01—Abstract
Summary
Summary of the 10-K filed March 8, 1995. Cited figures are marked; the original filing is the authoritative source.
This is Thermo Electron Corporation's Form 10-K for fiscal 1994 (year ended December 31, 1994), filed in March 1995.
The filing predates the 2006 merger that created Thermo Fisher Scientific, though the company traded under the TMO symbol on the NYSE. Revenue rose 27% to $1,585.3 milliona, and operating income rose 51% to $179.1 million. Net income increased 35% to $103.4 million, or $2.10 primary and $1.85 fully diluted EPS, versus $1.75 and $1.57 in 1993.
Investors should note that non-operating gains from subsidiaries selling stock fell to $25.3 millionb from $39.9 million, so the earnings growth came more from operations than in prior years. Management itself says these gains should shrink as a share of net income. The company is a decentralized holding structure, with six segments and 13 subsidiaries that have sold minority stakes to outside investors, 11 of them publicly traded.
Growth was driven by acquisitions and by the Instruments segment, which generated $650.1 millionc of sales and $105.4 million of segment income. Backlog grew to $871.1 million from $643.3 million. Two large pending deals could change the profile further: a Coleman Research Corporation acquisition for up to 2.67 million shares, expected to close around March 15, 1995 under pooling accounting, and Thermo Instrument's agreement to buy Fisons plc's Scientific Instruments Division for 202 million pounds sterling.
The balance sheet carried $997.7 milliond of cash and short-term investments against $1,049.8 million of long-term obligations, including $345 million of 5% convertible debentures issued in April 1994. Key risks disclosed include the Dade County cogeneration joint venture litigation and regulatory proceedings, a covenant issue at the San Diego waste-recycling facility that could lead to impairment, a $12.2 million jury verdict against subsidiary Napco that the company is contesting, and the scheduled conversion of certain Thermo Ecotek power plant contracts to avoided-cost rates in 2000. The company has never paid cash dividends.
02—Key points
Key Highlights
- Revenue grew 27% to $1,585.3 million in 1994, and operating income rose 51% to $179.1 million, showing operating leverage on acquisitions and organic growth.
- Net income reached $103.4 million (up 35% from $76.6 million), with fully diluted EPS of $1.85 versus $1.57 in 1993.
- Gains from subsidiaries issuing stock fell to $25.3 million from $39.9 million, a sign that earnings are shifting toward core operations, though these gains still represent a meaningful share of net income.
- Backlog increased to $871.1 million from $643.3 million, with Process Equipment backlog rising sharply to $199.0 million, mainly on a $145 million de-inking facility contract.
- Two pending acquisitions: Coleman Research Corporation (up to 2.67 million shares, pooling-of-interests) and Fisons plc's Scientific Instruments Division (202 million pounds sterling).
- Strong liquidity with $997.7 million in cash and short-term investments, offset by $1,049.8 million in long-term obligations including $345 million of 5% convertible debentures issued in 1994.
- Legal and operational risks include the Dade County cogeneration litigation, the San Diego recycling facility covenant issue, and a $12.2 million Napco jury verdict under appeal; the company has never paid cash dividends.
03—Questions
Frequently Asked Questions
How did Thermo Electron perform financially in 1994?
Revenue reached $1,585.3 million, up 27% from $1,249.7 million in 1993. Operating income increased 51% to $179.1 million, and net income rose 35% to $103.4 million. Fully diluted EPS was $1.85, compared with $1.57 the prior year.
How much of the earnings growth came from subsidiary stock sales rather than operations?
Gains on issuance of stock by subsidiaries were $25.3 million in 1994, down from $39.9 million in 1993, and were recorded as non-operating income. Operating income grew much faster than these gains declined, so the improvement was driven mainly by operations. Management has said it expects these gains to represent a shrinking portion of net income over time, but the timing depends on market conditions.
What are the most significant pending transactions?
The company agreed to acquire Coleman Research Corporation for up to 2,669,158 shares, expected to close around March 15, 1995 under pooling-of-interests accounting, subject to CRC shareholder approval. Thermo Instrument also agreed on March 1, 1995 to buy Fisons plc's Scientific Instruments Division for 202 million pounds sterling, subject to Fisons shareholder and regulatory approvals. The Division had unaudited 1994 revenues of about 262 million pounds and a net loss of about 19 million pounds.
What major legal or financial risks should investors monitor?
The Dade County cogeneration joint venture, in which the company holds a 50% interest, faces FERC and Florida Public Service Commission proceedings that could bring refund liabilities, and the plant has been temporarily shut down. The San Diego waste-recycling facility faces a possible lender default tied to a County covenant breach, which could impair a $16.5 million investment. Subsidiary Napco is contesting a $12.2 million jury verdict. Thermo Ecotek's power plants also face reduced income beginning in 1996 as contracts move to lower avoided-cost rates by 2000.
Does the company pay dividends, and how is it structured?
Thermo Electron has never paid cash dividends and does not expect to in the foreseeable future, preferring to reinvest earnings in growth. Its structure includes 13 subsidiaries that have sold minority equity stakes, 11 of them publicly traded on the AMEX. The parent maintains ownership of at least 80% in Thermo Instrument, Thermo Fibertek, and Thermo Ecotek to keep consolidated tax filing, and it has been spending on repurchases of subsidiary stock ($101.5 million in 1994).
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