Business context and reporting period
This filing is PerkinElmer, Inc.’s unaudited Form 10-Q for the three months ended April 3, 2011—not a filing identified as Revvity, Inc. The filing reports Human Health and Environmental Health segments; fiscal 2011 and 2010 both had 52 weeks.
Financial performance and liquidity
Unless stated otherwise, figures below are in millions of dollars. Comparisons are with the three months ended April 4, 2010.
| Metric | Q1 2011 | Q1 2010 | Change / context |
|---|---|---|---|
| Sales | $447.9 | $393.6 | Up 14%; acquisitions and favorable foreign exchange each contributed approximately 2%. |
| Gross margin | 44.7% | 44.5% | Up approximately 20 basis points. |
| Operating income from continuing operations | $39.3 | $30.6 | Up 28%; operating margin approximately 8.8% versus 7.8%. |
| Income from continuing operations | $25.9 | $19.6 | Effective tax rate 22.9%, down from 28.6%. |
| Net income | $23.5 | $24.4 | Continuing operations improved, but discontinued operations moved from $4.8 income to a $2.4 loss. |
| Diluted EPS | $0.20 | $0.21 | Continuing-operations diluted EPS was $0.22 versus $0.17. |
| Cash from continuing operating activities | $47.3 | $51.2 | Down $4.0. |
| Cash and cash equivalents | $415.8 | $420.1 at fiscal year-end | Quarter-end cash decreased $4.2. |
| Debt | $516.3 total | $426.3 at fiscal year-end | Includes $364.0 drawn on the revolver, $150.0 senior notes, and $2.3 short-term debt. |
Current assets were $1,087.7 million and current liabilities $511.2 million at quarter-end. The company reported $272.8 million of additional borrowing availability under its $650 million revolving facility, after letters of credit and borrowings. Continuing-operations investing cash use was $64.3 million, including $56.6 million for acquisitions and related items; capital expenditures were $7.7 million. Continuing-operations financing cash use was $1.9 million, including $109.2 million of share repurchases and $8.1 million of dividends, partly offset by borrowings and stock-plan proceeds.
Segment results
- Human Health: Sales of $202.0 million, up 7%; operating income of $20.8 million, down 5%. Diagnostics and academic research growth was partly offset by weaker medical imaging, lower U.S. birth rates and tight screening-lab inventories, pharmaceutical customer consolidation, and lower legacy radioisotope demand.
- Environmental Health: Sales of $245.9 million, up 20%; operating income of $29.1 million, up 54%. Growth included environmental, food and consumer safety testing, industrial markets, and OneSource laboratory services.
Material changes versus the prior comparable period
- Sales growth and improved gross and operating margins lifted continuing-operations earnings, but higher other expense—principally foreign-currency-related—raised net interest and other expense to $5.8 million from $3.1 million.
- Operating cash flow from continuing operations declined, while acquisition spending and share repurchases increased substantially. The company repurchased approximately 4.0 million shares under its program for $107.8 million, in addition to shares withheld for taxes.
- Long-term debt rose to $514.0 million from $424.0 million at fiscal year-end, principally reflecting greater revolver borrowings.
- Quarter-end goodwill increased to $1,585.4 million, including acquisition-related additions and currency translation.
Outlook, management commentary, risks and unusual items
- Management cited improved spending trends, recovery in industrial capital purchases, demand for testing and safety products, and growth in screening and laboratory services. It expected continued growth in relevant markets but provided no numerical revenue or earnings guidance in the supplied filing text.
- Management expected internally generated cash to cover operating expenses, capital expenditures, smaller acquisitions, interest and dividends; external funding may be needed for larger acquisitions and certain long-term obligations. It anticipated compliance with debt covenants and stated the company was compliant at quarter-end.
- Management anticipated pension costs would remain elevated and said international pension contributions of up to $11.0 million might be required by fiscal year-end.
- Acquisitions included chemagen, ArtusLabs and ID Biological Systems in the quarter. CambridgeSoft was acquired in April and Geospiza in May, after the reporting period. The acquired businesses were intended to expand diagnostics and scientific software/informatics offerings; purchase-price allocations were preliminary. Additional contingent consideration was possible for certain acquisitions.
- The prior sale of the Illumination and Detection Solutions business generated a $315.3 million pre-tax gain in fiscal 2010; a first-quarter working-capital and contingency adjustment resulted in a $1.6 million pre-tax loss. The company had a $28.7 million receivable related to that sale at quarter-end.
- Key stated risks include market and government-funding weakness, foreign-exchange and interest-rate exposure, acquisition integration and valuation, competition and product development, regulation, supply-chain disruption, and potential impairment of goodwill and other intangible assets. The company reported $6.1 million accrued for environmental matters and disclosed a stayed Enzo patent and other claims; management did not expect these matters to have a material adverse effect, while acknowledging uncertainty.
- The company planned approximately $250 million of cash repatriation related to previously unremitted earnings; $50.2 million had been repatriated by April 3 and a further $20.0 million by May 4. Management expected minimal additional repatriation taxes using existing tax attributes. Gross tax-effected unrecognized tax benefits were $40.9 million.
Important facts for investors to verify
- Confirm the issuer and period: the supplied filing is PerkinElmer, Inc. for Q1 2011, despite the request metadata naming Revvity, Inc.
- Review continuing-operations earnings and cash generation separately from discontinued operations, including the IDS sale adjustment and the prior-year discontinued-business results.
- Track acquisition integration, final purchase-price allocations, contingent consideration, and the impact of the April and May acquisitions on subsequent results and debt.
- Assess revolver utilization, variable-rate exposure, covenant headroom, planned repurchases and dividends, and potential pension funding needs.
- Monitor the Enzo litigation, environmental and tax contingencies, and the recoverability of substantial goodwill and intangible assets.