in 2004) - 43,018
Gain on Disposal of Discontinued
Operations (net of income tax
provision
of $16,341 in 2005; includes
income tax benefit of $36,728 in
2004) 24,917 100,452
Net Income 223,218 8.5% $361,837 16.4%
Earnings per Share from Continuing
Operations:
Basic $1.23 $1.34
Diluted $1.21 $1.31
Earnings per Share:
Basic $1.38 $2.22
Diluted $1.36 $2.17
Weighted Average Shares:
Basic 161,587 163,133
Diluted 165,334 167,641
Reconciliation of Adjusted Operating
Income and Adjusted Operating
Margin
GAAP Operating Income (a) $263,487 10.0% $237,512 10.8%
Cost of Revenues Charges (c) 13,387 0.5% 3,361 0.2%
Restructuring and Other Costs,
Net (d) 16,900 0.6% 15,829 0.7%
Amortization of Acquisition-
related Intangible Assets 77,640 3.0% 22,831 1.0%
Adjusted Operating Income (b) $371,414 14.1% $279,533 12.7%
Reconciliation of Adjusted Net
Income
GAAP Net Income (a) 223,218 8.5% 361,837 16.4%
Cost of Revenues Charges (c) 13,387 0.5% 3,361 0.2%
Restructuring and Other Costs,
Net (d) 16,900 0.6% 15,829 0.7%
Amortization of Acquisition-
related Intangible Assets 77,640 3.0% 22,831 1.0%
Other Income, Net (e) (27,594) -1.1% (9,614) -0.5%
Provision for Income Taxes (f) (23,546) -0.9% (42,377) -1.9%
Discontinued Operations, Net of
Tax (24,917) -0.9% (143,470) -6.5%
Adjusted Net Income (b) 255,088 9.7% 208,397 9.4%
Reconciliation of Adjusted Earnings
per Share
GAAP EPS (a) $1.36 $2.17
Cost of Revenues Charges, Net of
Tax (c) 0.05 0.02
Restructuring and Other Costs, Net
of Tax (d) 0.07 0.07
Amortization of Acquisition-
related Intangible Assets, Net of
Tax 0.30 0.10
Other Income, Net of Tax (e) (0.11) (0.04)
Provision for Income Taxes (f) 0.03 (0.21)
Discontinued Operations, Net of
Tax (0.15) (0.86)
Adjusted EPS (b) $1.55 $1.25
(a) "GAAP" (reported) results were determined in accordance with U.S.
generally accepted accounting principles (GAAP).
(b) Adjusted results are non-GAAP measures and exclude certain charges to
cost of revenues (see note (c) for details); amortization of
acquisition-related intangible assets; restructuring and other costs,
net (see note (d) for details); certain other income/expense (see note
(e) for details); the tax consequences of the preceding items (see
note (f) for details); and results of discontinued operations.
(c) Reported results in 2005 and 2004 include $13,387 and $3,361,
respectively, of charges primarily for the sale of inventories
revalued at the date of acquisition and accelerated depreciation on
manufacturing equipment being abandoned due to facility
consolidations.
(d) Reported results in 2005 include restructuring and other costs, net
consisting principally of severance, abandoned facility and other
expenses of real estate consolidation and net gains on the sale of
abandoned buildings. Reported results in 2004 include restructuring
and other costs, net consisting principally of severance, abandoned
facility and other expenses of real estate consolidation, gain on the
sale of a business and legal/advisory fees associated with a
reorganization of the company's non-U.S. subsidiary structure.
(e) Reported results include $27,594 and $9,614 of net gains from the sale
of shares of Newport Corporation and Thoratec Corporation in 2005 and
Thoratec Corporation in 2004, respectively.
(f) Reported provision for income taxes includes $27,705 and $7,695 of
incremental tax benefit in 2005 and 2004, respectively, for the items
in (b) through (d); $4,159 in 2005 of tax provision for the estimated
effect of tax audits of prior years in a non-U.S. country and $33,782
in 2004 of tax benefits that the company determined were realizable
upon completion of tax audits; and $900 in 2004 of tax benefit
resulting from a reorganization of the company's subsidiary structure
in Europe.
Segment Data (g)(h)(i)
Year Ended
December % of December % of
31, Revenues 31, Revenues
(In thousands except per share 2005 2004
amounts)
Life and Laboratory Sciences
Revenues $1,960,153 $1,573,445
Reconciliation of
Adjusted Operating
Income and Adjusted
Operating Margin
GAAP Operating Income 237,710 12.1% 224,393 14.3%
Cost of Revenues Charges
(j) 12,374 0.6% 3,177 0.2%
Restructuring and Other
Costs, Net (k) 5,524 0.3% 7,054 0.4%
Amortization of
Acquisition-related
Intangible Assets 72,530 3.7% 19,830 1.3%
Adjusted Operating
Income $328,138 16.7% $254,454 16.2%
Measurement and Control
Revenues $672,874 $632,550
Reconciliation of
Adjusted Operating
Income and Adjusted
Operating Margin
GAAP Operating Income 64,190 9.5% 53,376 8.4%
Cost of Revenues Charges
(j) 1,013 0.1% 184 0.0%
Restructuring and Other
Costs, Net (k) 9,870 1.5% 6,337 1.0%
Amortization of
Acquisition-related
Intangible Assets 5,105 0.8% 2,998 0.5%
Adjusted Operating
Income $80,178 11.9% $62,895 9.9%
(g) GAAP operating income and GAAP operating margin were determined in
accordance with U.S. generally accepted accounting principles.
(h) Adjusted operating income and adjusted operating margin are non-GAAP
measures and exclude the items in notes (c) and (d) and amortization
of acquisition-related intangible assets.
(i) Depreciation expense in 2005 was $30,869 at Life and Laboratory
Sciences, $9,810 at Measurement and Control and $45,632 Consolidated.
Depreciation expense in 2004 was $29,811 at Life and Laboratory
Sciences, $10,245 at Measurement and Control and $43,310 Consolidated.
(j) Includes items described in note (c).
(k) Includes items described in note (d).
Condensed Consolidated Balance Sheet
(In thousands) Dec. 31, 2005 Dec. 31, 2004
Assets
Current Assets:
Cash and cash equivalents $214,326 $326,886
Short-term available-for-sale
investments 80,661 185,369
Accounts receivable, net 565,564 469,553
Inventories 359,392 336,711
Other current assets 133,957 151,135
1,353,900 1,469,654
Property, Plant and Equipment, Net 280,654 261,041
Acquisition-related Intangible Assets 450,740 158,577
Other Assets 200,080 174,428
Goodwill 1,966,195 1,513,025
$4,251,569 $3,576,725
Liabilities and Shareholders' Equity
Current Liabilities:
Short-term obligations and current
maturities of long-term obligations $130,137 $15,017
Other current liabilities 626,334 521,159
Current liabilities of discontinued
operations 35,191 42,552
791,662 578,728
Long-term Deferred Income Taxes and
Other Long-term Liabilities 197,965 106,377
Long-term Obligations:
Senior notes 380,542 135,232
Subordinated convertible
obligations 77,234 77,234
Other 10,854 13,604
468,630 226,070
Total Shareholders' Equity 2,793,312 2,665,550
$4,251,569 $3,576,725
SOURCE Thermo Electron Corporation
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Related links:
http://www.thermo.com
Company News On-Call:
http://www.prnewswire.com/comp/877850.html
CONTACT:
Lori Gorski, +1-781-622-1242,
lori.gorski@thermo.com, or Kenneth J. Apicerno, +1-781-622-1111,
ken.apicerno@thermo.com
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