01—Abstract
Summary
Summary of the 10-K/A filed August 2, 1995. Cited figures are marked; the original filing is the authoritative source.
This Form 10-K/A (Amendment No. 2) for fiscal 1994 is filed by Thermo Electron Corporation (NYSE: TMO), the predecessor of today's Thermo Fisher Scientific, not under the Thermo Fisher name.
It restates the 1994 financials to include the March 1995 pooling-of-interests acquisition of Coleman Research Corporation and to reflect a three-for-two stock split distributed in May 1995. For 1994, revenues rose 28% to $1,729.2 milliona, operating income rose 53% to $182.1 million, and net income rose 36% to $104.7 million. Primary EPS was $1.35 (vs. $1.11) and fully diluted EPS was $1.20 (vs. $1.00).
Segment income grew 44% to $206.3 millionb, and the company says its segment income is becoming a larger share of earnings. Earnings quality remains a key investor consideration. Gains from subsidiaries issuing stock were $25.3 million in 1994, down from $39.9 million in 1993, and management states these gains have been a substantial part of net income in recent years.
The company is diversified across instruments, alternative-energy systems, process equipment, biomedical products, environmental services, and advanced technologies, with the Instruments segment the largest contributor. The balance sheet strengthened in cash and investments ($997.9 millionc in cash and short-term investments), but long-term obligations roughly doubled to $1,049.9 million, largely from a $345 million 5% convertible debenture issued in April 1994. Operating cash flow was $192.5 million against capital expenditures of $65.5 million.
Major risks disclosed include a pending acquisition by Thermo Instrument of Fisons plc's Scientific Instruments Division for about 202 million pounds sterling, which faces an FTC second request and had its termination date extended to August 15, 1995. The filing also describes continuing losses at the Dade County cogeneration joint venture, regulatory proceedings that could create liabilities, a $12.2 milliond jury verdict against Napco that the company is contesting, and expected margin pressure at Thermo Ecotek's California plants after 2000. The company has never paid cash dividends.
02—Key points
Key Highlights
- Revenue grew 28% to $1,729.2 million in 1994 (from $1,354.5 million in 1993), and operating income grew 53% to $182.1 million, with the figures restated for the Coleman Research pooling-of-interests merger.
- Net income rose 36% to $104.7 million, and fully diluted EPS increased to $1.20 from $1.00 (post three-for-two split).
- Segment income increased 44% to $206.3 million, led by Instruments ($105.4 million) and Alternative-energy Systems ($34.5 million, up from $14.4 million).
- Gains from subsidiaries' stock issuances declined to $25.3 million from $39.9 million, and management acknowledges these gains have been a substantial share of recent net income.
- Cash and short-term investments totaled $997.9 million at year-end 1994, but long-term obligations rose to $1,049.9 million from $647.6 million, including a $345 million 5% convertible debenture due 2001.
- Pending Fisons Scientific Instruments acquisition (about 202 million pounds sterling) faces an FTC second request; the termination date was extended to August 15, 1995.
- Ongoing losses at the Dade County cogeneration joint venture and regulatory proceedings (FERC and FPSC) could result in refund liabilities or other penalties.
03—Questions
Frequently Asked Questions
How much did Thermo Electron's revenue and earnings grow in 1994?
Revenues increased 28% to $1,729.2 million, operating income increased 53% to $182.1 million, and net income increased 36% to $104.7 million. Primary EPS was $1.35 versus $1.11, and fully diluted EPS was $1.20 versus $1.00. These figures are restated to include Coleman Research and reflect the May 1995 three-for-two stock split.
How much of Thermo Electron's profit comes from subsidiary stock sales rather than operations?
Gains from subsidiaries issuing stock were $25.3 million in 1994, compared with $39.9 million in 1993. These are non-operating and nontaxable gains that depend on market conditions, and the company says they will not necessarily continue. Segment income of $206.3 million is a better measure of operating performance, and management aims to make it a growing share of earnings.
Did the company's debt increase significantly in 1994?
Yes. Long-term obligations rose to $1,049.9 million from $647.6 million, mainly due to the April 1994 issuance of $345 million of 5% senior convertible debentures due 2001, along with tax-exempt obligations tied to alternative-energy facilities. The company was in compliance with its financial ratio covenants at year-end 1994.
What are the main legal and financial risks disclosed?
Key risks include the Dade County cogeneration joint venture's continuing losses and possible FERC or Florida PSC liabilities, a $12.2 million jury verdict against Napco that the company is contesting, a San Diego County waste-recycling facility covenant dispute that could impair a $16.5 million investment, and a $7.9 million development-fee lawsuit. Management believes contingencies will not have a material adverse effect on financial condition, though outcomes are uncertain.
Does Thermo Electron pay dividends?
No. The company has never paid cash dividends and does not expect to pay them in the foreseeable future, as it reinvests earnings to finance growth. Any future dividends would depend on earnings, capital requirements, and financial condition, at the discretion of the Board of Directors.
04—Continue