PerkinElmer, Inc.
Aug 1, 2013
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PerkinElmer Announces Financial Results for the Second Quarter of 2013

WALTHAM, Mass.--(BUSINESS WIRE)-- 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 30, 2013.

The Company reported GAAP earnings per share from continuing operations of $0.24, compared to $0.29 in the second quarter of 2012. Revenue in the second quarter of 2013 was $543.3 million, as compared to $521.8 million in the second quarter of 2012. GAAP operating income from continuing operations for the second quarter of 2013 was $39.7 million, compared to $49.8 million in the second quarter of 2012. GAAP operating profit margin from continuing operations was 7.3% in the second quarter of 2013, compared to 9.5% in the second quarter of 2012.

Adjusted earnings per share was $0.51, compared to $0.53 in the second quarter of 2012. Adjusted revenue and organic revenue both increased 3% for the quarter. Adjusted revenue was $547.1 million, compared to $532.3 million in the second quarter of 2012. Adjusted operating income for the second quarter of 2013 was $85.2 million, compared to $89.7 million for the same period a year ago. Adjusted operating profit margin was 15.6% as a percentage of adjusted revenue, compared to 16.9% for the same period a year ago. For the Company's non-GAAP financial measures, adjustments have been noted in the attached reconciliations.

"I am encouraged by our performance in the second quarter as we exceeded our adjusted revenue and adjusted operating profit forecasts despite a challenging global environment. We were able to deliver sequential revenue improvements in the areas that were under pressure in the first quarter while the remaining portfolio continued to perform well," said Robert Friel, chairman and chief executive officer of PerkinElmer. "Our second quarter performance gives us confidence in our ability to deliver organic growth and improved profitability in the back half of the year."

Cash Flow

For the six months ending June 30, 2013, operating cash flow from continuing operations was $38.7 million as compared to $92.7 million for the same period a year ago. Adjusted operating cash flow from continuing operations was $98.6 million as compared to $114.6 million for the same period a year ago.

Financial Overview by Reporting Segment for the Second Quarter 2013

Human Health

Environmental Health

Financial Guidance — Full Year 2013 - Updated

For the full year 2013, the Company forecasts organic revenue to increase in the low-single digit range relative to 2012. For the full year 2013, the Company now forecasts GAAP earnings per share from continuing operations in the range of $1.40 to $1.47 and on a non-GAAP basis, which is expected to include the adjustments noted in the attached reconciliation, and updates adjusted earnings per share to a range of $2.03 to $2.10 from a range of $2.00 to $2.10.

Conference Call Information

The Company will discuss its second quarter results and its outlook for business trends in a conference call on August 1, 2013 at 5:00 p.m. Eastern Time (ET). To access the call, please dial (617) 399-5131 prior to the scheduled conference call time and provide the access code 50839653. A playback of this conference call will be available beginning 7:00 p.m. ET, Thursday, August 1, 2013. The playback phone number is (617) 801-6888 and the code number is 27752648.

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, and plans concerning business development opportunities and divestitures. 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 $2.1 billion in 2012, has about 7,400 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
CONSOLIDATED INCOME STATEMENTS
 
 

Three Months Ended

Six Months Ended

(In thousands, except per share data)

June 30, 2013

July 1, 2012

June 30, 2013

July 1, 2012

 
 
Revenue $ 543,297 $ 521,790 $ 1,048,675 $ 1,032,680
 
Cost of revenue 300,998 282,996 581,491 561,872
Selling, general and administrative expenses 148,755 149,735 300,252 306,584
Research and development expenses 34,603 34,069 68,780 66,693
Restructuring and contract termination charges, net   19,277     5,203     22,587     11,362  
 
Operating income from continuing operations 39,664 49,787 75,565 86,169
 
Interest income (64 ) (150 ) (169 ) (360 )
Interest expense 11,913 11,339 23,606 22,776

Other expense, net

  1,016     169     1,468     1,772  
 
Income from continuing operations before income taxes 26,799 38,429 50,660 61,981
 
(Benefit from) provision for income taxes   (137 )   4,861     (8,565 )   6,337  
 
Net income from continuing operations 26,936 33,568 59,225 55,644
 
Gain on disposition of discontinued operations, before income taxes 613 482 521 1,017
(Benefit from) provision for income taxes on discontinued operations and dispositions   (376 )   417     (395 )   459  
 
Net income from discontinued operations and dispositions 989 65 916 558
 
Net income $ 27,925   $ 33,633   $ 60,141   $ 56,202  
 
 
Diluted earnings per share:
Net income from continuing operations $ 0.24 $ 0.29 $ 0.52 $ 0.49
 
Net income from discontinued operations and dispositions   0.01     0.00     0.01     0.00  
 
Net income $ 0.25   $ 0.29   $ 0.53   $ 0.49  
 
 
Weighted average diluted shares of common stock outstanding 112,718 114,578 113,717 114,348
 
 
ABOVE PREPARED IN ACCORDANCE WITH GAAP
 
                 

Additional Supplemental Information(1):

(per share, continuing operations)
 
GAAP EPS from continuing operations $ 0.24 $ 0.29 $ 0.52 $ 0.49
Amortization of intangible assets, net of income taxes 0.13 0.13 0.26 0.26
Purchase accounting adjustments, net of income taxes 0.02 0.06 0.03 0.13
Acquisition-related costs, net of income taxes 0.00 0.00 0.00 0.00
Mark to market on post-retirement benefits, net of income taxes - 0.00 (0.00 ) 0.01
Significant tax credits - - (0.08 ) -
Restructuring and contract termination charges, net of income taxes   0.11     0.04     0.13     0.07  
Adjusted EPS $ 0.51   $ 0.53   $ 0.86   $ 0.96  
                 

(1) Amount may not add due to rounding.

 

PerkinElmer, Inc. and Subsidiaries
REVENUE AND OPERATING INCOME (LOSS)
     
 
 

Three Months Ended

Six Months Ended

(In thousands, except percentages)

June 30, 2013

July 1, 2012

June 30, 2013

July 1, 2012

(as adjusted) (as adjusted)
 
Human Health Reported revenue $ 299,943 $ 287,753 $ 581,272 $ 568,531
Purchase accounting adjustments 3,799   10,463   5,731   16,936  
Adjusted Revenue 303,742   298,216   587,003   585,467  
 
Reported operating income from continued operations 30,076 30,353 55,096 48,564
OP% 10.0 % 10.5 % 9.5 % 8.5 %
Amortization of intangible assets 19,796 20,352 39,822 41,168
Purchase accounting adjustments 3,905 11,307 5,885 22,854
Acquisition-related costs 7 163 29 339
Restructuring and contract termination charges, net 10,580   4,442   13,818   9,383  
Adjusted operating income 64,364   66,617   114,650   122,308  
Adjusted OP% 21.2 % 22.3 % 19.5 % 20.9 %
 
Environmental Health Reported revenue 243,354 234,037 467,403 464,149
Purchase accounting adjustments -   -   -   -  
Adjusted Revenue 243,354   234,037   467,403   464,149  
 
Reported operating income from continued operations 19,298 29,344 40,026 59,473
OP% 7.9 % 12.5 % 8.6 % 12.8 %
Amortization of intangible assets 2,474 2,989 4,936 5,572
Purchase accounting adjustments - - - -
Acquisition-related costs 59 (68 ) 108 7
Restructuring and contract termination charges, net 8,697   761   8,769   1,979  
Adjusted operating income 30,528   33,026   53,839   67,031  
Adjusted OP% 12.5 % 14.1 % 11.5 % 14.4 %
 
Corporate

Reported operating loss

(9,710 ) (9,910 ) (19,557 ) (21,868 )
Mark to market on post-retirement benefits -   -   (47 ) 1,219  
Adjusted operating loss (9,710 ) (9,910 ) (19,604 ) (20,649 )
 
 
Continuing Operations Reported revenue $ 543,297 $ 521,790 $ 1,048,675 $ 1,032,680
Purchase accounting adjustments 3,799   10,463   5,731   16,936  
Adjusted Revenue 547,096   532,253   1,054,406   1,049,616  
 
Reported operating income from continued operations 39,664 49,787 75,565 86,169
OP% 7.3 % 9.5 % 7.2 % 8.3 %
Amortization of intangible assets 22,270 23,341 44,758 46,740
Purchase accounting adjustments 3,905 11,307 5,885 22,854
Acquisition-related costs 66 95 137 346
Mark to market on post-retirement benefits - - (47 ) 1,219
Restructuring and contract termination charges, net 19,277   5,203   22,587   11,362  
Adjusted operating income $ 85,182   $ 89,733   $ 148,885   $ 168,690  
Adjusted OP% 15.6 % 16.9 % 14.1 % 16.1 %
 
 
REPORTED REVENUE AND REPORTED OPERATING INCOME (LOSS) PREPARED IN ACCORDANCE WITH GAAP
 
 

PerkinElmer, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
               
 

Three Months Ended

Six Months Ended

June 30, 2013

July 1, 2012

June 30, 2013

July 1, 2012

(In thousands)
 
Operating activities:
Net income $ 27,925 $ 33,633 $ 60,141 $ 56,202
Less: income from discontinued operations and dispositions, net of income taxes   (989 )   (65 )   (916 )   (558 )
Income from continuing operations   26,936     33,568     59,225     55,644  
Adjustments to reconcile income from continuing operations
to net cash provided by continuing operations:
Stock-based compensation 3,226 4,776 7,642 10,252
Restructuring and contract termination charges, net 19,277 5,203 22,587 11,362
Amortization of deferred debt issuance costs, interest rate hedge and accretion of discounts 867 878 1,680 1,745
Depreciation and amortization 32,239 32,156 62,810 64,163
Amortization of acquired inventory revaluation 74 279 203 4,774
Changes in operating assets and liabilities which (used) provided cash, excluding
effects from companies purchased and divested:
Accounts receivable, net (25,597 ) 7,623 14,630 13,473
Inventories, net (1,363 ) 318 (17,550 ) (12,652 )
Accounts payable (1,463 ) 13,364 3,478 1,645
Accrued expenses and other   (26,587 )   (20,752 )   (115,978 )   (57,733 )
Net cash provided by operating activities of continuing operations   27,609     77,413     38,727     92,673  
Net cash provided by (used in) operating activities of discontinued operations   253     (1,023 )   66     (744 )
Net cash provided by operating activities   27,862     76,390     38,793     91,929  
 
Investing activities:
Capital expenditures (11,023 ) (6,221 ) (22,852 ) (11,449 )
Proceeds from surrender of life insurance policies 220 - 220 -
Changes in restricted cash balances - 200 - 200
Activity related to acquisitions and investments, net of cash and cash equivalents acquired   (1,449 )   -     (49 )   -  
Net cash used in investing activities of continuing operations   (12,252 )   (6,021 )   (22,681 )   (11,249 )
Net cash provided by investing activities of discontinued operations   371     988     494     988  
Net cash used in investing activities   (11,881 )   (5,033 )   (22,187 )   (10,261 )
 
Financing Activities:
Payments on revolving credit facility (147,000 ) (122,000 ) (282,000 ) (244,000 )
Proceeds from revolving credit facility 127,000 99,000 340,000 210,000
Payments of debt issuance costs - (137 ) - (416 )
Settlement of cash flow hedges 523 - 1,363 -
Net (payments on) proceeds from other credit facilities (2,758 ) - 5,264 -
Payments for acquisition-related contingent consideration - (9,343 ) - (9,343 )
Excess tax benefit from exercise of common stock options - - - 1,139
Proceeds from issuance of common stock under stock plans 1,827 2,247 7,289 11,746
Purchases of common stock (135 ) (431 ) (126,993 ) (2,063 )
Dividends paid   (7,832 )   (7,969 )   (15,892 )   (15,891 )
Net cash used in financing activities   (28,375 )   (38,633 )   (70,969 )   (48,828 )
 
Effect of exchange rate changes on cash and cash equivalents   (1,007 )   (6,078 )   (4,611 )   (3,779 )
 
Net (decrease) increase in cash and cash equivalents (13,401 ) 26,646 (58,974 ) 29,061
Cash and cash equivalents at beginning of period   125,871     144,757     171,444     142,342  
Cash and cash equivalents at end of period $ 112,470   $ 171,403   $ 112,470   $ 171,403  
 
 
 
PREPARED IN ACCORDANCE WITH GAAP
 
 

PerkinElmer, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
         
 
 
(In thousands)

June 30, 2013

December 30, 2012

 
Current assets:
Cash and cash equivalents $ 112,470 $ 171,444
Accounts receivable, net 434,798 457,011
Inventories, net 259,470 247,688
Other current assets   99,767     95,611  
Total current assets   906,505     971,754  
 
Property, plant and equipment, net:
At cost 528,051 513,479
Accumulated depreciation   (313,922 )   (302,963 )
Property, plant and equipment, net 214,129 210,516
Marketable securities and investments 1,139 1,149
Intangible assets, net 487,312 529,901
Goodwill 2,117,062 2,122,788
Other assets, net   85,137     65,654  
Total assets $ 3,811,284   $ 3,901,762  
 
Current liabilities:
Short-term debt $ 2,215 $ 1,772
Accounts payable 170,122 168,943

Short-term accrued restructuring

32,641 21,364
Accrued expenses and other current liabilities 357,803 388,026
Current liabilities of discontinued operations   500     995  
Total current liabilities   563,281     581,100  
 
Long-term debt 1,001,858 938,824

Long-term accrued restructuring

4,972 6,387
Long-term liabilities   381,321     435,639  
Total liabilities   1,951,432     1,961,950  
 
Total stockholders' equity   1,859,852     1,939,812  
Total liabilities and stockholders' equity $ 3,811,284   $ 3,901,762  
 
 
PREPARED IN ACCORDANCE WITH GAAP
 
 

PerkinElmer, Inc. and Subsidiaries

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES(1)

                     
(In millions, except per share data and percentages) PKI
Three Months Ended

June 30, 2013

   

July 1, 2012

 
 
Adjusted revenue:
Revenue $ 543.3 $ 521.8
Purchase accounting adjustments   3.8           10.5      
Adjusted revenue $ 547.1         $ 532.3      
 
Adjusted gross margin:
Gross margin $ 242.3 44.6 % $ 238.8 45.8 %
Amortization of intangible assets 12.7 2.3 % 13.0 2.5 %
Purchase accounting adjustments   3.9     0.7 %     10.7     2.1 %
Adjusted gross margin $ 258.9     47.3 %   $ 262.5     49.3 %
 
Adjusted SG&A:
SG&A $ 148.8 27.4 % $ 149.7 28.7 %
Amortization of intangible assets (9.5 ) -1.7 % (10.1 ) -1.9 %
Purchase accounting adjustments (0.0 ) 0.0 % (0.6 ) -0.1 %
Acquisition-related costs   (0.1 )   0.0 %     (0.1 )   0.0 %
Adjusted SG&A $ 139.2     25.4 %   $ 138.9     26.1 %
 
Adjusted R&D:
R&D $ 34.6 6.4 % $ 34.1 6.5 %
Amortization of intangible assets   (0.1 )   0.0 %     (0.3 )   0.0 %
Adjusted R&D $ 34.5     6.3 %   $ 33.8     6.4 %
 
Adjusted operating income:
Operating income $ 39.7 7.3 % $ 49.8 9.5 %
Amortization of intangible assets 22.3 4.1 % 23.3 4.5 %
Purchase accounting adjustments 3.9 0.7 % 11.3 2.2 %
Acquisition-related costs 0.1 0.0 % 0.1 0.0 %
Restructuring and contract termination charges, net   19.3     3.5 %     5.2     1.0 %
Adjusted operating income $ 85.2     15.6 %   $ 89.7     16.9 %
             
PKI
Three Months Ended

June 30, 2013

July 1, 2012

 
Adjusted EPS:
EPS $ 0.25 $ 0.29
Discontinued operations, net of income taxes   0.01           0.00      
EPS from continuing operations 0.24 0.29
Amortization of intangible assets, net of income taxes 0.13 0.13
Purchase accounting adjustments, net of income taxes 0.02 0.06
Acquisition-related costs, net of income taxes 0.00 0.00
Restructuring and contract termination charges, net of income taxes   0.11           0.04      
Adjusted EPS $ 0.51         $ 0.53      
             
Human Health
Three Months Ended

June 30, 2013

July 1, 2012

 
Adjusted revenue:
Revenue $ 299.9 $ 287.8
Purchase accounting adjustments   3.8           10.5      
Adjusted revenue $ 303.7         $ 298.2      
 
Adjusted operating income:
Operating income $ 30.1 10.0 % $ 30.4 10.5 %
Amortization of intangible assets 19.8 6.6 % 20.4 7.1 %
Purchase accounting adjustments 3.9 1.3 % 11.3 3.9 %
Acquisition-related costs 0.0 0.0 % 0.2 0.1 %
Restructuring and contract termination charges, net   10.6     3.5 %     4.4     1.5 %
Adjusted operating income $ 64.4     21.2 %   $ 66.6     22.3 %
             
Environmental Health
Three Months Ended

June 30, 2013

July 1, 2012

 
Adjusted revenue:
Revenue $ 243.4 $ 234.0
Purchase accounting adjustments   -           -      
Adjusted revenue $ 243.4         $ 234.0      
 
Adjusted operating income:
Operating income $ 19.3 7.9 % $ 29.3 12.5 %
Amortization of intangible assets 2.5 1.0 % 3.0 1.3 %
Acquisition-related costs 0.1 0.0 % (0.1 ) 0.0 %
Restructuring and contract termination charges, net   8.7     3.6 %     0.8     0.3 %
Adjusted operating income $ 30.5     12.5 %   $ 33.0     14.1 %
 

(1) Amount may not add 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 30, 2013

   

July 1, 2012

 
 
Adjusted revenue:
Revenue $ 1,048.7 $ 1,032.7
Purchase accounting adjustments   5.7           16.9      
Adjusted revenue $ 1,054.4         $ 1,049.6      
 
Adjusted gross margin:
Gross margin $ 467.2 44.5 % $ 470.8 45.6 %
Amortization of intangible assets 25.6 2.4 % 25.9 2.5 %
Purchase accounting adjustments 5.9 0.6 % 21.7 2.1 %

Mark to market on post-retirement benefits

  (0.0 )   0.0 %     1.2     0.1 %
Adjusted gross margin $ 498.7     47.3 %   $ 519.7     49.5 %
 
Adjusted SG&A:
SG&A $ 300.3 28.6 % $ 306.6 29.7 %
Amortization of intangible assets (19.0 ) -1.8 % (20.4 ) -2.0 %
Purchase accounting adjustments 0.0 0.0 % (1.1 ) -0.1 %
Acquisition-related costs   (0.1 )   0.0 %     (0.3 )   0.0 %
Adjusted SG&A $ 281.1     26.7 %   $ 284.6     27.1 %
 
Adjusted R&D:
R&D $ 68.8 6.6 % $ 66.7 6.5 %
Amortization of intangible assets   (0.1 )   0.0 %     (0.4 )   0.0 %
Adjusted R&D $ 68.6     6.5 %   $ 66.3     6.3 %
 
Adjusted operating income:
Operating income $ 75.6 7.2 % $ 86.2 8.3 %
Amortization of intangible assets 44.8 4.3 % 46.7 4.5 %
Purchase accounting adjustments 5.9 0.6 % 22.9 2.2 %
Acquisition-related costs 0.1 0.0 % 0.3 0.0 %

Mark to market on post-retirement benefits

(0.0 ) 0.0 % 1.2 0.1 %
Restructuring and contract termination charges, net   22.6     2.2 %     11.4     1.1 %
Adjusted operating income $ 148.9     14.1 %   $ 168.7     16.1 %
             
PKI
Six Months Ended

June 30, 2013

July 1, 2012

 
Adjusted EPS:
EPS $ 0.53 $ 0.49
Discontinued operations, net of income taxes   0.01           0.00      
EPS from continuing operations 0.52 0.49
Amortization of intangible assets, net of income taxes 0.26 0.26
Purchase accounting adjustments, net of income taxes 0.03 0.13
Acquisition-related costs, net of income taxes 0.00 0.00

Mark to market on post-retirement benefits, net of income taxes

(0.00 ) 0.01
Significant tax credits (0.08 ) -
Restructuring and contract termination charges, net of income taxes   0.13           0.07      
Adjusted EPS $ 0.86         $ 0.96      
             
PKI
Twelve Months Ended

December 30, 2012

Adjusted EPS: Projected
EPS from continuing operations $ 1.40 - $1.47
Amortization of intangible assets, net of income taxes 0.52
Purchase accounting adjustments, net of income taxes 0.05
Acquisition-related costs, net of income taxes -

Mark to market on post-retirement benefits,

net of income taxes -
Significant tax credits (0.08 )
Restructuring and contract termination charges, net of income taxes           0.14      
Adjusted EPS         $ 2.03 - $2.10      
             
PKI
Six Months Ended
Adjusted Operating Cash Flow:

June 30, 2013

July 1, 2012

Net cash provided by operating activities of continuing operations $ 38.7 $ 92.7
Significant contributions to post-retirement plans 47.0 17.0
Significant prepaid royalty payments 12.9 -
Acquisition adjustments - 3.8

Excess tax benefit from exercise of common stock

  -           1.1      
Adjusted operating cash flow $ 98.6         $ 114.6      
             
Human Health
Six Months Ended

June 30, 2013

July 1, 2012

 
Adjusted revenue:
Revenue $ 581.3 $ 568.5
Purchase accounting adjustments   5.7           16.9      
Adjusted revenue $ 587.0         $ 585.5      
 
Adjusted operating income:
Operating income $ 55.1 9.5 % $ 48.6 8.5 %
Amortization of intangible assets 39.8 6.9 % 41.2 7.2 %
Purchase accounting adjustments 5.9 1.0 % 22.9 4.0 %
Acquisition-related costs 0.0 0.0 % 0.3 0.1 %
Restructuring and contract termination charges, net   13.8     2.4 %     9.4     1.7 %
Adjusted operating income $ 114.7     19.5 %   $ 122.3     20.9 %
             
Environmental Health
Six Months Ended

June 30, 2013

July 1, 2012

 
Adjusted revenue:
Revenue $ 467.4 $ 464.1
Purchase accounting adjustments   -           -      
Adjusted revenue $ 467.4         $ 464.1      
 
Adjusted operating income:
Operating income $ 40.0 8.6 % $ 59.5 12.8 %
Amortization of intangible assets 4.9 1.1 % 5.6 1.2 %
Acquisition-related costs 0.1 0.0 % 0.0 0.0 %
Restructuring and contract termination charges, net   8.8     1.9 %     2.0     0.4 %
Adjusted operating income $ 53.8     11.5 %   $ 67.0     14.4 %
 

(1) Amount may not add due to rounding.

PerkinElmer, Inc. and Subsidiaries

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES(1)

       
 
PKI
Three Months Ended

June 30, 2013

Organic revenue growth:
Reported revenue growth 4%
Less: effect of foreign exchange rates 0%
Less: effect of acquisitions including purchase accounting adjustments 2%
Organic revenue growth 3%
 
 
Human Health
Three Months Ended

June 30, 2013

Organic revenue growth:
Reported revenue growth 4%
Less: effect of foreign exchange rates 0%
Less: effect of acquisitions including purchase accounting adjustments 3%
Organic revenue growth 2%
 
 
Environmental Health
Three Months Ended

June 30, 2013

Organic revenue growth:
Reported revenue growth 4%
Less: effect of foreign exchange rates 0%
Less: effect of acquisitions including purchase accounting adjustments

1%

Organic revenue growth 3%
 

(1) Amount may not add due to rounding.

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.

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. 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.

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, 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 from these measures because intangibles amortization 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 adjustments for mark to market accounting on post-retirement benefits do not represent what we believe our investors consider to be 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. 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.

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, and other costs related to business acquisitions. 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 from these measures because intangibles amortization 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 intangibles amortization 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, 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. 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.

Adjusted Earnings Per Share

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, restructuring and contract termination charges, and significant tax credits, 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, the provision for taxes related to these items, and significant tax credits 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, restructuring and contract termination charges, and significant tax credits, 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. 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.

The second quarter tax effect on adjusted EPS for (i) discontinued operations was a benefit of $0.00 in 2013 and an expense of $0.00 in 2012, (ii) amortization of intangible assets was an expense of $0.07 in both 2013 and 2012, (iii) restructuring and contract termination charges was an expense of $0.06 in 2013 and an expense of $0.01 in 2012, (iv) 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 $0.01 in 2013 and an expense of $0.03 in 2012. The second quarter tax effect on adjusted EPS for each of the remaining items (inventory fair value adjustments related to business acquisitions, 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 2013 and 2012.

The full year tax effect on adjusted EPS through the second quarter of 2013 for (i) discontinued operations was a benefit of $0.00 in 2013 and an expense of $0.00 in 2012, (ii) amortization of intangible assets was an expense of $0.14 in both 2013 and 2012, (iii) inventory fair value adjustments related to business acquisitions was an expense of $0.00 in 2013 and an expense of $0.02 in 2012, (iv) restructuring and contract termination charges was an expense of $0.07 in 2013 and an expense of $0.03 in 2012, (v) significant tax credits was a benefit of $0.08 in 2013, (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 $0.02 in 2013 and an expense of $0.06 in 2012. The full year tax effect on adjusted EPS through the second quarter of 2013 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 2013 and 2012.

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, adjustments for mark to market accounting on post-retirement benefits, restructuring and contract termination charges, significant tax credits, 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.

Adjusted Operating Cash Flow

We use the term "adjusted operating cash flow" to refer to GAAP operating cash flow from continuing operations, excluding the effect of the excess tax benefit from the exercise of equity grants, significant contributions to our post-retirement benefit plans, significant payments for prepaid royalties, and payments for changes to the fair values assigned to contingent consideration. We believe that this non-GAAP measure, when taken together with our GAAP financial measure, allows us and our investors to better evaluate the long-term performance trends and to assess our ability to invest in the business. Adjusted operating cash flow also provides for easier comparisons of our performance with prior and future periods and relative comparisons to our peers. We exclude the effect of the excess tax benefit from the exercise of equity grants, significant contributions to our post-retirement benefit plans, significant payments for prepaid royalties, and payments for changes to the fair values assigned to contingent consideration from this measure because the excess tax benefit from the exercise of equity grants, significant contributions to our post-retirement benefit plans, significant payments for prepaid royalties, and payments for changes to the fair values assigned to contingent consideration can vary dramatically by quarter and between us and our peers and can obscure underlying trends, 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.

***

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.

Investor Relations
PerkinElmer, Inc.
Tommy J. Thomas, CPA, 781-663-5889
tommy.thomas@perkinelmer.com
or
Media Contact:
PerkinElmer, Inc.
Fara Goldberg, 781-663-5699
fara.goldberg@perkinelmer.com

Source: PerkinElmer, Inc.

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