| | Thermo Electron Reports Third Quarter 2003 Results
2003-10-21 16:07 (New York)
WALTHAM, Mass., Oct. 21 /PRNewswire-FirstCall/ -- Thermo Electron
Corporation (NYSE: TMO) today reported that GAAP diluted earnings per share
(EPS) increased to $.29 in the third quarter of 2003, compared with $.23 in
the year-ago period. Earnings in 2003 included significant after-tax gains
from the disposal of discontinued operations. Revenues were $497.1 million in
2003, versus $517.2 million in 2002. Organic revenues declined 7 percent.
Organic revenues exclude the effect of currency translation (which increased
revenues by 4 percent) and the impact of acquisitions and divestitures. GAAP
operating margin for the quarter was 8.5 percent in 2003, versus 8.7 percent a
year ago.
Adjusted EPS for the third quarter of 2003 rose 8 percent to $.27,
compared with $.25 in 2002. Adjusted operating margin for the quarter
increased 110 basis points to 11.9 percent in 2003, compared with 10.8 percent
a year ago. Adjusted EPS and adjusted operating margin exclude restructuring
and other costs/income and amortization of acquisition-related intangible
assets. Adjusted EPS also excludes income from the sale of shares of FLIR
Systems and Thoratec Corporation, gains/losses on the early retirement of
debt, gains/losses on disposal of discontinued operations, tax
provisions/benefits related to the previous items, and benefit from tax credit
carryforwards. For a reconciliation of these non-GAAP financial measures to
the most directly comparable GAAP financial measures, see the accompanying
table entitled "Consolidated Statement of Income."
Marijn E. Dekkers, president and chief executive officer of Thermo
Electron, said, "Our earnings improvement continues to gain momentum, with
increases in productivity outweighing persistent industry challenges. We are
particularly pleased with the rise in our adjusted operating margins, which
were up significantly both year-to-year and sequentially. As we move into the
fourth quarter, we are cautiously optimistic that the general tone of business
is improving, evidenced by our significantly stronger book-to-bill ratio of
1.04.
"While productivity improvement remains an important objective, our
primary focus is on driving revenue growth -- both organically and through
acquisitions. We are aggressively pursuing numerous commercial initiatives to
stimulate growth. In our Life and Laboratory Sciences sector, for example, we
are now packaging complete solutions under a single Thermo brand, working in
partnership with our customers to help them equip their laboratories. We also
recently announced the acquisition of Jouan SA, a $92 million business that
expands our sample preparation and storage product line and adds distribution
channels in emerging markets such as Eastern Europe, Russia, and Latin
America. We expect to complete this acquisition by year-end."
Mr. Dekkers continued, "Going into the fourth quarter of 2003, we expect
our earnings improvement trend to continue. Our goal is to report $.32 to $.34
in adjusted EPS for the fourth quarter and $1.07 to $1.09 for the full year."
This guidance excludes $.01 of expense per quarter from the amortization of
acquisition-related intangible assets, and also excludes restructuring and
other costs/income and gains and losses from the sale of businesses, real
estate, and our remaining interest in Thoratec, as well as unusual items we
may have in the future.
Life and Laboratory Sciences
Third quarter 2003 revenues for the Life and Laboratory Sciences sector
increased slightly to $301 million; organic revenues declined 3 percent.
Ongoing weakness in industrial markets for instrumentation and scientific
equipment was offset in part by higher sales of clinical diagnostics and
laboratory informatics products during the quarter. GAAP operating margin was
14.5 percent in the third quarter of 2003, up from 14.3 percent a year ago.
Adjusted operating margin improved to 16.7 percent, compared with 16.0 percent
in 2002, resulting from productivity gains.
We continue to make good progress in positioning Thermo as the premier
supplier of laboratory products and services. New products, such as the
Finnigan LTQ-FT Fourier-transform mass spectrometer introduced earlier this
year, are generating strong orders. In the quarter, we accelerated efforts to
integrate our commercial organization and opened One Thermo customer
demonstration centers in Frankfurt, Paris, and Beijing. We also formed a
strategic alliance with Qiagen N.V., a leading supplier of innovative products
for nucleic acid separation, purification, and handling, to co-market related
technologies for use in life sciences research and molecular diagnostics.
Measurement and Control
Revenues in the Measurement and Control sector were $147 million in the
third quarter of 2003, versus $155 million in 2002; organic revenues declined
8 percent. Although many process markets we serve remain weak, some specific
markets, such as the steel industry, are showing positive signs. In addition,
homeland security initiatives continue to generate strong sales. GAAP
operating margin increased to 7.4 percent in 2003, versus 5.6 percent a year
ago. Adjusted operating margin was 9.6 percent, compared with 9.4 percent in
2002. To sharpen the sector's market focus, we acquired Siemens' Electronic
Personal Dosimetry business, which broadens our radiation-monitoring
offerings, and sold our test and measurement business to SPX Corporation --
both after quarter-end.
Optical Technologies
In the Optical Technologies sector, revenues were $52 million for the
third quarter of 2003, versus $65 million in 2002. While continued weakness in
scientific and industrial end-markets resulted in a 21 percent decline in
organic revenues year-to-year, sequentially, revenues were flat. GAAP
operating margin was negative 10.3 percent for the 2003 period, versus 0.4
percent in 2002, primarily due to the writedown of our molecular-beam epitaxy
(MBE) product line, which we sold to Oxford Instruments plc just after
quarter-end. The sector reported adjusted operating margin of 1.2 percent in
2003, compared with negative 0.6 percent last year, reflecting the positive
impact of restructuring efforts and continued productivity improvements.
During the quarter, we announced a strategic alliance with German photonics
leader Jenoptik AG to develop and market thin-disk lasers, a key technology
platform for the future.
Use of Non-GAAP Financial Measures
In addition to the financial measures prepared in accordance with
generally accepted accounting principles (GAAP), we use the non-GAAP financial
measures of adjusted EPS and adjusted operating margin, which exclude
restructuring and other costs/income and amortization of acquisition-related
intangible assets. Adjusted EPS also excludes certain other gains and losses,
tax provisions/benefits related to the previous items, and benefit from tax
credit carryforwards. We exclude these items because they are outside of our
normal operations and, in certain cases, are difficult to forecast accurately
for future periods. We believe that the inclusion of such non-GAAP 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.
Specifically:
-- We exclude costs and tax effects associated with restructuring
activities, such as reducing overhead and consolidating facilities, in
connection with the final phase of our overall reorganization, which we
expect will be substantially complete in 2004. We believe that the
costs related to these restructuring activities 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. Exclusion of the amortization
expense allows comparisons of operating results that are consistent
over time.
-- We also exclude certain gains/losses and related tax effects, as well
as benefit from tax credit carryforwards, that are either isolated or
cannot be expected to occur again with any regularity or
predictability, such as those arising from the sale of a business or
real estate, the sale of our remaining equity interests in Thoratec and
FLIR Systems, and the early retirement of debt, which we believe are
not indicative of our normal operating gains and losses.
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 decisions concerning the
location and timing of facility consolidations, and the timing of and proceeds
from the sale of our remaining equity interest in Thoratec. We no longer own
any shares of FLIR Systems.
Conference Call
Thermo Electron will hold its earnings conference call on Wednesday,
October 22, 2003, at 11 a.m. Eastern time. To listen, dial 888-872-9028 within
the U.S., or 973-633-6740 outside the U.S. You can also listen to the call
live on the Web by visiting www.thermo.com and clicking on "Investors." An
audio archive of the call will be available in that section of our Web site
until Friday, November 21, 2003. Also in that section, you will find this
press release and the accompanying reconciliation of non-GAAP financial
measures under the heading "News & Events."
About Thermo Electron
A world leader in high-tech instruments, Thermo Electron Corporation helps
life science, laboratory, and industrial customers advance scientific
knowledge, enable drug discovery, improve manufacturing processes, and protect
people and the environment with instruments, scientific equipment, and
integrated software solutions. Based in Waltham, Massachusetts, Thermo
Electron has revenues of more than $2 billion, and employs approximately
10,000 people in 30 countries worldwide. For more information, visit
www.thermo.com. |
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