Filing summary
Issuer identification: The supplied 10-Q is for PerkinElmer, Inc., not a filing identified as Revvity, Inc. The report covers the three months ended March 31, 2013; the comparable quarter ended April 1, 2012. Financial statements are unaudited. Amounts below are in U.S. dollars.
Business context and results
PerkinElmer operated through Human Health and Environmental Health segments, serving diagnostics, research, environmental, industrial and laboratory-services markets. At the start of fiscal 2013, it moved certain field-service and informatics activities from Environmental Health to Human Health; comparative segment results were retrospectively adjusted.
| Metric | Q1 2013 | Q1 2012 | Change |
|---|---|---|---|
| Revenue | $505.4 million | $510.9 million | Down $5.5 million, or 1% |
| Gross margin | 44.5% | 45.4% | Down 0.9 percentage points |
| Operating income | $35.9 million | $36.4 million | Down $0.5 million |
| Income from continuing operations | $32.3 million | $22.1 million | Up $10.2 million |
| Net income | $32.2 million | $22.6 million | Up $9.6 million |
| Diluted EPS | $0.28 | $0.20 | Up $0.08 |
| Operating cash flow | $11.1 million | $15.3 million | Down $4.1 million |
| Capital expenditures | $11.8 million | $5.2 million | Up $6.6 million |
The increase in continuing-operations income primarily reflected an $8.4 million income-tax benefit, versus a $1.5 million tax provision in the prior-year quarter. The current-quarter benefit included a $9.4 million reversal of uncertain-tax-position reserves following statute expirations. Operating margin was approximately 7.1% in both periods. Product revenue declined while service revenue increased.
Segments and material period changes
- Human Health: Revenue was $281.3 million, up 0.2%; operating income increased to $25.0 million from $18.2 million. Diagnostics revenue grew, partly offset by lower research-market revenue.
- Environmental Health: Revenue was $224.0 million, down 3%; operating income fell to $20.7 million from $30.1 million. Weakness in environmental, safety and industrial markets—particularly in Europe and Japan—was partly offset by laboratory-services growth.
- Consolidated gross margin fell amid lower sales volume, pricing pressure and less favorable product mix, partly offset by productivity improvements. SG&A declined, while R&D expense rose 5% to $34.2 million.
- Foreign exchange reduced reported revenue by approximately 1%. Acquisition-related deferred-revenue accounting reduced recognized revenue by $1.9 million in Q1 2013, versus $6.5 million in Q1 2012.
Cash, debt and liquidity
- Cash and equivalents were $125.9 million at March 31, 2013, down from $171.4 million at year-end 2012. Total assets were $3.81 billion.
- Short- and long-term debt totaled approximately $1.03 billion, compared with $940.6 million at year-end. The $700 million revolving facility had $351.7 million available; revolver borrowings were $336.0 million. The company reported compliance with applicable debt covenants.
- Cash from operations was $10.9 million including discontinued operations. Investing used $10.3 million, and financing used $42.6 million, including $126.9 million of share repurchases and $8.1 million of dividends. Cash declined by $45.6 million during the quarter.
- Working-capital movements included a $40.2 million reduction in receivables and a $16.2 million increase in inventory; accrued expenses and other items were a substantial use of cash, largely due to payment timing for taxes, pensions, royalties, restructuring and compensation.
- The company paid $37.0 million into its U.S. pension plan and $12.6 million into non-U.S. plans during the quarter; it expected approximately $22.0 million of non-U.S. contributions for fiscal 2013.
Outlook, risks and unusual items
- No specific consolidated revenue or earnings guidance was provided. Management expected growth opportunities in diagnostics, screening, medical imaging and laboratory services, while noting weak research demand and industrial-market softness. It cited delayed research orders amid U.S. sequestration concerns, European austerity and weaker Asian research markets.
- Management expected restructuring savings to exceed $11 million annually beginning in fiscal 2014. The company recorded $3.3 million of net restructuring and contract-termination charges in Q1, including workforce reductions; additional restructuring expense was expected under an existing plan.
- Share repurchases were significant: 3.6 million shares were bought under the program for $123.0 million, with 2.4 million shares remaining authorized. The quarterly dividend was $0.07 per share; the board could reduce or eliminate it to conserve capital or fund other priorities.
- Approximately 60% of business was conducted outside the U.S.; currency movements, variable interest rates, economic weakness, government funding changes, competition, regulation, supply interruptions, acquisition integration and substantial debt were identified risks.
- Contingencies included a $6.5 million environmental remediation accrual and the long-running Enzo patent and commercial dispute. Management said it did not expect these matters to have a material adverse effect, while acknowledging uncertainty. Gross unrecognized tax benefits were $48.0 million.
- The annual goodwill and indefinite-lived intangible-asset impairment tests found no impairment. Management reported effective disclosure controls and no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Confirm the issuer identity: the supplied filing names PerkinElmer, Inc.; the request names Revvity, Inc.
- Assess whether the tax-reserve release makes reported earnings and EPS less representative of recurring performance.
- Track Environmental Health demand, gross-margin pressure, research-market order delays and the timing of expected restructuring savings.
- Monitor cash generation against share repurchases, pension funding, dividends and debt service; verify available revolver capacity and covenant headroom.
- Review developments in the Enzo litigation, environmental matters, open tax examinations and acquisition-related contingent consideration.