Filing summary
Entity and period: The supplied filing is PerkinElmer, Inc.’s audited Form 10-K for the fiscal year ended December 30, 2018—not a Revvity, Inc. filing. Fiscal 2018 comprised 52 weeks. The filing includes unaudited fourth-quarter results. Verify the company and period against the intended filing before relying on this summary.
Business context and reporting period
PerkinElmer reported two segments: Discovery & Analytical Solutions (life sciences and applied markets) and Diagnostics (including reproductive health, infectious disease testing and applied genomics). It operated in more than 180 countries and employed approximately 12,500 people.
Financial performance
| Metric | FY 2018 | FY 2017 | Change / context |
|---|---|---|---|
| Revenue | $2.778 billion | $2.257 billion | Up 23%; acquisitions and divestitures contributed about 14 percentage points, and foreign exchange about 1 point. |
| Gross profit / margin | $1.341 billion / 48.3% | $1.074 billion / 47.6% | Margin improved 70 basis points, primarily from product mix and productivity. |
| Operating income / margin | $323.9 million / 11.7% | $295.6 million / 13.1% | Income rose, but margin fell about 144 basis points amid acquisition-related amortization, inventory revaluation and growth investments. |
| Income from continuing operations | $237.5 million | $156.9 million | Up 51%; effective tax rate was 7.8%, compared with 47.1% in 2017. |
| Net income | $237.9 million | $292.6 million | Down 19%; 2017 included a $179.6 million pretax gain from the Medical Imaging sale. |
| Diluted EPS | $2.13 | $2.64 | 2017 included discontinued-operation and disposition income; continuing-operations diluted EPS was $2.13 versus $1.42. |
| Operating cash flow, continuing operations | $311.2 million | $292.2 million | Up $19.1 million; working capital absorbed $115.8 million. |
| Capital expenditures | $93.3 million | $39.1 million | Approximate continuing-operations cash flow less capex was $218.0 million, versus $253.1 million in 2017. |
| Cash and cash equivalents | $163.1 million | $202.1 million | $149.4 million was held by non-U.S. subsidiaries. |
| Total debt, carrying value | $1.891 billion | $2.006 billion | Net debt was approximately $1.728 billion; $418.0 million was drawn on the revolving facility. |
At year-end, current assets were $1.235 billion and current liabilities $771.6 million, implying a current ratio of about 1.60. The $1.0 billion revolving facility had $570.6 million of additional borrowing capacity; the company reported covenant compliance.
Segments and fourth quarter
- Discovery & Analytical Solutions: FY revenue was $1.693 billion, up 7%; operating income was $230.5 million, up 12%. Growth reflected industrial, environmental and food offerings, drug discovery and informatics.
- Diagnostics: FY revenue was $1.085 billion, up 60%, including $359.4 million from EUROIMMUN. Operating income rose 4% to $153.2 million; acquired-intangible amortization and inventory fair-value charges weighed on results.
- Unaudited Q4: Revenue was $756.3 million versus $641.6 million; operating income was $115.7 million versus $93.6 million; continuing-operations income was $71.3 million versus a loss of $38.4 million. The prior-year quarter included a $179.6 million pretax Medical Imaging sale gain at the full-year level and a large tax charge; quarterly discontinued-operations results also differed materially.
Material changes, outlook and unusual items
- The 2017 EUROIMMUN acquisition was the principal driver of 2018 growth and increased Diagnostics’ scale. The company also acquired four smaller businesses in 2018 for aggregate consideration of approximately $106.0 million.
- Fiscal 2018 included $11.1 million of restructuring and contract termination charges, a $21.4 million pretax postretirement mark-to-market loss, and $19.3 million of acquired-inventory revaluation expense. The multispectral imaging business sale generated a $13.0 million pretax gain.
- The low 2018 effective tax rate reflects international earnings, tax benefits and discrete items; management reported $8.1 million of net discrete tax benefits. Fiscal 2017 tax expense included the Tax Act charge, principally the one-time transition tax.
- PerkinElmer adopted ASC 606 using the modified retrospective method. Reported 2018 revenue was $31.4 million higher and net income $15.8 million higher than under the former revenue standard; comparative periods were not restated.
- Management expected 2019 capital expenditures to be similar to 2018, primarily for new products, process improvements, manufacturing shifts and information technology. It expected operating cash to cover routine operating needs, capex, smaller acquisitions, interest and dividends; larger acquisitions and debt maturities could require external financing. No specific revenue or EPS guidance is provided in the supplied filing text.
- The company paid a $0.28 per-share annual dividend in 2018 and declared a $0.07 quarterly dividend for Q1 2019. A new $250 million repurchase authorization had $197.8 million remaining at year-end.
- Debt maturities are concentrated in 2021: the revolving facility, $500 million notes due November 2021, and euro notes due April 2021. The filing identifies variable-rate exposure, refinancing and covenant risks.
- Other risks include dependence on global markets and government funding, product innovation and regulatory compliance, acquisition integration, foreign exchange and trade uncertainty, limited-source suppliers, cybersecurity, and potential impairment of goodwill and intangibles. Goodwill and net intangible assets were about $2.953 billion and $1.200 billion; management identified Informatics as comparatively more exposed to impairment, though no impairment was recorded in the annual test.
- Environmental remediation accruals were $7.9 million. Management said pending ordinary-course legal matters were not expected to materially affect the consolidated statements, while noting outcomes remain uncertain.
Most important facts for investors to verify
- Confirm this is the intended issuer and filing: the document is PerkinElmer’s FY 2018 10-K, despite the request metadata naming Revvity and 2018 Q4.
- Separate organic growth from acquisition-driven growth, especially EUROIMMUN’s contribution to Diagnostics revenue and the durability of acquired-business performance.
- Assess underlying profitability after acquired-intangible amortization, inventory step-up costs, restructuring and the unusual pension mark-to-market loss.
- Review the 2021 debt refinancing requirement, variable-rate exposure, available revolver capacity and covenant headroom.
- Reconcile cash generation with higher working-capital needs and the increase in capital expenditures; check cash accessibility given its concentration outside the U.S.
- Evaluate whether the unusually low effective tax rate and acquisition-related growth are sustainable, and monitor the Informatics reporting unit and other acquired intangible assets for impairment risk.