| | Thermo Electron Corporation Reports Second Quarter with 12% Revenue Growth
Tuesday July 27, 4:16 pm ET
WALTHAM, Mass., July 27 /PRNewswire-FirstCall/ -- Thermo Electron Corporation (NYSE: TMO - News) today reported GAAP diluted earnings per share (EPS) of $.54 for the second quarter of 2004, compared with $.32 in the year-ago period. The 2004 quarter includes a tax benefit in discontinued operations of $.23 per share that became realizable upon execution of the June 2004 agreement to sell the Optical Technologies segment (Spectra-Physics). Second- quarter revenues were $525 million, up 12 percent from $467 million a year ago. GAAP operating income increased 19 percent, compared to the 2003 quarter, and GAAP operating margin rose to 11.2 percent, versus 10.6 percent in 2003. Results for the 2003 quarter have been reclassified to reflect Spectra-Physics as a discontinued operation. Thermo filed a Form 8-K on July 26, 2004 with the Securities and Exchange Commission that includes financial information pertaining to this reclassification.
Adjusted EPS increased 7 percent for the second quarter of 2004 to $.29, compared with $.27 in 2003. Adjusted operating income increased 16 percent over the 2003 quarter, and adjusted operating margin rose 40 basis points to 12.5 percent, compared with 12.1 percent a year ago. 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."
Revenues for the quarter increased 12 percent. Organic revenues, which exclude the effects of currency translation and acquisitions/divestitures, grew 3 percent. Currency translation increased revenues by 3 percent, and the net effect of acquisitions/divestitures increased revenues by 6 percent.
Second-quarter Highlights
* Reported revenues increased 12 percent
* Organic revenues grew 3 percent
* Adjusted operating income increased 16 percent
* Mass spectrometry continued strong growth
* Laboratory services business USCS acquired for $75 million
* Spectra-Physics sold for $300 million after quarter end
Marijn E. Dekkers, president and chief executive officer of Thermo Electron, said, "We are pleased to deliver adjusted earnings per share at the top of our guidance range, as well as solid increases in revenues, operating margins, and cash flow. We continue to drive growth by bringing innovative instrument solutions to our customers, both in the laboratory and the process manufacturing environment.
"We are seeing the results of these efforts, particularly in the life science markets we serve, with continued strong sales of mass spectrometry systems and new technology platforms in our anatomical pathology and laboratory automation businesses."
Dekkers continued, "As a result of the Spectra-Physics sale to Newport Corporation, we are now focusing all of our resources on our two core segments, Life and Laboratory Sciences and Measurement and Control, where our instrument solutions enable our customers to make the world a healthier, cleaner, and safer place.
"In June, when we announced the agreement to sell Spectra-Physics, we adjusted our full-year 2004 guidance to $1.20 to $1.25, which included a $.04 increase in our core business to account for improved operating performance. We are reiterating this adjusted EPS guidance for the year. For the third quarter of 2004, our adjusted EPS guidance is $.28 to $.30."
This guidance excludes approximately $.03 of expense per quarter from the amortization of acquisition-related intangible assets, an additional gain of approximately $.20 from the July 2004 sale of Spectra-Physics, and the other items described in this press release under the heading, "Use of Non-GAAP Financial Measures."
Life and Laboratory Sciences
The Life and Laboratory Sciences segment reported $370 million in revenues for the second quarter of 2004, versus $314 million last year, an increase of 18 percent. Organic revenues rose 2 percent. The effect of currency translation increased revenues by 3 percent and acquisitions increased revenues by 12 percent. Strong sales of mass spectrometry systems, as well as anatomical pathology and laboratory automation systems, were partially offset by weaker results in Europe across the segment and lower sales of rapid test kits for diagnosing respiratory disease. Also during the quarter, the acquisition of USCS was completed, bringing asset management capabilities to Thermo's laboratory services business.
GAAP operating income increased 21 percent, and GAAP operating margin increased to 14.4 percent from 14.0 percent in the 2003 period. Adjusted operating income for the segment increased 16 percent, and adjusted operating margin declined to 15.6 percent, versus 15.8 percent in the 2003 period. The inclusion of the recently acquired Jouan, LMSi, and USCS businesses reduced the segment's adjusted operating margin by 60 basis points. The company expects margins from these acquired businesses to improve in ensuing quarters.
Measurement and Control
Second-quarter revenues in the Measurement and Control segment increased 3 percent to $155 million, versus $151 million last year. Organic revenues increased 3 percent. This increase is an early indication of the strengthening of our industrial end-markets. The effect of currency translation increased revenues by 3 percent, while the net effect of acquisitions/divestitures decreased revenues by 3 percent. GAAP operating income for the segment declined 7 percent from the 2003 period, and GAAP operating margin decreased to 8.0 percent in 2004, versus 8.8 percent a year ago. This change is due primarily to a gain on the sale of real estate in the 2003 period. Adjusted operating income for the segment increased 4 percent from the 2003 period, and adjusted operating margin was 9.3 percent, up from 9.2 percent in 2003.
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, 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 also use the concept of organic revenue growth, which excludes the effects of currency translation and acquisitions/divestitures. 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.
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 charges relating 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. 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, 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 and/or the text of this press release. 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, July 28, at 8:30 a.m. Eastern time. To listen, dial 888-872-9028 within the U.S., or 973-633-6740 outside the U.S. You may also listen to the call live on the Web by visiting thermo.com. Click on "About Us," then "Investors." An audio archive of the call will be available in that section of our Website until Friday, August 27, 2004. 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 business provides analytical instruments, scientific equipment, services, and software solutions for life science, drug discovery, clinical, environmental, and industrial laboratories. Thermo's Measurement and Control business 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. Based near Boston, Massachusetts, Thermo has revenues of more than $2 billion, and employs approximately 10,000 people in 30 countries. For more information, visit thermo.com. |
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