UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report
(Date of earliest event reported):
February 2, 2005
----------------------------------------
THERMO ELECTRON CORPORATION
(Exact name of Registrant as specified in its Charter)
Delaware 1-8002 04-2209186
(State or other jurisdiction of (Commission File Number) (I.R.S. Employer Identification
incorporation or organization) Number)
81 Wyman Street, P.O. Box 9046
Waltham, Massachusetts 02454-9046
(Address of principal executive offices) (Zip Code)
(781) 622-1000
(Registrant's telephone number
including area code)
This Current Report on Form 8-K contains forward-looking statements that
involve a number of risks and uncertainties. Important factors that could cause
actual results to differ materially from those indicated by such forward-looking
statements are set forth under the heading "Forward Looking Statements" in the
Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended October
2, 2004. These include risks and uncertainties relating to the need to develop
new products and adapt to significant technological change, dependence on
customers that operate in cyclical industries, general worldwide economic
conditions and related uncertainties, the effect of changes in governmental
regulations, dependence on customers' capital spending policies and government
funding policies, use and protection of intellectual property, exposure to
product liability claims in excess of insurance coverage, retention of
contingent liabilities from businesses we sold, realization of potential future
savings from new productivity initiatives, implementation of new branding
strategy, implementation of strategies for improving internal growth, the effect
of exchange rate fluctuations on international operations, identification,
completion and integration of new acquisitions and potential impairment of
goodwill from previous acquisitions. While we may elect to update
forward-looking statements at some point in the future, we specifically disclaim
any obligation to do so, even if our estimates change and, therefore, you should
not rely on these forward-looking statements as representing our views as of any
date subsequent to today.
Item 2.02 Results of Operations and Financial Condition.
On February 2, 2005, the Registrant announced its financial results for the
fiscal quarter and year ended December 31, 2004. The full text of the press
release issued in connection with the announcement is attached as Exhibit 99.1
to this Form 8-K and incorporated herein by reference.
The information contained in this Form 8-K (including Exhibit 99.1) shall
not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act
of 1934 (the "Exchange Act") or otherwise subject to the liabilities of that
section, nor shall it be deemed incorporated by reference in any filing under
the Securities Act of 1933 or the Exchange Act, except as expressly set forth by
specific reference in such a filing.
Item 9.01. Financial Statements and Exhibits.
(c) Exhibits
The following Exhibit relating to Item 2.02 shall be deemed "furnished", and not
"filed":
99.1 Press Release dated February 2, 2005.
SIGNATURE
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, on this 2nd day of February, 2005.
THERMO ELECTRON CORPORATION
By: /s/ Peter E. Hornstra
----------------------------
Peter E. Hornstra
Corporate Controller and
Chief Accounting Officer
[THERMO LOGO]
Exhibit 99.1
News
FOR IMMEDIATE RELEASE
Media Contact Information: Investor Contact Information:
Lori Gorski J. Timothy Corcoran
Phone: 781-622-1242 Phone: 781-622-1111
E-mail: lori.gorski@thermo.com E-mail: tim.corcoran@thermo.com
Website: www.thermo.com
Thermo Electron Reports 16% Revenue Growth and
Record Operating Income in the Fourth Quarter
WALTHAM, Mass. (February 2, 2005) - Thermo Electron Corporation (NYSE:TMO) today
reported fourth quarter 2004 revenues of $613 million, a 16 percent increase
from $529 million in the fourth quarter of 2003. GAAP diluted earnings per share
(EPS) increased to $.74 in the 2004 quarter, compared with $.37 in the year-ago
period, primarily due to tax benefits that were recorded following the
completion of prior-year tax audits, as well as improved operating performance.
GAAP operating income for the quarter rose 25 percent, and GAAP operating margin
increased to 10.8 percent from 10.0 percent in 2003.
Adjusted EPS grew 15 percent to $.38 in the fourth quarter of 2004, compared
with $.33 in the 2003 period. Adjusted operating income increased 7 percent to
record fourth quarter levels since the company's reorganization in 2000.
Adjusted operating margin in the 2004 quarter was 13.1 percent, versus 14.2
percent in 2003. The margin in 2004 was reduced by 1.1 percent due to up-front
costs associated with Sarbanes-Oxley compliance and the initial dilutive effect
of acquisitions. Organic revenues, which exclude the effects of currency
translation and acquisitions/divestitures, grew 3 percent in the quarter.
Currency translation increased revenues by 5 percent, and the net effect of
acquisitions/divestitures led to an 8 percent increase for the quarter.
For the full year, Thermo Electron reported a revenue increase of 16 percent in
2004 to $2.2 billion, up from $1.9 billion in 2003. GAAP diluted EPS in 2004
rose to $2.17, versus $1.20 a year ago, principally driven by tax benefits,
large gains from the sale of discontinued operations, and improved operating
performance. GAAP operating income grew 27 percent over 2003, and GAAP operating
margin for the year increased to 10.8 percent, versus 9.9 percent in 2003.
Full-year adjusted EPS grew 15 percent to $1.25 in 2004, compared with $1.09 in
2003. Adjusted operating income was up 16 percent year to year, and adjusted
operating margin was 12.7 percent. Organic revenues grew 4 percent. Currency
translation increased revenues by 5 percent, and the net effect of
acquisitions/divestitures increased revenues by 7 percent for the year.
Adjusted EPS, adjusted operating income, adjusted operating margin and organic
revenues are non-GAAP measures that exclude certain items detailed at the end of
this press release under the heading, "Use of Non-GAAP Financial Measures."
Year-End Highlights
o Adjusted EPS grew 15 percent
o Reported revenues rose 16 percent
o Organic revenues increased 4 percent
o Cash flow from continuing operations rose 20 percent to $240 million
o Manufacturing centers opened in China and Germany
o Agreement announced in January 2005 to acquire Kendro Laboratory Products
"We're pleased to have achieved $.38 in adjusted EPS for the quarter, which is
at the high end of our earnings guidance," said Marijn E. Dekkers, president and
chief executive officer of Thermo Electron. "We also had an excellent year
overall, with a 16 percent increase in revenues, 15 percent growth in adjusted
EPS and strong cash flow. Our full-year adjusted EPS of $1.25 was also at the
top of our guidance range, which we raised for continuing operations after the
sale of Spectra-Physics.
"We made great strides during 2004 in changing our business mix to better serve
our laboratory customers and reinforce our position as the world leader in
analytical instruments. We sold Spectra-Physics, our only non-Thermo brand. We
made a number of strategic acquisitions - Jouan, USCS, InnaPhase, and the
recently announced agreement to acquire Kendro - to augment our offerings of
laboratory equipment, software and services. And, we continue to make
significant internal investments that allow us to strengthen our competitive
position worldwide, such as new state-of-the-art manufacturing centers we
recently opened in Shanghai, China, and Bremen, Germany.
"With a clear business focus, the ability to reinvest for growth and continuous
efforts to improve productivity, we remain optimistic and expect to begin 2005
with strength. Our goal is to report $.29 to $.31 in adjusted EPS for the first
quarter of 2005, versus $.27 in the year-ago quarter. For the full year, we are
providing guidance of $1.40 to $1.45." (This guidance excludes approximately
$.03 of expense per quarter from the amortization of acquisition-related
intangible assets; results from the pending Kendro acquisition; the effect of
new accounting rules relating to the expensing of stock options, which we expect
to adopt in the third quarter of 2005; and the other items described in this
press release under the heading, "Use of Non-GAAP Financial Measures.")
Life and Laboratory Sciences
The Life and Laboratory Sciences segment reported a 21 percent revenue increase
in the fourth quarter of 2004 to $455 million, versus $377 million in 2003.
Organic revenues grew 3 percent. The effects of currency translation and
acquisitions increased revenues by 5 percent and 13 percent, respectively. We
reported strong sales of mass spectrometry and molecular spectroscopy
instruments, laboratory automation systems and laboratory informatics, where we
have greatly extended our pharmaceutical offerings through the addition of
InnaPhase. Partially offsetting these increases, we reported extremely weak
sales of our rapid point-of-care test kits resulting from this year's light flu
season compared with an exceptionally strong quarter in 2003.
GAAP operating income for the segment grew 24 percent in the 2004 quarter, with
GAAP operating margin increasing to 15.3 percent from 14.9 percent a year ago.
Adjusted operating income increased 19 percent in the 2004 quarter, and adjusted
operating margin was 17.8 percent, compared with 18.1 percent in the 2003
quarter. The adjusted operating margin improved by 50 basis points in 2004
before the effect of acquisitions, which lowered the margin by 80 basis points.
As we continue to integrate these operations, we expect margins to improve in
future quarters.
Measurement and Control
Fourth quarter revenues in the Measurement and Control segment were $158
million, up 4 percent compared with $152 million last year. Organic revenues
grew slightly, at 1 percent, due to a difficult year-to-year comparison
resulting from large shipments of our food-quality and security instruments in
the 2003 quarter. The effect of currency translation increased revenues by 4
percent, while the net effect of acquisitions/divestitures decreased revenues by
1 percent.
GAAP operating income for the segment increased 29 percent from the 2003
quarter, and GAAP operating margin rose to 7.7 percent, versus 6.2 percent last
year. Adjusted operating income and adjusted operating margin for the segment
were virtually flat compared with 2003.
Use of Non-GAAP Financial Measures
In addition to the financial measures prepared in accordance with generally
accepted accounting principles (GAAP), we use certain non-GAAP financial
measures, including adjusted EPS, adjusted operating income and adjusted
operating margin, which exclude restructuring and other costs/income and
amortization of acquisition-related intangible assets. Adjusted EPS and adjusted
operating income also exclude certain other gains and losses, tax
provisions/benefits related to the previous items, benefits from tax credit
carryforwards and the impact of the resolution of significant tax audits. In
addition, our adjusted EPS guidance excludes results of pending acquisitions and
the impact of accounting principles not yet adopted, such as stock option
expensing. We exclude these items because they are outside of our normal
operations and/or, in certain cases, are difficult to forecast accurately for
future periods. We also use the concept of organic revenue growth, which
excludes the effects of currency translation and acquisitions/divestitures. We
believe that the inclusion of such measures helps investors to gain a better
understanding of our core operating results and future prospects, consistent
with how management measures and forecasts the company's performance, especially
when comparing such results to previous periods or forecasts.
Specifically:
We exclude costs and tax effects associated with restructuring activities, such
as reducing overhead and consolidating facilities, in connection with the final
phase of our overall reorganization, which we substantially completed in 2004.
We believe that the costs related to these restructuring activities are not
indicative of our normal operating costs.
We exclude charges relating to the sale of inventories revalued at the date of
acquisition, as we believe these charges are not indicative of our normal
operating costs.
We exclude the expense and tax effects associated with the amortization of
acquisition-related intangible assets because a significant portion of the
purchase price for acquisitions may be allocated to intangible assets that have
lives of 5 to 10 years. Exclusion of the amortization expense allows comparisons
of operating results that are consistent over time for both our newly acquired
and long-held businesses and with both acquisitive and non-acquisitive peer
companies.
We also exclude certain gains/losses and related tax effects, benefits from tax
credit carryforwards and the impact of the resolution of significant tax audits
that are either isolated or cannot be expected to occur again with any
regularity or predictability and which we believe are not indicative of our
normal operating gains and losses. We exclude gains/losses from the sale of our
equity interests in Newport Corporation, Thoratec Corporation and FLIR Systems,
Inc., as well as other items such as the sale of a business or real estate and
the early retirement of debt.
Thermo's management uses these non-GAAP measures, in addition to GAAP financial
measures, as the basis for measuring the company's core operating performance
and comparing such performance to that of prior periods and to the performance
of our competitors. Such measures are also used by management in their financial
and operating decision-making and for compensation purposes.
The non-GAAP financial measures of Thermo's results of operations included in
this press release are not meant to be considered superior to or a substitute
for Thermo's results of operations prepared in accordance with GAAP.
Reconciliations of such non-GAAP financial measures to the most directly
comparable GAAP financial measures are set forth in the accompanying tables
and/or the text of this press release. Thermo's earnings guidance, however, is
only provided on an adjusted basis. It is not feasible to provide GAAP EPS
guidance because the items excluded, other than the amortization expense, are
difficult to predict and estimate and are primarily dependent on future events,
such as the timing of completion of and results from pending acquisitions, the
impact of accounting principles not yet adopted (such as stock option
expensing), decisions concerning the location and timing of facility
consolidations and the timing of and proceeds from the sale of our equity
interests in Newport and Thoratec. We no longer own any shares of FLIR Systems.
Conference Call
Thermo Electron will hold its earnings conference call on Thursday, February 3,
at 8:30 a.m. Eastern time. To listen, dial 888-872-9028 within the U.S., or
973-633-6740 outside the U.S. You may also listen to the call live on the Web by
visiting www.thermo.com. Click on "About Thermo," then "Investors." An audio
archive of the call will be available in that section of our Website until
Friday, March 4, 2005. You will also find this press release, including the
accompanying reconciliation of non-GAAP financial measures, under the heading
"Press Releases," and related information under the heading "Financial Reports,"
in the Investors section of our Website.
About Thermo Electron
Thermo Electron Corporation is the world leader in analytical instruments. Our
instrument solutions enable our customers to make the world a healthier, cleaner
and safer place. Thermo's Life and Laboratory Sciences segment provides
analytical instruments, scientific equipment, services and software solutions
for life science, drug discovery, clinical, environmental and industrial
laboratories. Thermo's Measurement and Control segment is dedicated to providing
analytical instruments used in a variety of manufacturing processes and
in-the-field applications, including those associated with safety and homeland
security. Based near Boston, Massachusetts, Thermo has revenues of more than $2
billion, and employs approximately 10,000 people in 30 countries. For more
information, visit www.thermo.com.
The following constitutes a "Safe Harbor" statement under the Private Securities
Litigation Reform Act of 1995: This press release contains forward-looking
statements that involve a number of risks and uncertainties. Important factors
that could cause actual results to differ materially from those indicated by
such forward-looking statements are set forth under the heading "Forward-Looking
Statements" in the company's Quarterly Report on Form 10-Q for the fiscal
quarter ended October 2, 2004. These include risks and uncertainties relating
to: the need to develop new products and adapt to significant technological
change, dependence on customers that operate in cyclical industries, general
worldwide economic conditions and related uncertainties, the effect of changes
in governmental regulations, dependence on customers' capital spending policies
and government funding policies, use and protection of intellectual property,
exposure to product liability claims in excess of insurance coverage, retention
of contingent liabilities from businesses we sold, realization of potential
future savings from new productivity initiatives, implementation of new branding
strategy, implementation of strategies for improving internal growth, the effect
of exchange rate fluctuations on international operations, identification,
completion and integration of new acquisitions and potential impairment of
goodwill from previous acquisitions. We undertake no obligation to publicly
update any forward-looking statement, whether as a result of new information,
future events or otherwise.
###
Consolidated Statement of Income (unaudited)
Three Months Ended
---------------------------------------------------------------
---------------------------------------------------------------
December 31, 2004 December 31, 2003
------------------------------ ------------------------------
---------------------------------------------------------------
(In thousands except per share amounts) Reported (a) Adjusted (b) Reported (a) Adjusted (b)
- ------------------------------------------------------------------------------------------------------------------------------
Revenues $ 613,339 $ 613,339 $ 528,915 $ 528,915
-------------- ------------- -------------- -------------
Costs and Operating Expenses:
Cost of revenues (c) 329,560 329,280 285,444 285,373
Selling, general, and administrative expenses 168,664 168,664 136,273 136,273
Amortization of acquisition-related intangible assets 7,302 - 2,331 -
Research and development expenses 34,945 34,945 32,233 32,233
Restructuring and other costs, net (d) 6,821 - 19,743 -
-------------- ------------- -------------- -------------
547,292 532,889 476,024 453,879
-------------- ------------- -------------- -------------
Operating Income 66,047 80,450 52,891 75,036
Interest Income 2,976 2,976 2,007 2,007
Interest Expense (2,879) (2,879) (2,653) (2,653)
Other Income, Net (e) 5,870 5,870 6,737 788
-------------- ------------- -------------- -------------
Income from Continuing Operations Before Income Taxes 72,014 86,417 58,982 75,178
Benefit from (Provision for) Income Taxes (f) 13,468 (24,197) (11,496) (20,081)
-------------- ------------- -------------- -------------
Income from Continuing Operations 85,482 62,220 47,486 55,097
Income from Discontinued Operations (includes income tax
benefit of $91 in 2003) - - 1,684 -
Gain on Disposal of Discontinued Operations (includes income tax
benefit of $32,406 in 2004; net of income tax provision of
$7,177 in 2003) 35,617 - 12,758 -
-------------- ------------- -------------- -------------
Net Income $ 121,099 $ 62,220 $ 61,928 $ 55,097
============== ============= ============== =============
Earnings per Share from Continuing Operations:
Basic $ .53 $ .29
============== ==============
Diluted $ .52 $ .29
============== ==============
Earnings per Share:
Basic $ .76 $ .38
============== ==============
Diluted $ .74 $ .38 $ .37 $ .33
============== ============= ============== =============
Weighted Average Shares:
Basic 160,239 163,427
============== ==============
Diluted 164,477 164,477 167,812 167,812
============== ============= ============== =============
(a) Reported results were determined in accordance with U.S. generally accepted accounting principles (GAAP). Prior period
amounts have been adjusted to reflect the treatment of Spectra-Physics as a discontinued operation.
(b) Adjusted results are non-GAAP measures and exclude charges to cost of revenues (note c), amortization of acquisition-
related intangible assets, restructuring and other costs/income (note d), certain other income/expense (note e), the tax
consequences of these items (note f), and results of discontinued operations.
(c) Reported results in 2004 include $280,000 of charges for accelerated depreciation on manufacturing equipment being
abandoned due to facility consolidations. Reported results in 2003 include $71,000 of charges primarily for the sale of
inventories revalued at the date of acquisition.
facility and other expenses of real estate consolidation. Reported results in 2003 include restructuring and other items
consisting principally of severance; abandoned facility and other expenses of real estate consolidation; and legal/advisory
fees associated with a reorganization of the company's non-U.S. subsidiary structure.
(e) Reported results include $5,949,000 of gains from the sale of shares of Thoratec Corporation in 2003.
(f) Adjusted provision for income taxes excludes $3,883,000 and $4,870,000 of incremental tax benefit in 2004 and 2003,
respectively, for the items in (b) through (e); $33,782,000 in 2004 of tax benefits that the company determined were
realizable upon completion of tax audits; and $3,715,000 in 2003 of tax benefit from the sale of a business.
Segment Data (g)(h)(i)(l) Three Months Ended
-----------------------------------------
(In thousands except percentage amounts) December 31, 2004 December 31, 2003
- -----------------------------------------------------------------------------------------------------------------------------------
Life and Laboratory Sciences
Revenues $ 454,994 $ 377,143
----------------- ----------------
GAAP Operating Income 69,757 56,062
Cost of Revenue Charges (j) 280 -
Restructuring and Other Items (k) 4,285 10,457
Amortization of Acquisition-related Intangible Assets 6,541 1,684
----------------- ----------------
Adjusted Operating Income $ 80,863 $ 68,203
----------------- ----------------
GAAP Operating Margin 15.3% 14.9%
Adjusted Operating Margin 17.8% 18.1%
Measurement and Control
Revenues $ 158,345 $ 151,761
----------------- ----------------
GAAP Operating Income 12,245 9,473
Cost of Revenue Charges (j) - 71
Restructuring and Other Items (k) 1,714 4,099
Amortization of Acquisition-related Intangible Assets 760 647
----------------- ----------------
Adjusted Operating Income $ 14,719 $ 14,290
----------------- ----------------
GAAP Operating Margin 7.7% 6.2%
Adjusted Operating Margin 9.3% 9.4%
Consolidated (including Corporate Costs)
Revenues $ 613,339 $ 528,915
----------------- ----------------
GAAP Operating Income 66,047 52,891
Cost of Revenue Charges (j) 280 71
Restructuring and Other Items (k) 6,821 19,743
Amortization of Acquisition-related Intangible Assets 7,302 2,331
----------------- ----------------
Adjusted Operating Income $ 80,450 $ 75,036
----------------- ----------------
GAAP Operating Margin 10.8% 10.0%
Adjusted Operating Margin 13.1% 14.2%
(g) GAAP operating income and GAAP operating margin were determined in accordance with U.S. generally accepted accounting
principles.
(h) Adjusted operating income and adjusted operating margin are non-GAAP measures and exclude the items in notes (c) and (d)
and amortization of acquisition-related intangible assets.
(i) Depreciation expense in 2004 was $7,642,000 at Life and Laboratory Sciences, $2,972,000 at Measurement and Control,
and $11,446,000 Consolidated. Depreciation expense in 2003 was $5,811,000 at Life and Laboratory Sciences, $3,018,000 at
Measurement and Control, and $9,652,000 Consolidated.
(j) Includes items described in note (c).
(k) Includes items described in note (d).
(l) Book-to-bill ratio was .99 in the fourth quarter of 2004.
Consolidated Statement of Income
Twelve Months Ended
----------------------------------------------------------------
December 31, 2004 December 31, 2003
------------------------------ -------------------------------
(In thousands except per share amounts) Reported (a) Adjusted (b) Reported (a) Adjusted (b)
- -------------------------------------------------------------------------------------------------------------------------------
Revenues $ 2,205,995 $ 2,205,995 $ 1,899,378 $ 1,899,378
-------------- -------------- -------------- --------------
Costs and Operating Expenses:
Cost of revenues (c) 1,191,516 1,188,155 1,019,476 1,019,405
Selling, general, and administrative expenses 603,627 603,627 510,284 510,284
Amortization of acquisition-related intangible assets 22,831 - 9,038 -
Research and development expenses 134,680 134,680 127,996 127,996
Restructuring and other costs, net (d) 15,829 - 45,200
-------------- -------------- -------------- --------------
1,968,483 1,926,462 1,711,994 1,657,685
-------------- -------------- -------------- --------------
Operating Income 237,512 279,533 187,384 241,693
Interest Income 9,021 9,021 19,663 19,663
Interest Expense (10,979) (10,979) (18,197) (18,197)
Other Income, Net (e) 23,665 14,051 33,781 4,824
-------------- -------------- -------------- --------------
Income from Continuing Operations Before Income Taxes 259,219 291,626 222,631 247,983
Provision for Income Taxes (f) (40,852) (83,229) (47,421) (66,807)
-------------- -------------- -------------- --------------
Income from Continuing Operations 218,367 208,397 175,210 181,176
Income (Loss) from Discontinued Operations (includes income tax
benefit of $36,321 in 2004 and $1,485 in 2003) 43,018 - (2,513) -
Gain on Disposal of Discontinued Operations (includes income tax
benefit of $36,728 in 2004; net of income tax provision of
$8,141 in 2003) 100,452 - 27,312 -
-------------- -------------- -------------- --------------
Net Income $ 361,837 $ 208,397 $ 200,009 $ 181,176
============== ============== ============== ==============
Earnings per Share from Continuing Operations:
Basic $ 1.34 $ 1.08
============== ==============
Diluted $ 1.31 $ 1.05
============== ==============
Earnings per Share:
Basic $ 2.22 $ 1.23
============== ==============
Diluted $ 2.17 $ 1.25 $ 1.20 $ 1.09
============== ============== ============== =============
Weighted Average Shares:
Basic 163,133 162,713
============== ==============
Diluted 167,641 167,641 170,730 170,730
============== ============== ============== =============
(a) Reported results were determined in accordance with U.S. generally accepted accounting principles (GAAP). Prior period
amounts have been adjusted to reflect the treatment of Spectra-Physics as a discontinued operation.
(b) Adjusted results are non-GAAP measures and exclude charges to cost of revenues (note c), amortization of acquisition-
related intangible assets, restructuring and other costs/income (note d), certain other income/expense (note e), the tax
consequences of these items (note f), and results of discontinued operations.
(c) Reported results include $3,361,000 and $71,000 in 2004 and 2003, respectively, of charges primarily for the sale of
inventories revalued at the date of acquisition and accelerated depreciation on manufacturing equipment being abandoned
due to facility consolidations.
(d) Reported results in 2004 include restructuring and other items consisting principally of severance; abandoned facility and
other expenses of real estate consolidation; gain on the sale of a business; and legal/advisory fees associated with a
reorganization of the company's non-U.S. subsidiary structure. Reported results in 2003 include restructuring and other items
consisting principally of severance; abandoned facility and other expenses of real estate consolidation; a writedown to
disposal value of a product line and a business that were sold in October 2003; net gains on the sale of a product line and
property; and legal/advisory fees associated with a reorganization of the company's non-U.S. subsidiary structure.
(e) Reported results include $9,614,000 and $16,279,000 of gains from the sale of shares of Thoratec Corporation in 2004 and
2003, respectively, and $13,654,000 of gains from the sale of shares of FLIR Systems, Inc. in 2003. Reported results also
include a loss of $976,000 in 2003 on the early retirement of debt.
(f) Adjusted provision for income taxes excludes $7,695,000 and $6,645,000 of incremental tax benefit in 2004 and 2003,
respectively, for the items in (b) through (e); $33,782,000 in 2004 of tax benefits that the company determined were
realizable upon completion of tax audits; $900,000 in 2004 of tax benefit resulting from a reorganization of the company's
subsidiary structure in Europe; $9,026,000 in 2003 of tax benefit from the reversal of a valuation allowance due to expected
utilization of foreign tax credit carryforwards; and $3,715,000 in 2003 of tax benefit from the sale of a business.
Segment Data (g)(h)(i) Twelve Months Ended
-----------------------------------
(In thousands except percentage amounts) December 31, 2004 December 31, 2003
- -----------------------------------------------------------------------------------------------------------------------------------
Life and Laboratory Sciences
Revenues $ 1,573,445 $ 1,293,009
--------------- ----------------
GAAP Operating Income 224,393 183,533
Cost of Revenue Charges (j) 3,177 -
Restructuring and Other Items (k) 7,054 21,808
Amortization of Acquisition-related Intangible Assets 19,830 6,592
--------------- ----------------
Adjusted Operating Income $ 254,454 $ 211,933
--------------- ----------------
GAAP Operating Margin 14.3% 14.2%
Adjusted Operating Margin 16.2% 16.4%
Measurement and Control
Revenues $ 632,550 $ 601,104
--------------- ----------------
GAAP Operating Income 53,376 44,549
Cost of Revenue Charges (j) 184 71
Restructuring and Other Items (k) 6,337 10,214
Amortization of Acquisition-related Intangible Assets 2,998 2,446
--------------- ----------------
Adjusted Operating Income $ 62,895 $ 57,280
--------------- ----------------
GAAP Operating Margin 8.4% 7.4%
Adjusted Operating Margin 9.9% 9.5%
Consolidated (including Corporate Costs)
Revenues $ 2,205,995 $ 1,899,378
--------------- ----------------
GAAP Operating Income 237,512 187,384
Cost of Revenue Charges (j) 3,361 71
Restructuring and Other Items (k) 15,829 45,200
Amortization of Acquisition-related Intangible Assets 22,831 9,038
--------------- ----------------
Adjusted Operating Income $ 279,533 $ 241,693
--------------- ----------------
GAAP Operating Margin 10.8% 9.9%
Adjusted Operating Margin 12.7% 12.7%
(g) GAAP operating income and GAAP operating margin were determined in accordance with U.S. generally accepted accounting
principles.
(h) Adjusted operating income and adjusted operating margin are non-GAAP measures and exclude the items in notes (c) and
(d) and amortization of acquisition-related intangible assets.
(i) Depreciation expense in 2004 was $29,811,000 at Life and Laboratory Sciences, $10,245,000 at Measurement and Control,
and $43,310,000 Consolidated. Depreciation expense in 2003 was $23,399,000 at Life and Laboratory Sciences, $10,698,000 at
Measurement and Control, and $37,678,000 Consolidated.
(j) Includes items described in note (c).
(k) Includes items described in note (d).
Condensed Consolidated Balance Sheet
(In thousands) Dec 31, 2004 Dec. 31, 2003
- -----------------------------------------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents $ 430,809 $ 303,912
Short-term available-for-sale investments 81,446 114,326
Accounts receivable, net 469,553 419,625
Inventories 336,711 302,161
Other current assets 145,857 160,001
Current assets of discontinued operations 5,600 95,231
-------------- --------------
1,469,976 1,395,256
-------------- --------------
Property, Plant, and Equipment, Net 261,041 252,252
-------------- --------------
Acquisition-related Intangible Assets 158,577 65,542
-------------- --------------
Other Assets 181,328 47,761
-------------- --------------
Goodwill 1,513,025 1,441,172
-------------- --------------
Long-term Assets of Discontinued Operations - 187,339
-------------- --------------
$ 3,583,947 $ 3,389,322
============== ==============
Current Liabilities:
Short-term obligations and current maturities of long-term obligations $ 15,017 $ 45,981
Other current liabilities 528,381 542,993
Current liabilities of discontinued operations 42,552 95,819
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585,950 684,793
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Long-term Deferred Income Taxes and Other Long-term Liabilities 106,377 86,561
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Long-term Liabilities of Discontinued Operations - 6,766
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Long-term Obligations:
Senior notes 135,232 137,874
Subordinated convertible obligations 77,234 77,234
Other 13,604 14,401
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226,070 229,509
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Total Shareholders' Equity 2,665,550 2,381,693
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$ 3,583,947 $ 3,389,322
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