PerkinElmer, Inc. (historical filing; named Revvity in the request) — Q2 2015 Form 10-Q
Business context and period. The filing covers the quarter and six months ended June 28, 2015. PerkinElmer reported Human Health and Environmental Health segments; OneSource was reassigned to Human Health, and prior-period segment data was recast. Fiscal 2015 includes 53 weeks, with the extra week in Q3.
Financial performance
| Metric | Q2 2015 | Q2 2014 | Six months 2015 | Six months 2014 |
|---|---|---|---|---|
| Revenue | $563.9M | $556.2M | $1,090.8M | $1,086.8M |
| Operating income | $68.1M | $69.6M | $125.5M | $121.4M |
| Income from continuing operations | $49.0M | $52.0M | $89.3M | $87.0M |
| Net income | $49.0M | $50.5M | $89.3M | $84.7M |
| Diluted EPS | $0.43 | $0.44 | $0.79 | $0.74 |
| Gross margin | 44.8% | 44.6% | 44.7% | 44.5% |
- Q2 revenue increased 1%; management attributed approximately 7% of revenue impact to unfavorable foreign exchange and approximately 4% to acquisitions. Q2 operating margin was about 12.1%, down from 12.5% a year earlier; higher restructuring and product-development costs offset improved gross margin and cost savings.
- Six-month revenue rose 0.4%, while continuing-operations operating income rose 3.4%. Six-month diluted EPS increased to $0.79 from $0.74.
- Segments, Q2: Human Health revenue was $341.5M, down 0.3%, and operating income was $60.5M, up 5%. Environmental Health revenue was $222.4M, up 4%, but operating income fell 24% to $19.4M. Perten acquisition revenue and stronger environmental/food demand supported Environmental Health sales; currency effects were a substantial headwind across both segments.
- Cash flow, six months: continuing-operations operating cash flow was $101.2M versus $122.6M; capital expenditures were $10.1M; acquisition/investment outflow was $18.7M. Cash and equivalents ended at $192.2M, up $17.3M from year-end. Working capital and timing of tax, restructuring, salary and benefit payments weighed on cash generation.
- Liquidity and debt: current assets were $1.07B and current liabilities $574.3M. Total debt was approximately $988.4M, including $451.0M drawn on a $700M revolver, $497.8M carrying value of 5% notes due 2021 and financing leases. Revolver availability was $236.8M; the company reported compliance with applicable covenants.
Material changes, outlook and risks
- Q2 2015 included $5.0M of restructuring and contract termination charges, versus $0.7M in Q2 2014. The six-month charge was $5.0M versus $2.9M. A new workforce-reduction plan affected 102 employees, with payments expected substantially by Q2 FY2016.
- Three businesses were acquired in the first half for $19.0M cash; purchase-price allocations remained preliminary. Perten, acquired in December 2014, contributed to Environmental Health growth. Inventory purchase-accounting charges were $6.5M in the first half.
- Management provided no quantified revenue or earnings guidance in the supplied filing text. It expressed expectations for continued opportunity in disease screening, research products and services, and testing tied to contaminant regulation, while emphasizing currency headwinds and investments in product development.
- Key exposures include foreign exchange (about 60% of business conducted outside the U.S.), customer funding and order timing, competition and product innovation, acquisition integration, variable-rate debt, pension funding and regulatory changes. The company held $175.9M of cash outside the U.S.; it said approximately $67.8M could incur U.S. tax if transferred without planning.
- Environmental remediation accruals were $12.1M; management did not expect known environmental matters or other ordinary-course legal contingencies to have a material adverse effect, but outcomes remain uncertain. Unrecognized tax benefits were $30.1M; approximately $5.4M could be resolved within 12 months.
- The board declared a $0.07-per-share Q3 dividend, payable in November 2015; management noted dividends could be reduced or eliminated. No open-market repurchases occurred under the authorization in the first half.
Investor facts to verify
- Whether revenue and segment profitability improve as currency effects, Perten contributions and restructuring costs evolve.
- Whether operating cash flow recovers from the year-over-year decline and inventory build, and whether cash conversion supports dividends and investment needs.
- Revolver usage, debt repayment capacity, variable-rate exposure and continued covenant compliance.
- Final acquisition purchase accounting, integration performance and any contingent consideration or impairment effects.
- Potential tax costs and access to overseas cash, pension contributions, and developments in environmental or legal contingencies.