Fitch Ratings Affirms Thermo Electron Corp.'s Ratings.Business Editors CHICAGO--(BUSINESS WIRE)--Sept. 4, 2002 Fitch Ratings Fitch Ratings An international rating agency for financial institutions, insurance companies, and corporate, sovereign, and municipal debt. Fitch Ratings has headquarters in New York and London and is wholly owned by FIMALAC of Paris. has affirmed Thermo Electron's (Thermo) senior unsecured debt Unsecured debt Debt that does not identify specific assets that the debtholder is entitled to in case of default. rating at 'BBB+', and subordinated convertible debt rating at 'BBB'. The ratings apply to approximately $656 million of outstanding debt. The Rating Outlook is Stable. The ratings reflect the loss in top-line revenues due to declines in demand from many of Thermo's key end markets, most notably, those located in the Optical Technologies and the Measurement and Control sectors. Fitch also recognizes the company's efforts to mitigate the loss in revenues through productivity improvements such as real estate rationalization, census reduction, and supply chain cost containment cost containment, n the features of a dental benefits program or of the administration of the program designed to reduce or eliminate certain charges to the plan. , which has allowed the company to maintain a credit profile consistent with the current ratings. In the first half of 2002, Thermo redeemed all of its outstanding 4-1/4% convertible subordinated debentures subordinated debenture An unsecured bond with a claim to assets that is subordinate to all existing and future debt. Thus, in the event that the issuer encounters financial difficulties and must be liquidated, all other claims must be satisfied before due 2003 (approximately $398 million) and all of its outstanding 4-5/8% convertible subordinated debentures (approximately $58 million) due 2003. Borrowings from a securities-lending agreement and cash were used for the reduction in the debt level. The securities-lending agreement pledges Thermo available-for-sale investments as collateral in exchange for cash borrowings ($337.4 million as of 6/29/02). Fitch expects short-term debt Short-term debt Debt obligations, recorded as current liabilities, requiring payment within the year. levels to decrease as the collateralized securities mature. Total debt at the end of the second quarter was $1.108 billion and coupled with a cash balance, including marketable securities Marketable Securities Very liquid securities that can be converted into cash quickly at a reasonable price. Notes: Marketable securities are very liquid as they tend to have maturities less than one year, and the rate at which these securities can be bought or sold has , of approximately $976 million, placed the company in a net debt position at approximately $132 million. Leverage as indicated by net debt-to-EBITDA (including restructuring charges restructuring charge The expense of reorganizing a company's operations. A restructuring charge is an infrequent expense that generally results from asset writedowns or facility closings. ) was 1.0 times (x) for the last 12 months ending 6/29/02. Thermo continues to release $100 million tranches of cash used for the repurchase of stock Repurchase of stock Technique to pay cash to firm's shareholders that provides more preferential tax treatment for shareholders than dividends. Treasury stock is the name given to previously issued stock that has been repurchased by the firm. and repayment of outstanding debt with two tranches approved by the Board of Directors in 2002. Fitch anticipates that the majority of the tranches will be used for share repurchases in the near term given the low share price. Thermo maintains a minimal amount of off-balance-sheet debt in the form of a guarantee at the privatized entity, Kadant Inc. (formerly Thermo Fibertek). Thermo guarantees approximately $88 million in Kadant subordinated convertible debt due 2004, protected by restrictive bond covenants placed on Kadant by Thermo. Thermo's corporate financial policy is to maintain a ratio of net debt-to-net capital not greater than 30% and to target an EBITA-to-net interest expense of not less than 4.0x. Two challenges facing Thermo is the integration of over 60 divisional and sub-divisional units, that had previously been autonomous, into one instruments company, and secondly, the creation of a centralized cen·tral·ize v. cen·tral·ized, cen·tral·iz·ing, cen·tral·iz·es v.tr. 1. To draw into or toward a center; consolidate. 2. brand image across the entire organization, which will allow the company to leverage the sales and marketing presence in diverse end-markets already served. |
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