Business context and reporting period
PerkinElmer, Inc. (the registrant named in the supplied filing) reported unaudited results for the three months ended March 29, 2015, compared with the three months ended March 30, 2014. The business provides products and services in diagnostics, research, environmental, industrial and laboratory-services markets through Human Health and Environmental Health segments. The organization moved its OneSource service business from Environmental Health to Human Health; prior-period segment results were retrospectively adjusted. Fiscal 2015 includes 53 weeks, with the extra week in the third quarter.
Entity note: The request identifies Revvity, Inc., but the supplied filing is for PerkinElmer, Inc. and covers 2015. Confirm the intended issuer and filing before relying on this summary.
Financial performance
Unless noted otherwise, amounts are in millions of U.S. dollars. Year-over-year changes are for the comparable quarter.
| Metric | Q1 2015 | Q1 2014 | Change / context |
|---|---|---|---|
| Revenue | $526.9 | $530.6 | Down $3.7, or 1%; management attributed approximately 6% decline to foreign exchange and approximately 3% growth to acquisitions. |
| Gross profit / margin | $235.4 / 44.7% | $235.7 / 44.4% | Gross margin improved 25 basis points despite slightly lower revenue. |
| Operating income / margin | $57.4 / 10.9% | $51.8 / 9.8% | Operating income rose 11%; margin increased about 114 basis points. |
| Continuing-operations income | $40.3 | $35.0 | Up 15%; diluted EPS was $0.36 versus $0.31. |
| Net income / diluted EPS | $40.3 / $0.36 | $34.2 / $0.30 | Prior-year net income included a larger discontinued-operations loss. |
| Operating cash flow, continuing operations | $37.6 | $68.1 | Down $30.5; working-capital and other payment timing were significant factors. |
| Cash and cash equivalents | $168.9 | $174.8 at Dec. 28, 2014 | Quarter-end cash fell $5.9. |
| Total debt, including current portion | $1,015.7 | $1,053.0 at Dec. 28, 2014 | Includes revolving-facility borrowings, 2021 notes and financing leases. |
| Quarterly dividend per share | $0.07 | $0.07 | Second-quarter 2015 dividend of $0.07 was declared after quarter-end. |
Current assets were $1,022.5 million and current liabilities $550.6 million at March 29, 2015. The $700 million revolving facility had $208.8 million of additional borrowing capacity available; the company reported compliance with applicable debt covenants. Net cash used in investing activities was $9.0 million, including $4.5 million of capital expenditures and $4.6 million for acquisitions and investments. Net cash used in financing activities was $24.7 million, including $7.9 million of dividends.
Material changes and segment results
- Human Health: Revenue was $326.1 million, down 1%. Operating income increased to $55.9 million from $44.0 million. Management cited growth in newborn screening, research products, OneSource and medical imaging, more than offset by foreign-exchange headwinds.
- Environmental Health: Revenue was $200.8 million, essentially flat. Operating income fell to $11.3 million from $21.6 million. Management cited foreign exchange, higher product-development spending and $4.9 million of acquired-inventory purchase-accounting amortization; growth in materials characterization and Perten revenue partly offset these pressures.
- Consolidated SG&A decreased 4% to $145.9 million, while R&D increased 9% to $32.1 million, reflecting investment in new product development. No restructuring charge was recorded in Q1 2015, compared with $2.1 million in Q1 2014.
- Comprehensive income was $16.6 million versus $34.8 million, principally reflecting a $23.7 million foreign-currency translation loss in Q1 2015, compared with a small translation gain in the prior-year quarter.
Outlook, commentary, risks and unusual items
- No numerical full-year revenue or earnings guidance is provided in the supplied filing. Management expressed expectations for continued demand in screening, research and testing markets, while noting that the stronger U.S. dollar was a substantial revenue headwind.
- Management credited improved product mix, early supply-chain benefits, and cost-containment and productivity actions for margin expansion. It also reported increased R&D investment and warned that results can vary with order timing and market conditions.
- Approximately 60% of the business is conducted outside the United States. Currency exposure is a key risk; the company uses foreign-exchange contracts as economic hedges and reported that currency movements materially reduced reported revenue.
- Cash from continuing operations declined to $37.6 million. The filing attributes cash-flow movements to working capital and payment timing, including a $20.0 million U.S. pension contribution and $4.9 million of non-U.S. pension contributions. Management expected an additional $2.6 million of non-U.S. pension contributions by fiscal year-end.
- At quarter-end, goodwill was $2.25 billion and net intangible assets were $470.0 million. The annual impairment test found no goodwill or indefinite-lived intangible impairment; impairment remains a risk if business performance or valuation assumptions weaken.
- Potential contingent acquisition payments were up to $31.4 million, although only $0.1 million was recorded as the estimated fair value of the disclosed obligation. Environmental remediation accruals were $12.0 million; management said ordinary-course legal matters were not expected to have a material adverse effect, while acknowledging uncertainty.
- Unrecognized tax benefits were $30.7 million; approximately $5.2 million, including interest and penalties and net of tax benefits, could be resolved within twelve months. The effective tax rate rose to 16.0% from 13.6%, primarily due to projected income in higher-tax jurisdictions.
- Two businesses were acquired in Q1 for $4.7 million in cash; another acquisition for $14.0 million closed after quarter-end. Perten, acquired in December 2014, contributed to Environmental Health revenue. The company reported no material subsequent events affecting the statements.
Important facts for investors to verify
- Confirm the issuer: the supplied document is PerkinElmer’s 2015 Q1 10-Q, not a filing identified as Revvity, Inc.
- Assess underlying organic performance separately from currency and acquisitions, particularly given the approximately 6% foreign-exchange revenue drag.
- Investigate the sharp year-over-year decline in Environmental Health operating income and distinguish recurring operating trends from acquired-inventory amortization and investment spending.
- Review the durability of operating cash flow and working-capital movements, as well as pension funding needs and the geographic availability of cash; $161.8 million of cash was held by non-U.S. subsidiaries.
- Monitor debt, revolving-credit availability and covenant headroom, along with goodwill and intangible-asset assumptions, acquisition contingencies, environmental exposures and tax examinations.