PerkinElmer, Inc. — FY2015 Form 10-K
Filing identity and period: The supplied filing is for PerkinElmer, Inc. (NYSE: PKI), not Revvity, Inc. It reports the fiscal year ended January 3, 2016; FY2015 included 53 weeks, compared with 52 weeks in FY2014. The filing includes unaudited fourth-quarter results but is not a standalone Q4 report.
Business context
PerkinElmer supplied products, services and solutions to diagnostics, research, environmental, industrial and laboratory-services markets. Its two reportable segments were Human Health and Environmental Health. OneSource laboratory services moved from Environmental Health to Human Health in FY2015; prior-year segment figures were recast.
Financial performance
| Metric | FY2015 | FY2014 | Change |
|---|---|---|---|
| Revenue | $2,262.4 million | $2,237.2 million | +1% |
| Gross margin | 45.3% | 44.9% | +0.4 percentage points |
| Operating income | $286.1 million | $210.7 million | +36% |
| Income from continuing operations | $212.7 million | $161.2 million | +32% |
| Net income | $212.4 million | $157.8 million | +35% |
| Diluted EPS | $1.87 | $1.39 | +35% |
| Cash from continuing operations | $287.6 million | $282.3 million | +$5.3 million |
| Capital expenditures | $29.6 million | $29.1 million | +$0.6 million |
Operating margin was approximately 12.6%, versus 9.4% in FY2014. The improvement was driven substantially by lower postretirement-plan mark-to-market losses, cost-containment and productivity measures, and higher gross margin. The effective tax rate on continuing operations rose to 12.8% from 5.0%; FY2015 included $7.2 million of discrete tax benefits.
Segment results: Human Health revenue was $1,376.6 million (down 1%) and operating income was $251.7 million (up 8%). Environmental Health revenue was $885.7 million (up 4%) while operating income declined 6% to $89.5 million.
Fourth-quarter revenue was $608.1 million, compared with $608.4 million in Q4 FY2014. Q4 operating income was $84.7 million versus $30.6 million, and net income was $68.3 million versus $30.8 million. Diluted EPS was $0.61 versus $0.27.
Liquidity, debt and capital allocation
At year-end, cash and cash equivalents were $237.9 million, including $234.0 million held by non-U.S. subsidiaries. Current assets were $1,033.2 million and current liabilities $561.5 million (current ratio approximately 1.84). The company had $206.5 million of additional borrowing availability on its $700 million revolving facility.
Total debt carrying value was approximately $1.013 billion: $479.6 million on the revolving facility, $495.1 million on 5% notes due 2021, and $38.2 million of financing lease obligations. The revolver had $482 million outstanding, variable-rate exposure, and a January 2019 maturity. The company reported compliance with applicable covenants.
FY2015 continuing-operations cash flow from operations was $287.6 million; investing activities used $100.9 million, including $72.0 million for acquisitions and investments; financing activities used $107.1 million. The company paid $31.6 million in dividends and repurchased $72.0 million of shares under its program. The annual dividend declared was $0.28 per share. From January 4 through February 25, 2016, it repurchased a further 2.4 million shares for $109.7 million.
Material changes, outlook and risks
- Reported revenue growth was limited by currency: management estimated a roughly 6% revenue headwind from foreign exchange, partly offset by acquisition contribution of about 3% and the additional fiscal week. Perten contributed $65.7 million of FY2015 revenue.
- Human Health benefited from OneSource and informatics demand, new research products, and newborn and infectious-disease screening, while currency was a significant drag. Environmental Health growth reflected Perten and materials-characterization demand; its operating income was pressured by product-development investment, restructuring, and purchase-accounting inventory charges.
- Management expected continued R&D investment in FY2016 and capital expenditures at a level similar to FY2015. It described demand opportunities in disease detection, contaminant testing and laboratory efficiency, but provided no specific consolidated revenue or earnings guidance in the supplied text.
- FY2015 restructuring and contract-termination charges were $13.6 million; the year-end accrual was $22.2 million. Management expected no significant future operating-results or cash-flow impact from FY2015 restructuring actions.
- Acquisitions involved potentially significant contingent payments: recorded contingent consideration was $57.4 million, with total potential payments of up to $95.4 million. Vanadis-related consideration could reach $93 million and depended on development, regulatory and sales milestones.
- Other key risks include foreign-exchange exposure (about 60% of sales were international), variable interest rates, reliance on limited or single-source suppliers, market and government-funding volatility, product-development and acquisition execution, regulatory compliance, intellectual-property disputes, and possible impairment of goodwill and intangibles. Goodwill and non-amortizing intangible assets were not impaired in the annual FY2015 tests; Perten’s reporting-unit fair value approximated carrying value.
- Environmental remediation accruals were $11.8 million. Management said ordinary-course legal contingencies were not expected to materially affect the consolidated statements, while noting outcomes remain uncertain. The filing also reports $2.8 billion of net intangible assets in its risk-factor discussion, making impairment assumptions relevant to monitor.
Important facts for investors to verify
- Confirm the issuer and ticker: this filing is PerkinElmer (PKI), despite the request metadata naming Revvity.
- Assess underlying organic growth apart from the extra fiscal week, acquisitions and the estimated foreign-exchange impact.
- Track segment profitability, particularly Environmental Health’s revenue growth alongside its operating-income decline.
- Review cash generation, offshore cash accessibility, revolver refinancing needs and variable-rate debt exposure.
- Monitor Vanadis milestone progress, contingent-consideration remeasurement, and the assumptions supporting goodwill and intangible-asset values.
- Check subsequent share repurchases and the sustainability of dividends against liquidity and investment needs.
The financial statements received an unqualified audit opinion, and management and the auditor reported effective internal control over financial reporting as of January 3, 2016.