PerkinElmer, Inc. (PKI) — Q1 2020 Form 10-Q
Filing identity: The filing names PerkinElmer, Inc. as the registrant, not Revvity, Inc. It covers the three months ended April 5, 2020; the comparable period ended March 31, 2019. The company supplies products and services in diagnostics, life sciences and applied markets through Discovery & Analytical Solutions and Diagnostics.
Financial performance and position
| Metric | Q1 2020 | Q1 2019 |
|---|---|---|
| Revenue | $652.4 million | $648.7 million |
| Gross margin | 47.2% | 47.4% |
| Operating income | $44.7 million | $53.3 million |
| Income from continuing operations | $33.7 million | $35.5 million |
| Net income | $33.7 million | $35.4 million |
| Diluted EPS | $0.30 | $0.32 |
| Operating cash flow | $60.1 million | $(5.3) million |
| Capital expenditures | $20.5 million | $19.9 million |
- Operating margin was approximately 6.8%, versus 8.2% a year earlier. Management attributed lower gross and operating margins to higher acquired-intangible amortization, lower volume, investment in product development and the extra fiscal week, partly offset by pricing, service productivity and cost actions.
- At April 5, cash and equivalents were $195.1 million; current assets were $1.342 billion and current liabilities $730.1 million. The current ratio was approximately 1.84. The company also reported $681.4 million available under its $1.0 billion revolving facility.
- Reported debt was $2.020 billion, comprising $9.7 million current and $2.011 billion long-term. Cash less reported debt implies net debt of about $1.825 billion. The company said it was in compliance with applicable debt covenants.
- Cash from operations improved by $65.4 million year over year, reflecting income, noncash charges and working-capital movements. Receivables provided $80.6 million of cash, while inventory used $54.8 million. Cash increased by $3.3 million from year-end to $195.1 million.
- Other comprehensive loss was $78.7 million, primarily from foreign-currency translation; comprehensive loss was $45.0 million despite positive net income.
Changes versus the prior period
- Revenue rose $3.7 million, or 1%. Discovery & Analytical Solutions revenue increased 2% to $398.4 million; Diagnostics revenue declined 2% to $254.0 million.
- Life-sciences growth, including pharma and biotech, supported Discovery & Analytical Solutions. Applied-market revenue fell $18.8 million, with COVID-19-related demand declines in industrial, environmental and food markets.
- Diagnostics faced lower reproductive-health and immunodiagnostics sales amid the pandemic; growth in applied-genomics COVID-19 offerings and the extra fiscal week partly offset the decline.
- Operating income fell $8.6 million, or about 16%. Segment operating income declined 23% in Discovery & Analytical Solutions and 6% in Diagnostics.
- Fiscal 2020 includes 53 weeks, compared with 52 weeks in fiscal 2019; management cites the extra week as a factor in comparisons.
Outlook, risks and unusual items
- Management provided no quantified full-year guidance in the supplied filing text. It said COVID-19’s duration and ultimate effects could not be predicted and anticipated potential material adverse effects on business, financial condition, results and cash flows.
- COVID-19 had already reduced demand in several markets. Disclosed risks include supply-chain and manufacturing disruption, raw-material shortages, customer credit concerns, market volatility, reduced liquidity and increased borrowing costs.
- Q1 included a $4.2 million restructuring plan charge for workforce reductions and an excess-facility closure; the plan covered 32 headcount reductions. Management did not expect further charges under the plans described, though some payments and lease obligations extend through fiscal 2022.
- Acquisition and divestiture-related costs were $12.4 million, including a $12.3 million incentive award associated with the Meizheng acquisition. Separately, a $12.3 million favorable change in contingent-consideration fair value reduced expenses.
- The effective tax rate on continuing operations was 2.8%, reflecting $4.9 million of discrete tax benefits, including a $3.8 million valuation-allowance reversal. The company reported $34.9 million of gross tax-effected unrecognized tax benefits.
- Environmental remediation accruals were $7.5 million. Management said ordinary-course legal contingencies were not expected to have a material adverse effect, while noting outcomes remain uncertain.
- The board declared a $0.07-per-share second-quarter dividend after quarter-end. Management cautioned that dividends could be reduced or eliminated to preserve capital or fund other priorities.
Important facts for investors to verify
- Confirm the intended issuer: this source filing is for PerkinElmer, Inc. (PKI), and not an entity identified as Revvity, Inc.
- Assess subsequent COVID-19 effects on end-market demand, operations, supply chains and cash generation; Q1 results alone do not establish the full-year impact.
- Review the 2021 note maturity, refinancing or repayment plans, and availability under the revolving credit facility.
- Track inventory levels, collections and working-capital cash flows, given the pandemic-related inventory build and the quarter’s strong receivables collections.
- Evaluate the drivers of declining operating income, including acquired-intangible amortization, acquisition-related costs, volume and segment performance.
- Monitor contingent consideration, goodwill and intangible-asset impairment assumptions, foreign-currency exposure, and tax uncertainties.