PerkinElmer, Inc. (NYSE: PKI), a global leader focused on improving the health and safety of people and the environment, today reported financial results for the second quarter ended June 28, 2015.

The Company reported GAAP earnings per share from continuing operations of $0.43, compared to $0.46 in the second quarter of 2014. Revenue in the second quarter of 2015 was $563.9 million, compared to $556.2 million in the second quarter of 2014. GAAP operating income from continuing operations for the second quarter of 2015 was $68.1 million, compared to $69.6 million in the second quarter of 2014. GAAP operating profit margin from continuing operations was 12.1% in the second quarter of 2015, compared to 12.5% in the second quarter of 2014.

Adjusted earnings per share was $0.60, compared to $0.59 in the second quarter of 2014. Adjusted revenue increased 1% and organic revenue increased 4%, compared to the second quarter of 2014. Adjusted revenue was $564.1 million, compared to $556.6 million in the second quarter of 2014. Adjusted operating income for the second quarter of 2015 was $95.8 million, compared to $93.3 million for the same period a year ago. Adjusted operating profit margin was 17.0% as a percentage of adjusted revenue, as compared to 16.8% for the same period a year ago. Adjustments for the Company's non-GAAP financial measures have been noted in the attached reconciliations. Certain of these non-GAAP financial measures are presented on a ‘constant currency’ basis, so that financial results can be viewed without the fluctuations in foreign currency exchange rates, allowing for a period-to-period comparison of underlying business performance.

“I am pleased with our accomplishments in the quarter and am particularly encouraged by the broad based strength of our financial performance through the first half of the year,” said Robert Friel, chairman and chief executive officer of PerkinElmer. “While we remain mindful of the economic uncertainties in various parts of the world, our continued focus on execution and new product innovation gives us the confidence in our ability to deliver on our commitments in the second half.”

Cash Flow

For the six months ended June 28, 2015, GAAP operating cash flow from continuing operations, after taking into account approximately $22.0 million of voluntary pension funding, was $101.2 million as compared to $122.6 million for the same period a year ago.

Financial Overview by Reporting Segment for the Second Quarter 2015

Human Health

  • Revenue of $341.5 million, as compared to $342.5 million for the second quarter of 2014.
  • Operating income of $60.5 million, as compared to $57.9 million for the same period a year ago.
  • Adjusted revenue of $341.7 million, as compared to $343.0 million for the second quarter of 2014. Organic revenue increased 5%.
  • Adjusted operating income of $78.0 million, as compared to $76.3 million for the same period a year ago.
  • Adjusted operating profit margin was 22.8% as a percentage of adjusted revenue, an increase of approximately 60 basis points as compared to the second quarter of 2014.

Environmental Health

  • Revenue of $222.4 million, as compared to $213.6 million for the second quarter of 2014. Revenue increased 4% and organic revenue increased 3%.
  • Operating income of $19.4 million, as compared to $25.6 million for the same period a year ago.
  • Adjusted operating income of $28.9 million, as compared to $27.4 million for the same period a year ago.
  • Adjusted operating profit margin was 13.0% as a percentage of revenue, an increase of approximately 20 basis points as compared to the second quarter of 2014.

Financial Guidance – Full Year 2015 - Updated

For the full year 2015, the Company now forecasts GAAP earnings per share from continuing operations in the range of $2.00 to $2.05 and on a non-GAAP basis, which is expected to include the adjustments noted in the attached reconciliation, adjusted earnings per share in the range of $2.55 to $2.60 representing 13-15% constant currency adjusted earnings per share growth.

Conference Call Information

The Company will discuss its second quarter results and its outlook for business trends in a conference call on July 30, 2015 at 5:00 p.m. Eastern Time (ET). To access the call, please dial (617) 399-5127 prior to the scheduled conference call time and provide the access code 13142415.

A live audio webcast of the call will be available on the Investor section of the Company’s Web site, www.perkinelmer.com. Please go to the site at least 15 minutes prior to the call in order to register, download, and install any necessary software. An archived version of the webcast will be posted on the Company’s Web site for a two week period beginning approximately two hours after the call.

Use of Non-GAAP Financial Measures

In addition to financial measures prepared in accordance with generally accepted accounting principles (GAAP), this earnings announcement also contains non-GAAP financial measures. The reasons that we use these measures, a reconciliation of these measures to the most directly comparable GAAP measures, and other information relating to these measures are included below following our GAAP financial statements.

Factors Affecting Future Performance

This press release contains "forward-looking" statements within the meaning of the Private Securities Litigation Reform Act of 1995, including, but not limited to, statements relating to estimates and projections of future earnings per share, cash flow and revenue growth and other financial results, developments relating to our customers and end-markets, plans concerning business development opportunities and divestitures and effects of foreign currency exchange rates. Words such as "believes," "intends," "anticipates," "plans," "expects," "projects," "forecasts," "will" and similar expressions, and references to guidance, are intended to identify forward-looking statements. Such statements are based on management's current assumptions and expectations and no assurances can be given that our assumptions or expectations will prove to be correct. A number of important risk factors could cause actual results to differ materially from the results described, implied or projected in any forward-looking statements. These factors include, without limitation: (1) markets into which we sell our products declining or not growing as anticipated; (2) fluctuations in the global economic and political environments; (3) our failure to introduce new products in a timely manner; (4) our ability to execute acquisitions and license technologies, or to successfully integrate acquired businesses and licensed technologies into our existing business or to make them profitable, or successfully divest businesses; (5) our failure to adequately protect our intellectual property; (6) the loss of any of our licenses or licensed rights; (7) our ability to compete effectively; (8) fluctuation in our quarterly operating results and our ability to adjust our operations to address unexpected changes; (9) significant disruption in third-party package delivery and import/export services or significant increases in prices for those services; (10) disruptions in the supply of raw materials and supplies; (11) the manufacture and sale of products exposing us to product liability claims; (12) our failure to maintain compliance with applicable government regulations; (13) regulatory changes; (14) our failure to comply with healthcare industry regulations; (15) economic, political and other risks associated with foreign operations; (16) our ability to retain key personnel; (17) significant disruption in our information technology systems; (18) our ability to obtain future financing; (19) restrictions in our credit agreements; (20) our ability to realize the full value of our intangible assets; (21) significant fluctuations in our stock price; (22) reduction or elimination of dividends on our common stock; and (23) other factors which we describe under the caption "Risk Factors" in our most recent quarterly report on Form 10-Q and in our other filings with the Securities and Exchange Commission. We disclaim any intention or obligation to update any forward-looking statements as a result of developments occurring after the date of this press release.

About PerkinElmer

PerkinElmer, Inc. is a global leader focused on improving the health and safety of people and the environment. The Company reported revenue of approximately $2.2 billion in 2014, has about 7,700 employees serving customers in more than 150 countries, and is a component of the S&P 500 Index. Additional information is available through 1-877-PKI-NYSE, or at www.perkinelmer.com.

                             
PerkinElmer, Inc. and Subsidiaries
CONDENSED CONSOLIDATED INCOME STATEMENTS
 
 
Three Months Ended   Six Months Ended
(In thousands, except per share data)June 28, 2015June 29, 2014June 28, 2015June 29, 2014
 
 
Revenue $ 563,906 $ 556,170 $ 1,090,807 $ 1,086,780
 
Cost of revenue 311,394 308,186 602,921 603,083
Selling, general and administrative expenses 146,742 147,253 292,615 299,690
Research and development expenses 32,683 30,352 64,803 59,731
Restructuring and contract termination charges, net   4,956     742     4,956     2,877  
 
Operating income from continuing operations 68,131 69,637 125,512 121,399
 
Interest income (132 ) (151 ) (341 ) (245 )
Interest expense 9,302 9,079 18,690 18,298
Other expense, net   1,673     36     1,915     2,200  
 
Income from continuing operations, before income taxes 57,288 60,673 105,248 101,146
 
Provision for income taxes   8,292     8,670     15,941     14,192  
 
Income from continuing operations 48,996 52,003 89,307 86,954
 
Gain (loss) from discontinued operations, before income taxes 35 (2,084 ) (2 ) (3,114 )
Loss on disposition of discontinued operations, before income taxes (10 ) (302 ) (23 ) (374 )
Provision for (benefit from) income taxes on discontinued operations and dispositions   47     (873 )   (26 )   (1,248 )
 
(Loss) gain from discontinued operations and dispositions (22 ) (1,513 ) 1 (2,240 )
 
Net income $ 48,974   $ 50,490   $ 89,308   $ 84,714  
 
 
Diluted earnings per share:
Income from continuing operations $ 0.43 $ 0.46 $ 0.79 $ 0.76
 
(Loss) gain from discontinued operations and dispositions   (0.00 )   (0.01 )   0.00     (0.02 )
 
Net income $ 0.43   $ 0.44   $ 0.79   $ 0.74  
 
 
Weighted average diluted shares of common stock outstanding 113,833 113,971 113,636 113,874
 
 
ABOVE PREPARED IN ACCORDANCE WITH GAAP
 
 
Additional Supplemental Information (1):
(per share, continuing operations)
 
GAAP EPS from continuing operations $ 0.43 $ 0.46 $ 0.79 $ 0.76
Amortization of intangible assets, net of income taxes 0.12 0.12 0.23 0.24
Purchase accounting adjustments, net of income taxes 0.01 (0.01 ) 0.05 (0.00 )
Significant litigation matter, net of income taxes - 0.02 - 0.04
Mark to market on postretirement benefits, net of income taxes 0.01 - 0.01 (0.00 )
Restructuring and contract termination charges, net of income taxes   0.03     0.00     0.03     0.02  
Adjusted EPS$0.60   $0.59   $1.10   $1.05  
 
(1) amounts may not sum due to rounding

 
PerkinElmer, Inc. and Subsidiaries
REVENUE AND OPERATING INCOME (LOSS)
                       
 
 
Three Months EndedSix Months Ended
(In thousands, except percentages)June 28, 2015June 29, 2014June 28, 2015June 29, 2014
 
 
Human Health Reported revenue $ 341,488 $ 342,543 $ 667,541 $ 672,576
Purchase accounting adjustments 195   426   464   1,878  
Adjusted Revenue 341,683   342,969   668,005   674,454  
 
Reported operating income from continued operations 60,531 57,908 116,413 101,890
OP% 17.7 % 16.9 % 17.4 % 15.1 %
Amortization of intangible assets 15,270 18,288 30,743 36,308
Purchase accounting adjustments 225 (337 ) 525 1,201
Acquisition-related costs 137 40 209 69
Restructuring and contract termination charges, net 1,820   365   1,820   855  
Adjusted operating income 77,983   76,264   149,710   140,323  
Adjusted OP% 22.8 % 22.2 % 22.4 % 20.8 %
 
Environmental Health Reported revenue 222,418 213,627 423,266 414,204
 
Reported operating income from continued operations 19,422 25,578 30,768 47,185
OP% 8.7 % 12.0 % 7.3 % 11.4 %
Amortization of intangible assets 4,583 2,288 8,948 4,963
Purchase accounting adjustments 1,617 (830 ) 6,467 (830 )
Acquisition-related costs 93 30 216 112
Restructuring and contract termination charges, net 3,136   377   3,136   2,022  
Adjusted operating income 28,851   27,443   49,535   53,452  
Adjusted OP% 13.0 % 12.8 % 11.7 % 12.9 %
 
Corporate Reported operating (loss) income (11,822 ) (13,849 ) (21,669 ) (27,676 )
Significant litigation matter - 3,418 - 6,645
Mark to market on postretirement benefits 832   -   1,066   (54 )
Adjusted operating loss (10,990 ) (10,431 ) (20,603 ) (21,085 )
 
 
Continuing Operations Reported revenue $ 563,906 $ 556,170 $ 1,090,807 $ 1,086,780
Purchase accounting adjustments 195   426   464   1,878  
Adjusted Revenue 564,101   556,596   1,091,271   1,088,658  
 
Reported operating income from continued operations 68,131 69,637 125,512 121,399
OP% 12.1 % 12.5 % 11.5 % 11.2 %
Amortization of intangible assets 19,853 20,576 39,691 41,271
Purchase accounting adjustments 1,842 (1,167 ) 6,992 371
Acquisition-related costs 230 70 425 181
Significant litigation matter - 3,418 - 6,645
Mark to market on postretirement benefits 832 - 1,066 (54 )
Restructuring and contract termination charges, net 4,956   742   4,956   2,877  
Adjusted operating income $ 95,844   $ 93,276   $ 178,642   $ 172,690  
Adjusted OP% 17.0 % 16.8 % 16.4 % 15.9 %
 
REPORTED REVENUE AND REPORTED OPERATING INCOME (LOSS) PREPARED IN ACCORDANCE WITH GAAP

             
PerkinElmer, Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
 
 
 
(In thousands)June 28, 2015December 28, 2014
 
Current assets:
Cash and cash equivalents $ 192,170 $ 174,821
Accounts receivable, net 425,698 470,563
Inventories, net 304,754 285,457
Other current assets   147,706     137,710  
Total current assets   1,070,328     1,068,551  
 
Property, plant and equipment:
At cost 492,497 492,814
Accumulated depreciation   (326,180 )   (316,620 )
Property, plant and equipment, net 166,317 176,194
Marketable securities and investments 1,633 1,568
Intangible assets, net 454,251 490,265
Goodwill 2,275,898 2,284,077
Other assets, net   114,329     113,420  
Total assets $ 4,082,756   $ 4,134,075  
 
Current liabilities:
Current portion of long-term debt $ 1,974 $ 1,075
Accounts payable 170,677 173,953
Short-term accrued restructuring and contract termination charges 15,402 17,124
Accrued expenses and other current liabilities 384,182 403,021
Current liabilities of discontinued operations   2,109     2,137  
Total current liabilities   574,344     597,310  
 
Long-term debt 986,452 1,051,892
Long-term liabilities   401,056     442,771  
Total liabilities   1,961,852     2,091,973  
 
Total stockholders' equity   2,120,904     2,042,102  
Total liabilities and stockholders' equity $ 4,082,756   $ 4,134,075  
 
PREPARED IN ACCORDANCE WITH GAAP

                         
PerkinElmer, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 
 
Three Months EndedSix Months Ended

June 28,
2015

June 29,
2014

June 28,
2015

June 29,
2014

(In thousands)
 
Operating activities:
Net income $ 48,974 $ 50,490 $ 89,308 $ 84,714
Less: loss (gain) from discontinued operations and dispositions, net of income taxes   22     1,513     (1 )   2,240  
Income from continuing operations   48,996     52,003     89,307     86,954  

Adjustments to reconcile income from continuing operations
to net cash provided by continuing operations:

Stock-based compensation 4,206 4,803 8,193 9,319
Restructuring and contract termination charges, net 4,956 742 4,956 2,877
Amortization of deferred debt issuance costs and accretion of discount 365 358 677 662
Depreciation and amortization 28,259 28,579 56,593 57,907
Amortization of acquired inventory revaluation 1,617 - 6,467 -

Changes in operating assets and liabilities which (used) provided cash, excluding
effects from companies purchased and divested:

Accounts receivable, net (6,739 ) (3,298 ) 30,843 23,434
Inventories, net (10,829 ) 1,982 (33,327 ) (15,737 )
Accounts payable 10,794 (12,826 ) (1,541 ) (11,867 )
Accrued expenses and other   (18,112 )   (17,886 )   (61,007 )   (30,979 )
Net cash provided by operating activities of continuing operations   63,513     54,457     101,161     122,570  
Net cash used in operating activities of discontinued operations   (42 )   (62 )   (27 )   (464 )
Net cash provided by operating activities   63,471     54,395     101,134     122,106  
 
Investing activities:
Capital expenditures (5,620 ) (8,427 ) (10,099 ) (14,447 )
Changes in restricted cash balances - - 59 -
Proceeds from surrender of life insurance policies - 425 - 425
Activity related to acquisitions and investments, net of cash and cash equivalents acquired   (14,116 )   (350 )   (18,735 )   (350 )
Net cash used in investing activities of continuing operations   (19,736 )   (8,352 )   (28,775 )   (14,372 )
Net cash used in investing activities of discontinued operations   -     (213 )   -     (213 )
Net cash used in investing activities   (19,736 )   (8,565 )   (28,775 )   (14,585 )
 
Financing Activities:
Payments on revolving credit facility (151,000 ) (137,000 ) (249,000 ) (232,000 )
Proceeds from revolving credit facility 123,000 103,000 184,000 193,000
Payments of debt issuance costs - (121 ) - (1,845 )
Settlement of hedges 7,905 - 23,468 -
Net proceeds from (payments on) other credit facilities 607 (255 ) 344 (507 )
Proceeds from issuance of common stock under stock plans 3,829 12,223 12,669 19,454
Purchases of common stock (141 ) (35,060 ) (4,095 ) (38,976 )
Dividends paid   (7,923 )   (7,922 )   (15,799 )   (15,809 )
Net cash used in financing activities   (23,723 )   (65,135 )   (48,413 )   (76,683 )
 
Effect of exchange rate changes on cash and cash equivalents   3,234     450     (6,597 )   1,178  
 
Net increase (decrease) in cash and cash equivalents 23,246 (18,855 ) 17,349 32,016
Cash and cash equivalents at beginning of period   168,924     224,113     174,821     173,242  
Cash and cash equivalents at end of period $ 192,170   $ 205,258   $ 192,170   $ 205,258  
 
PREPARED IN ACCORDANCE WITH GAAP

                       
PerkinElmer, Inc. and Subsidiaries
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES (1)
     

 

PKI

  
(In millions, except per share data and percentages)

 

Three Months Ended

June 28, 2015

June 29, 2014

 
Adjusted revenue:
Revenue $ 563.9 $ 556.2
Purchase accounting adjustments   0.2                   0.4          
Adjusted revenue $ 564.1                 $ 556.6          
 
Adjusted gross margin:
Gross margin $ 252.5 44.8 % $ 248.0 44.6 %
Amortization of intangible assets 10.8 1.9 % 12.3 2.2 %
Purchase accounting adjustments   1.8         0.3 %         0.4         0.1 %
Adjusted gross margin $ 265.1         47.0 %       $ 260.7         46.8 %
 
Adjusted SG&A:
SG&A $ 146.7 26.0 % $ 147.3 26.5 %
Amortization of intangible assets (8.9 ) -1.6 % (8.1 ) -1.5 %
Purchase accounting adjustments (0.0 ) 0.0 % 1.6 0.3 %
Acquisition-related costs (0.2 ) 0.0 % (0.1 ) 0.0 %
Significant litigation matter - 0.0 % (3.4 ) -0.6 %
Mark to market on postretirement benefits   (0.8 )       -0.1 %         -         0.0 %
Adjusted SG&A $ 136.7         24.2 %       $ 137.2         24.7 %
 
Adjusted R&D:
R&D $ 32.7 5.8 % $ 30.4 5.5 %
Amortization of intangible assets   (0.1 )       0.0 %         (0.1 )       0.0 %
Adjusted R&D $ 32.6         5.8 %       $ 30.2         5.4 %
 
Adjusted operating income:
Operating income $ 68.1 12.1 % $ 69.6 12.5 %
Amortization of intangible assets 19.9 3.5 % 20.6 3.7 %
Purchase accounting adjustments 1.8 0.3 % (1.2 ) -0.2 %
Acquisition-related costs 0.2 0.0 % 0.1 0.0 %
Significant litigation matter - 0.0 % 3.4 0.6 %
Mark to market on postretirement benefits 0.8 0.1 % - 0.0 %
Restructuring and contract termination charges, net   5.0         0.9 %         0.7         0.1 %
Adjusted operating income $ 95.8         17.0 %       $ 93.3         16.8 %
                         
       

PKI

                
 
Three Months Ended

June 28, 2015

June 29, 2014

 
Adjusted EPS:
GAAP EPS $ 0.43 $ 0.44
Discontinued operations, net of income taxes   (0.00 )                 (0.01 )        
GAAP EPS from continuing operations 0.43 0.46
Amortization of intangible assets, net of income taxes 0.12 0.12
Purchase accounting adjustments, net of income taxes 0.01 (0.01 )
Significant litigation matter, net of income taxes - 0.02
Acquisition-related costs, net of income taxes 0.00 0.00
Mark to market on postretirement benefits, net of income taxes 0.01 -
Restructuring and contract termination charges, net of income taxes   0.03                   0.00          
Adjusted EPS $ 0.60                 $ 0.59          
                         
       

PKI

                
 
Three Months Ended

June 28, 2015

June 29, 2014

 

Constant currency adjusted EPS:

GAAP EPS $ 0.43 $ 0.44
Discontinued operations, net of income taxes   (0.00 )                 (0.01 )        
GAAP EPS from continuing operations 0.43 0.46
Amortization of intangible assets, net of income taxes 0.12 0.12
Purchase accounting adjustments, net of income taxes 0.01 (0.01 )
Significant litigation matter, net of income taxes - 0.02
Acquisition-related costs, net of income taxes 0.00 0.00
Mark to market on postretirement benefits, net of income taxes 0.01 -
Restructuring and contract termination charges, net of income taxes 0.03 0.00
Effect of currency changes from prior year period   0.06                   -          

Constant currency adjusted EPS

$ 0.66                 $ 0.59          
                         
       

Human Health

                
 
Three Months Ended

June 28, 2015

June 29, 2014

 
Adjusted revenue:
Revenue $ 341.5 $ 342.5
Purchase accounting adjustments   0.2                   0.4          
Adjusted revenue $ 341.7                 $ 343.0          
 
Adjusted operating income:
Operating income $ 60.5 17.7 % $ 57.9 16.9 %
Amortization of intangible assets 15.3 4.5 % 18.3 5.3 %
Purchase accounting adjustments 0.2 0.1 % (0.3 ) -0.1 %
Acquisition-related costs 0.1 0.0 % 0.0 0.0 %
Restructuring and contract termination charges, net   1.8         0.5 %         0.4         0.1 %
Adjusted operating income $ 78.0         22.8 %       $ 76.3         22.2 %
                         
       

Environmental Health

                
 
Three Months Ended

June 28, 2015

June 29, 2014

 
Revenue:
Revenue $ 222.4 $ 213.6
 
Adjusted operating income:
Operating income $ 19.4 8.7 % $ 25.6 12.0 %
Amortization of intangible assets 4.6 2.1 % 2.3 1.1 %
Purchase accounting adjustments 1.6 0.7 % (0.8 ) -0.4 %
Acquisition-related costs 0.1 0.0 % 0.0 0.0 %
Restructuring and contract termination charges, net   3.1   1.4 %   0.4   0.2 %
Adjusted operating income $ 28.9   13.0 % $ 27.4   12.8 %
 
(1) amounts may not sum due to rounding

                     
PerkinElmer, Inc. and Subsidiaries
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES (1)
 
     
(In millions, except per share data and percentages)

 

PKI

  

 

Six Months Ended

June 28, 2015

June 29, 2014

 
Adjusted revenue:
Revenue $ 1,090.8 $ 1,086.8
Purchase accounting adjustments   0.5                   1.9          
Adjusted revenue $ 1,091.3                 $ 1,088.7          
 
Adjusted gross margin:
Gross margin $ 487.9 44.7 % $ 483.7 44.5 %
Amortization of intangible assets 21.5 2.0 % 25.0 2.3 %
Purchase accounting adjustments 7.0 0.6 % 1.9 0.2 %
Mark to market on postretirement benefits   0.2         0.0 %         (0.1 )       0.0 %
Adjusted gross margin $ 516.6         47.3 %       $ 510.6         46.9 %
 
Adjusted SG&A:
SG&A $ 292.6 26.8 % $ 299.7 27.6 %
Amortization of intangible assets (17.9 ) -1.6 % (16.0 ) -1.5 %
Purchase accounting adjustments (0.0 ) 0.0 % 1.5 0.1 %
Acquisition-related costs (0.4 ) 0.0 % (0.2 ) 0.0 %
Significant litigation matter - 0.0 % (6.6 ) -0.6 %
Mark to market on postretirement benefits   (0.8 )       -0.1 %         -         0.0 %
Adjusted SG&A $ 273.4         25.1 %       $ 278.4         25.6 %
 
Adjusted R&D:
R&D $ 64.8 5.9 % $ 59.7 5.5 %
Amortization of intangible assets   (0.2 )       0.0 %         (0.3 )       0.0 %
Adjusted R&D $ 64.6         5.9 %       $ 59.4         5.5 %
 
Adjusted operating income:
Operating income $ 125.5 11.5 % $ 121.4 11.2 %
Amortization of intangible assets 39.7 3.6 % 41.3 3.8 %
Purchase accounting adjustments 7.0 0.6 % 0.4 0.0 %
Acquisition-related costs 0.4 0.0 % 0.2 0.0 %
Significant litigation matter - 0.0 % 6.6 0.6 %
Mark to market on postretirement benefits 1.1 0.1 % (0.1 ) 0.0 %
Restructuring and contract termination charges, net   5.0         0.5 %         2.9         0.3 %
Adjusted operating income $ 178.6         16.4 %       $ 172.7         15.9 %
                         

 

PKI

  
Six Months Ended

June 28, 2015

June 29, 2014

 
Adjusted EPS:
GAAP EPS $ 0.79 $ 0.74
Discontinued operations, net of income taxes   0.00                   (0.02 )        
GAAP EPS from continuing operations 0.79 0.76
Amortization of intangible assets, net of income taxes 0.23 0.24
Purchase accounting adjustments, net of income taxes 0.05 (0.00 )
Significant litigation matter, net of income taxes - 0.04
Acquisition-related costs, net of income taxes 0.00 0.00
Mark to market on postretirement benefits, net of income taxes 0.01 (0.00 )
Restructuring and contract termination charges, net of income taxes   0.03                   0.02          
Adjusted EPS $ 1.10                 $ 1.05          
                         

 

PKI

  
Twelve Months Ended

January 3, 2016

Adjusted EPS:

Projected

GAAP EPS from continuing operations $ 2.00 - $2.05
Amortization of intangible assets, net of income taxes 0.46
Purchase accounting adjustments, net of income taxes 0.05
Mark to market on postretirement benefits, net of income taxes 0.01
Restructuring and contract termination charges, net of income taxes                   0.03
Adjusted EPS                 $ 2.55 - $2.60
                         

 

PKI

  
Twelve Months Ended
January 3, 2016
Constant Currency Adjusted EPS:Projected
GAAP EPS from continuing operations $ 2.00 - $2.05
Amortization of intangible assets, net of income taxes 0.46
Purchase accounting adjustments, net of income taxes 0.05
Mark to market on postretirement benefits, net of income taxes 0.01
Restructuring and contract termination charges, net of income taxes 0.03
Effect of currency changes from prior year period                  

0.23

Constant currency adjusted EPS

                $

2.78 - $2.83

                         

 

Human Health

  
Six Months Ended

June 28, 2015

June 29, 2014

 
Adjusted revenue:
Revenue $ 667.5 $ 672.6
Purchase accounting adjustments   0.5                   1.9          
Adjusted revenue $ 668.0                 $ 674.5          
 
Adjusted operating income:
Operating income $ 116.4 17.4 % $ 101.9 15.1 %
Amortization of intangible assets 30.7 4.6 % 36.3 5.4 %
Purchase accounting adjustments 0.5 0.1 % 1.2 0.2 %
Acquisition-related costs 0.2 0.0 % 0.1 0.0 %
Restructuring and contract termination charges, net   1.8         0.3 %         0.9         0.1 %
Adjusted operating income $ 149.7         22.4 %       $ 140.3         20.8 %  
                         

 

Environmental Health

  
Six Months Ended

June 28, 2015

June 29, 2014

 
Revenue:
Revenue $ 423.3 $ 414.2
 
Adjusted operating income:
Operating income $ 30.8 7.3 % $ 47.2 11.4 %
Amortization of intangible assets 8.9 2.1 % 5.0 1.2 %
Purchase accounting adjustments 6.5 1.5 % (0.8 ) -0.2 %
Acquisition-related costs 0.2 0.1 % 0.1 0.0 %
Restructuring and contract termination charges, net   3.1         0.7 %         2.0         0.5 %
Adjusted operating income $ 49.5         11.7 %       $ 53.5         12.9 %
 
(1) amounts may not sum due to rounding

       
PerkinElmer, Inc. and Subsidiaries
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
 
   

 

PKI

Three Months Ended

June 28, 2015

Organic revenue growth:
Reported revenue growth 1%
Less: effect of foreign exchange rates -7%
Less: effect of acquisitions including purchase accounting adjustments   4%
Organic revenue growth   4%
 
   

 

PKI

Three Months Ended

June 28, 2015

Constant currency adjusted revenue growth:

Reported revenue growth 1%
Less: effect of foreign exchange rates -7%

Less: effect of purchase accounting adjustments

 

0%

Constant currency adjusted revenue growth

  8%
 
   

 

Human Health

Three Months Ended

June 28, 2015

Organic revenue growth:
Reported revenue growth 0%
Less: effect of foreign exchange rates -6%
Less: effect of acquisitions including purchase accounting adjustments   0%
Organic revenue growth   5%
 
   

 

Environmental Health

Three Months Ended

June 28, 2015

Organic revenue growth:
Reported revenue growth 4%
Less: effect of foreign exchange rates -8%
Less: effect of acquisitions including purchase accounting adjustments   9%
Organic revenue growth   3%

Adjusted Revenue and Adjusted Revenue Growth

We use the term “adjusted revenue” to refer to GAAP revenue, including estimated revenue from contracts acquired in various acquisitions that will not be fully recognized due to business combination accounting rules. We use the related term “adjusted revenue growth” to refer to the measure of comparing current period adjusted revenue with the corresponding period of the prior year. We believe that these non-GAAP measures, when taken together with our GAAP financial measures, allow us and our investors to better measure the performance of our investments in technology, to evaluate long-term performance trends and to assess our ability to invest in our business. Adjusted revenue growth also provides for easier comparisons of our performance with prior and future periods and relative comparisons to our peers. Our GAAP revenue for the periods subsequent to our acquisitions does not reflect the full amount of revenue on such contracts that would have otherwise been recorded by the acquired businesses. The non-GAAP adjustment is intended to reflect the full amount of such revenue. We believe our investors will use this adjustment as a measure of the ongoing performance of the acquired businesses because customers have historically entered into such contracts for renewed and/or developmental support, although there can be no assurance that customers will do so in the future.

Constant Currency Adjusted Revenue and Constant Currency Adjusted Revenue Growth

We use the term “constant currency adjusted revenue” to refer to GAAP revenue, excluding the impact from foreign currency exchange rates on the current period, and including estimated revenue from contracts acquired in various acquisitions that will not be fully recognized due to business combination accounting rules. We use the related term “constant currency adjusted revenue growth” to refer to the measure of comparing current period constant currency adjusted revenue with the corresponding period of the prior year. We believe that these non-GAAP measures, when taken together with our GAAP financial measures, allow us and our investors to better measure the performance of our investments in technology, to evaluate long-term performance trends and to assess our ability to invest in our business. We exclude the impact of foreign currency exchanges rates from these measures by using the prior period’s foreign currency exchange rates for the current period because foreign currency exchange rates are subject to volatility and can obscure underlying trends. We include estimated revenue from contracts acquired with various acquisitions that will not be fully recognized due to business combination rules because we believe our investors will use this adjustment as a measure of the ongoing performance of the acquired businesses, as a result of customers having historically entered into such contracts for renewed and/or developmental support, although there can be no assurance that customers will do so in the future.

Organic Revenue and Organic Revenue Growth

We use the term “organic revenue” to refer to GAAP revenue, excluding the effect of foreign currency translation and acquisitions, and including estimated revenue from contracts acquired in various acquisitions that will not be fully recognized due to business combination accounting rules. We use the related term “organic revenue growth” to refer to the measure of comparing current period organic revenue with the corresponding period of the prior year. We believe that these non-GAAP measures, when taken together with our GAAP financial measures, allow us and our investors to better measure the performance of our investments in technology, to evaluate long-term performance trends and to assess our ability to invest in our business. Organic revenue growth also provides for easier comparisons of our performance with prior and future periods and relative comparisons to our peers. We exclude the effect of foreign currency translation from these measures because foreign currency translation is subject to volatility and can obscure underlying trends. We exclude the effect of acquisitions because acquisition activity can vary dramatically between reporting periods and between us and our peers, which we believe makes comparisons of long-term performance trends difficult for management and investors, and could result in overstating or understating to our investors the performance of our operations. We include estimated revenue from contracts acquired with various acquisitions that will not be fully recognized due to business combination rules because we believe our investors will use this adjustment as a measure of the ongoing performance of the acquired businesses, as a result of customers having historically entered into such contracts for renewed and/or developmental support, although there can be no assurance that customers will do so in the future.

Adjusted Gross Margin and Adjusted Gross Margin Percentage

We use the term “adjusted gross margin” to refer to GAAP gross margin, excluding amortization of intangible assets, inventory fair value adjustments related to business acquisitions, other costs related to business acquisitions, and including estimated revenue from contracts acquired in various acquisitions that will not be fully recognized due to business combination accounting rules. We also exclude adjustments for mark-to-market accounting on post-retirement benefits, therefore only our projected costs have been used to calculate our non-GAAP measure. We use the related term “adjusted gross margin percentage” to refer to adjusted gross margin as a percentage of adjusted revenue. We believe that these non-GAAP measures, when taken together with our GAAP financial measures, allow us and our investors to better measure the performance of our investments in technology, to evaluate the long-term profitability trends and to assess our ability to invest in our business. We exclude amortization of intangible assets and adjustments for mark-to-market accounting on post-retirement benefits from these measures because these charges do not represent what we believe our investors consider to be costs of producing our products and could distort the additional value generated over the cost of producing those products. In addition, inventory fair value adjustments related to business acquisitions and other costs related to business acquisitions are excluded because they only occur due to an acquisition and the potential subsequent repositioning of the business that could distort the performance measures of costs used in producing our products. We include estimated revenue from contracts acquired with various acquisitions that will not be fully recognized due to business combination rules because we believe our investors will use this adjustment as a measure of the ongoing performance of the acquired businesses, as a result of customers having historically entered into such contracts for renewed and/or developmental support, although there can be no assurance that customers will do so in the future.

Adjusted Selling, General and Administrative (“SG&A”) Expense and Adjusted SG&A Percentage

We use the term “adjusted SG&A expense” to refer to GAAP SG&A expense, excluding amortization of intangible assets, changes to the fair values assigned to contingent consideration, other costs related to business acquisitions, and a significant litigation matter. We use the related term “adjusted SG&A percentage” to refer to adjusted SG&A expense as a percentage of adjusted revenue. We believe that these non-GAAP measures, when taken together with our GAAP financial measures, allow us and our investors to better measure the cost of the internal operating structure, our ability to leverage that structure and the level of investment required to grow our business. We exclude amortization of intangible assets and a significant litigation matter because these charges do not represent what we believe our investors consider to be costs that support our internal operating structure and could distort the efficiencies of that structure. We exclude changes to the fair values assigned to contingent consideration and other costs related to business acquisitions because they only occur due to an acquisition and the potential subsequent repositioning of the business that could distort the performance measures of costs to support our internal operating structure.

Adjusted Research and Development (“R&D”) Expense and Adjusted R&D Percentage

We use the term “adjusted R&D expense” to refer to GAAP R&D expense, excluding amortization of intangible assets. We use the related term “adjusted R&D percentage” to refer to adjusted R&D expense as a percentage of adjusted revenue. We believe that these non-GAAP measures, when taken together with our GAAP financial measures, allow us and our investors to better understand and evaluate our internal technology investments. We exclude amortization of intangible assets from these measures because these charges do not represent what we believe our investors consider to be internal investments in R&D activities and could distort our R&D investment level.

Adjusted Operating Income, Adjusted Operating Profit Percentage, Adjusted Operating Profit Margin and Adjusted Operating Margin

We use the term “adjusted operating income,” to refer to GAAP operating income, excluding amortization of intangible assets, inventory fair value adjustments related to business acquisitions, changes to the fair values assigned to contingent consideration, other costs related to business acquisitions, a significant litigation matter, and restructuring and contract termination charges, and including estimated revenue from contracts acquired in various acquisitions that will not be fully recognized due to business combination accounting rules. We also exclude adjustments for mark-to-market accounting on post-retirement benefits, therefore only our projected costs have been used to calculate our non-GAAP measure. Adjusted operating income is calculated by subtracting adjusted R&D expense and adjusted SG&A expense from adjusted gross margin. We use the related terms “adjusted operating profit percentage,” “adjusted operating profit margin,” or “adjusted operating margin” to refer to adjusted operating income as a percentage of adjusted revenue. We believe that these non-GAAP measures, when taken together with our GAAP financial measures, allow us and our investors to analyze the costs of the different components of producing and selling our products, to better measure the performance of our internal investments in technology and to evaluate the long-term profitability trends of our core operations. Adjusted operating income also provides for easier comparisons of our performance and profitability with prior and future periods and relative comparisons to our peers. We believe our investors do not consider the items that we exclude from adjusted operating income to be costs of producing our products, investments in technology and production or costs to support our internal operating structure, and so we present this non-GAAP measure to avoid overstating or understating to our investors the performance of our operations. We exclude restructuring and contract termination charges because they tend to occur due to an acquisition, divestiture, repositioning of the business or other unusual event that could distort the performance measures of our internal investments and costs to support our internal operating structure. We include estimated revenue from contracts acquired with various acquisitions that will not be fully recognized due to business combination rules because we believe our investors will use this adjustment as a measure of the ongoing performance of the acquired businesses, as a result of customers having historically entered into such contracts for renewed and/or developmental support, although there can be no assurance that customers will do so in the future.

Adjusted Earnings Per Share and Adjusted EPS

We use the term “adjusted earnings per share,” or “adjusted EPS,” to refer to GAAP earnings per share, excluding discontinued operations, amortization of intangible assets, inventory fair value adjustments related to business acquisitions, changes to the fair values assigned to contingent consideration, other costs related to business acquisitions, a significant litigation matter, restructuring and contract termination charges, and including estimated revenue from contracts acquired in various acquisitions that will not be fully recognized due to business combination accounting rules. We also exclude adjustments for mark-to-market accounting on post-retirement benefits, therefore only our projected costs have been used to calculate our non-GAAP measure. Adjusted earnings per share is calculated by subtracting the items above included in adjusted gross margin, adjusted R&D expense, adjusted SG&A expense, restructuring and contract termination charges, and the provision for taxes related to these items from GAAP earnings per share. We believe that this non-GAAP measure, when taken together with our GAAP financial measures, allows us and our investors to analyze the costs of producing and selling our products and the performance of our internal investments in technology and our internal operating structure, to evaluate the long-term profitability trends of our core operations and to calculate the underlying value of the core business on a dilutive share basis, which is a key measure of the value of the Company used by our management and we believe used by investors as well. Adjusted earnings per share also facilitates the overall analysis of the value of the Company and the core measure of the success of our operating business model as compared to prior and future periods and relative comparisons to our peers. We exclude discontinued operations, amortization of intangible assets, inventory fair value adjustments related to business acquisitions, changes to the fair values assigned to contingent consideration, other costs related to business acquisitions, adjustments for mark-to-market accounting on post-retirement benefits, a significant litigation matter, and restructuring and contract termination charges, as these items do not represent what we believe our investors consider to be costs of producing our products, investments in technology and production, and costs to support our internal operating structure, which could result in overstating or understating to our investors the performance of our operations. We include estimated revenue from contracts acquired with various acquisitions that will not be fully recognized due to business combination rules because we believe our investors will use this adjustment as a measure of the ongoing performance of the acquired businesses, as a result of customers having historically entered into such contracts for renewed and/or developmental support, although there can be no assurance that customers will do so in the future.

The second quarter tax effect on adjusted EPS for (i) discontinued operations was a provision of $0.00 in 2015 and a benefit of $0.01 in 2014, (ii) amortization of intangible assets was an expense of $0.06 in both 2015 and 2014, (iii) inventory fair value adjustments related to business acquisitions was an expense of $0.00 in 2015, (iv) significant litigation matter was an expense of $0.01 in 2014, and (v) restructuring and contract termination charges was an expense of $0.01 in 2015 and $0.00 in 2014. The second quarter tax effect on adjusted EPS for each of the remaining items (changes to the fair values assigned to contingent consideration, other costs related to business acquisitions, adjustments for mark-to-market accounting on post-retirement benefits, and the estimated revenue from contracts acquired with various acquisitions that will not be fully recognized due to business combination accounting rules) was $0.00 in both 2015 and 2014.

The full year tax effect on adjusted EPS for (i) discontinued operations was a benefit of $0.00 in 2015 and a benefit of $0.01 in 2014, (ii) amortization of intangible assets was an expense of $0.12 in both 2015 and 2014, (iii) inventory fair value adjustments related to business acquisitions was an expense of $0.01 in 2015, (iv) significant litigation matter was an expense of $0.02 in 2014, (v) restructuring and contract termination charges was an expense of $0.01 in both 2014 and 2015, and (vi) the estimated revenue from contracts acquired with various acquisitions that will not be fully recognized due to business combination accounting rules was an expense of $0.00 in 2015 and $0.01 in 2014. The full year tax effect on adjusted EPS for each of the remaining items (changes to the fair values assigned to contingent consideration, other costs related to business acquisitions, and adjustments for mark-to-market accounting on post-retirement benefits) was $0.00 in both 2015 and 2014.

Constant Currency Adjusted Earnings Per Share and Constant Currency Adjusted EPS

We use the term “constant currency adjusted earnings per share,” or “constant currency adjusted EPS,” to refer to GAAP earnings per share, excluding the impact from foreign currency exchange rates on the current period, discontinued operations, amortization of intangible assets, inventory fair value adjustments related to business acquisitions, changes to the fair values assigned to contingent consideration, other costs related to business acquisitions, a significant litigation matter, restructuring and contract termination charges, and including estimated revenue from contracts acquired in various acquisitions that will not be fully recognized due to business combination accounting rules. We also exclude adjustments for mark-to-market accounting on post-retirement benefits, therefore only our projected costs have been used to calculate our non-GAAP measure. We believe that this non-GAAP measure, when taken together with our GAAP financial measures, allows us and our investors to analyze the costs of producing and selling our products and the performance of our internal investments in technology and our internal operating structure, to evaluate the long-term profitability trends of our core operations and to calculate the underlying value of the core business on a dilutive share basis, which is a key measure of the value of the Company used by our management and we believe used by investors as well. Constant currency adjusted earnings per share also facilitates the overall analysis of the value of the Company and the core measure of the success of our operating business model as compared to prior and future periods and relative comparisons to our peers. We exclude the impact of foreign currency exchanges rates from these measures by using the prior period’s foreign currency exchange rates for the current period because foreign currency exchange rates are subject to volatility and can obscure underlying trends. We exclude discontinued operations, amortization of intangible assets, inventory fair value adjustments related to business acquisitions, changes to the fair values assigned to contingent consideration, other costs related to business acquisitions, adjustments for mark-to-market accounting on post-retirement benefits, a significant litigation matter, and restructuring and contract termination charges, as these items do not represent what we believe our investors consider to be costs of producing our products, investments in technology and production, and costs to support our internal operating structure, which could result in overstating or understating to our investors the performance of our operations. We include estimated revenue from contracts acquired with various acquisitions that will not be fully recognized due to business combination rules because we believe our investors will use this adjustment as a measure of the ongoing performance of the acquired businesses, as a result of customers having historically entered into such contracts for renewed and/or developmental support, although there can be no assurance that customers will do so in the future.

The second quarter tax effect on adjusted EPS for (i) discontinued operations was a provision of $0.00 in 2015 and a benefit of $0.01 in 2014, (ii) amortization of intangible assets was an expense of $0.06 in both 2015 and 2014, (iii) inventory fair value adjustments related to business acquisitions was an expense of $0.00 in 2015, (iv) significant litigation matter was an expense of $0.01 in 2014, (v) restructuring and contract termination charges was an expense of $0.01 in 2015 and $0.00 in 2014 and (vi) the impact from foreign currency exchange rates on the current period by using the prior period’s exchange rates for the current period’s expense was an expense of $0.02 in 2015. The second quarter tax effect on adjusted EPS for each of the remaining items (changes to the fair values assigned to contingent consideration, other costs related to business acquisitions, adjustments for mark-to-market accounting on post-retirement benefits, and the estimated revenue from contracts acquired with various acquisitions that will not be fully recognized due to business combination accounting rules) was $0.00 in both 2015 and 2014.

The full year tax effect on adjusted EPS for (i) discontinued operations was a benefit of $0.00 in 2015 and a benefit of $0.01 in 2014, (ii) amortization of intangible assets was an expense of $0.12 in both 2015 and 2014, (iii) inventory fair value adjustments related to business acquisitions was an expense of $0.01 in 2015, (iv) significant litigation matter was an expense of $0.02 in 2014, (v) restructuring and contract termination charges was an expense of $0.01 in both 2014 and 2015, (vi) the estimated revenue from contracts acquired with various acquisitions that will not be fully recognized due to business combination accounting rules was an expense of $0.00 in 2015 and $0.01 in 2014 and (vii) the impact from foreign currency exchange rates on the current period by using the prior period’s exchange rates for the current period’s expense was an expense of $0.05 in 2015. The full year tax effect on adjusted EPS for each of the remaining items (changes to the fair values assigned to contingent consideration, other costs related to business acquisitions, and adjustments for mark-to-market accounting on post-retirement benefits) was $0.00 in both 2015 and 2014.

# # #

The tax effect for discontinued operations is calculated based on the authoritative guidance in the Financial Accounting Standards Board’s Accounting Standards Codification 740, Income Taxes. The tax effect for amortization of intangible assets, inventory fair value adjustments related to business acquisitions, changes to the fair values assigned to contingent consideration, other costs related to business acquisitions, a significant litigation matter, adjustments for mark-to-market accounting on post-retirement benefits, restructuring and contract termination charges, and the estimated revenue from contracts acquired with various acquisitions is calculated based on operational results and applicable jurisdictional law, which contemplates tax rates currently in effect to determine our tax provision. The tax effect for the impact from foreign currency exchange rates on the current period is calculated based on the average rate currently in effect to determine our tax provision.

The non-GAAP financial measures described above are not meant to be considered superior to, or a substitute for, our financial statements prepared in accordance with GAAP. There are material limitations associated with non-GAAP financial measures because they exclude charges that have an effect on our reported results and, therefore, should not be relied upon as the sole financial measures to evaluate our financial results. Management compensates and believes that investors should compensate for these limitations by viewing the non-GAAP financial measures in conjunction with the GAAP financial measures. In addition, the non-GAAP financial measures included in this earnings announcement may be different from, and therefore may not be comparable to, similar measures used by other companies.

Each of the non-GAAP financial measures listed above are also used by our management to evaluate our operating performance, communicate our financial results to our Board of Directors, benchmark our results against our historical performance and the performance of our peers, evaluate investment opportunities including acquisitions and discontinued operations, and determine the bonus payments for senior management and employees.