Business context and reporting period
Entity discrepancy: The supplied filing is PerkinElmer, Inc. (NYSE: PKI), not a filing under the name Revvity, Inc. It is the Form 10-K for the 52-week fiscal year ended December 29, 2019; it includes quarterly information, but is not a standalone fourth-quarter filing. Fiscal 2020 was expected to contain 53 weeks.
PerkinElmer provided products, services and solutions in diagnostics, life sciences and applied markets through Discovery & Analytical Solutions and Diagnostics. The company reported approximately 13,000 employees and sales in more than 190 countries.
Financial performance and position
| Metric | FY 2019 | FY 2018 | Change |
|---|---|---|---|
| Revenue | $2,883.7 million | $2,778.0 million | Up 4% |
| Gross profit / margin | $1,396.1 million / 48.4% | $1,340.9 million / 48.3% | Margin up 14 basis points |
| Operating income / margin | $362.0 million / 12.6% | $323.9 million / 11.7% | Income up 12% |
| Income from continuing operations | $227.8 million | $237.5 million | Down 4% |
| Net income | $227.6 million | $237.9 million | Down 4% |
| Diluted EPS | $2.04 | $2.13 | Down 4% |
| Operating cash flow | $363.5 million | $311.2 million | Up $52.2 million |
| Capital expenditures | $76.3 million | $93.3 million | Down $17.0 million |
Operating cash flow less capital expenditures was approximately $287.1 million, compared with $218.0 million in FY 2018. Cash and cash equivalents were $191.9 million at year-end, including $172.9 million held by non-U.S. subsidiaries. The company also had $663.2 million available under its revolving credit facility.
Current assets were $1.374 billion and current liabilities were $763 million, implying a current ratio of approximately 1.8. Total debt carrying value was approximately $2.074 billion, versus $1.891 billion a year earlier; cash-adjusted debt was approximately $1.882 billion. Stockholders’ equity was $2.814 billion.
Discovery & Analytical Solutions revenue rose 3% to $1.746 billion and operating income rose 3% to $238.3 million. Diagnostics revenue rose 5% to $1.138 billion and operating income rose 24% to $189.3 million.
In the fourth quarter, revenue was $805.5 million versus $756.3 million a year earlier. Income from continuing operations was $64.5 million versus $71.3 million, and diluted EPS was $0.58 versus $0.64.
Material changes versus the prior year
- Revenue growth reflected increases in both segments, with acquisitions and divestitures contributing approximately 1% and foreign exchange reducing reported revenue by approximately 2%.
- Operating margin improved as product mix, pricing, productivity and cost-containment benefits outweighed higher amortization and acquired-inventory costs.
- Interest and other expense rose to $124.8 million from $66.2 million. The increase included $32.5 million of debt-extinguishment costs, primarily related to redeeming the 5% November 2021 notes, and higher pension-related and other expenses.
- Five businesses were acquired for aggregate consideration of $433.1 million, including Cisbio for $219.9 million and Meizheng for $166.5 million. Net acquisition cash outflow was $400.4 million, compared with $97.7 million in FY 2018.
- Restructuring and other costs increased to $29.4 million from $11.1 million. The company implemented workforce-reduction plans in each quarter of FY 2019.
- Cash from operating activities increased, but accounts receivable rose by $100.6 million, contributing to a $102.9 million working-capital cash use.
Outlook, commentary, risks and unusual items
- Management cited growth in drug discovery, informatics, OneSource laboratory services, food-related products (including cannabis demand), reproductive health and immunodiagnostics. Applied genomics performance declined.
- No specific FY 2020 revenue or earnings guidance is provided in the supplied filing text. Management expected FY 2020 capital expenditures to be similar to FY 2019’s $76.3 million and projected $6.6 million of contributions to non-U.S. pension plans.
- The filing warned that the COVID-19 outbreak beginning in late 2019 could disrupt sales and supply chains, particularly in China; approximately 20% of FY 2019 net sales came from China. The eventual effect was described as uncertain.
- Other stated exposures include foreign exchange and trade tensions, dependence on limited or single-source suppliers for some components, fluctuating customer order timing, regulatory and product-liability risks, cybersecurity, acquisition integration and impairment risk, and substantial debt with variable-rate exposure.
- Year-end goodwill was $3.111 billion and net intangible assets were $1.283 billion. Goodwill testing found no impairment, but the filing noted that Tulip and EUROIMMUN reporting-unit fair values approximated carrying values.
- The fourth quarter included a $31.2 million pre-tax mark-to-market pension and postretirement-plan loss. The November 2021 note redemption generated a separate $32.3 million pre-tax charge. The FY 2019 effective tax rate was 4.0%, reflecting foreign tax rates and discrete tax benefits, among other items.
- Environmental remediation accruals were $7.7 million. Management did not expect ordinary-course legal contingencies to materially adversely affect the consolidated financial statements, while acknowledging that outcomes remain uncertain.
- The company reported effective disclosure controls and internal control over financial reporting; the auditor gave unqualified opinions on the financial statements and internal controls. The auditor identified acquisition purchase-price allocation and valuation of acquired intangible assets as a critical audit matter.
Investor verification priorities
- Confirm the issuer and ticker: the filing identifies PerkinElmer, Inc. and PKI, not Revvity, Inc.
- Review the reconciliation of operating-income growth to lower continuing-operations income, particularly debt-extinguishment and pension-related charges.
- Track collections and working capital after the $100.6 million increase in accounts receivable and assess whether higher customer payment terms persist.
- Assess acquisition returns and integration, including the preliminary FY 2019 purchase-price allocations, goodwill growth and contingent consideration of up to $57.1 million.
- Monitor debt maturities, especially the $334.2 million carrying value of euro-denominated notes due April 2021, and available revolver capacity and covenants.
- Evaluate the realized effects of COVID-19, China exposure, foreign exchange and supply-chain constraints against management’s stated uncertainties.
- Check whether expected restructuring savings materialized and whether further charges or cash outlays followed the FY 2019 workforce reductions.