EX-99.1 CHARTER 2 ex99_1.htm EXHIBIT 99.1 Exhibit 99.1
 
 
 

 
FOR IMMEDIATE RELEASE
  
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:  www.thermo.com
  
 
 
Thermo Electron Reports Continued Strong Growth in Revenues
and Operating Income in First Quarter 2006
 
Raises Financial Guidance for the Year
 
WALTHAM, Mass., April 26, 2006 - 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® 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 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 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.
 
 

 
###
 
 
 

Consolidated Statement of Income (unaudited) (a)
                  
   
Three Months Ended
  
   
April 1,
  
% of
  
April 2,
  
% of
  
(In thousands except per share amounts)
  
2006
  
Revenues
  
2005
  
Revenues
  
                   
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 amounts)
  
2006
  
Revenues
  
2005
  
Revenues
  
                   
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