PerkinElmer, Inc.
Oct 30, 2014
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PerkinElmer Announces Financial Results for the Third Quarter of 2014

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 third quarter ended September 28, 2014.

The Company reported GAAP earnings per share from continuing operations of $0.38, compared to $0.36 in the third quarter of 2013. Revenue in the third quarter of 2014 was $542.0 million, as compared to $522.1 million in the third quarter of 2013. GAAP operating income from continuing operations for the third quarter of 2014 was $58.8 million, compared to $58.0 million in the third quarter of 2013. GAAP operating profit margin from continuing operations was 10.8% in the third quarter of 2014, compared to 11.1% in the third quarter of 2013.

Adjusted earnings per share was $0.57, compared to $0.50 in the third quarter of 2013. Adjusted revenue and organic revenue both increased 4% for the quarter. Adjusted revenue was $542.9 million, compared to $523.0 million in the third quarter of 2013. Adjusted operating income for the third quarter of 2014 was $91.3 million, compared to $82.0 million for the same period a year ago. Adjusted operating profit margin was 16.8% as a percentage of adjusted revenue, compared to 15.7% for the same period a year ago. Adjustments for the Company's non-GAAP financial measures have been noted in the attached reconciliations.

"I am pleased with our team's performance in the third quarter as we were able to deliver solid revenue growth, healthy adjusted operating margin expansion, and strong year-over-year improvement in cash flow and adjusted earnings per share," said Robert Friel, Chairman and CEO. "We believe our growth and productivity investments combined with improved organizational capabilities leave us well positioned for long term success."

Cash Flow

For the nine months ending September 28, 2014, operating cash flow from continuing operations was $185.7 million as compared to $88.3 million for the same period a year ago.

Financial Overview by Reporting Segment for the Third Quarter 2014

Human Health

Environmental Health

Share Repurchase Program

On October 23, 2014, the Company's Board of Directors approved a new share repurchase program for up to 8.0 million shares of the Company's common stock that will expire on October 23, 2016 unless terminated earlier, replacing the Company's existing share repurchase program which expired on October 24, 2014.

Financial Guidance - Updated

The Company is updating guidance due to the recent trends in foreign exchange rates. For the full year 2014, the Company now forecasts GAAP earnings per share from continuing operations in the range of $1.80 to $1.82, and on a non-GAAP basis, which is expected to include the adjustments noted in the attached reconciliation, updates adjusted earnings per share to a range of $2.39 to $2.41 from a range of $2.42 to $2.46.

Conference Call Information

The Company will discuss its third quarter results and its outlook for business trends in a conference call on October 30, 2014 at 5:00 p.m. Eastern Time (ET). To access the call, please dial (617) 213-8893 prior to the scheduled conference call time and provide the access code 64896606.

A live audio webcast of the call will also be available on the Investor section of the Company's Web site at 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 $2.2 billion in 2013, has about 7,600 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

Nine Months Ended

(In thousands, except per share data)

September 28,
2014

September 29,
2013

September 28,
2014

September 29,
2013

 
 
Revenue $ 542,049 $ 522,100 $ 1,628,829 $ 1,565,716
 
Cost of revenue 298,740 288,832 901,823 866,344
Selling, general and administrative expenses 142,997 142,780 442,687 441,015
Research and development expenses 30,444 31,410 90,175 99,812
Restructuring and contract termination charges, net   11,092     1,124     13,969     23,681  
 
Operating income from continuing operations 58,776 57,954 180,175 134,864
 
Interest income (130 ) (119 ) (375 ) (288 )
Interest expense 8,909 11,704 27,207 35,310
Other expense, net   2,187     755     4,387     2,223  
 
Income from continuing operations before income taxes 47,810 45,614 148,956 97,619
 
Provision for (benefit from) income taxes   4,912     4,851     19,104     (3,193 )
 
Income from continuing operations 42,898 40,763 129,852 100,812
 
Loss from discontinued operations, before income taxes (1,091 ) (758 ) (4,205 ) (2,103 )
(Loss) gain on disposition of discontinued operations, before income taxes (7 ) (64 ) (381 ) 457
Benefit from income taxes on discontinued operations and dispositions   (477 )   (257 )   (1,725 )   (1,173 )
 
Loss from discontinued operations and dispositions (621 ) (565 ) (2,861 ) (473 )
 
Net income $ 42,277   $ 40,198   $ 126,991   $ 100,339  
 
 
Diluted earnings per share:
Income from continuing operations $ 0.38 $ 0.36 $ 1.14 $ 0.89
 
Loss income from discontinued operations and dispositions   (0.01 )   (0.00 )   (0.03 )   (0.00 )
 
Net income $ 0.37   $ 0.36   $ 1.12   $ 0.88  
 
 
Weighted average diluted shares of common stock outstanding 113,759 113,115 113,836 113,516
 
 
ABOVE PREPARED IN ACCORDANCE WITH GAAP
 
                         

Additional Supplemental Information(1):

(per share, continuing operations)
 
GAAP EPS from continuing operations $ 0.38 $ 0.36 $ 1.14 $ 0.89
Amortization of intangible assets, net of income taxes 0.11 0.13 0.35 0.38
Purchase accounting adjustments, net of income taxes 0.00 (0.00 ) 0.00 0.03
Significant litigation matter, net of income taxes - - 0.04 -
Restructuring and contract termination charges, net of income taxes 0.07 0.01 0.09 0.14

Significant tax credits

 

-

   

-

   

-

   

(0.08

)

Adjusted EPS $ 0.57   $ 0.50   $ 1.62   $ 1.36  
 
(1) amounts may not sum due to rounding                        
 

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

Three Months Ended

Nine Months Ended

(In thousands, except percentages)

September 28,
2014

September 29,
2013

September 28,
2014

September 29,
2013

 
 
Human Health Reported revenue

$

301,525

$

290,207

$

907,219

$

866,420

Purchase accounting adjustments   811     842     2,689     6,573  
Adjusted Revenue   302,336     291,049     909,908     872,993  
 
Reported operating income from continued operations 45,033 44,659 141,737 101,100
OP% 14.9 % 15.4 % 15.6 % 11.7 %
Amortization of intangible assets 18,313 20,293 54,438 59,569
Purchase accounting adjustments 836 161 2,037 6,046
Acquisition-related costs 18 (50 ) 87 (21 )
Restructuring and contract termination charges, net   6,022     1,040     6,792     14,828  
Adjusted operating income   70,222     66,103     205,091     181,522  
Adjusted OP% 23.2 % 22.7 % 22.5 % 20.8 %
 
Environmental Health Reported revenue 240,524 231,893 721,610 699,296
Purchase accounting adjustments   -     9     -     9  
Adjusted Revenue   240,524     231,902     721,610     699,305  
 
Reported operating income from continued operations 21,596 21,896 73,967 61,922
OP% 9.0 % 9.4 % 10.3 % 8.9 %
Amortization of intangible assets 2,266 2,531 7,412 7,467
Purchase accounting adjustments - 9 (830 ) 9
Acquisition-related costs 17 17 129 125
Restructuring and contract termination charges, net   5,070     84     7,177     8,853  
Adjusted operating income   28,949     24,537     87,855     78,376  
Adjusted OP% 12.0 % 10.6 % 12.2 % 11.2 %
 
Corporate Reported operating loss (7,853 ) (8,601 ) (35,529 ) (28,158 )
Significant litigation matter - - 6,645 -
Mark to market on postretirement benefits   -     -     (54 )   (47 )
Adjusted operating loss   (7,853 )   (8,601 )   (28,938 )   (28,205 )
 
 
Continuing Operations Reported revenue

$

542,049

$

522,100

$

1,628,829

$

1,565,716

Purchase accounting adjustments   811     851     2,689     6,582  
Adjusted Revenue   542,860     522,951     1,631,518     1,572,298  
 
Reported operating income from continued operations 58,776 57,954 180,175 134,864
OP% 10.8 % 11.1 % 11.1 % 8.6 %
Amortization of intangible assets 20,579 22,824 61,850 67,036
Purchase accounting adjustments 836 170 1,207 6,055
Acquisition-related costs 35 (33 ) 216 104
Significant litigation matter - - 6,645 -
Mark to market on postretirement benefits - - (54 ) (47 )
Restructuring and contract termination charges, net   11,092     1,124     13,969     23,681  
Adjusted operating income

$

91,318

 

$

82,039

 

$

264,008

 

$

231,693

 
Adjusted OP% 16.8 % 15.7 % 16.2 % 14.7 %
 
REPORTED REVENUE AND REPORTED OPERATING INCOME (LOSS) PREPARED IN ACCORDANCE WITH GAAP
 

               
PerkinElmer, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
 
 

Three Months Ended

Nine Months Ended

September 28,
2014

September 29,
2013

September 28,
2014

September 29,
2013

(In thousands)
 
Operating activities:
Net income $ 42,277 $ 40,198 $ 126,991 $ 100,339
Less: loss from discontinued operations and dispositions, net of income taxes   621     565     2,861     473  
Income from continuing operations   42,898     40,763     129,852     100,812  
Adjustments to reconcile income from continuing operations
to net cash provided by continuing operations:
Stock-based compensation 2,450 3,781 11,769 11,423
Restructuring and contract termination charges, net 11,092 1,124 13,969 23,681
Amortization of deferred debt issuance costs, interest rate hedges and accretion of discounts 409 918 1,071 2,598
Depreciation and amortization 28,926 33,261 86,833 95,241
Gains on disposition - (1,566 ) - (1,566 )
Amortization of acquired inventory revaluation - - - 203
Changes in operating assets and liabilities which provided (used) cash, excluding
effects from companies purchased and divested:
Accounts receivable, net 3,407 12,079 26,841 27,568
Inventories, net (12,799 ) (14,310 ) (28,536 ) (32,020 )
Accounts payable 7,858 (9,504 ) (4,009 ) (5,514 )
Accrued expenses and other   (21,154 )   (18,203 )   (52,133 )   (134,158 )
Net cash provided by operating activities of continuing operations   63,087     48,343     185,657     88,268  
Net cash used in operating activities of discontinued operations   (160 )   (248 )   (624 )   (1,380 )
Net cash provided by operating activities   62,927     48,095     185,033     86,888  
 
Investing activities:
Capital expenditures (7,767 ) (8,702 ) (22,214 ) (31,554 )
Proceeds from dispositions of property, plant and equipment, net - 52,202 - 52,202
Proceeds from surrender of life insurance policies 65 563 490 783
Activity related to acquisitions and investments, net of cash and cash equivalents acquired   (1,529 )   (7,000 )   (1,879 )   (7,049 )
Net cash (used in) provided by investing activities of continuing operations   (9,231 )   37,063     (23,603 )   14,382  
Net cash (used in) provided by investing activities of discontinued operations   -     (10 )   (213 )   484  
Net cash (used in) provided by investing activities   (9,231 )   37,053     (23,816 )   14,866  
 
Financing Activities:
Payments on revolving credit facility (73,000 ) (147,000 ) (305,000 ) (429,000 )
Proceeds from revolving credit facility 34,000 79,000 227,000 419,000
Payments of debt issuance costs - - (1,845 ) -
Settlement of cash flow hedges - - - 1,363
Net (payments on) proceeds from other credit facilities (718 ) 266 (1,225 ) 5,530
Payments for acquisition-related contingent consideration (855 ) - (855 ) -
Proceeds from issuance of common stock under stock plans 1,493 8,003 20,947 15,292
Purchases of common stock (28 ) (193 ) (39,004 ) (127,186 )
Dividends paid   (7,904 )   (7,841 )   (23,713 )   (23,733 )
Net cash used in financing activities   (47,012 )   (67,765 )   (123,695 )   (138,734 )
 
Effect of exchange rate changes on cash and cash equivalents   (8,259 )   2,450     (7,081 )   (2,161 )
 
Net (decrease) increase in cash and cash equivalents (1,575 ) 19,833 30,441 (39,141 )
Cash and cash equivalents at beginning of period   205,258     112,470     173,242     171,444  
Cash and cash equivalents at end of period $ 203,683   $ 132,303   $ 203,683   $ 132,303  
 
 
 
PREPARED IN ACCORDANCE WITH GAAP
 

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

September 28, 2014

December 29, 2013

 
Current assets:
Cash and cash equivalents $ 203,683 $ 173,242
Accounts receivable, net 427,008 466,749
Inventories, net 281,617 260,858
Other current assets 161,389 140,342
Current assets of discontinued operations   650     3,647  
Total current assets   1,074,347     1,044,838  
 
Property, plant and equipment, net:
At cost 505,905 498,111
Accumulated depreciation   (328,581 )   (314,923 )
Property, plant and equipment, net 177,324 183,188
Marketable securities and investments 1,391 1,319
Intangible assets, net 396,466 460,430
Goodwill 2,123,235 2,143,120
Other assets, net 111,898 111,633
Long-term assets of discontinued operations   1,809     2,184  
Total assets $ 3,886,470   $ 3,946,712  
 
Current liabilities:
Short-term debt $ 1,157 $ 2,624
Accounts payable 160,506 166,881
Short-term accrued restructuring 22,175 26,374
Accrued expenses and other current liabilities 381,354 403,678
Current liabilities of discontinued operations   2,241     3,239  
Total current liabilities   567,433     602,796  
 
Long-term debt 858,578 932,104
Long-term accrued restructuring 6,873 9,161
Long-term liabilities   390,832     408,164  
Total liabilities   1,823,716     1,952,225  
 
Total stockholders' equity   2,062,754     1,994,487  
Total liabilities and stockholders' equity $ 3,886,470   $ 3,946,712  
 
 
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

September 28, 2014

September 29, 2013

 
Adjusted revenue:
Revenue $ 542.0 $ 522.1
Purchase accounting adjustments   0.8             0.9      
Adjusted revenue $ 542.9           $ 523.0      
 
Adjusted gross margin:
Gross margin $ 243.3 44.9 % $ 233.3 44.7 %
Amortization of intangible assets 12.4 2.3 % 14.0 2.7 %
Purchase accounting adjustments   0.8     0.2 %       1.0     0.2 %
Adjusted gross margin $ 256.5     47.3 %     $ 248.3     47.5 %
 
Adjusted SG&A:
SG&A $ 143.0 26.4 % $ 142.8 27.3 %
Amortization of intangible assets (8.0 ) -1.5 % (8.8 ) -1.7 %
Purchase accounting adjustments (0.0 ) 0.0 % 1.1 0.2 %
Acquisition-related costs   (0.0 )   0.0 %       0.0     0.0 %
Adjusted SG&A $ 134.9     24.9 %     $ 135.1     25.8 %
 
Adjusted R&D:
R&D $ 30.4 5.6 % $ 31.4 6.0 %
Amortization of intangible assets (0.2 ) 0.0 % (0.1 ) 0.0 %
Purchase accounting adjustments   -     0.0 %       (0.2 )   0.0 %
Adjusted R&D $ 30.3     5.6 %     $ 31.2     6.0 %
 
Adjusted operating income:
Operating income $ 58.8 10.8 % $ 58.0 11.1 %
Amortization of intangible assets 20.6 3.8 % 22.8 4.4 %
Purchase accounting adjustments 0.8 0.2 % 0.2 0.0 %
Acquisition-related costs 0.0 0.0 % (0.0 ) 0.0 %
Restructuring and contract termination charges, net   11.1     2.0 %       1.1     0.2 %
Adjusted operating income $ 91.3     16.8 %     $ 82.0     15.7 %
 
               

PKI

Three Months Ended

September 28, 2014

September 29, 2013

 
Adjusted EPS:
GAAP EPS $ 0.37 $ 0.36
Discontinued operations, net of income taxes (0.01 )     (0.00 )
GAAP EPS from continuing operations 0.38 0.36
Amortization of intangible assets, net of income taxes 0.11 0.13
Purchase accounting adjustments, net of income taxes 0.00 (0.00 )
Acquisition-related costs, net of income taxes 0.00 (0.00 )
Restructuring and contract termination charges, net of income taxes 0.07       0.01  
Adjusted EPS $ 0.57       $ 0.50  
 
               

Human Health

Three Months Ended

September 28, 2014

September 29, 2013

 
Adjusted revenue:
Revenue $ 301.5 $ 290.2
Purchase accounting adjustments   0.8             0.8      
Adjusted revenue $ 302.3           $ 291.0      
 
Adjusted operating income:
Operating income $ 45.0 14.9 % $ 44.7 15.4 %
Amortization of intangible assets 18.3 6.1 % 20.3 7.0 %
Purchase accounting adjustments 0.8 0.3 % 0.2 0.1 %
Acquisition-related costs 0.0 0.0 % (0.1 ) 0.0 %
Restructuring and contract termination charges, net   6.0     2.0 %       1.0     0.4 %
Adjusted operating income $ 70.2     23.2 %     $ 66.1     22.7 %
 
               

Environmental Health

Three Months Ended

September 28, 2014

September 29, 2013

 
Revenue:
Revenue $ 240.5 $ 231.9
Purchase accounting adjustments   -             0.0      
Adjusted revenue $ 240.5           $ 231.9      
 
Adjusted operating income:
Operating income $ 21.6 9.0 % $ 21.9 9.4 %
Amortization of intangible assets 2.3 0.9 % 2.5 1.1 %
Purchase accounting adjustments - 0.0 % 0.0 0.0 %
Acquisition-related costs 0.0 0.0 % 0.0 0.0 %
Restructuring and contract termination charges, net   5.1     2.1 %       0.1     0.0 %
Adjusted operating income $ 28.9     12.0 %     $ 24.5     10.6 %
 
 
(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

Nine Months Ended

September 28, 2014

September 29, 2013

 
Adjusted revenue:
Revenue $ 1,628.8 $ 1,565.7
Purchase accounting adjustments   2.7             6.6      
Adjusted revenue $ 1,631.5           $ 1,572.3      
 
Adjusted gross margin:
Gross margin $ 727.0 44.6 % $ 699.4 44.7 %
Amortization of intangible assets 37.4 2.3 % 39.0 2.5 %
Purchase accounting adjustments 2.7 0.2 % 7.0 0.4 %
Mark to market on postretirement benefits   (0.1 )   0.0 %       (0.0 )   0.0 %
Adjusted gross margin $ 767.1     47.0 %     $ 745.3     47.4 %
 
Adjusted SG&A:
SG&A $ 442.7 27.2 % $ 441.0 28.2 %
Amortization of intangible assets (24.0 ) -1.5 % (27.8 ) -1.8 %
Purchase accounting adjustments 1.5 0.1 % 1.1 0.1 %
Acquisition-related costs (0.2 ) 0.0 % (0.1 ) 0.0 %
Significant litigation matter   (6.6 )   -0.4 %       -     0.0 %
Adjusted SG&A $ 413.4     25.3 %     $ 414.2     26.3 %
 
Adjusted R&D:
R&D $ 90.2 5.5 % $ 99.8 6.4 %
Amortization of intangible assets (0.4 ) 0.0 % (0.2 ) 0.0 %
Purchase accounting adjustments   -     0.0 %       (0.2 )   0.0 %
Adjusted R&D $ 89.7     5.5 %     $ 99.4     6.3 %
 
Adjusted operating income:
Operating income $ 180.2 11.1 % $ 134.9 8.6 %
Amortization of intangible assets 61.9 3.8 % 67.0 4.3 %
Purchase accounting adjustments 1.2 0.1 % 6.1 0.4 %
Acquisition-related costs 0.2 0.0 % 0.1 0.0 %
Significant litigation matter 6.6 0.4 % - 0.0 %
Mark to market on postretirement benefits (0.1 ) 0.0 % (0.0 ) 0.0 %
Restructuring and contract termination charges, net   14.0     0.9 %       23.7     1.5 %
Adjusted operating income $ 264.0     16.2 %     $ 231.7     14.7 %
 
               

PKI

Nine Months Ended

September 28, 2014

September 29, 2013

 
Adjusted EPS:
GAAP EPS $ 1.12 $ 0.88
Discontinued operations, net of income taxes   (0.03 )           (0.00 )    
GAAP EPS from continuing operations 1.14 0.89
Amortization of intangible assets, net of income taxes 0.35 0.38
Purchase accounting adjustments, net of income taxes 0.00 0.03
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 (0.00 ) (0.00 )
Restructuring and contract termination charges, net of income taxes 0.09 0.14

Significant tax credits

 

-

           

(0.08

)

   
Adjusted EPS $ 1.62           $ 1.36      
 
               

PKI

Twelve Months Ended

December 28, 2014

Adjusted EPS: Projected
GAAP EPS from continuing operations $1.80 - $1.82
Amortization of intangible assets, net of income taxes 0.46
Purchase accounting adjustments, net of income taxes -
Significant litigation matter, net of income taxes 0.04
Acquisition-related costs, net of income taxes -
Mark to market on postretirement benefits, net of income taxes -
Restructuring and contract termination charges, net of income taxes       0.09  
Adjusted EPS           $2.39 - $2.41  
 
           

Human Health

Nine Months Ended

September 28, 2014

September 29, 2013

 
Adjusted revenue:
Revenue $ 907.2 $ 866.4
Purchase accounting adjustments   2.7             6.6      
Adjusted revenue $ 909.9           $ 873.0      
 
Adjusted operating income:
Operating income $ 141.7 15.6 % $ 101.1 11.7 %
Amortization of intangible assets 54.4 6.0 % 59.6 6.9 %
Purchase accounting adjustments 2.0 0.2 % 6.0 0.7 %
Acquisition-related costs 0.1 0.0 % (0.0 ) 0.0 %
Restructuring and contract termination charges, net   6.8     0.7 %       14.8     1.7 %
Adjusted operating income $ 205.1     22.5 %     $ 181.5     20.8 %
 
     

Environmental Health

Nine Months Ended

September 28, 2014

September 29, 2013

 
Revenue:
Revenue $ 721.6 $ 699.3
Purchase accounting adjustments   -             0.0      
Adjusted revenue $ 721.6           $ 699.3      
 
Adjusted operating income:
Operating income $ 74.0 10.3 % $ 61.9 8.9 %
Amortization of intangible assets 7.4 1.0 % 7.5 1.1 %
Purchase accounting adjustments (0.8 ) -0.1 % 0.0 0.0 %
Acquisition-related costs 0.1 0.0 % 0.1 0.0 %
Restructuring and contract termination charges, net   7.2     1.0 %       8.9     1.3 %
Adjusted operating income $ 87.9     12.2 %     $ 78.4     11.2 %
 
 
(1) amounts may not sum due to rounding
 

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

PKI

Three Months Ended

September 28, 2014

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

Human Health

Three Months Ended

September 28, 2014

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

Environmental Health

Three Months Ended

September 28, 2014

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

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, 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. 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, 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 from these measures 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 and other costs related to business acquisitions. 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. We exclude 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 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. 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, a significant litigation matter, 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, a significant litigation matter, 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 third quarter tax effect on adjusted EPS for (i) discontinued operations was a benefit of $0.00 in both 2014 and 2013, (ii) amortization of intangible assets was an expense of $0.07 in both 2014 and 2013, and (iii) restructuring and contract termination charges was an expense of $0.03 in 2014 and an expense of $0.00 in 2013. The third 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, adjustments for mark-to-market accounting on post-retirement benefits, a significant litigation matter, significant tax credits 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 2014 and 2013.

The full year tax effect on adjusted EPS through the third quarter for (i) discontinued operations was a benefit of $0.02 in 2014 and a benefit of $0.01 in 2013, (ii) amortization of intangible assets was an expense of $0.19 in 2014 and an expense of $0.21 in 2013, (iii) a significant litigation matter was an expense of $0.02 in 2014, (iv) restructuring and contract termination charges was an expense of $0.03 in 2014 and an expense of $0.07 in 2013, (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 $0.01 in 2014 and an expense of $0.02 in 2013. The full year tax effect on adjusted EPS through the third quarter 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 2014 and 2013.

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, 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.

***

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.

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

Source: PerkinElmer, Inc.

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