Business Context and Reporting Period
This Form 8-K, filed on November 23, 1999, reports on PerkinElmer, Inc. (formerly EG&G, Inc.), a global technology company operating in Life Sciences, Optoelectronics, Instruments, and Fluid Sciences segments. The filing primarily addresses the sale of the Technical Services segment, a name change effective October 26, 1999, and provides unaudited financial results for the first quarter ended April 4, 1999, alongside audited annual data for the fiscal year ended January 3, 1999.
Key Financial Metrics
Fiscal Year 1998 (Ended Jan 3, 1999)
- Revenue: $854.4 million (Continuing Operations).
- Net Income: $102.0 million (including $23.0 million from discontinued operations).
- Operating Income: $119.7 million (Continuing Operations).
- Cash Flow: $69.6 million provided by operating activities.
- Debt: $157.9 million short-term; $129.8 million long-term.
- Liquidity: $95.6 million in cash and cash equivalents.
First Quarter 1999 (Ended April 4, 1999 - Unaudited)
- Revenue: $243.2 million (Continuing Operations), a 11% increase year-over-year.
- Net Income: $14.1 million (including $6.0 million from discontinued operations).
- Operating Income: $17.0 million (Continuing Operations).
- Cash Flow: $10.2 million provided by operating activities.
- Debt: $184.1 million short-term; $117.3 million long-term.
- Liquidity: $106.3 million in cash and cash equivalents.
Material Changes and Significant Events
- Divestiture of Technical Services: On August 20, 1999, the company sold its Technical Services segment to an affiliate of The Carlyle Group for approximately $250 million in cash. This resulted in a net gain of $106 million (after taxes and costs) recorded in the third quarter of 1999. The segment is now reported as discontinued operations.
- Acquisitions:
- PE Corp. Analytical Instruments (PEAI): Acquired on May 28, 1999, for approximately $425 million. The company assumed a $65 million German pension liability and recorded a $23 million in-process R&D charge.
- Vivid Technologies: Agreed to acquire in October 1999 for approximately $63 million in stock.
- Restructuring: The company recorded $23.5 million in pre-tax restructuring charges in Q3 1999 and recognized a $12 million restructuring credit due to the completion of prior plans. Total expected cash outlays for 1999 restructuring were estimated at $25–$30 million.
- Asset Impairment: An $18 million impairment charge was recorded in Q3 1999 for goodwill write-downs in the Instruments and Optoelectronics segments.
Outlook, Risks, and Management Commentary
Management views the divestiture of Technical Services and the acquisition of PEAI as strategic milestones in transitioning to a commercial high-technology company. The company expects fiscal 2000 to reflect a full year of savings from restructuring plans, estimated at $24 million pre-tax. Capital expenditures for 1999 are not expected to exceed $40 million.
Risks and Contingencies:
- Year 2000 (Y2K): The company has incurred approximately $6.7 million to address Y2K issues as of April 4, 1999, with an additional $3.4 million estimated for the remainder of 1999. While remediation is largely complete, risks remain regarding third-party suppliers and infrastructure failures.
- Legal and Tax: The company is contesting IRS tax deficiencies totaling $74 million plus interest for tax years 1985–1994. Environmental liabilities are accrued at $9.5 million.
- Market Conditions: Demand is sensitive to economic conditions in Asia and the semiconductor industry. Currency fluctuations and competitive pricing pressures are noted risks.
Investor Verification Checklist
- Verify the final purchase price and working capital adjustments for the PEAI acquisition and the Technical Services divestiture.
- Monitor the integration progress of PEAI and the Vivid Technologies acquisition.
- Track the resolution of the IRS tax dispute regarding the 1985–1994 deficiencies.
- Review the actual cash outlays for restructuring plans against the $25–$30 million estimate for 1999.
- Assess the impact of the $65 million assumed German pension liability on future cash flows.
- Confirm the status of Y2K remediation for critical third-party suppliers and infrastructure.