Raises Financial Guidance for the YearWALTHAM, Mass., April 26, 2006 /PRNewswire-FirstCall via COMTEX News Network/ -- Thermo Electron
Corporation (NYSE: TMO) today reported revenue growth of 22% to $684 million
in the first quarter of 2006, compared with $559 million in the 2005 quarter.
Acquisitions (net of divestitures) increased revenues by 16%, and unfavorable
currency translation reduced revenues by 4%. GAAP diluted earnings per share
(EPS) were $.28 in the 2006 quarter, compared with $.30 in the year-ago
period. GAAP earnings in the 2006 quarter reflect a $.02 impact from stock
option expense for rules that became effective in 2006 and $.07 of increased
amortization expense due to acquisitions. GAAP operating income in the first
quarter of 2006 rose 14%, and GAAP operating margin for the period was 9.9%,
versus 10.7% a year ago.
Adjusted EPS grew 34% to $.39 in the first quarter of 2006 (including $.02
of stock option expense), compared with $.29 in 2005 on a pro forma basis as
if stock option expense had been recorded in that quarter. Adjusted operating
income increased 58% in the 2006 quarter, and adjusted operating margin rose
320 basis points to 14.2%, from 11.0% in 2005 on a pro forma basis including
stock option expense.
Adjusted EPS, adjusted operating income and adjusted operating margin are
non-GAAP measures that exclude certain items detailed later in this press
release under the heading "Use of Non-GAAP Financial Measures."
First Quarter Highlights
- Revenues grew 22%
- Adjusted EPS rose 34%
- Adjusted operating margin increased 320 basis points
- Expanding mass spectrometry portfolio drives strong growth in Life and
Laboratory Sciences
- Commodity materials and environmental end markets continue to be robust
"We're off to an excellent start in 2006, continuing our trend of strong
growth in revenues and adjusted EPS, as well as significant expansion of our
adjusted operating margin," said Marijn E. Dekkers, Thermo Electron president
and chief executive officer. "The aggressive investments we've made to expand
our breadth of technologies and services are enabling us to offer more
complete solutions to the challenges our customers face in a variety of
industries. This provides us with greater pricing opportunities at a time when
our major end markets are strong.
"In life sciences, our expanding range of integrated laboratory
technologies -- from sample preparation and analysis to data interpretation --
is helping to redefine research for our customers and is leading to
accelerated growth in this part of our business. The unmatched strength and
breadth of our laboratory capabilities was evident at last month's PITTCON(R)
exhibition, where we introduced a host of important new products to strengthen
our portfolio of solutions and reinforce our position as the world leader in
analytical instruments. In industrial markets, where growth remains strong,
demand for our comprehensive offering of environmental monitoring technologies
is increasing as our customers prepare to meet strict new regulations around
the world.
"Based on our solid first quarter performance and the strength in our
markets, we are raising our 2006 guidance. For the full year, we now expect to
achieve adjusted EPS of $1.68 to $1.73 (including $.10 per share of stock
option expense), leading to a 14 to 18% increase over our pro forma 2005
results including stock option expense. We expect to report revenues in the
range of $2.81 to $2.86 billion in 2006, for a 7 to 9% increase over last
year, reflecting a more optimistic view of our growth potential and slightly
more favorable currency translation."
In the following segment information, results identified as "adjusted"
exclude stock option expense and other items described below under "Use of
Non-GAAP Financial Measures."
Life and Laboratory Sciences
The Life and Laboratory Sciences segment reported that revenues grew 30%
in the first quarter of 2006 to $512 million, compared with $393 million in
2005. GAAP operating income for the segment increased 10% in the quarter, and
GAAP operating margin was 11.1%, versus 13.2% in the year-ago period. Adjusted
operating income rose 52% in the 2006 quarter, and adjusted operating margin
increased to 16.8%, compared with 14.4% in 2005.
Measurement and Control
Revenues in the Measurement and Control segment increased 4% to $172
million in the first quarter of 2006, compared with $166 million in the 2005
quarter. GAAP operating income for the segment rose 18% in the 2006 period,
and GAAP operating margin was 12.7%, compared with 11.1% a year ago. Adjusted
operating income grew 21% in the 2006 quarter, and adjusted operating margin
increased to 14.2%, from 12.2% in 2005.
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 also
excludes certain other gains and losses, tax provisions/benefits related to
the previous items, benefits from tax credit carryforwards, the impact of
significant tax audits or events and discontinued operations. 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. Stock
option expense has been excluded from adjusted segment results because
management does not utilize that component of cost in evaluating the
performance of the segments. For purposes of comparison, 2005 consolidated
adjusted results reflect the pro forma effect of stock option expense as if it
had been required in that period. We believe that the use of 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.
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, April 26, 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 6449366. 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 Friday, May 26, 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 "Risk Factors" in the company's Annual Report on Form 10-K for the
fiscal year ended December 31, 2005. These include risks and uncertainties
relating to: the need to develop new products and adapt to significant
technological change; implementation of strategies for improving internal
growth; use and protection of intellectual property; dependence on customers'
capital spending policies and government funding policies; realization of
potential future savings from new productivity initiatives; dependence on
customers that operate in cyclical industries; general worldwide economic
conditions and related uncertainties; the effect of changes in governmental
regulations; exposure to product liability claims in excess of insurance
coverage; implementation of our branding strategy; identification, completion
and integration of new acquisitions and potential impairment of goodwill from
previous acquisitions; retention of contingent liabilities from businesses we
sold; and the effect of exchange rate fluctuations on international
operations. 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
April 1, % of April 2, % of
(In thousands except per share 2006 Revenues 2005 Revenues
amounts)
Revenues $684,287 $559,208
Costs and Operating Expenses:
Cost of revenues 371,663 54.3% 299,974 53.6%
Selling, general and
administrative expenses 176,887 25.8% 156,087 27.9%
Amortization of acquisition-
related intangible assets 25,561 3.8% 7,414 1.3%
Research and development expenses 38,737 5.7% 36,328 6.5%
Restructuring and other costs
(income), net (c) 3,594 0.5% (271) 0.0%
616,442 90.1% 499,532 89.3%
Operating Income 67,845 9.9% 59,676 10.7%
Interest Income 3,532 3,336
Interest Expense (7,795) (3,155)
Other Income, Net 484 3,123
Income from Continuing Operations
Before Income Taxes 64,066 62,980
Provision for Income Taxes (20,447) (17,397)
Income from Continuing Operations 43,619 45,583
Gain on Disposal of Discontinued
Operations (net of income tax
provision
of $1,926 in 2006 and $2,238 in
2005) 3,287 3,273
Net Income $46,906 6.9% $48,856 8.7%
Earnings per Share from Continuing
Operations:
Basic $.27 $.28
Diluted $.26 $.28
Earnings per Share:
Basic $.29 $.30
Diluted $.28 $.30
Weighted Average Shares:
Basic 163,044 160,957
Diluted 166,982 164,730
Reconciliation of Adjusted Operating
Income and Adjusted Operating Margin
GAAP Operating Income (a) $67,845 9.9% $59,676 10.7%
Restructuring and Other Costs
(Income), Net (c) 3,594 0.5% (271) 0.0%
Pro Forma Stock Option Compensation
Expense - 0.0% (5,332) -1.0%
Amortization of Acquisition-related
Intangible Assets 25,561 3.8% 7,414 1.3%
Adjusted Operating Income (b) $97,000 14.2% $61,487 11.0%
Reconciliation of Adjusted Net Income
GAAP Net Income (a) 46,906 6.9% 48,856 8.7%
Restructuring and Other Costs
(Income), Net (c) 3,594 0.5% (271) 0.0%
Pro Forma Stock Option Compensation
Expense - 0.0% (5,332) -1.0%
Amortization of Acquisition-related
Intangible Assets 25,561 3.8% 7,414 1.3%
Provision for Income Taxes (d) (7,967) -1.2% (388) 0.0%
Discontinued Operations, Net of Tax (3,287) -0.5% (3,273) -0.6%
Adjusted Net Income (b) 64,807 9.5% 47,006 8.4%
Reconciliation of Adjusted Earnings
per Share
GAAP EPS (a) $0.28 $0.30
Restructuring and Other Costs
(Income), Net of Tax (c) 0.03 -
Pro Forma Stock Option Compensation
Expense, Net of Tax - (0.02)
Amortization of Acquisition-related
Intangible Assets, Net of Tax 0.10 0.03
Discontinued Operations, Net of Tax (0.02) (0.02)
Adjusted EPS (b) $0.39 $0.29
(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 amortization of
acquisition-related intangible assets; restructuring and other costs
(income), net (see note c for details); the tax consequences of the
preceding items (see note d for details); and results of discontinued
operations. In 2005, adjusted results include pro forma stock option
compensation expense. In 2006, stock option expense is included both
reported and adjusted results as follows: cost of revenues $583;
selling, general and administrative expenses $4,456; and research and
development expenses $304.
(c) Reported results in 2006 and 2005 include restructuring and other
costs (income), net, consisting principally of severance, abandoned
facility and other expenses of real estate consolidation, net of net
gains on the sale of product lines and abandoned facilities.
(d) Reported provision for income taxes includes $7,967 and $2,254 of
incremental tax benefit in 2006 and 2005, respectively, for the items
in (b) through (c). Adjusted provision for income taxes in 2005
includes $1,866 of tax benefits for the pro forma stock option
compensation expense.
Segment Data (e)(f)(g) Three Months Ended
April 1, % of April 2, % of
(In thousands except percentage 2006 Revenues 2005 Revenues
amounts)
Life and Laboratory Sciences
Revenues $512,355 $393,305
Reconciliation of Adjusted Operating
Income and Adjusted Operating
Margin
GAAP Operating Income 56,757 11.1% 51,830 13.2%
Restructuring and Other Costs
(Income), Net (h) 3,046 0.6% (1,734) -0.5%
Stock Option Compensation Expense 2,252 0.4% - 0.0%
Amortization of Acquisition-related
Intangible Assets 24,095 4.7% 6,614 1.7%
Adjusted Operating Income $86,150 16.8% $56,710 14.4%
Measurement and Control
Revenues $171,932 $165,903
Reconciliation of Adjusted Operating
Income and Adjusted Operating
Margin
GAAP Operating Income 21,752 12.7% 18,360 11.1%
Restructuring and Other Costs, Net
(h) 540 0.3% 1,034 0.6%
Stock Option Compensation Expense 643 0.4% - 0.0%
Amortization of Acquisition-related
Intangible Assets 1,464 0.8% 799 0.5%
Adjusted Operating Income $24,399 14.2% $20,193 12.2%
(e) GAAP operating income and GAAP operating margin were determined in
accordance with U.S. generally accepted accounting principles.
(f) Adjusted operating income and adjusted operating margin are non-GAAP
measures and exclude the items in notes (c) and (d); amortization of
acquisition-related intangible assets; and for the segments, stock
option compensation expense.
(g) Depreciation expense in 2006 was $7,933 at Life and Laboratory
Sciences, $2,125 at Measurement and Control and $11,759 Consolidated.
Depreciation expense in 2005 was $6,779 at Life and Laboratory
Sciences, $2,416 at Measurement and Control and $10,152 Consolidated.
(h) Includes items described in note (c).
Condensed Consolidated Balance Sheet (unaudited)
(In thousands) Apr. 1, 2006 Dec. 31, 2005
Assets
Current Assets:
Cash and cash equivalents $230,792 $214,326
Short-term available-for-sale investments 79,761 80,661
Accounts receivable, net 542,929 565,564
Inventories 381,502 359,392
Other current assets 142,154 133,957
1,377,138 1,353,900
Property, Plant and Equipment, Net 283,106 280,654
Acquisition-related Intangible Assets 425,468 450,740
Other Assets 203,954 200,080
Goodwill 1,950,988 1,966,195
$4,240,654 $4,251,569
Liabilities and Shareholders' Equity
Current Liabilities:
Short-term obligations and current
maturities of long-term obligations $91,247 $130,137
Other current liabilities 590,497 626,334
Current liabilities of discontinued
operations 34,823 35,191
716,567 791,662
Long-term Deferred Income Taxes and
Other Long-term Liabilities 180,829 197,965
Long-term Obligations:
Senior notes 381,285 380,542
Subordinated convertible obligations 77,234 77,234
Other 10,691 10,854
469,210 468,630
Total Shareholders' Equity 2,874,048 2,793,312
$4,240,654 $4,251,569
SOURCE Thermo Electron Corporation
Lori Gorski, +1-781-622-1242, lori.gorski@thermo.com, or Kenneth J. Apicerno,
+1-781-622-1111, ken.apicerno@thermo.com, both of Thermo Electron Corporation
