PerkinElmer, Inc. — FY2011 Form 10-K
Filing and period: The supplied filing is PerkinElmer, Inc.’s annual report for the 52-week fiscal year ended January 1, 2012, filed February 28, 2012. It is not a standalone Q4 filing, and the issuer named in the filing is not Revvity, Inc.; verify the company and filing before relying on this summary.
Business context and results
PerkinElmer supplied diagnostics, research, environmental, industrial and laboratory-service products through Human Health and Environmental Health segments. Fiscal 2011 growth reflected acquisitions, ongoing product investment and increased sales in several end markets; the Caliper acquisition closed in November 2011.
| Metric | FY2011 | FY2010 |
|---|---|---|
| Revenue | $1,921.3 million | $1,704.3 million |
| Gross profit / gross margin | $850.6 million / 44.3% | $761.2 million / 44.7% |
| Operating income / margin | $91.1 million / 4.7% | $157.6 million / 9.2% |
| Income from continuing operations | $1.2 million | $138.9 million |
| Net income | $7.7 million | $391.0 million |
| Diluted EPS | $0.07 | $3.31 |
| Cash from continuing operating activities | $234.0 million | $167.2 million |
Revenue, segments and material changes
- Revenue rose 13% year over year, including approximately 4% from acquisitions and 3% from foreign exchange. Product revenue was $1,319.5 million and service revenue $601.8 million.
- Human Health revenue increased 11% to $887.2 million; segment operating income was $99.3 million, up 1%. Diagnostics and imaging grew, while pharmaceutical customer consolidation, weaker legacy radioisotope demand and tight neonatal-screening inventory weighed on results.
- Environmental Health revenue increased 14% to $1,034.1 million; segment operating income rose 4% to $99.3 million. Environmental, food-safety and industrial products and OneSource laboratory services contributed to growth.
- Consolidated operating income fell despite higher revenue. Reported results included a $67.9 million pretax pension/postretirement mark-to-market and curtailment loss, increased acquisition-related costs, higher sales and marketing and R&D spending, and $13.5 million of restructuring and contract-termination charges. The prior year included a $25.6 million gain on a step acquisition and a $315.3 million pretax gain from the sale of the IDS business, materially elevating FY2010 earnings.
- The FY2011 tax provision included $79.7 million related to planned repatriation of $350 million of foreign earnings. The resulting 98.2% effective tax rate on continuing operations was a major factor in the near-break-even continuing-operations result.
Cash flow, debt and liquidity
- Cash and cash equivalents were $142.3 million at year-end, versus $420.1 million a year earlier. Cash from continuing operations was $234.0 million; continuing-operations investing cash outflow was $942.1 million, including $914.0 million for acquisitions and related items. Capital expenditures were $30.6 million.
- Continuing-operations financing provided $399.1 million, including $496.9 million net proceeds from issuing $500 million of 5% senior notes due 2021. Year-end debt comprised $298.0 million drawn on a revolving facility, $150.0 million of 6% notes due 2015 and the 2021 notes (carrying value $496.9 million); total carrying debt was approximately $944.9 million.
- The amended revolving facility provides $700 million and had $389 million available for additional borrowing at year-end. The company reported compliance with applicable debt covenants. Variable-rate debt was $298 million; management estimated a 10% rise in current rates (about 16 basis points) would increase FY2012 pretax interest expense by about $0.5 million.
- Management expected internally generated cash to fund ordinary operating needs, capital spending, smaller acquisitions, interest and dividends; external funding might be needed for larger acquisitions and debt repayment. FY2012 capital expenditures were expected to be similar to FY2011. Planned pension contributions were up to $16.0 million for U.S. plans and $11.1 million for non-U.S. plans.
Outlook, risks and unusual items
- Management expected continued investment in R&D and growth in Human Health and Environmental Health, citing demand for diagnostics, regulated testing and laboratory services. The filing provides no specific consolidated revenue or earnings guidance.
- Management expected approximately $6.9 million of FY2012 retirement and postretirement plan expense excluding any mark-to-market adjustment; the amount of any such adjustment was not reliably forecastable and could vary with interest rates and investment performance.
- Caliper was acquired for $646.3 million in cash and financed primarily with the new 2021 notes. Its preliminary purchase-price allocation included $352.5 million of goodwill; its reported post-acquisition revenue was $29.3 million and pretax loss was $3.0 million. Purchase accounting also reduced recognition of acquired deferred revenue; the company said $30.8 million of FY2011 revenue, primarily in informatics, was not recognized because of acquisition accounting.
- Other key risks include uneven global economic conditions and customer funding, acquisition integration and goodwill/intangible-asset impairment, product and regulatory risks, foreign-exchange exposure (about 62% of sales were international), critical single-source suppliers, substantial debt and restrictive covenants, and litigation. The Enzo patent and related-claims case remained stayed; management believed resolution would not materially affect the financial statements. Environmental remediation accruals were $6.7 million, with possible losses above recorded amounts acknowledged.
- The company changed pension and postretirement accounting to recognize actuarial gains and losses immediately; prior periods were retrospectively adjusted. The independent auditor issued an unqualified opinion on the financial statements and internal controls.
Important facts for investors to verify
- Confirm the filing issuer and period: this is PerkinElmer’s FY2011 10-K, not a Revvity filing or a Q4-only report.
- Assess normalized earnings excluding the $67.9 million pension-related charge, the $79.7 million repatriation tax provision, acquisition costs and prior-year divestiture/step-acquisition gains.
- Review acquisition performance, especially Caliper integration, its preliminary purchase-price allocation, goodwill and deferred-revenue effects.
- Check liquidity and debt repayment capacity, covenant headroom, variable-rate exposure, and planned pension contributions against cash generation.
- Monitor international demand and currency effects, deferred revenue and working capital, and the outcome of legal, tax and environmental contingencies.