Business context and reporting period
This filing is PerkinElmer, Inc.’s unaudited Form 10-Q for the quarter ended September 30, 2012, with nine-month results compared with the periods ended October 2, 2011. The supplied metadata names Revvity, Inc.; the filing itself identifies the issuer as PerkinElmer, Inc. PerkinElmer reported Human Health and Environmental Health segments. Caliper Life Sciences, acquired in November 2011, contributed to Human Health results.
Key financial metrics
Amounts are in millions of dollars, except per-share data.
| Metric | Q3 2012 | Q3 2011 | Nine months 2012 | Nine months 2011 |
|---|---|---|---|---|
| Revenue | $509.6 | $452.9 | $1,542.3 | $1,379.2 |
| Gross margin | 45.3% | 44.0% | 45.5% | 44.1% |
| Operating income | $43.2 | $36.1 | $129.4 | $117.0 |
| Net income | $29.6 | $36.6 | $85.8 | $91.3 |
| Diluted EPS | $0.26 | $0.32 | $0.75 | $0.80 |
| Continuing-operations net income | $29.0 | $28.0 | $84.6 | $84.4 |
- Q3 revenue rose 13%; nine-month revenue rose 12%. Product revenue grew faster than service revenue.
- Q3 operating margin was approximately 8.5%, versus 8.0% a year earlier; nine-month operating margin was approximately 8.4%, versus 8.5%.
- Continuing-operations effective tax rates were 7.5% for Q3 and 9.3% for the nine months, compared with 13.1% and 18.1%. Management attributed the lower rates mainly to favorable permanent tax differences, audit settlements and a higher expected mix of profits in lower-tax jurisdictions.
- Nine-month cash from continuing operating activities was $113.8, down from $151.5. Capital expenditures were $24.4, implying operating cash flow less capital expenditures of about $89.4, versus $126.5 in the prior period.
- Cash and cash equivalents were $170.8 at September 30, 2012, up from $142.3 at year-end. Current assets were $941.0 and current liabilities $582.3.
- Balance-sheet debt was approximately $932.3, including $930.9 long-term and $1.5 short-term. The company had $256.0 outstanding on its revolving facility and reported $432.0 available for additional borrowing. It reported compliance with applicable debt covenants.
- Cash dividends were $0.07 per share each quarter; $23.9 was paid during the first nine months.
Material changes versus the prior comparable period
- Human Health revenue grew 25% in Q3 and 23% for the nine months, driven by research-market growth, diagnostics and Caliper. Environmental Health revenue grew 2% in Q3 and 3% for the nine months; laboratory services growth was partly offset by weaker industrial and environmental/safety markets.
- Foreign exchange reduced revenue by approximately 3% in both segments. Acquisitions contributed approximately 9% to consolidated revenue growth, according to management.
- Gross margin improved by 126 basis points in Q3 and 134 basis points for the nine months, reflecting sales volume, product mix and productivity improvements.
- Interest and other expense increased to $11.9 in Q3 from $3.9, and to $36.1 for the nine months from $13.9, primarily reflecting higher debt and interest expense following the 2021 note issuance.
- Net income declined despite higher continuing-operations earnings, in part because prior-year discontinued-operations gains and tax benefits were larger.
- Continuing-operations operating cash flow fell by $37.7. Management cited working-capital use, including inventory growth and lower accounts payable, and payment timing for taxes, pensions, royalties, restructuring and compensation.
Outlook, commentary, risks and unusual items
- Management described demand as generally stable and cited opportunities in diagnostics, research, laboratory services, contaminant testing and emerging markets. The filing does not provide specific full-year revenue or EPS guidance.
- Management expects restructuring savings to exceed $11.0 annually beginning in fiscal 2014, primarily through lower cost of revenue and SG&A. Restructuring charges were $21.0 for the first nine months of 2012. Plans included workforce reductions and a shared-service-center transition; remaining payments extend into 2014 and, for older facility obligations, as far as 2022.
- Caliper’s purchase-price allocation remained preliminary, with tax-related items and residual goodwill still subject to measurement-period adjustment. Goodwill was approximately $2.09 billion and net intangible assets $606.1 million at quarter-end.
- The company planned to repatriate $350.0 of previously unremitted foreign earnings and had repatriated $229.2 by September 30, 2012. It had provided for estimated taxes; management expected to use tax attributes to limit cash taxes and complete the repatriation by fiscal 2013.
- A new authorization to repurchase up to 6.0 million shares was approved October 24, 2012, after quarter-end. The board also declared a $0.07 quarterly dividend payable in February 2013; future dividends may be reduced or eliminated.
- Risks include economic and funding weakness in customer markets, foreign-exchange exposure (about 60% of business outside the United States), competition and product-development execution, acquisition integration, debt and variable interest rates, regulation, supply-chain dependence, and potential impairment of substantial goodwill and intangibles.
- Contingencies include $6.3 of accrued environmental remediation and the long-running Enzo patent and related claims. The company said it did not expect these matters to have a material adverse effect, while acknowledging uncertainty. On September 12, 2012, the court granted in part and denied in part the company’s motion for summary judgment of non-infringement.
- Management stated that disclosure controls were effective and that no material change in internal control over financial reporting occurred during the quarter.
Most important facts for investors to verify
- Confirm issuer identity and period: the supplied metadata says Revvity, but this filing is PerkinElmer’s 2012 third-quarter 10-Q.
- Separate organic performance from acquisition contribution and foreign-exchange effects, particularly in Human Health.
- Assess whether cash generation recovers from the year-over-year decline and whether working-capital use persists.
- Track leverage, interest expense, revolver availability and the timing and cash-tax cost of the planned repatriation.
- Monitor restructuring execution and whether the anticipated annual savings above $11.0 begin in fiscal 2014.
- Review Caliper purchase-accounting adjustments, intangible amortization and impairment assumptions, along with developments in the Enzo litigation and environmental matters.