UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------------------------------
FORM 10-Q
(mark one)
[ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the Quarter Ended April 3, 2004
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File Number 1-8002
THERMO ELECTRON CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 04-2209186
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
81 Wyman Street, P.O. Box 9046
Waltham, Massachusetts 02454-9046
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (781) 622-1000
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements for
the past 90 days. Yes [ X ] No [ ]
Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes [ X ] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
Common Stock, as of the latest practicable date.
Class Outstanding at April 30, 2004
----------------------------- -----------------------------
Common Stock, $1.00 par value 165,717,120
PART I - Financial Information
Item 1 - Financial Statements
- -----------------------------
THERMO ELECTRON CORPORATION
Consolidated Balance Sheet
(Unaudited)
Assets
April 3, December 31,
(In thousands) 2004 2003
- --------------------------------------------------------------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents $ 352,994 $ 303,912
Short-term available-for-sale investments, at quoted market value (amortized
cost of $43,182 and $65,273) 91,063 114,326
Accounts receivable, less allowances of $24,766 and $26,102 458,128 460,926
Inventories:
Raw materials and supplies 132,205 134,352
Work in process 59,112 56,323
Finished goods 172,921 153,083
Deferred tax assets 115,241 113,167
Other current assets 70,013 59,167
---------- ----------
1,451,677 1,395,256
---------- ----------
Property, Plant, and Equipment, at Cost 608,622 605,691
Less: Accumulated depreciation and amortization 317,030 304,989
---------- ----------
291,592 300,702
---------- ----------
Acquisition-related Intangible Assets (Note 2) 102,319 70,903
---------- ----------
Other Assets (Note 9) 69,289 64,931
---------- ----------
Goodwill (Note 2) 1,538,630 1,557,177
---------- ----------
$3,453,507 $3,388,969
========== ==========
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THERMO ELECTRON CORPORATION
Consolidated Balance Sheet (continued)
(Unaudited)
Liabilities and Shareholders' Equity
April 3, December 31,
(In thousands except share amounts) 2004 2003
- --------------------------------------------------------------------------------------------------------------------------------
Current Liabilities:
Short-term obligations and current maturities of long-term obligations $ 40,189 $ 45,981
Accounts payable 132,845 114,206
Accrued payroll and employee benefits 78,294 100,706
Accrued income taxes 108,203 100,163
Deferred revenue 75,847 65,224
Accrued restructuring costs (Note 11) 20,033 25,198
Other accrued expenses (Notes 2 and 10) 183,718 184,502
Net liabilities of discontinued operations 47,244 48,813
---------- ----------
686,373 684,793
---------- ----------
Deferred Income Taxes (Note 2) 24,694 11,589
---------- ----------
Other Long-term Liabilities 83,778 80,272
---------- ----------
Long-term Obligations:
Senior notes (Note 9) 141,756 137,874
Subordinated convertible obligations 77,234 77,234
Other 13,809 14,401
---------- ----------
232,799 229,509
---------- ----------
Shareholders' Equity:
Preferred stock, $100 par value, 50,000 shares authorized; none issued
Common stock, $1 par value, 350,000,000 shares authorized; 177,073,926 and
175,479,994 shares issued 177,074 175,480
Capital in excess of par value 1,321,492 1,298,881
Retained earnings 1,062,542 1,019,420
Treasury stock at cost, 11,617,263 and 10,416,770 shares (225,950) (192,469)
Deferred compensation (3,759) (2,834)
Accumulated other comprehensive items (Notes 6 and 9) 94,464 84,328
---------- ----------
2,425,863 2,382,806
---------- ----------
$3,453,507 $3,388,969
========== ==========
The accompanying notes are an integral part of these consolidated financial statements.
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THERMO ELECTRON CORPORATION
Consolidated Statement of Income
(Unaudited)
Three Months Ended
---------------------------
April 3, March 29,
(In thousands except per share amounts) 2004 2003
- -------------------------------------------------------------------------------------------------------------------------------
Revenues $582,002 $500,205
-------- --------
Costs and Operating Expenses:
Cost of revenues (Note 11) 317,418 276,367
Selling, general, and administrative expenses 163,711 139,119
Research and development expenses 39,822 37,321
Restructuring and other costs, net (Note 11) 3,166 8,102
-------- --------
524,117 460,909
-------- --------
Operating Income 57,885 39,296
Other Income, Net (Note 4) 2,195 5,901
-------- --------
Income from Continuing Operations Before Provision for Income Taxes 60,080 45,197
Provision for Income Taxes (16,958) (13,806)
-------- --------
Income from Continuing Operations 43,122 31,391
Gain on Disposal of Discontinued Operations (net of income tax provision of $3,564) - 5,036
-------- --------
Net Income $ 43,122 $ 36,427
======== ========
Earnings per Share from Continuing Operations (Note 5):
Basic $ .26 $ .19
======== ========
Diluted $ .26 $ .19
======== ========
Earnings per Share (Note 5):
Basic $ .26 $ .22
======== ========
Diluted $ .26 $ .22
======== ========
Weighted Average Shares (Note 5):
Basic 165,206 162,844
======== ========
Diluted 169,996 165,614
======== ========
The accompanying notes are an integral part of these consolidated financial statements.
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THERMO ELECTRON CORPORATION
Consolidated Statement of Cash Flows
(Unaudited)
Three Months Ended
----------------------------
April 3, March 29,
(In thousands) 2004 2003
- -------------------------------------------------------------------------------------------------------------------------------
Operating Activities:
Net income $ 43,122 $ 36,427
Gain on disposal of discontinued operations, net - (5,036)
--------- ---------
Income from continuing operations 43,122 31,391
Adjustments to reconcile income from continuing operations to net cash
provided by operating activities:
Depreciation and amortization 17,513 14,034
Noncash restructuring and other costs, net (Note 11) 482 2,974
Provision for losses on accounts receivable 337 661
Change in deferred income taxes (95) 1,627
Gain on sale of businesses - (262)
Gain on investments, net (Note 4) (2,631) (5,175)
Other 2,811 1,505
Changes in current accounts, excluding the effects of acquisitions and
dispositions:
Accounts receivable 5,387 20,984
Inventories (21,350) (6,590)
Other current assets (10,266) (8,756)
Accounts payable 18,036 (7,381)
Other current liabilities (5,162) (27,290)
--------- ---------
Net cash provided by continuing operations 48,184 17,722
Net cash used in discontinued operations (1,666) (5,359)
--------- ---------
Net cash provided by operating activities 46,518 12,363
--------- ---------
Investing Activities:
Proceeds from maturities of available-for-sale investments 18,578 173,848
Proceeds from sale of available-for-sale investments 6,180 10,788
Purchases of property, plant, and equipment (11,118) (12,587)
Proceeds from sale of property, plant, and equipment 4,310 1,236
Acquisition, net of cash acquired - (2,620)
Proceeds from sale of businesses, net of cash divested - 384
Increase in other assets (694) (528)
Other (1,169) 110
--------- ---------
Net cash provided by continuing operations 16,087 170,631
Net cash provided by discontinued operations 97 1,871
--------- ---------
Net cash provided by investing activities 16,184 172,502
--------- ---------
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THERMO ELECTRON CORPORATION
Consolidated Statement of Cash Flows (continued)
(Unaudited)
Three Months Ended
----------------------------
April 3, March 29,
(In thousands) 2004 2003
- -------------------------------------------------------------------------------------------------------------------------------
Financing Activities:
Repayment of long-term obligations $ (836) $ (1,084)
Purchases of company common stock and subordinated convertible debentures (31,544) (46,102)
Net proceeds from issuance of company common stock 21,088 10,540
Decrease in short-term notes payable (2,741) (237,336)
Other 25 -
--------- ---------
Net cash used in continuing operations (14,008) (273,982)
Net cash used in discontinued operations - (3,707)
--------- ---------
Net cash used in financing activities (14,008) (277,689)
--------- ---------
Exchange Rate Effect on Cash of Continuing Operations 388 2,950
Exchange Rate Effect on Cash of Discontinued Operations - (82)
--------- ---------
Increase (Decrease) in Cash and Cash Equivalents 49,082 (89,956)
Cash and Cash Equivalents at Beginning of Period 303,912 339,067
--------- ---------
Cash and Cash Equivalents at End of Period $ 352,994 $ 249,111
========= =========
Noncash Investing Activities:
Fair value of assets of acquired product line $ - $ 3,063
Cash paid for acquired product line - (2,769)
--------- ---------
Liabilities assumed of acquired product line $ - $ 294
========= =========
The accompanying notes are an integral part of these consolidated financial statements.
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THERMO ELECTRON CORPORATION
Notes to Consolidated Financial Statements
(Unaudited)
1. General
The interim consolidated financial statements presented herein have been
prepared by Thermo Electron Corporation (the company or the Registrant), are
unaudited and, in the opinion of management, reflect all adjustments of a normal
recurring nature necessary for a fair statement of the financial position at
April 3, 2004, and the results of operations and cash flows for the three-month
periods ended April 3, 2004, and March 29, 2003. Certain prior-period amounts
have been reclassified to conform to the presentation in the current financial
statements. Interim results are not necessarily indicative of results for a full
year.
The consolidated balance sheet presented as of December 31, 2003, has
been derived from the audited consolidated financial statements as of that date.
The consolidated financial statements and notes are presented as permitted by
Form 10-Q and do not contain all of the information that is included in the
annual financial statements and notes of the company. The consolidated financial
statements and notes included in this report should be read in conjunction with
the financial statements and notes included in the company's Annual Report on
Form 10-K for the fiscal year ended December 31, 2003, filed with the Securities
and Exchange Commission (SEC).
2. Acquisitions
The company has undertaken restructuring activities at acquired
businesses. These activities, which were accounted for in accordance with
Emerging Issues Task Force Issue (EITF) No. 95-3, "Recognition of Liabilities in
Connection with a Purchase Business Combination," have primarily included
reductions in staffing levels and the abandonment of excess facilities. In
connection with these restructuring activities, as part of the cost of
acquisitions, the company established reserves, primarily for severance and
excess facilities. In accordance with EITF No. 95-3, the company finalizes its
restructuring plans no later than one year from the respective dates of the
acquisitions. Upon finalization of restructuring plans or settlement of
obligations for less than the expected amount, any excess reserves are reversed
with a corresponding decrease in goodwill or other intangible assets when no
goodwill exists. Accrued acquisition expenses are included in other accrued
expenses in the accompanying balance sheet.
On December 31, 2003, the Life and Laboratory Sciences segment acquired
Jouan SA, a global supplier of products used by life science researchers. During
the first quarter of 2004, the company determined the fair value of Jouan's
identifiable intangible assets and completed the purchase price allocation. As a
result, $34.9 million has been reclassified from goodwill to acquired intangible
assets as of April 3, 2004. In addition, the company recorded a deferred tax
liability of $12.1 million related to these intangible assets.
Acquired intangible assets for the acquisition of Jouan are as follows:
(In thousands)
- -------------------------------------------------------------------------------------------------------------------------------
Customer and Distributor Relationships $24,643
Product Technology 10,231
-------
$34,874
=======
The weighted-average amortization periods for intangible assets acquired
in the acquisition of Jouan are 6 years for customer and distributor
relationships and 5 years for product technology. The weighted-average
amortization period for all intangible assets acquired in the acquisition of
Jouan is approximately 6 years. Annual amortization expense has increased by
$6.2 million as a result of the acquisition of Jouan.
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THERMO ELECTRON CORPORATION
2. Acquisitions (continued)
There were no acquisitions completed during the first quarter of 2004.
The changes in accrued acquisition expenses for acquisitions completed during
2003 are as follows:
Abandonment
of Excess
(In thousands) Severance Facilities Other Total
- -------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 2003 $4,998 $3,925 $ 106 $9,029
Reserves established - 245 208 453
Payments (242) (225) (151) (618)
Decrease recorded as a reduction in goodwill (805) - - (805)
Currency translation (25) (23) 4 (44)
------ ------ ------ ------
Balance at April 3, 2004 $3,926 $3,922 $ 167 $8,015
====== ====== ====== ======
The 2003 acquisitions primarily consisted of Jouan. The principal accrued
acquisition expenses for 2003 acquisitions were for severance for approximately
100 employees at Jouan across all functions and the downsizing to a smaller site
of a Jouan manufacturing facility in Denmark, with a lease expiring in 2007. The
company expects to pay amounts accrued for severance and other expenses
primarily through 2004 and amounts accrued for abandonment of excess facilities
through 2007.
The changes in accrued acquisition expenses for acquisitions completed
during 2002 are as follows:
Abandonment
of Excess
(In thousands) Facilities Other Total
- -------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 2003 $ 20 $147 $167
Payments - (17) (17)
Currency translation - (1) (1)
---- ---- ----
Balance at April 3, 2004 $ 20 $129 $149
==== ==== ====
The changes in accrued acquisition expenses for acquisitions completed
prior to 2002 are as follows:
Abandonment
of Excess
(In thousands) Facilities
- -------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 2003 $6,620
Payments (54)
Currency translation 270
------
Balance at April 3, 2004 $6,836
======
The remaining accrued acquisition expenses for pre-2002 acquisitions
represent lease obligations for four abandoned operating facilities in England
with leases expiring through 2014.
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THERMO ELECTRON CORPORATION
3. Business Segment Information
Three Months Ended
---------------------------
April 3, March 29,
(In thousands) 2004 2003
- ---------------------------------------------------------------------------------------------------------------------------------
Revenues:
Life and Laboratory Sciences $365,058 $299,465
Measurement and Control 161,093 153,920
Optical Technologies 59,368 50,202
Intersegment (a) (3,517) (3,382)
-------- --------
$582,002 $500,205
======== ========
Income from Continuing Operations Before Provision for Income Taxes:
Life and Laboratory Sciences (b) $ 46,649 $ 39,022
Measurement and Control (c) 14,173 10,819
Optical Technologies (d) 4,780 (3,677)
Intersegment - 324
-------- --------
Total Operating Income - Segments 65,602 46,488
Corporate/Other (e) (5,522) (1,291)
-------- --------
$ 60,080 $ 45,197
======== ========
Depreciation:
Life and Laboratory Sciences $ 7,466 $ 5,363
Measurement and Control 2,457 2,579
Optical Technologies 2,711 2,963
Corporate 902 737
-------- --------
$ 13,536 $ 11,642
======== ========
Amortization:
Life and Laboratory Sciences $ 3,143 $ 1,588
Measurement and Control 662 523
Optical Technologies 171 281
Corporate 1 -
-------- --------
$ 3,977 $ 2,392
======== ========
(a) Intersegment sales are accounted for at prices that are representative of transactions with unaffiliated parties.
(b) Includes restructuring and other costs, net, of $3.8 million and $2.6 million in the first quarter of 2004 and 2003,
respectively.
(c) Includes restructuring and other costs, net, of $1.3 million and $3.6 million in the first quarter of 2004 and 2003,
respectively.
(d) Includes restructuring and other costs, net, of $0.1 million and $1.3 million in the first quarter of 2004 and 2003,
respectively.
(e) Includes corporate general and administrative expenses and other income and expense. Includes corporate restructuring and other
costs of $0.5 million and $0.6 million in the first quarter of 2004 and 2003, respectively. Other income, net, includes gains on
the sale of shares of Thoratec of $1.6 million in the first quarter of 2004, and gains on the sale of shares of FLIR Systems,
Inc. of $3.7 million in the first quarter of 2003 (Note 4).
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THERMO ELECTRON CORPORATION
4. Other Income, Net
The components of other income, net, in the accompanying statement of
income are as follows:
Three Months Ended
---------------------------
April 3, March 29,
(In thousands) 2004 2003
- --------------------------------------------------------------------------------------------------------------------------------
Interest Income $ 1,922 $ 7,685
Interest Expense (Note 9) (2,862) (6,904)
Gain on Investments, Net 2,631 5,175
Other Items, Net 504 (55)
------- -------
$ 2,195 $ 5,901
======= =======
The company sold 250,000 shares of Thoratec Corporation common stock
during the first quarter of 2004 and realized a gain of $1.6 million. In
addition, the company sold 100,000 shares of FLIR Systems, Inc. common stock
during the first quarter of 2003 and realized a gain of $3.7 million. This gain
included $1.2 million in the first quarter of 2003 from the recovery of amounts
written down in prior years. The company obtained common shares of Thoratec as
part of the sale of Thermo Cardiosystems Inc. in 2001 and obtained an equity
interest in FLIR as part of the acquisition of Spectra-Physics AB in 1999. At
April 3, 2004, the company owned 5.4 million shares of Thoratec with a fair
market value of $70 million, which are classified as short-term
available-for-sale investments in the accompanying balance sheet. The company no
longer owned shares of FLIR as of December 31, 2003.
5. Earnings per Share
Basic and diluted earnings per share were calculated as follows:
Three Months Ended
---------------------------
April 3, March 29,
(In thousands except per share amounts) 2004 2003
- --------------------------------------------------------------------------------------------------------------------------------
Income from Continuing Operations $ 43,122 $ 31,391
Gain on Disposal of Discontinued Operations, Net - 5,036
-------- --------
Net Income for Basic Earnings per Share 43,122 36,427
Effect of Convertible Debentures 413 52
-------- --------
Income Available to Common Shareholders, as Adjusted
for Diluted Earnings per Share $ 43,535 $ 36,479
-------- --------
Basic Weighted Average Shares 165,206 162,844
Effect of:
Stock options 2,847 1,653
Convertible debentures 1,846 917
Contingently issuable shares 97 200
-------- --------
Diluted Weighted Average Shares 169,996 165,614
-------- --------
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THERMO ELECTRON CORPORATION
5. Earnings per Share (continued)
Three Months Ended
---------------------------
April 3, March 29,
(In thousands except per share amounts) 2004 2003
- --------------------------------------------------------------------------------------------------------------------------------
Basic Earnings per Share:
Continuing operations $ .26 $ .19
Discontinued operations - .03
-------- --------
$ .26 $ .22
======== ========
Diluted Earnings per Share:
Continuing operations $ .26 $ .19
Discontinued operations - .03
-------- --------
$ .26 $ .22
======== ========
Options to purchase 10,099,000 and 12,139,000 shares of common stock were
not included in the computation of diluted earnings per share for the first
quarter of 2004 and 2003, respectively, because the options' exercise prices
were greater than the average market price for the common stock and their effect
would have been antidilutive.
In the first quarter of 2004, there were no convertible debentures
outstanding that if converted would be antidilutive. In the first quarter of
2003, the computation of diluted earnings per share excludes the effect of
assuming the conversion of the company's 3 1/4%, 4%, and 4 3/8% subordinated
convertible debentures because the effect would be antidilutive.
6. Comprehensive Income
Comprehensive income combines net income and other comprehensive items.
Other comprehensive items represents certain amounts that are reported as
components of shareholders' equity in the accompanying balance sheet, including
currency translation adjustments, unrealized gains and losses, net of tax, on
available-for-sale investments and hedging instruments, and minimum pension
liability adjustment. During the first quarter of 2004 and 2003, the company had
comprehensive income of $54.9 million and $70.4 million, respectively.
7. Stock-based Compensation Plans and Pro Forma Stock-based Compensation
Expense
The company applies Accounting Principles Board Opinion (APB) No. 25,
"Accounting for Stock Issued to Employees" and related interpretations in
accounting for its stock-based compensation plans. Accordingly, no accounting
recognition is given to stock options granted at fair market value until they
are exercised. Upon exercise, net proceeds, including tax benefits realized, are
credited to shareholders' equity.
In October 1995, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for
Stock-Based Compensation," which sets forth a fair-value-based method of
recognizing stock-based compensation expense. As permitted by SFAS No. 123, the
company has elected to continue to apply APB No. 25 to account for its
stock-based compensation plans. Had compensation cost for awards granted after
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THERMO ELECTRON CORPORATION
7. Stock-based Compensation Plans and Pro Forma Stock-based Compensation
Expense (continued)
1994 under the company's stock-based compensation plans been determined based on
the fair value at the grant dates consistent with the method set forth under
SFAS No. 123, the effect on certain financial information of the company would
have been as follows:
Three Months Ended
---------------------------
April 3, March 29,
(In thousands except per share amounts) 2004 2003
- ---------------------------------------------------------------------------------------------------------------------------------
Income from Continuing Operations:
As reported $43,122 $31,391
Add: Stock-based employee compensation expense
included in reported results, net of tax 244 484
Deduct: Total stock-based employee compensation
expense determined under the fair-value-based
method for all awards, net of tax (4,670) (6,714)
------- -------
Pro forma $38,696 $25,161
======= =======
Basic Earnings per Share from Continuing Operations:
As reported $ .26 $ .19
Pro forma $ .23 $ .15
Diluted Earnings per Share from Continuing Operations:
As reported $ .26 $ .19
Pro forma $ .23 $ .15
Net Income:
As reported $43,122 $36,427
Add: Stock-based employee compensation expense
included in reported net income, net of tax 244 484
Deduct: Total stock-based employee compensation
expense determined under the fair-value-based
method for all awards, net of tax (4,670) (6,714)
------- -------
Pro forma $38,696 $30,197
======= =======
Basic Earnings per Share:
As reported $ .26 $ .22
Pro forma $ .23 $ .19
Diluted Earnings per Share:
As reported $ .26 $ .22
Pro forma $ .23 $ .18
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THERMO ELECTRON CORPORATION
8. Defined Benefit Pension Plans
Several of the company's non-U.S. subsidiaries and one U.S. subsidiary
have defined benefit pension plans covering substantially all full-time
employees at those subsidiaries. Some of the plans are unfunded, as permitted
under the plans and applicable laws. Net periodic benefit costs for the plans in
aggregate included the following components:
Three Months Ended
----------------------
April 3, March 29,
(In thousands) 2004 2003
- ----------------------------------------------------------------------------------------------------------------------------------
Service Cost $ 1,031 $ 920
Interest Cost on Benefit Obligation 2,555 2,122
Expected Return on Plan Assets (2,134) (1,693)
Recognized Net Actuarial Loss 672 450
Amortization of Unrecognized Initial Obligation and Prior Service Cost 12 29
------- -------
$ 2,136 $ 1,828
======= =======
9. Derivative Instruments and Hedging
The company uses forward currency-exchange contracts primarily to hedge
certain operational (cash-flow hedges) and balance sheet (fair-value hedges)
exposures resulting from changes in currency exchange rates. Such exposures
result from sales that are denominated in currencies other than the functional
currencies of the respective operations. The company enters into these
currency-exchange contracts to hedge anticipated product sales and recorded
accounts receivable made in the normal course of business. Accordingly, the
hedges are not speculative in nature. As part of the company's overall strategy
to manage the level of exposure to the risk of currency-exchange fluctuations,
some operating units hedge a portion of their currency exposures anticipated
over the ensuing 12-month period, using exchange contracts that have maturities
of 12 months or less. The company does not hold or engage in transactions
involving derivative instruments for purposes other than risk management.
The company records its forward currency-exchange contracts at fair value
in its balance sheet as other current assets or other accrued expenses and, for
cash-flow hedges, the related gains or losses on these contracts are deferred as
a component of accumulated other comprehensive items in the accompanying balance
sheet. These deferred gains and losses are recognized in earnings in the period
in which the underlying anticipated transaction occurs. Unrealized gains and
losses resulting from the impact of currency exchange rate movements on
fair-value hedges are recognized in earnings in the period in which the exchange
rates change and offset the currency losses and gains on the underlying exposure
being hedged. Cash flows resulting from currency-exchange contracts qualifying
as cash-flow hedges are recorded in the accompanying statement of cash flows in
the same category as the item being hedged. At April 3, 2004, the company had
deferred losses, net of income taxes, relating to forward currency-exchange
contracts of approximately $1.9 million, substantially all of which is expected
to be recognized as expense over the next 12 months to approximately offset
gains on the exposures being hedged. The ineffective portion of the gain or loss
on derivative instruments is recorded in other income, net, in the accompanying
statement of income and is not material.
During 2002, the company entered into interest-rate swap arrangements for
its $128.7 million principal amount 7 5/8% senior notes, due in 2008, with the
objective of reducing interest costs. The arrangements provide that the company
will receive a fixed interest rate of 7 5/8%, and will pay a variable rate of
90-day LIBOR plus 2.19% (3.33% as of April 3, 2004). The swaps have terms
expiring at the maturity of the debt. The swaps are designated as fair-value
hedges and as such, are carried at fair value, which over time has resulted in
an increase in other long-term assets and long-term debt totaling $13.1 million
at April 3, 2004. The swap arrangements are with different counterparties than
the holders of the underlying debt. Management believes that any credit risk
associated with the swaps is remote based on the creditworthiness of the
financial institutions issuing the swaps.
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THERMO ELECTRON CORPORATION
10. Warranty Obligations
Product warranties are included in other accrued expenses in the
accompanying balance sheet. The changes in the carrying amount of warranty
obligations are as follows:
(In thousands)
- -------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 2003 $29,607
Provision charged to income 6,477
Usage (5,246)
Adjustments to previously provided warranties, net (1,388)
Other, net (a) 171
-------
Balance at April 3, 2004 $29,621
=======
(a) Primarily represents the effects of currency translation.
11. Restructuring and Other Costs, Net
In response to a continued downturn in markets served by the company and
in connection with the company's overall reorganization, restructuring actions
were initiated in 2002 in a number of business units to reduce costs and
redundancies, principally through headcount reductions and consolidation of
facilities. Certain costs associated with these actions are recorded when
incurred. Further actions were initiated in 2003. Restructuring and other costs
recorded in 2004 are primarily for charges associated with actions initiated
prior to 2004 that could not be recorded until incurred. The company expects to
incur an additional $2 million of restructuring costs through the remainder of
2004 for charges associated with the pre-2004 actions that cannot be recorded
until incurred. The company believes that restructuring actions undertaken in
2003 will be substantially completed in 2004.
During the first quarter of 2004, the company recorded net restructuring
and other costs by segment as follows:
Life and
Laboratory Measurement Optical
(In thousands) Sciences and Control Technologies Corporate Total
- --------------------------------------------------------------------------------------------------------------------------------
Cost of Revenues $2,346 $ 62 $ - $ - $2,408
Restructuring and Other Costs, Net 1,421 1,222 56 467 3,166
------ ------ ------ ------ ------
$3,767 $1,284 $ 56 $ 467 $5,574
====== ====== ====== ====== ======
The components of net restructuring and other costs by segment are as
follows:
Life and Laboratory Sciences
- ----------------------------
The Life and Laboratory Sciences segment recorded $3.8 million of net
restructuring and other charges in the first quarter of 2004. The segment
recorded charges to cost of revenues of $2.4 million, primarily for the sale of
inventories revalued at the date of acquisition of Jouan, and $1.4 million of
other costs. These other costs consisted of $1.0 million of cash costs,
principally associated with facility consolidations, including $0.6 million of
severance for 20 employees across all functions; $0.2 million of net
abandoned-facility costs, primarily for charges associated with facilities
vacated in prior periods that could not be recorded until incurred; and $0.2
million of other cash costs, primarily relocation expenses. In addition, the
segment recorded a loss of $0.4 million from the sale of two abandoned
buildings.
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THERMO ELECTRON CORPORATION
11. Restructuring and Other Costs, Net (continued)
Measurement and Control
- -----------------------
The Measurement and Control segment recorded $1.3 million of net
restructuring and other charges in the first quarter of 2004. The segment
recorded charges to cost of revenues of $0.1 million for the sale of inventories
revalued at the date of acquisition, and $1.2 million of other costs. These
other costs consisted of $1.1 million of cash costs, principally associated with
facility consolidations, including $0.5 million of net abandoned-facility costs,
primarily for charges associated with facilities vacated in prior periods that
could not be recorded until incurred; $0.4 million of severance for 7 employees
primarily in sales and service functions; and $0.2 million of other cash costs,
primarily relocation expenses. In addition, the segment recorded charges of $0.1
million, primarily for the writedown of equipment at an abandoned facility.
Optical Technologies
- --------------------
The Optical Technologies segment recorded $0.1 million of net
restructuring and other charges in the first quarter of 2004, consisting
primarily of cash costs associated with facility consolidations for charges that
could not be recorded until incurred.
Corporate
- ---------
The company recorded $0.5 million of restructuring and other charges at
its corporate offices in the first quarter of 2004, all of which were cash
costs. The cash costs were primarily for third-party advisory fees. While the
company no longer has any public subsidiaries, it has numerous non-U.S.
subsidiaries through which the formerly public subsidiaries conducted business.
The third-party advisory fees are being incurred to simplify this legal
structure.
General
- -------
The following table summarizes the company's severance actions in 2004.
Number of
2003 Restructuring Plans Employees
- -------------------------------------------------------------------------------------------------------------------------------
Remaining Terminations at December 31, 2003 167
Terminations Announced in 2004 27
Terminations Occurring to Date in 2004 (118)
----
Remaining Terminations at April 3, 2004 76
====
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THERMO ELECTRON CORPORATION
11. Restructuring and Other Costs, Net (continued)
The following table summarizes the cash components of the company's
restructuring plans. The noncash components and other amounts reported as
restructuring and other costs, net, in the accompanying 2004 statement of income
have been summarized in the notes to the table.
Abandonment
Employee of Excess
(In thousands) Severance Retention (a) Facilities Other Total
- --------------------------------------------------------------------------------------------------------------------------------
Pre-2001 Restructuring Plans
Balance at December 31, 2003 $ - $ 59 $ - $ - $ 59
Payments - (32) - - (32)
------- ------- ------- ------- -------
Balance at April 3, 2004 $ - $ 27 $ - $ - $ 27
======= ======= ======= ======= =======
2001 Restructuring Plans
Balance at December 31, 2003 $ 1,254 $ 16 $ 6,074 $ 138 $ 7,482
Costs incurred in 2004 - - 159 - 159
Payments (151) - (667) - (818)
Currency translation (6) - 51 - 45
------- ------- ------- ------- -------
Balance at April 3, 2004 $ 1,097 $ 16 $ 5,617 $ 138 $ 6,868
======= ======= ======= ======= =======
2002 Restructuring Plans
Balance at December 31, 2003 $ 2,093 $ 54 $ 3,264 $ 19 $ 5,430
Costs incurred in 2004 41 - 174 26 241
Payments (311) - (531) (26) (868)
Currency translation (2) - - - (2)
------- ------- ------- ------- -------
Balance at April 3, 2004 $ 1,821 $ 54 $ 2,907 $ 19 $ 4,801
======= ======= ======= ======= =======
2003 Restructuring Plans
Balance at December 31, 2003 $ 6,728 $ 68 $ 5,320 $ 111 $12,227
Costs incurred in 2004 (b) 1,070 35 394 805 2,304
Reserves reversed (18) - - - (18)
Payments (4,357) - (1,051) (867) (6,275)
Currency translation 4 - 97 (2) 99
------- ------- ------- ------- -------
Balance at April 3, 2004 $ 3,427 $ 103 $ 4,760 $ 47 $ 8,337
======= ======= ======= ======= =======
(a) Employee-retention costs are accrued ratably over the period through which employees must work to qualify for a payment.
(b) Excludes noncash charges, net, of $0.4 million and $0.1 million in the Life and Laboratory Sciences and Measurement and Control
segments, respectively.
The company expects to pay accrued restructuring costs as follows:
severance, primarily through 2005; employee-retention obligations and other
costs, primarily through 2004; and abandoned-facility payments, over lease terms
expiring through 2016.
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THERMO ELECTRON CORPORATION
12. Litigation
Continuing Operations
The company has been named a defendant, along with many other companies,
in a patent-infringement lawsuit brought by the Lemelson Medical, Education &
Research Foundation, L.P. The suit asserts that products manufactured, used, or
sold by the defendants infringe one or more patents related to methods of
machine vision or computer-image analysis. The Lemelson action seeks damages,
including enhanced damages for alleged willful infringement, attorney's fees,
and injunctive relief.
The company intends to vigorously defend this matter. In the opinion of
management, an unfavorable outcome could have a material adverse effect on the
company's financial position as well as its results of operations and cash flows
for a particular quarter or annual period.
The company's continuing and discontinued operations are defendants in a
number of other pending legal proceedings incidental to present and former
operations. The company does not expect the outcome of these proceedings, either
individually or in the aggregate, to have a material adverse effect on its
financial position, results of operations, or cash flows.
13. Subsequent Event
On April 20, 2004, the Life and Laboratory Sciences segment acquired US
Counseling Services, Inc. (USCS), a supplier of instruments, scientific
equipment, services, and software solutions to the pharmaceutical and related
industries, for approximately $78 million in cash (or $75 million, net of cash
acquired). The purchase price is subject to a post-closing adjustment. USCS
reported revenues of $57 million in 2003.
Item 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operations
- --------------------------------------------------------------------------------
Forward-looking statements, within the meaning of Section 21E of the
Securities Exchange Act of 1934, are made throughout this Management's
Discussion and Analysis of Financial Condition and Results of Operations. Any
statements contained herein that are not statements of historical fact may be
deemed to be forward-looking statements. Without limiting the foregoing, the
words "believes," "anticipates," "plans," "expects," "seeks," "estimates," and
similar expressions are intended to identify forward-looking statements. While
the company may elect to update forward-looking statements in the future, it
specifically disclaims any obligation to do so, even if the company's estimates
change, and readers should not rely on those forward-looking statements as
representing the company's views as of any date subsequent to the date of the
filing of this Quarterly Report. There are a number of important factors that
could cause the actual results of the company to differ materially from those
indicated by such forward-looking statements, including those detailed under the
heading "Forward-looking Statements" in this report on Form 10-Q.
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THERMO ELECTRON CORPORATION
Overview of Results of Operations and Liquidity
The company develops and manufactures a broad range of products that are
sold worldwide. The company expands the product lines and services it offers by
developing and commercializing its own core technologies and by making strategic
acquisitions of complementary businesses. The company's continuing operations
fall into three principal business segments: Life and Laboratory Sciences,
Measurement and Control, and Optical Technologies.
Revenues
Three Months Ended
---------------------------------------------
(Dollars in thousands) April 3, 2004 March 29, 2003
- -------------------------------------------------------------------------------------------------------------------------------
Life and Laboratory Sciences $365,058 62.7% $299,465 59.9%
Measurement and Control 161,093 27.7% 153,920 30.8%
Optical Technologies 59,368 10.2% 50,202 10.0%
Intersegment (3,517) (0.6%) (3,382) (0.7%)
-------- ----- -------- -----
$582,002 100% $500,205 100%
======== ===== ======== =====
The company's revenues grew by 16% during the first quarter of 2004. The
strengthening of non-U.S. currencies relative to the dollar caused an increase
in reported revenues. In addition to the change in revenues caused by currency
translation and acquisitions, net of divestitures, which are discussed below,
sales increased 5% in 2004, primarily due to increased demand. The higher demand
resulted primarily from a recovery in the worldwide economy that has positively
affected capital spending across most markets addressed by the company. The
rebound particularly affected the Optical Technologies segment, where capital
spending by manufacturers of microelectronics increased significantly, and the
Life and Laboratory Sciences segment, where sales of mass spectrometry and
spectroscopy instruments improved as well as informatics and service offerings.
The company's strategy over time is to augment internal growth at
existing businesses with complementary acquisitions such as those completed in
2003. These acquisitions included Jouan SA, a manufacturer of products used to
prepare and preserve laboratory samples, which was acquired on December 31,
2003; Laboratory Management Systems, Inc. (LMSi), a supplier of regulatory
instrument and consulting services to the pharmaceutical and related industries,
which was acquired in October 2003; and the personal radiation-detection
instruments product line from Siemens plc, which was acquired in October 2003.
On April 20, 2004, the company acquired US Counseling Services, Inc. (USCS; Note
13) to enhance service offerings to customers.
In the first quarter of 2004, the company's operating income and
operating income margin improved to $57.9 million and 9.9%, respectively, from
$39.3 million and 7.9%, respectively, in the first quarter of 2003. (Operating
income margin is operating income divided by revenues.) The improvement resulted
primarily from the increase in sales and from a lower cost base following
facility consolidations in 2003. Restructuring and other costs, net (including
charges to cost of revenues associated with the acquisition of Jouan), reduced
pre-tax income by $5.6 million and $8.1 million in the first quarter of 2004 and
2003, respectively.
Income from continuing operations increased to $43.1 million in 2004,
from $31.4 million in 2003, primarily due to the improvement in operating income
discussed above. The favorable effect of a lower tax rate in 2004 was more than
offset by higher net interest expense and lower gains from the sale of
securities in 2004.
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THERMO ELECTRON CORPORATION
Overview of Results of Operations and Liquidity (continued)
During the first quarter of 2004, the company's cash flow from operations
totaled $46.5 million, compared with $12.4 million in the first quarter of 2003.
The increase resulted primarily from $16.2 million of lower investment in
working capital items in 2004 and, to a lesser extent, improved operating
results.
As of April 3, 2004, the company's outstanding debt totaled $273.0
million, of which 80% is due in 2007 and thereafter. The company expects that
its existing cash and investments of $444.1 million as of April 3, 2004, and its
future cash flow from operations together with available unsecured borrowings of
up to $250 million under its revolving credit agreements are sufficient to meet
the capital requirements of its existing businesses for the foreseeable future,
including at least the next 24 months.
Critical Accounting Policies
The company's discussion and analysis of its financial condition and
results of operations is based upon its financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States of America. The preparation of these financial statements requires
the company to make estimates and judgments that affect the reported amounts of
assets, liabilities, revenue and expenses, and related disclosure of contingent
liabilities. On an on-going basis, the company evaluates its estimates,
including those related to bad debts, inventories, intangible assets, warranty
obligations, income taxes, pension costs, contingencies and litigation,
restructuring, and sale of businesses. The company bases its estimates on
historical experience, current market and economic conditions, and other
assumptions that management believes are reasonable. The results of these
estimates form the basis for judgments about the carrying value of assets and
liabilities where the values are not readily apparent from other sources. Actual
results may differ from these estimates under different assumptions or
conditions.
The company believes the following represent its critical accounting
policies and estimates used in the preparation of its financial statements:
(a) The company maintains allowances for doubtful accounts for estimated
losses resulting from the inability of its customers to pay amounts
due. Such allowances totaled $24.8 million at April 3, 2004. The
company estimates the amount of customer receivables that are
uncollectible based on the age of the receivable, the
creditworthiness of the customer, and any other information that is
relevant to the judgment. If the financial condition of the company's
customers were to deteriorate, reducing their ability to make
payments, additional allowances would be required.
(b) The company writes down its inventories for estimated obsolescence
for differences between the cost and estimated net realizable value
based on usage in the preceding 12 months, expected demand, and any
other information that is relevant to the judgment. If ultimate usage
or demand vary significantly from expected usage or demand,
additional writedowns may be required.
(c) The company periodically evaluates goodwill for impairment using
market comparables for similar businesses or forecasts of discounted
future cash flows. Goodwill totaled $1.539 billion at April 3, 2004.
Estimates of future cash flows require assumptions related to revenue
and operating income growth, asset-related expenditures, working
capital levels, and other factors. Different assumptions from those
made in the company's analysis could materially affect projected cash
flows and the company's evaluation of goodwill for impairment. Should
the fair value of the company's goodwill decline because of reduced
operating performance, market declines, or other indicators of
impairment, charges for impairment of goodwill may be necessary.
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THERMO ELECTRON CORPORATION
Critical Accounting Policies (continued)
(d) The company reviews other long-lived assets for impairment when
indication of potential impairment exists, such as a significant
reduction in cash flows associated with the assets. Other long-lived
assets totaled $463.2 million at April 3, 2004, including $291.6
million of fixed assets. In testing a long-lived asset for
impairment, assumptions are made concerning projected cash flows
associated with the asset. Estimates of future cash flows require
assumptions related to revenue and operating income growth and
asset-related expenditures associated with the asset being reviewed
for impairment. Should future cash flows decline significantly from
estimated amounts, charges for impairment of other long-lived assets
may be necessary.
(e) In instances where the company sells equipment with a related
installation obligation, the company generally recognizes revenue
related to the equipment when title passes. The company recognizes
revenue related to the installation when it performs the
installation. The allocation of revenue between the equipment and the
installation is based on relative fair value at the time of sale.
Should the fair value of either the equipment or the installation
change, the company's revenue recognition would be affected.
(f) In instances where the company sells equipment with
customer-specified acceptance criteria, the company must assess
whether it can demonstrate adherence to the acceptance criteria prior
to the customer's acceptance testing to determine the timing of
revenue recognition. If the nature of customer-specified acceptance
criteria were to change or grow in complexity such that the company
could not demonstrate adherence, the company would be required to
defer additional revenues upon shipment of its products until
completion of customer acceptance testing.
(g) At the time the company recognizes revenue, it provides for the
estimated cost of product warranties based primarily on historical
experience and knowledge of any specific warranty problems that
indicate projected warranty costs may vary from historical patterns.
The liability for warranty obligations totaled $29.6 million at April
3, 2004. Should product failure rates or the actual cost of
correcting product failures vary from estimates, revisions to the
estimated warranty liability would be necessary.
(h) The company estimates the degree to which tax assets and loss
carryforwards will result in a benefit based on expected
profitability by tax jurisdiction, and provides a valuation allowance
for tax assets and loss carryforwards that it believes will more
likely than not go unused. If it becomes more likely than not that a
tax asset or loss carryforward will be used, the company reverses the
related valuation allowance. The company's tax valuation allowance
totaled approximately $75 million at April 3, 2004. Should the
company's actual future taxable income by tax jurisdiction vary from
estimates, additional allowances or reversals thereof may be
necessary.
(i) The company provides a liability for future income tax payments in
the worldwide tax jurisdictions in which it operates. Accrued income
taxes totaled $108.2 million at April 3, 2004. Should tax return
positions that the company expects are sustainable not be sustained
upon audit, the company could be required to record an incremental
tax provision for such taxes. Should disputed positions that are
reserved ultimately be sustained, the company would recognize a
reduction in its tax provision.
(j) The company estimates losses on contingencies and litigation and
provides a reserve for these losses. Should the ultimate losses on
contingencies and litigation vary from estimates, adjustments to
those reserves may be required.
(k) One of the company's U.S. subsidiaries and several non-U.S.
subsidiaries sponsor defined benefit pension plans. Major assumptions
used in the accounting for these employee benefit plans include the
discount rate, expected return on plan assets, and rate of increase
in employee compensation levels. Assumptions are determined based on
company data and appropriate market indicators in consultation with
the company's actuaries, and are evaluated each year as of the plans'
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THERMO ELECTRON CORPORATION
Critical Accounting Policies (continued)
measurement date. Net periodic pension costs for defined benefit
plans totaled $2.1 million in the first quarter of 2004. Should any
of these assumptions change, they would have an effect on net
periodic pension costs.
(l) The company records restructuring charges for the cost of vacating
facilities based on future lease obligations and expected sub-rental
income. The company's accrued restructuring costs for abandoned
facilities totaled $13.3 million at April 3, 2004. Should actual cash
flows associated with sub-rental income from vacated facilities vary
from estimated amounts, adjustments may be required.
(m) The company estimates the expected proceeds from any businesses held
for sale and, when necessary, records losses to reduce the carrying
value of these businesses to estimated realizable value. Should the
actual or estimated proceeds, which would include post-closing
purchase price adjustments, vary from current estimates, results
could differ from expected amounts.
Results of Operations
First Quarter 2004 Compared With First Quarter 2003
- ---------------------------------------------------
Continuing Operations
Sales in the first quarter of 2004 were $582.0 million, an increase of
$81.8 million from the first quarter of 2003. The favorable effects of currency
translation resulted in an increase in revenues of $34.2 million in 2004. Sales
increased $22.1 million due to acquisitions, net of divestitures. In addition to
the changes in revenue resulting from currency translation, acquisitions, and
divestitures, revenues increased $25.5 million, or 5%, primarily due to
increased demand, as described by segment below.
Operating Income Margin
Three Months Ended
-----------------------
April 3, March 29,
2004 2003
- ----------------------------------------------------------------------------------------------------------------------------------
Life and Laboratory Sciences 12.8% 13.0%
Measurement and Control 8.8% 7.0%
Optical Technologies 8.1% (7.3%)
Consolidated 9.9% 7.9%
Operating income was $57.9 million in the first quarter of 2004, compared
with $39.3 million in the first quarter of 2003. Operating income margin
increased to 9.9% in 2004 from 7.9% in 2003. Operating income increased
primarily due to higher revenues in each segment and, to a lesser extent, a
lower cost base following restructuring actions in 2003. Operating income in
2004 was reduced by additional charges associated with restructuring actions
initiated in 2003 and 2002 and certain other costs, net (Note 11). Operating
income in 2003 was reduced by charges associated with restructuring plans
initiated during 2003 and 2002, and certain other costs, net. The restructuring
and other items totaled $5.6 million and $8.1 million in 2004 and 2003,
respectively, and are discussed by segment below.
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THERMO ELECTRON CORPORATION
First Quarter 2004 Compared With First Quarter 2003 (continued)
- ---------------------------------------------------
Restructuring actions were initiated in 2003 in a number of business
units to reduce costs and redundancies in response to a downturn in markets
served by the company and in connection with the company's overall
reorganization, principally through headcount reductions and consolidation of
facilities. The company expects to incur an additional $2 million of
restructuring costs, primarily in 2004, for charges associated with these
actions that cannot be recorded until incurred. The company believes that
restructuring actions undertaken in 2003 will be substantially completed in
2004. The company does not currently expect to undertake significant
restructuring actions in 2004.
Life and Laboratory Sciences
Three Months Ended
----------------------------------
April 3, March 29,
(Dollars in thousands) 2004 2003 Change
- -------------------------------------------------------------------------------------------------------------------------------
Revenues $365,058 $299,465 21.9%
Operating Income Margin 12.8% 13.0% (0.2%)
Sales in the Life and Laboratory Sciences segment increased $65.6
million, or 22%, to $365.1 million in the first quarter of 2004. The favorable
effects of currency translation resulted in an increase in revenues of $22.9
million in 2004. Sales increased $27.8 million due to the acquisitions of Jouan
in December 2003 and LMSi in October 2003, net of product line divestitures. In
addition to the changes in revenues resulting from currency translation,
acquisitions, and divestitures, revenues increased $14.9 million, or 5%, due to
higher demand. The increase in demand resulted in higher sales of mass
spectrometry and spectroscopy instruments and, to a lesser extent, laboratory
information and services. The combination of new products and a rebound in sales
to industrial markets along with continued strength in pharmaceutical demand
have driven the instrument sales growth.
Operating income margin decreased to 12.8% in the first quarter of 2004
from 13.0% in the first quarter of 2003. Operating income margin was affected by
restructuring and other costs, net, of $3.8 million and $2.6 million in 2004 and
2003, respectively, as discussed below. The decrease in operating income margin
was also due to the inclusion of the results of Jouan and LMSi, which have
historically operated at lower levels of profitability compared with the
segment's existing businesses. The segment is currently integrating Jouan with
its existing operations and expects to improve its margin, taking advantage of
operating synergies in areas such as sales and service and research activities
to reduce costs. The segment's amortization of intangible assets increased by
$1.6 million over the 2003 quarter, primarily as a result of the two
acquisitions.
In the first quarter of 2004, the segment recorded restructuring and
other costs, net, of $3.8 million, including charges to costs of revenues of
$2.4 million, primarily for the sale of inventories revalued at the date of
acquisition of Jouan, and $1.0 million of cash costs, primarily for severance,
abandoned facilities, and relocation expenses at businesses that have been
consolidated. In addition, the segment recorded a loss of $0.4 million from the
sale of two abandoned buildings (Note 11). In 2003, the segment recorded
restructuring and other costs, net, of $2.6 million, including $2.7 million of
cash costs, primarily for abandoned facilities, employee retention, and
severance at businesses being consolidated. In addition, the segment recorded a
charge of $0.4 million to writedown the carrying value of a building held for
sale to net realizable value, offset by $0.5 million of net gains, primarily for
the sale of a product line.
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THERMO ELECTRON CORPORATION
First Quarter 2004 Compared With First Quarter 2003 (continued)
- ---------------------------------------------------
Measurement and Control
Three Months Ended
----------------------------------
April 3, March 29,
(Dollars in thousands) 2004 2003 Change
- -------------------------------------------------------------------------------------------------------------------------------
Revenues $161,093 $153,920 4.7%
Operating Income Margin 8.8% 7.0% 1.8%
Sales in the Measurement and Control segment increased $7.2 million, or
5%, to $161.1 million in the first quarter of 2004. The favorable effects of
currency translation resulted in an increase in revenues of $9.0 million in
2004. Sales decreased $3.3 million due to divestitures, net of acquisitions. In
addition to the changes in revenue resulting from currency translation,
acquisitions, and divestitures, revenues increased $1.5 million, or 1%. The
increase was primarily the result of a rebound in demand for precision
temperature-control products, particularly from the semiconductor industry.
Operating income margin increased to 8.8% in the first quarter of 2004
from 7.0% in the first quarter of 2003. Operating income margin was affected by
restructuring and other costs, net, of $1.3 million and $3.6 million in 2004 and
2003, respectively, as discussed below. The increase in operating income margin
resulted primarily from the $2.3 million reduction in restructuring and other
costs, net and, to a lesser extent, from cost reduction measures following
restructuring actions in 2002 and 2003.
In the first quarter of 2004, the segment recorded restructuring and
other costs, net, of $1.3 million, including cash costs of $1.1 million,
principally for abandoned facilities, severance, and relocation expenses at
businesses that have been consolidated. In addition, the segment recorded
charges of $0.1 million, primarily for the writedown of equipment at an
abandoned facility, and charges to costs of revenues of $0.1 million for the
sale of inventories revalued at the date of acquisition (Note 11). In 2003, the
segment recorded restructuring and other costs, net, of $3.6 million, including
$2.0 million of cash costs, principally for severance and relocation expenses at
businesses being consolidated. In addition, the segment recorded a charge of
$1.6 million, primarily for the writedown of goodwill in a business held for
sale to reduce the value to estimated disposal value.
Optical Technologies
Three Months Ended
----------------------------------
April 3, March 29,
(Dollars in thousands) 2004 2003 Change
- -------------------------------------------------------------------------------------------------------------------------------
Revenues $59,368 $50,202 18.3%
Operating Income Margin 8.1% (7.3%) 15.4%
Sales in the Optical Technologies segment increased $9.2 million, or 18%,
to $59.4 million in the first quarter of 2004. The favorable effects of currency
translation resulted in an increase in revenues of $2.3 million in 2004. Sales
decreased $2.3 million as a result of a product line divestiture. In addition to
the changes in revenue resulting from currency translation and a divestiture,
revenues increased $9.2 million, primarily due to increased demand. The
increased demand was principally the result of a rebound in demand for lasers
and photonics from microelectronics customers and other industrial markets
served by the segment.
Operating income margin was 8.1% in the first quarter of 2004, compared
with negative 7.3% in the first quarter of 2003. Operating income margin was
affected by restructuring and other costs, net, of $0.1 million and $1.3 million
in 2004 and 2003, respectively, as discussed below. The increase in the
segment's operating income was principally due to the increase in revenues
combined with the cost reduction and productivity measures undertaken in 2003
and, to a lesser extent, lower restructuring and other costs.
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THERMO ELECTRON CORPORATION
First Quarter 2004 Compared With First Quarter 2003 (continued)
- ---------------------------------------------------
In the first quarter of 2004, the segment recorded restructuring and
other costs, net, of $0.1 million, primarily cash costs associated with facility
consolidations that could not be recorded until incurred (Note 11). In 2003, the
segment recorded restructuring and other costs, net, of $1.3 million, including
a charge of $1.0 million for the writedown of a facility held for sale to
estimated disposal value, and $0.3 million of cash costs at businesses being
consolidated.
Other Income, Net
- -----------------
The company reported other income, net, of $2.2 million and $5.9 million
in the first quarter of 2004 and 2003, respectively (Note 4). Other income, net,
includes interest income, interest expense, gain on investments, net, and other
items, net. Interest income decreased to $1.9 million in 2004 from $7.7 million
in 2003, primarily due to lower invested cash balances following the repurchase
and redemption of company securities and the payment of short-term notes payable
and, to a lesser extent, lower prevailing interest rates. Interest expense
decreased to $2.9 million in 2004 from $6.9 million in 2003 as a result of the
redemption, maturity, and repurchase of debentures.
During the first quarter of 2004 and 2003, the company had gains on
investments, net, of $2.6 million and $5.2 million, respectively. The gains
included $1.6 million in 2004 from the sale of shares of Thoratec Corporation
and $3.7 million in 2003 from the sale of shares of FLIR Systems, Inc. Of the
total gain from the sale of FLIR shares, $1.2 million represents a recovery of
amounts written down in prior years when the company deemed an impairment of its
investment in FLIR to be other than temporary.
Provision for Income Taxes
- --------------------------
The company's effective tax rate was 28.2% and 30.5% in the first quarter
of 2004 and 2003, respectively. The effective tax rate decreased in 2004
primarily due to a reorganization of certain non-U.S. subsidiaries initiated
after the first quarter of 2003 that reduced the effective tax rate in the
balance of 2003 and thereafter.
In the normal course of business, the company and its subsidiaries are
examined by various tax authorities, including the Internal Revenue Service
(IRS). The IRS has concluded its field examination for the tax years 1997
through 2000 as part of its routine examinations of the company's income tax
returns. At the conclusion of the field examination, several issues were
unresolved and are currently being reviewed at the Appeals Office of the IRS. In
2004, the company expects to resolve the disputed issues and complete the
examination. Although the outcome of these matters cannot presently be
determined, management believes that it may reach favorable settlement of the
examinations upon completion of the appellate review by the IRS. Unfavorable
settlement of any particular issue would require use of cash. Favorable
resolution would result in a reduction to the company's effective tax rate in
the quarter of resolution. Any additional impact on the company's liability for
income taxes cannot presently be determined; however, the company believes its
accrued income tax liabilities are adequate.
Contingent Liabilities
- ----------------------
At April 3, 2004, the company was contingently liable with respect to
certain lawsuits. An unfavorable outcome in the matter described in Note 12
could materially affect the company's financial position as well as its results
of operations and cash flows for a particular quarterly or annual period.
Discontinued Operations
During the first quarter of 2003, the company recorded an after-tax gain
on disposal of discontinued operations of $5.0 million, resulting primarily from
the sale of the last remaining business in discontinued operations, Peter
Brotherhood Ltd., and a favorable post-closing adjustment resulting from the
2002 sale of its Trophy Radiologie business.
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THERMO ELECTRON CORPORATION
Liquidity and Capital Resources
First Quarter 2004
- ------------------
Consolidated working capital was $765.3 million at April 3, 2004,
compared with $710.5 million at December 31, 2003. Included in working capital
were cash, cash equivalents, and short-term available-for-sale investments of
$444.1 million at April 3, 2004, compared with $418.2 million at December 31,
2003.
Cash provided by operating activities was $46.5 million during the first
quarter of 2004, including $48.1 million provided by continuing operations and
$1.7 million used by discontinued operations. Payments for restructuring actions
of the company's continuing operations, principally severance, lease costs, and
other expenses of real estate consolidation, used cash of $5.5 million, net of
taxes, in the first quarter of 2004. Inventories increased $21.4 million, due in
part to increased production of mass spectrometry and spectroscopy instruments
in response to higher demand for these products. An increase in accounts payable
was a source of $18.0 million of cash due to a higher volume of purchase
activity. The use of cash of $1.7 million for discontinued operations was
principally due to the payment of liabilities, including settlement of
litigation and lease payments on abandoned facilities.
In connection with restructuring actions undertaken by continuing
operations, the company had accrued $20.0 million for restructuring costs at
April 3, 2004. The company expects to pay approximately $6.3 million of this
amount for severance primarily through 2005, and $0.4 million for employee
retention and other costs primarily through 2004. The balance of $13.3 million
will be paid for lease obligations over the remaining terms of the leases, with
approximately three-quarters to be paid through 2005 and the remainder through
2016. In addition, at April 3, 2004, the company had accrued $15.0 million for
acquisition expenses. Accrued acquisition expenses included $4.2 million of
severance and relocation obligations, which the company expects to pay primarily
through 2004. The balance primarily represents abandoned-facility payments that
will be paid over the remaining terms of the leases through 2014.
During the first quarter of 2004, the primary investing activities of the
company's continuing operations, excluding available-for-sale investment
activities, included the purchase of property, plant, and equipment. The company
expended $6.8 million for purchases of property, plant, and equipment, net of
dispositions. On April 20, 2004, the company used cash of $75 million, net of
cash acquired, for the acquisition of USCS (Note 13).
The company's financing activities used $14.0 million of cash during the
first quarter of 2004. During the first quarter of 2004, the company expended
$2.7 million to reduce short-term notes payable. The company received net
proceeds of $21.1 million from the exercise of employee stock options. During
the first quarter of 2004, the company expended $31.5 million to repurchase 1.1
million shares of the company's common stock. As of April 3, 2004, the company
had approximately $100 million remaining under Board of Directors'
authorizations to repurchase its own securities.
The company has no material commitments for purchases of property, plant,
and equipment and expects that for all of 2004, such expenditures will
approximate $55 - $65 million. The company's contractual obligations and other
commercial commitments did not change materially between December 31, 2003 and
April 3, 2004.
The company believes that its existing resources, including cash and
investments, future cash flow from operations, and available borrowings under
credit facilities are sufficient to meet the working capital requirements of its
existing businesses for the foreseeable future, including at least the next 24
months.
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THERMO ELECTRON CORPORATION
First Quarter 2003
- ------------------
Cash provided by operating activities was $12.4 million during the first
quarter of 2003, including $17.7 million provided by continuing operations and
$5.4 million used by discontinued operations. Payments for restructuring actions
of the company's continuing operations, principally severance, lease costs, and
other expenses of real estate consolidation, used cash of $10.3 million, net of
taxes, in the first quarter of 2003. Aside from cash used for restructuring
actions, a decrease in other current liabilities used cash of $17.1 million,
including $24.1 million of accrued payroll and employee benefits due to the
timing of payments, offset in part by an increase in deferred revenue. The use
of cash of $5.4 million for discontinued operations was principally due to the
payment of liabilities, including settlement of litigation and lease payments on
abandoned facilities.
During the first quarter of 2003, the primary investing activities of the
company's continuing operations, excluding available-for-sale investment
activities, included the purchase of property, plant, and equipment and an
acquisition. The company's continuing operations expended $11.4 million for
purchases of property, plant, and equipment, net of dispositions, and $2.6
million for a product line acquisition.
The company's financing activities used $277.7 million of cash during the
first quarter of 2003, including $274.0 million for continuing operations.
During the first quarter of 2003, the company's continuing operations expended
$237.3 million to reduce short-term notes payable. The company's continuing
operations received net proceeds of $10.5 million from the exercise of employee
stock options. During the first quarter of 2003, the company expended $46.1
million to repurchase its debt and equity securities, of which $30.4 million was
used to repurchase 1.7 million shares of the company's common stock.
Item 3 - Quantitative and Qualitative Disclosures About Market Risk
- -------------------------------------------------------------------
The company's exposure to market risk from changes in interest rates,
currency exchange rates, and equity prices has not changed materially from its
exposure at year-end 2003.
Item 4 - Controls and Procedures
- --------------------------------
The company's management, with the participation of the company's chief
executive officer and chief financial officer, evaluated the effectiveness of
the company's disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) as of April 3, 2004. Based on this evaluation,
the company's chief executive officer and chief financial officer concluded
that, as of April 3, 2004, the company's disclosure controls and procedures were
effective in providing reasonable assurance that information required to be
disclosed by the company in the reports that it files or submits under the
Exchange Act is recorded, processed, summarized and reported within the time
periods specified in the SEC's rules and forms.
There have been no changes in the company's internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))
during the fiscal quarter ended April 3, 2004 that have materially affected or
are reasonably likely to materially affect the company's internal control over
financial reporting.
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THERMO ELECTRON CORPORATION
Forward-looking Statements
In connection with the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995, we caution readers that the following important
factors, among others, in some cases have affected, and in the future could
affect, our actual results and could cause our actual results in 2004 and beyond
to differ materially from those expressed in any forward-looking statements made
by us.
We must develop new products, adapt to rapid and significant
technological change, and respond to introductions of new products in order to
remain competitive. Our growth strategy includes significant investment in and
expenditures for product development. We sell our products in several industries
that are characterized by rapid and significant technological changes, frequent
new product and service introductions, and enhancements and evolving industry
standards. Without the timely introduction of new products, services, and
enhancements, our products and services will likely become technologically
obsolete over time, in which case our revenue and operating results would
suffer.
Our customers use many of our products to develop, test, and manufacture
their own products. As a result, we must anticipate industry trends and develop
products in advance of the commercialization of our customers' products. If we
fail to adequately predict our customers' needs and future activities, we may
invest heavily in research and development of products and services that do not
lead to significant revenue.
Many of our existing products and those under development are
technologically innovative and require significant planning, design,
development, and testing at the technological, product, and
manufacturing-process levels. These activities require us to make significant
investments.
Products in our markets undergo rapid and significant technological
change because of quickly changing industry standards and the introduction of
new products and technologies that make existing products and technologies
uncompetitive or obsolete. Our competitors may adapt more quickly to new
technologies and changes in customers' requirements than we can. The products
that we are currently developing, or those we will develop in the future, may
not be technologically feasible or accepted by the marketplace, and our products
or technologies could become uncompetitive or obsolete.
We sell our products and services to a number of companies that operate
in cyclical industries, which would adversely affect our results of operations
when those industries experience a downturn. The growth and profitability of
some of our businesses depend in part on sales to industries that are subject to
cyclical downturns. For example, our Optical Technologies segment depends in
part on sales to the semiconductor industry, and our Measurement and Control
segment depends in part on sales to the steel and cement industries. Slowdowns
in these industries would adversely affect sales by these segments, which in
turn would adversely affect our revenues and results of operations.
Our business is impacted by general worldwide economic conditions and
related uncertainties affecting markets in which we operate. Adverse economic
conditions worldwide could adversely impact our business in 2004 and beyond,
resulting in:
- reduced demand for some of our products;
- increased rate of order cancellations or delays;
- increased risk of excess and obsolete inventories;
- increased pressure on the prices for our products and services; and
- greater difficulty in collecting accounts receivable.
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THERMO ELECTRON CORPORATION
Forward-looking Statements (continued)
Changes in governmental regulations may reduce demand for our products or
increase our expenses. We compete in many markets in which we and our customers
must comply with federal, state, local, and international regulations, such as
environmental, health and safety, and food and drug regulations. We develop,
configure, and market our products to meet customer needs created by those
regulations. Any significant change in regulations could reduce demand for our
products. For example, many of our instruments are marketed to the
pharmaceutical industry for use in discovering and developing drugs. Changes in
the U.S. Food and Drug Administration's regulation of the drug discovery and
development process could have an adverse effect on the demand for these
products.
Demand for most of our products depends on capital spending policies of
our customers and on government funding policies. Our customers include
manufacturers of semiconductors and products incorporating semiconductors,
pharmaceutical and chemical companies, laboratories, universities, healthcare
providers, government agencies, and public and private research institutions.
Many factors, including public policy spending priorities, available resources,
and product and economic cycles, have a significant effect on the capital
spending policies of these entities. These policies in turn can have a
significant effect on the demand for our products.
Our inability to protect our intellectual property could have a material
adverse effect on our business. In addition, third parties may claim that we
infringe their intellectual property, and we could suffer significant litigation
or licensing expense as a result. We place considerable emphasis on obtaining
patent and trade secret protection for significant new technologies, products,
and processes because of the length of time and expense associated with bringing
new products through the development process and into the marketplace. Our
success depends in part on our ability to develop patentable products and obtain
and enforce patent protection for our products both in the United States and in
other countries. We own numerous U.S. and foreign patents, and we intend to file
additional applications, as appropriate, for patents covering our products.
Patents may not be issued for any pending or future patent applications owned by
or licensed to us, and the claims allowed under any issued patents may not be
sufficiently broad to protect our technology. Any issued patents owned by or
licensed to us may be challenged, invalidated, or circumvented, and the rights
under these patents may not provide us with competitive advantages. In addition,
competitors may design around our technology or develop competing technologies.
Intellectual property rights may also be unavailable or limited in some foreign
countries, which could make it easier for competitors to capture increased
market position. We could incur substantial costs to defend ourselves in suits
brought against us or in suits in which we may assert our patent rights against
others. An unfavorable outcome of any such litigation could materially adversely
affect our business and results of operations.
We also rely on trade secrets and proprietary know-how which we seek to
protect, in part, by confidentiality agreements with our collaborators,
employees, and consultants. These agreements may be breached and we may not have
adequate remedies for any breach. In addition, our trade secrets may otherwise
become known or be independently developed by our competitors.
Third parties may assert claims against us to the effect that we are
infringing on their intellectual property rights. We could incur substantial
costs and diversion of management resources in defending these claims, which
could have a material adverse effect on our business, financial condition, and
results of operations. In addition, parties making these claims could secure a
judgment awarding substantial damages, as well as injunctive or other equitable
relief, which could effectively block our ability to make, use, sell,
distribute, or market our products and services in the United States or abroad.
In the event that a claim relating to intellectual property is asserted against
us, or third parties not affiliated with us hold pending or issued patents that
relate to our products or technology, we may seek licenses to such intellectual
property or challenge those patents. However, we may be unable to obtain these
licenses on commercially reasonable terms, if at all, and our challenge of the
patents may be unsuccessful. Our failure to obtain the necessary licenses or
other rights could prevent the sale, manufacture, or distribution of our
products and, therefore, could have a material adverse effect on our business,
financial condition, and results of operations.
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THERMO ELECTRON CORPORATION
Forward-looking Statements (continued)
If any of our security products fail to detect explosives or radiation,
we could be exposed to product liability and related claims for which we may not
have adequate insurance coverage. The products sold by our environmental
instruments division include a comprehensive range of fixed and portable
instruments used for chemical, radiation, and trace explosives detection. These
products are used in airports, embassies, cargo facilities, border crossings,
and other high-threat facilities for the detection and prevention of terrorist
acts. If any of these products were to malfunction, it is possible that
explosive or radioactive material could pass through the product undetected,
which could lead to product liability claims. There are also many other factors
beyond our control that could lead to liability claims, such as the reliability
and competence of the customer's operators and the training of such operators.
Any such product liability claims brought against us could be significant and
any adverse determination may result in liabilities in excess of our insurance
coverage. Although we carry product liability insurance, we cannot be certain
that our current insurance will be sufficient to cover these claims or that it
can be maintained on acceptable terms, if at all.
We have retained contingent liabilities from businesses that we have
sold. From 1997 through 2003, we divested over 60 businesses with aggregate
annual revenues in excess of $2 billion. As part of these transactions, we
retained responsibility for some of the contingent liabilities related to these
businesses, such as lawsuits, product liability claims, and potential claims by
buyers that representations and warranties we made about the businesses were
inaccurate. The resolution of these contingencies has not had a material adverse
effect on our results of operations or financial condition; however, we can not
be certain that this favorable pattern will continue.
Our results could be impacted if we are unable to realize potential
future benefits from new productivity initiatives. In addition to the real
estate consolidations and cost-saving initiatives that we have pursued over the
past three years, we are instituting practical process improvement (PPI)
programs at our locations to further enhance our productivity, efficiency, and
customer satisfaction. While we anticipate continued benefits from these PPI
initiatives as well as our continuing sourcing activities, future benefits are
expected to be fewer and smaller in size and may be more difficult to achieve.
Our new branding strategy could be unsuccessful. We historically operated
our business largely as autonomous, unaffiliated companies, and as a result,
each of our businesses independently created and developed its own brand names.
Our new marketing and branding strategy transitions multiple, unrelated brands
to two brands, Thermo Electron and Spectra-Physics. Several of our former brands
such as Finnigan, Nicolet, and Oriel commanded strong market recognition and
customer loyalty. We believe the transition to the two new brands enhances and
strengthens our collective brand image and brand awareness across the entire
company. Our success in promoting our brands depends on many factors, including
effective communication of the transition to our customers, acceptance and
recognition by customers of these new brands, and successful execution of the
branding campaign by our marketing and sales teams. If we are not successful
with this strategy, we may experience erosion in our product recognition, brand
image and customer loyalty, and a decrease in demand for our products.
It may be difficult for us to implement our strategies for improving
internal growth. Some of the markets in which we compete have been flat or
declining over the past several years. To address this issue, we are pursuing a
number of strategies to improve our internal growth, including:
- finding new markets for our products;
- developing new applications for our technologies;
- combining sales and marketing operations in appropriate markets to
compete more effectively;
- allocating research and development funding to products with higher
growth prospects;
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THERMO ELECTRON CORPORATION
Forward-looking Statements (continued)
- continuing key customer initiatives;
- strengthening our presence in selected geographic markets; and
- continuing the development of commercial tools and infrastructure to
increase and support cross-selling opportunities of products and
services to take advantage of our breadth in product offerings.
We may not be able to successfully implement these strategies, and these
strategies may not result in the growth of our business.
As a multinational corporation, we are exposed to fluctuations in
currency exchange rates, which could adversely affect our cash flows and results
of operations. International revenues account for a substantial portion of our
revenues, and we intend to continue expanding our presence in international
markets. In 2003, our international revenues from continuing operations,
including export revenues from the United States, accounted for approximately
56% of our total revenues. The exposure to fluctuations in currency exchange
rates takes on different forms. International revenues are subject to the risk
that fluctuations in exchange rates could adversely affect product demand and
the profitability in U.S. dollars of products and services provided by us in
international markets, where payment for our products and services is made in
the local currency. As a multinational corporation, our businesses occasionally
invoice third-party customers in currencies other than the one in which they
primarily do business (the "functional currency"). Movements in the invoiced
currency relative to the functional currency could adversely impact our cash
flows and our results of operations. In addition, reported sales made in
non-U.S. currencies by our international businesses, when translated into U.S.
dollars for financial reporting purposes, fluctuate due to exchange rate
movement. Should our international sales grow, exposure to fluctuations in
currency exchange rates could have a larger effect on our financial results. In
fiscal 2003 and 2002, currency translation had a favorable effect on revenues of
our continuing operations of $120.8 million and $28.7 million, respectively,
while in fiscal 2001, the unfavorable effects of currency translation decreased
revenues of our continuing operations by $46.5 million.
Our inability to successfully identify and complete acquisitions or
successfully integrate any new or previous acquisitions could have a material
adverse effect on our business. Our business strategy includes the acquisition
of technologies and businesses that complement or augment our existing products
and services. Promising acquisitions are difficult to identify and complete for
a number of reasons, including competition among prospective buyers and the need
for regulatory, including antitrust, approvals. We may not be able to identify
and successfully complete transactions. Any acquisition we may complete may be
made at a substantial premium over the fair value of the net assets of the
acquired company. Further, we may not be able to integrate any acquired
businesses successfully into our existing businesses, make such businesses
profitable, or realize anticipated cost savings or synergies, if any, from these
acquisitions, which could adversely affect our business.
Moreover, we previously acquired several companies and businesses. As a
result of these acquisitions, we recorded significant goodwill on our balance
sheet, which amounts to approximately $1.5 billion as of April 3, 2004. We
assess the realizability of the goodwill we have on our books annually as well
as whenever events or changes in circumstances indicate that the goodwill may be
impaired. These events or circumstances generally include operating losses or a
significant decline in earnings associated with the acquired business or asset.
Our ability to realize the value of the goodwill will depend on the future cash
flows of these businesses. These cash flows in turn depend in part on how well
we have integrated these businesses. If we are not able to realize the value of
the goodwill, we may be required to incur material charges relating to the
impairment of those assets.
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THERMO ELECTRON CORPORATION
PART II - OTHER INFORMATION
Item 2 - Changes in Securities, Use of Proceeds, and Issuer Purchases of Equity
Securities
- --------------------------------------------------------------------------------
The company has a repurchase program in place that authorizes the
purchase of up to $100 million of the company's equity (and debt) securities in
the open market or in negotiated transactions. During the first quarter of 2004,
the company repurchased 1,125,000 shares of its common stock for $31.5 million.
A summary of the share repurchase activity for the company's first
quarter of 2004 follows:
Total Number Maximum
of Shares Dollar Amount
Purchased of Shares That
as Part of May Yet Be
Total Publicly Purchased
Number Announced Under the
of Shares Average Price Plans or Plans or
Period Purchased Paid per Share Programs (1) Programs (1)
- --------------------------------------------------------------------------------------------------------------------------------
January 1 - January 31 - $ - - $ 73,108,900
February 1 - February 28 1,125,000 28.04 1,125,000 100,000,000
February 29 - April 3 - - - 100,000,000
------------ ------------
Total First Quarter 1,125,000 $ 28.04 1,125,000 $100,000,000
============ ============ ============ ============
(1) On February 27, 2003, the company announced a repurchase program authorizing the purchase of up to $100 million of the company's
equity (and debt) securities. All shares of the company's common stock purchased during the first quarter of 2004 were purchased
under this program, which expired on February 26, 2004. Subsequently, on February 26, 2004, the company announced a new
authorization for the purchase of up to $100 million of the company's equity (and debt) securities. This authorization will
expire on February 25, 2005.
Item 6 - Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) Exhibits
See Exhibit Index on page immediately preceding exhibits.
(b) Report on Form 8-K
On February 5, 2004, the company furnished a Current Report on Form 8-K
with respect to the company's financial results for the quarter ended December
31, 2003.
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THERMO ELECTRON CORPORATION
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized as of the 10th day of May 2004.
THERMO ELECTRON CORPORATION
/s/ Theo Melas-Kyriazi
-------------------------------------------------
Theo Melas-Kyriazi
Vice President and Chief Financial Officer
/s/ Peter E. Hornstra
------------------------------------------------
Peter E. Hornstra
Corporate Controller and Chief Accounting Officer
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THERMO ELECTRON CORPORATION
EXHIBIT INDEX
Exhibit
Number Description
- --------------------------------------------------------------------------------
31.1 Certification of Chief Executive Officer required by Exchange Act
Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.
31.2 Certification of Chief Financial Officer required by Exchange Act
Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.
32.1 Certification of Chief Executive Officer required by Exchange Act
Rules 13a-14(b) and 15d-14(b), as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.*
32.2 Certification of Chief Financial Officer required by Exchange Act
Rules 13a-14(b) and 15d-14(b), as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.*
*Certification is not deemed "filed" for purposes of Section 18 of the Exchange
Act, or otherwise subject to the liability of that section. Such certification
is not deemed to be incorporated by reference into any filing under the
Securities Act or the Exchange Act, except to the extent that the registrant
specifically incorporates it by reference.
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