What drove the strong revenue growth in 1993?

Most of the growth came from acquisitions. Instruments sales rose $167.5 million, with about $153 million from newly acquired businesses. Biomedical Products sales more than doubled to $127.5 million, mainly from Lorad and Nicolet Biomedical. Organic growth was modest in most segments, though Thermedics' high-speed quality assurance system added $24.4 million in Advanced Technologies.

How much of the earnings came from sustainable operations versus one-time or non-operating items?

Pre-tax income of $131.1 million included $39.9 million of gains from subsidiary stock issuances and $9.8 million from terminating a power sales agreement, while equity losses (mainly Dade County) reduced income by $21.1 million. Restructuring charges of $8.3 million were also recorded. Management says it aims to grow segment income so that subsidiary-stock gains become a smaller share of net income.

What are the main legal and financial risks disclosed?

The main risk is the Dade County cogeneration project in Florida. The joint venture is suing the county for over $60 million, while the county has counterclaimed for over $28 million and asserted about $10.5 million in property taxes. FERC is also considering whether the project lost its qualifying facility status, which could create refund liabilities. If the lease defaults, the company could be liable for about half of deficiencies of roughly $54 million or $42 million. Separately, there are a Connecticut environmental penalty case and CERCLA Superfund notices, which management does not expect to be material.

Does the company pay dividends, and how is it funded?

The company has never paid cash dividends and does not expect to in the foreseeable future, preferring to reinvest earnings in growth. It funds expansion through convertible debentures, subsidiary equity sales, and its July 1993 public offering. Its subsidiary structure lets it raise capital at the subsidiary level, though a portion of consolidated cash may not be readily available to the parent.

TMO 10-K FY1994 Annual Report — Revenue, Net Income, EPS

01—Abstract

Summary

Summary of the 10-K filed March 9, 1994. Cited figures are marked; the original filing is the authoritative source.

Thermo Electron Corporation (NYSE: TMO, now part of Thermo Fisher Scientific) reported strong fiscal 1993 results for the year ended January 1, 1994.

Revenues rose 32% to $1,249.7 million^a from $949.0 million, driven largely by acquisitions in instruments, biomedical products, and advanced technologies. Segment income increased 64% to $142.6 million, and net income grew about 30% to $76.6 million, or $1.75 primary and $1.57 fully diluted EPS before the cumulative-effect item. Note that this filing predates the 2006 Thermo Fisher merger and was filed by Thermo Electron Corporation.

Investors should weigh the quality of earnings. About $39.9 million^b of pre-tax income came from gains on stock issued by majority-owned subsidiaries, a non-operating source the company itself says it wants to shrink as a share of net income. Other income was negative, primarily because of $21.1 million in equity losses from the Dade County cogeneration joint venture, which included a $15.0 million reserve and faces significant litigation and regulatory exposure.

The company also recorded $8.3 million^c in restructuring charges. The balance sheet is substantial, with total assets of $2.47 billion, $700.2 million in cash and short-term investments, and working capital of $828.3 million.

Long-term obligations rose to $647.5 million^d, including convertible debentures. The company has a complex structure of majority-owned public subsidiaries and has never paid cash dividends, so returns depend on share price appreciation and growth.

02—Key points

Key Highlights

Revenue grew 32% to $1,249.7 million in 1993, up from $949.0 million, with the Instruments segment up 48% to $516.7 million, largely from acquisitions such as Nicolet, Spectra-Physics Analytical, and Gamma-Metrics.
Segment income rose 64% to $142.6 million; net income increased to $76.6 million from $59.2 million, with fully diluted EPS of $1.57 versus $1.38 in 1992.
Gains on issuance of stock by subsidiaries contributed $39.9 million pre-tax, a substantial portion of profits that depends on market conditions and is not guaranteed to recur.
The Dade County cogeneration joint venture (50% owned) generated continuing losses; the company recorded a $15.0 million reserve and faces lawsuits, FERC proceedings, and potential lease-default liabilities of roughly $27 million or more.
Total backlog reached $618.0 million at year-end 1993, up from $596.3 million, with about 95% expected to be filled in fiscal 1994 excluding the San Diego waste-recycling facility.
Strong liquidity: $700.2 million in cash and short-term investments and working capital of $828.3 million, supported by a July 1993 public offering that raised $246.0 million net.
Long-term obligations increased to $647.5 million, and the company spent $143.0 million on acquisitions and $56.6 million on capital expenditures in 1993; it has never paid cash dividends and plans to keep reinvesting earnings.

03—Questions

Frequently Asked Questions

What drove the strong revenue growth in 1993?
Most of the growth came from acquisitions. Instruments sales rose $167.5 million, with about $153 million from newly acquired businesses. Biomedical Products sales more than doubled to $127.5 million, mainly from Lorad and Nicolet Biomedical. Organic growth was modest in most segments, though Thermedics' high-speed quality assurance system added $24.4 million in Advanced Technologies.
How much of the earnings came from sustainable operations versus one-time or non-operating items?
Pre-tax income of $131.1 million included $39.9 million of gains from subsidiary stock issuances and $9.8 million from terminating a power sales agreement, while equity losses (mainly Dade County) reduced income by $21.1 million. Restructuring charges of $8.3 million were also recorded. Management says it aims to grow segment income so that subsidiary-stock gains become a smaller share of net income.
What are the main legal and financial risks disclosed?
The main risk is the Dade County cogeneration project in Florida. The joint venture is suing the county for over $60 million, while the county has counterclaimed for over $28 million and asserted about $10.5 million in property taxes. FERC is also considering whether the project lost its qualifying facility status, which could create refund liabilities. If the lease defaults, the company could be liable for about half of deficiencies of roughly $54 million or $42 million. Separately, there are a Connecticut environmental penalty case and CERCLA Superfund notices, which management does not expect to be material.
Does the company pay dividends, and how is it funded?
The company has never paid cash dividends and does not expect to in the foreseeable future, preferring to reinvest earnings in growth. It funds expansion through convertible debentures, subsidiary equity sales, and its July 1993 public offering. Its subsidiary structure lets it raise capital at the subsidiary level, though a portion of consolidated cash may not be readily available to the parent.

04—Continue

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