Thermo Electron reports 16% revenue growth and record operating income
in the fourth quarter
2 February 2005
WALTHAM, Mass. Thermo Electron Corporation (NYSE:TMO)
today reported fourth quarter 2004 revenues of $613 million, a 16 percent
increase from $529 million in the fourth quarter of 2003. GAAP diluted
earnings per share (EPS) increased to $.74 in the 2004 quarter, compared
with $.37 in the year-ago period, primarily due to tax benefits that were
recorded following the completion of prior-year tax audits, as well as
improved operating performance. GAAP operating income for the quarter rose
25 percent, and GAAP operating margin increased to 10.8 percent from 10.0
percent in 2003.
Adjusted EPS grew 15 percent to $.38 in the fourth quarter of 2004,
compared with $.33 in the 2003 period. Adjusted operating income increased 7
percent to record fourth quarter levels since the company's reorganization
in 2000. Adjusted operating margin in the 2004 quarter was 13.1 percent,
versus 14.2 percent in 2003. The margin in 2004 was reduced by 1.1 percent
due to up- front costs associated with Sarbanes-Oxley compliance and the
initial dilutive effect of acquisitions. Organic revenues, which exclude the
effects of currency translation and acquisitions/divestitures, grew 3
percent in the quarter. Currency translation increased revenues by 5
percent, and the net effect of acquisitions/divestitures led to an 8 percent
increase for the quarter.
For the full year, Thermo Electron reported a revenue increase of 16
percent in 2004 to $2.2 billion, up from $1.9 billion in 2003. GAAP diluted
EPS in 2004 rose to $2.17, versus $1.20 a year ago, principally driven by
tax benefits, large gains from the sale of discontinued operations, and
improved operating performance. GAAP operating income grew 27 percent over
2003, and GAAP operating margin for the year increased to 10.8 percent,
versus 9.9 percent in 2003.
Full-year adjusted EPS grew 15 percent to $1.25 in 2004, compared with
$1.09 in 2003. Adjusted operating income was up 16 percent year to year, and
adjusted operating margin was 12.7 percent. Organic revenues grew 4 percent.
Currency translation increased revenues by 5 percent, and the net effect of
acquisitions/divestitures increased revenues by 7 percent for the year.
Adjusted EPS, adjusted operating income, adjusted operating margin and
organic revenues 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."
Year-end highlights
- Adjusted EPS grew 15 percent
- Reported revenues rose 16 percent
- Organic revenues increased 4 percent
- Cash flow from continuing operations rose 20 percent to $240 million
- Manufacturing centers opened in China and Germany
- Agreement announced in January 2005 to acquire Kendro Laboratory
Products
"We're pleased to have achieved $.38 in adjusted EPS for the quarter,
which is at the high end of our earnings guidance," said Marijn E. Dekkers,
president and chief executive officer of Thermo Electron. "We also had an
excellent year overall, with a 16 percent increase in revenues, 15 percent
growth in adjusted EPS and strong cash flow. Our full-year adjusted EPS of
$1.25 was also at the top of our guidance range, which we raised for
continuing operations after the sale of Spectra-Physics.
"We made great strides during 2004 in changing our business mix to better
serve our laboratory customers and reinforce our position as the world
leader in analytical instruments. We sold Spectra-Physics, our only
non-Thermo brand. We made a number of strategic acquisitions -- Jouan, USCS,
InnaPhase, and the recently announced agreement to acquire Kendro -- to
augment our offerings of laboratory equipment, software and services. And,
we continue to make significant internal investments that allow us to
strengthen our competitive position worldwide, such as new state-of-the-art
manufacturing centers we recently opened in Shanghai, China, and Bremen,
Germany.
"With a clear business focus, the ability to reinvest for growth and
continuous efforts to improve productivity, we remain optimistic and expect
to begin 2005 with strength. Our goal is to report $.29 to $.31 in adjusted
EPS for the first quarter of 2005, versus $.27 in the year-ago quarter. For
the full year, we are providing guidance of $1.40 to $1.45." (This guidance
excludes approximately $.03 of expense per quarter from the amortization of
acquisition-related intangible assets; results from the pending Kendro
acquisition; the effect of new accounting rules relating to the expensing of
stock options, which we expect to adopt in the third quarter of 2005; 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 a 21 percent revenue
increase in the fourth quarter of 2004 to $455 million, versus $377 million
in 2003. Organic revenues grew 3 percent. The effects of currency
translation and acquisitions increased revenues by 5 percent and 13 percent,
respectively. We reported strong sales of mass spectrometry and molecular
spectroscopy instruments, laboratory automation systems and laboratory
informatics, where we have greatly extended our pharmaceutical offerings
through the addition of InnaPhase. Partially offsetting these increases, we
reported extremely weak sales of our rapid point-of-care test kits resulting
from this year's light flu season compared with an exceptionally strong
quarter in 2003.
GAAP operating income for the segment grew 24 percent in the 2004
quarter, with GAAP operating margin increasing to 15.3 percent from 14.9
percent a year ago. Adjusted operating income increased 19 percent in the
2004 quarter, and adjusted operating margin was 17.8 percent, compared with
18.1 percent in the 2003 quarter. The adjusted operating margin improved by
50 basis points in 2004 before the effect of acquisitions, which lowered the
margin by 80 basis points. As we continue to integrate these operations, we
expect margins to improve in future quarters.
Measurement and control
Fourth quarter revenues in the Measurement and Control segment were $158
million, up 4 percent compared with $152 million last year. Organic revenues
grew slightly, at 1 percent, due to a difficult year-to-year comparison
resulting from large shipments of our food-quality and security instruments
in the 2003 quarter. The effect of currency translation increased revenues
by 4 percent, while the net effect of acquisitions/divestitures decreased
revenues by 1 percent.
GAAP operating income for the segment increased 29 percent from the 2003
quarter, and GAAP operating margin rose to 7.7 percent, versus 6.2 percent
last year. Adjusted operating income and adjusted operating margin for the
segment were virtually flat compared with 2003.
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