x
|
Annual
Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of
1934 for the fiscal year ended December 31, 2006
or
|
o
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Transition
Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of
1934
|
Delaware
|
04-2209186
|
||
(State
of incorporation or organization)
|
(I.R.S.
Employer Identification No.)
|
||
81
Wyman Street, P.O. Box 9046
|
|||
Waltham,
Massachusetts
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02454-9046
|
||
(Address
of principal executive offices)
|
(Zip
Code)
|
Title
of each class
|
Name
of each exchange on which registered
|
|||
Common
Stock, $1.00 par value
|
New
York Stock Exchange
|
|||
Preferred
Stock Purchase Rights
|
New
York Stock Exchange
|
TABLE
OF CONTENTS
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|||
Page
|
PART
I
|
||
Item
1.
|
3
|
|
Item
1A.
|
23
|
|
Item
1B.
|
30
|
|
Item
2.
|
30
|
|
Item
3.
|
31
|
|
Item
4.
|
32
|
|
PART
II
|
||
Item
5.
|
32
|
|
Item
6.
|
33
|
|
Item
7.
|
34
|
|
Item
7A.
|
52
|
|
Item
8.
|
53
|
|
Item
9.
|
53
|
|
Item
9A.
|
53
|
|
Item
9B.
|
54
|
|
PART
III
|
||
|
||
Item
10.
|
54
|
|
Item
11.
|
55
|
|
Item
12.
|
55
|
|
Item
13.
|
55
|
|
Item
14.
|
55
|
|
PART
IV
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||
Item
15.
|
55
|
|
Item
1.
|
· |
Our
Scientific Instruments include analytical instrumentation that
analyzes
prepared samples.
|
· |
Our
Biosciences products include
a wide range of consumables and services across general chemistry
and life
sciences applications.
|
· |
Our
Integrative Technologies offerings include software interpretation
tools
and development support for the data generated by the instruments
as well
as laboratory automation equipment and systems.
|
· |
Our
Diagnostics products and services are used by healthcare and
other
laboratories to prepare and analyze patient samples to detect
and diagnose
diseases.
|
· |
Our
Environmental Instruments include solutions and services for
environmental
monitoring, safety and security.
|
· |
Our
Process Instruments provide measurement
solutions and services outside the laboratory to enable process
control
and optimization.
|
· |
LTQ
FTTM
-
Combines our most advanced ion trap and Fourier Transform (FT)
Ion
Cyclotron Resonance (ICR) technologies into a single instrument
with
superior analytical power and
versatility. The system uniquely combines high resolution,
accurate mass
determinations and MSn (mass spectrometry to the nth power)
for
high-throughput analysis on a single
instrument.
|
· |
LTQ
OrbitrapTM
-
Combines our most advanced ion trap with our patented Orbitrap
technology,
providing high resolution and accurate mass determinations
over a broad
dynamic range for the analysis of complex biological
mixtures.
|
· |
LTQ
XLTM
-
Based on a 2-dimensional (2-D) linear ion trap design and incorporating
patented innovative technologies and ease-of-use features,
this system is
primarily used for metabolic profiling and proteomics
research.
|
· |
LXQTM
-
Based
on a 2-D linear ion trap design, this system provides high-throughput
performance for drug discovery, forensics and proteomics
applications.
|
· |
LCQ Deca
XP MAXTM
-
Used primarily for rapid metabolite identification, peptide
mapping and
complex mixture analysis. It features the Ion MaxTM,
front-end ion source, which provides ruggedness and full scan
sensitivity,
making it a valuable tool for analysis of in-vivo
and in-vitro
samples.
|
· |
LCQ
Advantage MAXTM
-
An ion trap mass spectrometer that integrates the power of
MS/MS with an
LC system, boosting analytical power with library searchable
MS/MS spectra
for reliable compound identification. This instrument delivers
high
productivity for routine HPLC
environments.
|
· |
TSQ
Quantum AccessTM
-
A versatile, entry-level mass spectrometer that is used in
environmental
and food safety laboratories.
|
· |
TSQ
Quantum Discovery MAXTM
-
This high-performance, ultra-compact benchtop MS system incorporates
innovative technology for increased sensitivity, precision,
ruggedness and
reliability. It is principally designed for high-productivity
environments
such as environmental, clinical and drug discovery laboratories.
With the
Ion Max source, the TSQ Quantum Discovery MAX addresses the
needs of these
laboratories for more rugged and dependable LC/MS/MS to enable
around-the-clock productivity.
|
· |
TSQ
Quantum UltraTM
-
An advanced instrument used primarily for bioanalytical studies.
It
features the Ion Max source with interchangeable electrospray
ionization
(ESI) and atmospheric pressure chemical ionization (APCI) probes
for
increased robustness and
sensitivity.
|
· |
Biomarkers
- compounds that may be endogenous and signal the early onset
of a
specific disease.
|
· |
ADME/Tox
- Absorption, Distribution, Metabolism, Excretion and Toxicology
studies
that are conducted for drug discovery in support of human clinical
trials.
|
· |
Metabalomics
- measurement of the real biochemical status, dynamics, interactions
and
regulation of whole systems or organisms at a molecular
level.
|
2006
|
2005
|
|||||||
(In
thousands)
|
||||||||
Analytical
Technologies
|
$
|
827,097
|
$
|
445,321
|
||||
Laboratory
Products and Services
|
256,310
|
82,761
|
||||||
$
|
1,083,407
|
$
|
528,082
|
· |
technical
performance and advances in technology that result in new products
and
improved price/performance ratios;
|
· |
product
differentiation, availability and
reliability;
|
· |
our
broad product offering;
|
· |
our
reputation among customers as a quality provider of products
and
services;
|
· |
customer
service and support;
|
· |
active
research and application-development programs;
and
|
· |
relative
prices of our products and
services.
|
Name
|
Age
|
Present
Title (Fiscal Year First Became Executive Officer)
|
||||
Marijn
E. Dekkers
|
49
|
President
and Chief Executive Officer (2000)
|
||||
Marc
N. Casper
|
38
|
Executive
Vice President (2001)
|
||||
Guy
Broadbent
|
43
|
Senior
Vice President (2001)
|
||||
Seth
H. Hoogasian
|
52
|
Senior
Vice President, General Counsel and Secretary (2001)
|
||||
Alan
J. Malus
|
47
|
Senior
Vice President (2006)
|
||||
Joseph
R. Massaro
|
37
|
Senior
Vice President, Global Business Services (2006)
|
||||
Stephen
G. Sheehan
|
51
|
Senior
Vice President, Human Resources (2003)
|
||||
Fredric
T. Walder
|
49
|
Senior
Vice President, Commercial Excellence (2006)
|
||||
Peter
M. Wilver
|
47
|
Senior
Vice President and Chief Financial Officer (2003)
|
||||
Peter
E. Hornstra
|
47
|
Vice
President and Chief Accounting Officer (2001)
|
· |
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;
|
· |
continuing
key customer initiatives;
|
· |
expanding
our service offerings;
|
· |
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.
|
· |
if
we are unable to successfully combine the businesses of Thermo
and Fisher
in a manner that permits the company to achieve the cost savings
and
operating synergies anticipated to result from the merger,
such
anticipated benefits of the merger may not be realized fully
or at all or
may take longer to realize than
expected;
|
· |
lost
sales and customers as a result of certain customers of either
of the two
former companies deciding not to do business with the
company;
|
· |
complexities
associated with managing the combined
businesses;
|
· |
integrating
personnel from diverse corporate cultures while maintaining
focus on
providing consistent, high quality products and customer
service;
|
· |
potential
unknown liabilities and unforeseen increased expenses or delays
associated
with the merger;
|
· |
performance
shortfalls at the company as a result of the diversion of management’s
attention to the merger; and
|
· |
inability
to successfully execute a branding campaign for the combined
company.
|
Item
2.
|
Item
3.
|
Legal
Proceedings
|
Item
4.
|
Submission
of Matters to a Vote of Security
Holders
|
Item
5.
|
Market
for the Registrant’s
Common Equity, Related Stockholder Matters and Issuer Purchases
of Equity
Securities
|
2006
|
2005
|
||||||||||||
|
High
|
Low
|
High
|
Low
|
|||||||||
First
Quarter
|
$
|
37.12
|
$
|
30.28
|
$
|
29.99
|
$
|
24.89
|
|||||
Second
Quarter
|
39.45
|
34.00
|
27.20
|
24.24
|
|||||||||
Third
Quarter
|
40.21
|
34.59
|
30.90
|
26.70
|
|||||||||
Fourth
Quarter
|
46.16
|
38.93
|
31.78
|
29.53
|
Period
|
Total
Number
of
Shares
Purchased
|
Average
Price
Paid
per Share
|
Total
Number
of
Shares
Purchased
as
Part of
Publicly
Announced
Plans
or
Programs
(1)
|
Maximum
Dollar
Amount
of
Shares That
May
Yet Be
Purchased
Under
the
Plans
or
Programs
(1)
|
|||||||||||||||
October
1 - October 28
|
—
|
$
|
—
|
—
|
$
|
72,000,000
|
|||||||||||||
October
29 - November 25
|
—
|
$
|
—
|
—
|
$
|
72,000,000
|
|||||||||||||
November
26 - December 31
|
1,630,366
|
$
|
44.16
|
1,630,366
|
$
|
—
|
|||||||||||||
Total
Fourth Quarter
|
1,630,366
|
$
|
44.16
|
1,630,366
|
$
|
—
|
(1)
|
On
February 28,
2006, the company announced a repurchase program authorizing
the purchase
of up to $100 million of the company’s common stock in the open market or
in negotiated transactions. On May 7, 2006, the company increased
the
existing authorization for the purchase of up to an additional
$200
million of the company’s common stock in the open market or in negotiated
transactions. All of the shares of common stock repurchased
by the company
during the fourth quarter of 2006 were purchased under this
program. At
December 31, 2006, no remaining authorization existed for future
repurchases. In February 2007, the company’s Board of Directors authorized
the repurchase of up to $300 million of the company’s common stock through
February 28, 2008.
|
Item
6.
|
Selected
Financial
Data
|
2006
(a)
|
2005
(b)
|
|
2004
(c)
|
|
2003
(d)
|
|
2002
(e)
|
|
|||||||||
(In millions except per share amounts)
|
|||||||||||||||||
Statement
of Operations Data
|
|||||||||||||||||
Revenues
|
$
|
3,791.6
|
$
|
2,633.0
|
$
|
2,206.0
|
$
|
1,899.4
|
$
|
1,849.4
|
|||||||
Operating
Income
|
242.0
|
263.5
|
237.5
|
187.4
|
169.9
|
||||||||||||
Income from Continuing Operations
|
166.3
|
198.3
|
218.4
|
175.2
|
203.4
|
||||||||||||
Net
Income (Loss)
|
168.9
|
223.2
|
361.8
|
200.0
|
309.7
|
||||||||||||
Earnings per Share from Continuing Operations:
|
|||||||||||||||||
Basic
|
.85
|
1.23
|
1.34
|
1.08
|
1.21
|
||||||||||||
Diluted
|
.82
|
1.21
|
1.31
|
1.05
|
1.17
|
||||||||||||
Earnings
(Loss) per Share:
|
|||||||||||||||||
Basic
|
.86
|
1.38
|
2.22
|
1.23
|
1.84
|
||||||||||||
Diluted
|
.84
|
1.36
|
2.17
|
1.20
|
1.73
|
||||||||||||
Balance
Sheet Data
|
|||||||||||||||||
Working
Capital
|
$
|
1,507.2
|
$
|
562.2
|
$
|
890.9
|
$
|
710.5
|
$
|
667.8
|
|||||||
Total
Assets
|
21,262.2
|
4,251.6
|
3,576.7
|
3,389.3
|
3,651.5
|
||||||||||||
Long-term
Obligations
|
2,180.7
|
468.6
|
226.1
|
229.5
|
451.3
|
||||||||||||
Shareholders’
Equity
|
13,911.8
|
2,793.3
|
2,665.6
|
2,381.7
|
2,030.3
|
(a)
|
Reflects
completion of the merger with Fisher on November 9, 2006, including
issuance of common stock. Also reflects a $123.3 million pre-tax
charge
for restructuring and other costs; a charge of $36.7 million
for
acceleration of vesting of equity-based compensation as a result
of the
Fisher merger; and after-tax income of $2.6 million related
to the
company’s discontinued operations.
|
(b)
|
Reflects
a $30.3 million pre-tax charge for restructuring and other
costs; $27.6
million of pre-tax net gains from the sale of shares of Thoratec
Corporation and Newport Corporation; and after-tax income of
$24.9 million
related to the company’s discontinued operations. Also reflects use of
cash and debt for acquisitions, principally
Kendro.
|
(c)
|
Reflects
a $19.2 million pre-tax charge for restructuring and other
costs; $9.6
million of pre-tax gains from the sale of shares of Thoratec;
$33.8
million of tax benefits recorded on completion of tax audits;
after-tax
income of $143.5 million related to the company’s discontinued operations;
and the repurchase of $231.5 million of the company’s common
stock.
|
(d)
|
Reflects
a $45.3 million pre-tax charge for restructuring and other
costs; $16.3
million of pre-tax gains from the sale of shares of Thoratec;
$13.7
million of pre-tax gains from the sale of shares of FLIR
Systems,
Inc.; after-tax income of $24.8 million related to the company’s
discontinued operations; and the repurchase and redemption
of $356.9
million of the company’s debt and equity
securities.
|
(e)
|
Reflects
a $46.2 million pre-tax charge for restructuring and other
costs; $111.4
million of pre-tax gains from the sale of shares of FLIR; after-tax
income
of $106.3 million related to the company’s discontinued operations; the
repurchase and redemption of $924.9 million of the company’s debt and
equity securities; and the reclassification of the company’s $71.9 million
principal amount 4 3/8% subordinated convertible debentures
from long-term
obligations to current liabilities as a result of the company’s decision
to redeem them in April 2003. Also reflects the adoption of
SFAS No. 142,
under which amortization of goodwill
ceased.
|
Item
7.
|
Management’s
Discussion and Analysis of Financial Condition and Results
of Operations
|
Revenues |
2006
|
2005
|
||||||||||||
(Dollars
in thousands)
|
||||||||||||||
Analytical
Technologies
|
$
|
2,425,821
|
64.0%
|
|
$
|
2,006,744
|
76.2%
|
|
||||||
Laboratory
Products and Services
|
1,406,637
|
37.1%
|
|
626,283
|
23.8
%
|
|
||||||||
Eliminations
|
(40,841
|
)
|
(1.1
)%
|
|
—
|
—
|
||||||||
$
|
3,791,617
|
100%
|
|
$
|
2,633,027
|
100%
|
|
(a) |
Accounts
Receivable
|
The
company maintains allowances for doubtful accounts for estimated
losses
resulting from the inability of its customers to pay amounts
due. Such
allowances totaled $45 million at December 31, 2006. 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)
|
Inventories
|
The
company writes down its inventories for estimated obsolescence
for
differences between the cost and estimated net realizable value
taking
into consideration 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)
|
Intangible
Assets and Goodwill
|
The
company uses assumptions and estimates in determining the fair
value of
assets acquired and liabilities assumed in a business combination.
A
significant portion of the purchase price in many of the company’s
acquisitions is assigned to intangible assets that require
that use of
significant judgment in determining (i) fair value; and (ii)
whether such
intangibles are amortizable or non-amortizable and, if the
former, the
period and the method by which the intangible asset will be
amortized. The
company estimates the fair value of acquisition-related intangible
assets
principally based on projections of cash flows that will arise
from
identifiable intangible assets of acquired businesses. The
projected cash
flows are discounted to determine the present value of the
assets at the
dates of acquisition. Amortizable intangible assets totaled
$6.18 billion
at December 31, 2006. Actual cash flows arising from a particular
intangible asset could vary from projected cash flows which
could imply
different carrying values and annual amortization expense from
those
established at the dates of acquisition and which could result
in
impairment of such asset. The company reviews other intangible
assets for
impairment when indication of potential impairment exists,
such as a
significant reduction in cash flows associated with the
assets.
|
The
company evaluates goodwill and indefinite-lived intangible
assets for
impairment annually and when events occur or circumstances
change that may
reduce the value of the asset below its carrying amount using
forecasts of
discounted future cash flows. Events or circumstances that
might require
an interim evaluation include unexpected adverse business conditions,
economic factors, unanticipated technological changes or competitive
activities, loss of key personnel and acts by governments and
courts.
Goodwill and indefinite-lived intangible assets totaled $8.52
billion and
$1.33 billion, respectively, at December 31, 2006. 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 or indefinite-lived intangible assets decline because
of reduced
operating performance, market declines, or other indicators
of impairment,
or as a result of changes in the discount rate, charges for
impairment may
be necessary.
|
(d)
|
Other
Long-Lived Assets
|
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
$1.57 billion
at December 31, 2006, including $1.26 billion 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)
|
Revenues
|
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.
If fair value is not available for any undelivered element,
revenue for
all elements is deferred until delivery is
completed.
|
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.
|
The
company’s software license agreements generally include multiple products
and services, or “elements.” The company recognizes software license
revenue based on the residual method after all elements have
either been
delivered or vendor specific objective evidence (VSOE) of fair
value
exists for
|
any
undelivered elements. In the event VSOE is not available for
any
undelivered element, revenue for all elements is deferred until
delivery
is completed. Revenues from software maintenance and support
contracts are
recognized on a straight-line basis over the term of the contract.
VSOE of
fair value of software maintenance and support is determined
based on the
price charged for the maintenance and support when sold separately.
Revenues from training and consulting services are recognized
as services
are performed, based on VSOE, which is determined by reference
to the
price customers pay when the services are sold separately.
|
The
company records reductions to revenue for estimated product
returns by
customers. Should a greater or lesser number of products be
returned,
additional adjustments to revenue may be
required.
|
(f)
|
Warranty
Obligations
|
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 of the company’s continuing operations totaled $45
million at December 31, 2006. Should product failure rates
or the actual
cost of correcting product failures vary from estimates, revisions
to the
estimated warranty liability would be necessary.
|
(g)
|
Income
Taxes
|
The
company operates in numerous countries under many legal forms
and as a
result, is subject to the jurisdiction of numerous domestic
and non-U.S.
tax authorities, as well as to tax agreements and treaties
among these
governments. Determination of taxable income in any jurisdiction
requires
the interpretation of the related tax laws and regulations
and the use of
estimates and assumptions regarding significant future events,
such as the
amount, timing and character of deductions, permissible revenue
recognition methods under the tax law and the sources and character
of
income and tax credits. Changes in tax laws, regulations, agreements
and
treaties, currency exchange restrictions or our level of operations
or
profitability in each taxing jurisdiction could have an impact
upon the
amount of current and deferred tax balances and hence the company’s net
income.
|
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
with an offset
generally to goodwill as most of the tax attributes arose from
acquisitions. The company’s tax valuation allowance totaled $195 million
at December 31, 2006. Should the company’s actual future taxable income by
tax jurisdiction vary from estimates, additional allowances
or reversals
thereof may be necessary.
|
The
company provides a liability for future income tax payments
in the
worldwide tax jurisdictions in which it operates. Accrued income
taxes
totaled $60 million at December 31, 2006. 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 previously unrecognized tax benefits ultimately
be
sustained, a reduction in the company’s tax provision would
result.
|
(h)
|
Contingencies
and Litigation
|
The
company records accruals for various contingencies, including
legal
proceedings, environmental, workers’ compensation, product, general and
auto liabilities, self-insurance and other claims that arise
in the normal
course of business. The accruals are based on management’s judgment,
historical claims experience, the probability of losses and,
where
applicable, the consideration of opinions of internal and or
external
legal counsel and actuarial estimates. Reserves of Fisher,
including
environmental reserves, were initially recorded at their fair
value and as
such were discounted to their net present value. Additionally,
we record
receivables from third-party insurers when recovery has been
determined to
be probable.
|
(i)
|
Pension
and Other Retiree Benefits
|
Several
of the company’s U.S. and non-U.S. subsidiaries sponsor defined benefit
pension and other retiree benefit plans. The cost and obligations
of these
arrangements are calculated using many assumptions to estimate
the
benefits that the employee earns while working, the amount
of which cannot
be
|
completely
determined until the benefit payments cease. 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 third party
actuaries,
and are evaluated each year as of the plans’ measurement date. Net
periodic pension costs for the company’s pension and other postretirement
benefit plans totaled $16 million in 2006 and the company’s unfunded
benefit obligation totaled $237 million at year-end 2006. Should
any of
these assumptions change, they would have an effect on net
periodic
pension costs and the unfunded benefit obligation. For example,
a 10%
decrease in the discount rate would result in an annual increase
in
pension and other postretirement benefit expense of approximately
$2
million and an increase in the benefit obligation of approximately
$101
million.
|
(j)
|
Equity-based
Compensation
|
The
fair value of each stock option granted by the company is
estimated using the Black-Scholes option pricing model. Use
of a valuation
model requires management to make certain assumptions with
respect to
selected model inputs. Management estimates expected volatility
based on the historical volatility of the company’s stock.
The expected life of a grant is estimated using the simplified
method
for “plain vanilla” options as permitted by SAB 107. The risk-free
interest rate is based on U.S. Treasury zero-coupon issues
with a
remaining term which approximates the expected life assumed
at the date of
grant. Changes in these input variables would affect the amount
of expense associated with stock-based compensation. The
compensation expense recognized for all equity-based awards
is net of
estimated forfeitures. The company estimates forfeiture
rates based on historical analysis of option forfeitures.
If actual forfeitures should vary from estimated forfeitures,
adjustments
to compensation expense may be
required.
|
(k)
|
Restructuring
Costs
|
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 in
continuing operations totaled $12 million at December 31, 2006.
Should
actual cash flows associated with sub-rental income from vacated
facilities vary from estimated amounts, adjustments may be
required.
|
(l)
|
Assets
Held for Sale
|
The
company estimates the expected proceeds from any assets held
for sale and,
when necessary, records losses to reduce the carrying value
of these
assets 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.
|
Operating
Income Margin
|
2006
|
2005
|
||||||
Consolidated
|
6.4%
|
|
10.0%
|
|
2006
|
2005
|
Change
|
|||||||||
(Dollars
in thousands)
|
|||||||||||
Revenues:
|
|||||||||||
Analytical
Technologies
|
$
|
2,425,821
|
$
|
2,006,744
|
21%
|
|
|||||
Laboratory
Products and Services
|
1,406,637
|
626,283
|
125%
|
|
|||||||
Eliminations
|
(40,841
|
)
|
—
|
||||||||
Consolidated
Revenues
|
$
|
3,791,617
|
$
|
2,633,027
|
44%
|
|
|||||
Operating
Income:
|
|||||||||||
Analytical
Technologies
|
$
|
383,640
|
$
|
284,666
|
35%
|
|
|||||
Laboratory
Products and Services
|
189,229
|
86,600
|
119%
|
|
|||||||
Other
|
—
|
148
|
|||||||||
Subtotal
Reportable Segments
|
572,869
|
371,414
|
54%
|
|
|||||||
Cost
of Revenues Charges
|
(77,625
|
)
|
(13,387
|
)
|
|||||||
Restructuring
and Other Costs, Net
|
(45,712
|
)
|
(16,900
|
)
|
|||||||
Amortization
of Acquisition-related Intangible Assets
|
(170,826
|
)
|
(77,640
|
)
|
|||||||
Stock
Option Compensation Acceleration Charge
|
(36,747
|
)
|
—
|
||||||||
Consolidated
Operating Income
|
$
|
241,959
|
$
|
263,487
|
(8)%
|
|
2006
|
2005
|
Change
|
|||||||||
(Dollars
in thousands)
|
|||||||||||
Revenues
|
$
|
2,425,821
|
$
|
2,006,744
|
21%
|
|
|||||
Operating
Income Margin
|
15.8%
|
|
14.2%
|
|
1.6
pts.
|
2006
|
2005
|
Change
|
|||||||||
(Dollars
in thousands)
|
|||||||||||
Revenues
|
$
|
1,406,637
|
$
|
626,283
|
125%
|
|
|||||
Operating
Income Margin
|
13.5%
|
|
13.8%
|
|
(0.3)
pts.
|
Operating
Income Margin
|
2005
|
2004
|
||||
Consolidated
|
10.0%
|
|
10.8%
|
|
2005
|
2004
|
Change
|
|||||||||
(Dollars
in thousands)
|
|||||||||||
Revenues:
|
|||||||||||
Analytical
Technologies
|
$
|
2,006,744
|
$
|
1,814,647
|
11%
|
|
|||||
Laboratory
Products and Services
|
626,283
|
391,348
|
60%
|
|
|||||||
Consolidated
Revenues
|
$
|
2,633,027
|
$
|
2,205,995
|
19%
|
|
|||||
Operating
Income:
|
|||||||||||
Analytical
Technologies
|
$
|
284,666
|
$
|
237,018
|
20%
|
|
|||||
Laboratory
Products and Services
|
86,600
|
42,515
|
104%
|
|
|||||||
Other
|
148
|
—
|
|||||||||
Subtotal
Reportable Segments
|
371,414
|
279,533
|
33%
|
|
|||||||
Cost
of Revenues Charges
|
(13,387
|
)
|
(3,361
|
)
|
|||||||
Restructuring
and Other Costs, Net
|
(16,900
|
)
|
(15,829
|
)
|
|||||||
Amortization
of Acquisition-related Intangible Assets
|
(77,640
|
)
|
(22,831
|
)
|
|||||||
Consolidated
Operating Income
|
$
|
263,487
|
$
|
237,512
|
11%
|
|
2005
|
2004
|
Change
|
|||||||||
(Dollars
in thousands)
|
|||||||||||
Revenues
|
$
|
2,006,744
|
$
|
1,814,647
|
11%
|
|
|||||
Operating
Income Margin
|
14.2%
|
|
13.1%
|
|
1.1
pts.
|
2005
|
2004
|
Change
|
|||||||||
|
(Dollars
in thousands)
|
||||||||||
Revenues
|
$
|
626,283
|
$
|
391,348
|
60%
|
|
|||||
Operating
Income Margin
|
13.8%
|
|
10.9%
|
|
2.9
pts.
|
Payments
Due by Period or Expiration of
Commitment
|
|||||||||||||||||
2007
|
2008
and
2009
|
2010
and
2011
|
2012
and
Thereafter
|
Total
|
|||||||||||||
(In
thousands)
|
|||||||||||||||||
Contractual Obligations and Other Commercial Commitments:
|
|||||||||||||||||
Debt
principal, including short term debt (a)
|
$
|
478,912
|
$
|
132,861
|
$
|
591
|
$
|
2,036,610
|
$
|
2,648,974
|
|||||||
Interest (b)
|
108,407
|
199,954
|
191,590
|
732,543
|
1,232,494
|
||||||||||||
Capital lease obligations
|
4,386
|
5,944
|
2,743
|
1,956
|
15,029
|
||||||||||||
Operating lease obligations
|
92,111
|
134,308
|
75,574
|
85,089
|
387,082
|
||||||||||||
Unconditional
purchase obligations (c)
|
110,773
|
7,103
|
984
|
111
|
118,971
|
||||||||||||
Letters
of credit and bank guarantees
|
70,014
|
6,303
|
151
|
160
|
76,628
|
||||||||||||
Surety
bonds and other guarantees
|
28,832
|
—
|
—
|
8,358
|
37,190
|
||||||||||||
Other (d)
|
15,350
|
—
|
—
|
—
|
15,350
|
||||||||||||
$
|
908,785
|
$
|
486,473
|
$
|
271,633
|
$
|
2,864,827
|
$
|
4,531,718
|
(a)
|
Amounts
represent the expected cash payments for debt and do not
include any
deferred issuance costs.
|
(b)
|
For
the purpose of this calculation, amounts assume interest
rates on floating
rate obligations remain unchanged from levels at December
31, 2006,
throughout the life of the
obligation.
|
(c)
|
Unconditional
purchase obligations include agreements to purchase goods
or services that
are enforceable and legally binding and that specify all
significant
terms, including: fixed or minimum quantities to be purchased;
fixed,
minimum or variable price provisions; and the approximate
timing of the
transaction. Purchase obligations exclude agreements that
are cancelable
at any time without penalty.
|
(d)
|
Obligation
represents funding commitments pursuant to investments held
by the
company.
|
Item
8.
|
Financial
Statements and Supplementary
Data
|
Item
9.
|
Changes
in and Disagreements with Accountants on
Accounting and Financial
Disclosure
|
Item
9A.
|
Controls
and
Procedures
|
Item
9B.
|
Other
Information
|
Item
10.
|
Directors
and Executive Officers of the
Registrant
|
Item
12.
|
Security
Ownership of Certain Beneficial Owners and
Management and Related Stockholder
Matters
|
Item
13.
|
Certain
Relationships and Related Transactions and
Director Independence
|
Item
14.
|
Principal
Accountant Fees and
Services
|
Item
15.
|
Exhibits
and Financial Statement
Schedules
|
(a)
|
The
following documents are filed as part of this
report:
|
(1)
|
Consolidated
Financial Statements (see Index on page F-1 of this
report):
|
(2)
|
Consolidated
Financial Statement Schedule (see Index on page F-1 of this
report):
|
(b)
|
Exhibits
|
Date: March
1, 2007
|
THERMO
FISHER SCIENTIFIC INC.
|
By: |