PerkinElmer, Inc.
Nov 7, 2016
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PerkinElmer Announces Financial Results for the Third Quarter of 2016

WALTHAM, Mass.--(BUSINESS WIRE)-- PerkinElmer, Inc. (NYSE: PKI), a global leader committed to innovating for a healthier world, today reported financial results for the third quarter ended October 2, 2016.

The Company reported GAAP earnings per share from continuing operations of $0.52, as compared to $0.48 in the third quarter of 2015. GAAP revenue in the third quarter of 2016 was $548.1 million, as compared to $563.4 million in the comparable period of 2015. GAAP operating income from continuing operations for the third quarter of 2016 was $81.2 million, as compared to $75.9 million in the third quarter of 2015. Operating profit margin was 14.8% as a percentage of revenue, as compared to 13.5% for the same period a year ago.

Adjusted earnings per share was $0.68, as compared to $0.60 in the third quarter of 2015. Adjusted revenue for the quarter was $548.2 million, as compared to $563.6 million in the third quarter of 2015. Adjusted operating income for the third quarter of 2016 was $103.9 million, as compared to $95.7 million for the same period a year ago. Adjusted operating profit margin was 18.9% as a percentage of adjusted revenue, as compared to 17.0% for the same period a year ago. Adjustments for the Company's non-GAAP financial measures have been noted in the attached reconciliations.

"During the third quarter we continued to drive solid operational improvements across the Company resulting in strong margin expansion and EPS growth, however our top line performance was disappointing as our capital intensive businesses experienced challenging market conditions," said Robert Friel, chairman and chief executive officer of PerkinElmer. "We believe the strong profit performance this quarter and year-to-date validates the steps we are taking to rebalance the portfolio and the recent realignment of our operating segments into Diagnostics and Discovery & Analytical Solutions will help us accelerate that transition."

Cash Flow

For the first nine months of 2016, GAAP operating cash flow from continuing operations was $198.9 million, as compared to $161.9 million in the comparable period of 2015.

Financial Overview by Reporting Segment for the Third Quarter of 2016

Human Health

Environmental Health

Updated Financial Guidance - Full Year 2016

For the full year 2016, the Company is narrowing its previous guidance of GAAP earnings per share from continuing operations to a new range of $2.24 to $2.26 and on a non-GAAP basis, which is expected to include the adjustments noted in the attached reconciliation, adjusted earnings per share of $2.75 to $2.77.

Conference Call Information

The Company will discuss its third quarter results and its outlook for business trends in a conference call on November 7, 2016 at 5:00 p.m. Eastern Time. To access the call, please dial (541) 797-2422 prior to the scheduled conference call time and provide the access code 85694495.

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) the approval of the Brexit Referendum in the United Kingdom; (21) our ability to realize the full value of our intangible assets; (22) significant fluctuations in our stock price; (23) reduction or elimination of dividends on our common stock; and (24) 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 committed to innovating for a healthier world. The Company reported revenue of approximately $2.3 billion in 2015, has about 8,000 employees serving customers in more than 150 countries, and is a component of the S&P 500 Index. Additional information is available through 1-877-PKI-NYSE, or at www.perkinelmer.com.

             
PerkinElmer, Inc. and Subsidiaries
CONDENSED CONSOLIDATED INCOME STATEMENTS
           
 

Three Months Ended

Nine Months Ended

(In thousands, except per share data)

October 2, 2016

October 4, 2015

October 2, 2016

October 4, 2015

 
 
Revenue $ 548,054 $ 563,436 $ 1,659,405 $ 1,654,243
 
Cost of revenue 287,255 308,833 $ 883,226 $ 911,754
Selling, general and administrative expenses 145,793 147,728 447,332 440,343
Research and development expenses 33,175 31,095 101,967 95,898
Restructuring and contract termination charges, net   603     (118 )   5,692     4,838  
 
Operating income from continuing operations 81,228 75,898 221,188 201,410
 
Interest income (124 ) (147 ) (361 ) (488 )
Interest expense 10,998 9,874 30,778 28,564
Gain on disposition of businesses and assets, net - - (5,562 ) -
Other expense, net   389     2,217     2,887     4,132  
 
Income from continuing operations, before income taxes 69,965 63,954 193,446 169,202
 
Provision for income taxes   12,216     9,057     26,970     24,998  
 
Income from continuing operations 57,749 54,897 166,476 144,204
 
Gain from discontinued operations, before income taxes - 8 - 6
Gain (loss) on disposition of discontinued operations, before income taxes 630 (3 ) 619 (26 )
Provision for (benefit from) income taxes on discontinued operations and dispositions   252     39     (2,355 )   13  
 
Gain (loss) from discontinued operations and dispositions   378     (34 )   2,974     (33 )
 
Net income $ 58,127   $ 54,863   $ 169,450   $ 144,171  
 
 
Diluted earnings per share:
Income from continuing operations $ 0.52 $ 0.48 $ 1.51 $ 1.27
 
Gain (loss) from discontinued operations and dispositions   0.00     (0.00 )   0.03     (0.00 )
 
Net income $ 0.53   $ 0.48   $ 1.54   $ 1.27  
 
 
Weighted average diluted shares of common stock outstanding 110,078 113,422 110,372 113,565
 
ABOVE PREPARED IN ACCORDANCE WITH GAAP
                                     
Additional Supplemental Information (1):
(per share, continuing operations)
 
GAAP EPS from continuing operations $ 0.52 $ 0.48 $ 1.51 $ 1.27
Amortization of intangible assets 0.16 0.17 0.50 0.52
Purchase accounting adjustments 0.04 0.01 0.10 0.07

Acquisition and divestiture-related expenses

0.00 0.00 0.01 0.00
Disposition of businesses - - (0.05 ) -
Mark to market on postretirement benefits - - (0.00 ) 0.01
Restructuring and contract termination charges 0.01 (0.00 ) 0.05 0.04
Tax on above items   (0.05 )   (0.06 )   (0.22 )   (0.22 )
Adjusted EPS $ 0.68   $ 0.60   $ 1.90   $ 1.70  
 
(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)

October 2, 2016

October 4, 2015

October 2, 2016

October 4, 2015

 
 
Human Health Reported revenue $ 338,241 $ 343,636 $ 1,024,160 $ 1,011,177
Purchase accounting adjustments 176   164   527   628  
Adjusted Revenue 338,417   343,800   1,024,687   1,011,805  
 
Reported operating income from continued operations 64,562 63,147 176,881 179,560
OP% 19.1 % 18.4 % 17.3 % 17.8 %
Amortization of intangible assets 13,699 15,298 41,145 46,041
Purchase accounting adjustments 4,258 195 10,295 720
Acquisition and divestiture-related expenses 447 74 872 283
Restructuring and contract termination charges, net 393   184   4,704   2,004  
Adjusted operating income 83,359   78,898   233,897   228,608  
Adjusted OP% 24.6 % 22.9 % 22.8 % 22.6 %
 
Environmental Health Reported revenue 209,813 219,800 635,245 643,066
Purchase accounting adjustments -   -   -   -  
Adjusted Revenue 209,813   219,800   635,245   643,066  
 
Reported operating income from continued operations 27,662 22,838 78,855 53,606
OP% 13.2 % 10.4 % 12.4 % 8.3 %
Amortization of intangible assets 3,641 3,551 14,127 12,499
Purchase accounting adjustments - 808 398 7,275
Acquisition and divestiture-related expenses - 19 102 235
Restructuring and contract termination charges, net 210   (302 ) 988   2,834  
Adjusted operating income 31,513   26,914   94,470   76,449  
Adjusted OP% 15.0 % 12.2 % 14.9 % 11.9 %
 
Corporate

Reported operating (loss)

(10,996 ) (10,087 ) (34,548 ) (31,756 )
Mark to market on postretirement benefits -   -   (3 ) 1,066  
Adjusted operating loss (10,996 ) (10,087 ) (34,551 ) (30,690 )
 
 
Continuing Operations Reported revenue $ 548,054 $ 563,436 $ 1,659,405 $ 1,654,243
Purchase accounting adjustments 176   164   527   628  
Adjusted Revenue 548,230   563,600   1,659,932   1,654,871  
 
Reported operating income from continued operations 81,228 75,898 221,188 201,410
OP% 14.8 % 13.5 % 13.3 % 12.2 %
Amortization of intangible assets 17,340 18,849 55,272 58,540
Purchase accounting adjustments 4,258 1,003 10,693 7,995
Acquisition and divestiture-related expenses 447 93 974 518
Mark to market on postretirement benefits - - (3 ) 1,066
Restructuring and contract termination charges, net 603   (118 ) 5,692   4,838  
Adjusted operating income $ 103,876   $ 95,725   $ 293,816   $ 274,367  
Adjusted OP% 18.9 % 17.0 % 17.7 % 16.6 %
 
REPORTED REVENUE AND REPORTED OPERATING INCOME (LOSS) PREPARED IN ACCORDANCE WITH GAAP
 

 
PerkinElmer, Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
               
 
 
(In thousands) October 2, 2016 January 3, 2016
 
Current assets:
Cash and cash equivalents $ 311,663 $ 237,932
Accounts receivable, net 443,275 439,015
Inventories, net 306,041 288,028
Other current assets   92,587     68,186  
Total current assets   1,153,566     1,033,161  
 
Property, plant and equipment:
At cost 525,396 494,956
Accumulated depreciation   (350,170 )   (327,927 )
Property, plant and equipment, net 175,226 167,029
Marketable securities and investments 1,539 1,586
Intangible assets, net 452,458 490,811
Goodwill 2,313,900 2,276,149
Other assets, net   207,867     197,559  
Total assets $ 4,304,556   $ 4,166,295  
 
Current liabilities:
Current portion of long-term debt $ 1,160 $ 1,123
Accounts payable 162,321 152,726
Short-term accrued restructuring and contract termination charges 9,133 17,090
Accrued expenses and other current liabilities 373,207 388,446
Current liabilities of discontinued operations   2,170     2,100  
Total current liabilities   547,991     561,485  
 
Long-term debt 1,131,925 1,011,762
Long-term liabilities   489,218     482,607  
Total liabilities   2,169,134     2,055,854  
 
Total stockholders' equity   2,135,422     2,110,441  
Total liabilities and stockholders' equity $ 4,304,556   $ 4,166,295  
 
PREPARED IN ACCORDANCE WITH GAAP
 

     
PerkinElmer, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
                 
 

Three Months Ended

Nine Months Ended

October 2, 2016

October 4, 2015

October 2, 2016

October 4, 2015

(In thousands)
 
Operating activities:
Net income $ 58,127 $ 54,863 $ 169,450 $ 144,171
(Gain on) loss from discontinued operations, net of income taxes   (378 )   34       (2,974 )   33  
Income from continuing operations   57,749     54,897       166,476     144,204  
Adjustments to reconcile income from continuing operations
to net cash provided by continuing operations:
Restructuring and contract termination charges, net 603 (118 ) 5,692 4,838
Depreciation and amortization 25,891 27,164 79,287 83,757
Stock-based compensation 3,908 4,290 13,819 12,483
Change in fair value of contingent consideration 4,051 - 9,678 -
Amortization of deferred debt financing costs and accretion of discounts 756 435 1,507 1,112
Gain on disposition of businesses and assets, net - - (5,562 ) -
Amortization of acquired inventory revaluation - 808 396 7,275
Changes in assets and liabilities which provided (used) cash, excluding
effects from companies purchased and divested:
Accounts receivable, net (4,385 ) 5,518 1,848 36,361
Inventories (5,711 ) (17,497 ) (12,350 ) (50,824 )
Accounts payable 5,955 (18,375 ) 8,986 (19,916 )
Accrued expenses and other   (15,580 )   3,646       (70,859 )   (57,361 )
Net cash provided by operating activities of continuing operations 73,237 60,768 198,918 161,929
Net cash provided by (used in) operating activities of discontinued operations   378     (43 )     2,974     (70 )
Net cash provided by operating activities   73,615     60,725       201,892     161,859  
 
Investing activities:
Capital expenditures (8,991 ) (7,715 ) (25,311 ) (17,814 )
Proceeds from surrender of life insurance policies - 757 44 757
Changes in restricted cash balances - - (2,000 ) 59
Proceeds from disposition of businesses - - 21,000 -
Activity related to acquisitions and investments, net of cash and cash equivalents acquired   (61,440 )   -       (71,924 )   (18,735 )
Net cash used in investing activities   (70,431 )   (6,958 )     (78,191 )   (35,733 )
 
Financing Activities:
Payments on revolving credit facility (609,507 ) (122,000 ) (804,507 ) (371,000 )
Proceeds from revolving credit facility 135,507 163,000 375,507 347,000
Proceeds from sale of senior debt 546,190 - 546,190 -
Payments of debt issuance costs (7,868 ) - (7,868 ) -
Settlement of cash flow hedges 396 (4,258 ) 1,674 19,210
Net payments on other credit facilities (282 ) (1,144 ) (835 ) (800 )
Payments for acquisition-related contingent consideration (14 ) (26 ) (113 ) (26 )
Proceeds from issuance of common stock under stock plans 3,128 412 12,081 13,081
Purchases of common stock (96 ) (72,063 ) (151,640 ) (76,158 )
Dividends paid   (7,658 )   (7,938 )     (23,131 )   (23,737 )
Net cash provided by (used in) financing activities   59,796     (44,017 )     (52,642 )   (92,430 )
 
Effect of exchange rate changes on cash and cash equivalents   600     (6,854 )     2,672     (13,451 )
 
Net increase in cash and cash equivalents 63,580 2,896 73,731 20,245
Cash and cash equivalents at beginning of period   248,083     192,170       237,932     174,821  
Cash and cash equivalents at end of period $ 311,663   $ 195,066     $ 311,663   $ 195,066  
 
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

October 2, 2016

October 4, 2015

 
Adjusted revenue:
Revenue $ 548.1 $ 563.4
Purchase accounting adjustments   0.2                 0.2        
Adjusted revenue $ 548.2               $ 563.6        
 
Adjusted gross margin:
Gross margin $ 260.8 47.6 % $ 254.6 45.2 %
Amortization of intangible assets 7.3 1.3 % 10.7 1.9 %
Purchase accounting adjustments   0.2       0.0 %         1.0       0.2 %
Adjusted gross margin $ 268.3       48.9 %       $ 266.3       47.2 %
 
Adjusted SG&A:
SG&A $ 145.8 26.6 % $ 147.7 26.2 %
Amortization of intangible assets (10.0 ) -1.8 % (8.0 ) -1.4 %
Purchase accounting adjustments (4.1 ) -0.7 % (0.0 ) 0.0 %
Acquisition and divestiture related expenses   (0.4 )     -0.1 %         (0.1 )     0.0 %
Adjusted SG&A $ 131.3       23.9 %       $ 139.6       24.8 %
 
Adjusted R&D:
R&D $ 33.2 6.1 % $ 31.1 5.5 %
Amortization of intangible assets   (0.1 )     0.0 %         (0.1 )     0.0 %
Adjusted R&D $ 33.1       6.0 %       $ 31.0       5.5 %
 
Adjusted operating income:
Operating income $ 81.2 14.8 % $ 75.9 13.5 %
Amortization of intangible assets 17.3 3.2 % 18.8 3.3 %
Purchase accounting adjustments 4.3 0.8 % 1.0 0.2 %
Acquisition and divestiture-related expenses 0.4 0.1 % 0.1 0.0 %
Restructuring and contract termination charges, net   0.6       0.1 %         (0.1 )     0.0 %
Adjusted operating income $ 103.9       18.9 %       $ 95.7       17.0 %
 
                     

PKI

Three Months Ended

October 2, 2016

October 4, 2015

 
Adjusted EPS:
GAAP EPS $ 0.53 $ 0.48
Discontinued operations, net of income taxes   0.00                 (0.00 )      
GAAP EPS from continuing operations 0.52 0.48
Amortization of intangible assets 0.16 0.17
Purchase accounting adjustments 0.04 0.01
Acquisition and divestiture-related expenses 0.00 0.00
Restructuring and contract termination charges 0.01 (0.00 )
Tax on above items   (0.05 )               (0.06 )      
Adjusted EPS $ 0.68               $ 0.60        
 
                     

Human Health

Three Months Ended

October 2, 2016

October 4, 2015

 
Adjusted revenue:
Revenue $ 338.2 $ 343.6
Purchase accounting adjustments   0.2                 0.2        
Adjusted revenue $ 338.4               $ 343.8        
 
Adjusted operating income:
Operating income $ 64.6 19.1 % $ 63.1 18.4 %
Amortization of intangible assets 13.7 4.1 % 15.3 4.5 %
Purchase accounting adjustments 4.3 1.3 % 0.2 0.1 %
Acquisition and divestiture-related expenses 0.4 0.1 % 0.1 0.0 %
Restructuring and contract termination charges, net   0.4       0.1 %         0.2       0.1 %
Adjusted operating income $ 83.4       24.6 %       $ 78.9       22.9 %
 
                     

Environmental Health

Three Months Ended

October 2, 2016

October 4, 2015

 
Revenue:
Revenue $ 209.8 $ 219.8
 
Adjusted operating income:
Operating income $ 27.7 13.2 % $ 22.8 10.4 %
Amortization of intangible assets 3.6 1.7 % 3.6 1.6 %
Purchase accounting adjustments - 0.0 % 0.8 0.4 %
Acquisition and divestiture-related expenses - 0.0 % 0.0 0.0 %
Restructuring and contract termination charges, net   0.2       0.1 %         (0.3 )     -0.1 %
Adjusted operating income $ 31.5       15.0 %       $ 26.9       12.2 %

(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

October 2, 2016

October 4, 2015

 
Adjusted revenue:
Revenue $ 1,659.4 $ 1,654.2
Purchase accounting adjustments   0.5                 0.6        
Adjusted revenue $ 1,659.9               $ 1,654.9        
 
Adjusted gross margin:
Gross margin $ 776.2 46.8 % $ 742.5 44.9 %
Amortization of intangible assets 24.1 1.5 % 32.2 1.9 %
Purchase accounting adjustments 1.0 0.1 % 7.9 0.5 %
Mark to market on postretirement benefits   (0.0 )     0.0 %         0.2       0.0 %
Adjusted gross margin $ 801.3       48.3 %       $ 782.9       47.3 %
 
Adjusted SG&A:
SG&A $ 447.3 27.0 % $ 440.3 26.6 %
Amortization of intangible assets (30.7 ) -1.8 % (26.0 ) -1.6 %
Purchase accounting adjustments (9.7 ) -0.6 % (0.0 ) 0.0 %
Acquisition and divestiture-related expenses (1.0 ) -0.1 % (0.5 ) 0.0 %
Mark to market on postretirement benefits   -       0.0 %         (0.8 )     -0.1 %
Adjusted SG&A $ 405.9       24.5 %       $ 413.0       25.0 %
 
Adjusted R&D:
R&D $ 102.0 6.1 % $ 95.9 5.8 %
Amortization of intangible assets   (0.5 )     0.0 %         (0.4 )     0.0 %
Adjusted R&D $ 101.5       6.1 %       $ 95.5       5.8 %
 
Adjusted operating income:
Operating income $ 221.2 13.3 % $ 201.4 12.2 %
Amortization of intangible assets 55.3 3.3 % 58.5 3.5 %
Purchase accounting adjustments 10.7 0.6 % 8.0 0.5 %
Acquisition and divestiture-related expenses 1.0 0.1 % 0.5 0.0 %
Mark to market on postretirement benefits (0.0 ) 0.0 % 1.1 0.1 %
Restructuring and contract termination charges, net   5.7       0.3 %         4.8       0.3 %
Adjusted operating income $ 293.8       17.7 %       $ 274.4       16.6 %
 
                     

PKI

Nine Months Ended

October 2, 2016

October 4, 2015

 
Adjusted EPS:
GAAP EPS $ 1.54 $ 1.27
Discontinued operations   0.03                 (0.00 )      
GAAP EPS from continuing operations 1.51 1.27
Amortization of intangible assets 0.50 0.52
Purchase accounting adjustments 0.10 0.07
Acquisition and divestiture-related expenses 0.01 0.00
Gain on disposition of businesses and assets, net (0.05 ) -
Mark to market on postretirement benefits (0.00 ) 0.01
Restructuring and contract termination charges 0.05 0.04
Tax on above items   (0.22 )               (0.22 )      
Adjusted EPS $ 1.90               $ 1.70        
 
                     

PKI

Twelve Months Ended

January 1, 2017

Adjusted EPS: Projected
GAAP EPS from continuing operations $2.24 - $2.26
Amortization of intangible assets 0.67
Purchase accounting adjustments 0.10
Gain on disposition of businesses and assets, net (0.05 )
Mark to market on postretirement benefits (0.00 )
Acquisition and divestiture-related expenses 0.01
Restructuring and contract termination charges 0.05
Tax on above items                 (0.27 )      
Adjusted EPS         $2.75 - $2.77  
 
                     

Human Health

Nine Months Ended

October 2, 2016

October 4, 2015

 
Adjusted revenue:
Revenue $ 1,024.2 $ 1,011.2
Purchase accounting adjustments   0.5                 0.6        
Adjusted revenue $ 1,024.7               $ 1,011.8        
 
Adjusted operating income:
Operating income $ 176.9 17.3 % $ 179.6 17.8 %
Amortization of intangible assets 41.1 4.0 % 46.0 4.6 %
Purchase accounting adjustments 10.3 1.0 % 0.7 0.1 %
Acquisition and divestiture-related expenses 0.9 0.1 % 0.3 0.0 %
Restructuring and contract termination charges, net   4.7       0.5 %         2.0       0.2 %
Adjusted operating income $ 233.9       22.8 %       $ 228.6       22.6 %
 
                     

Environmental Health

Nine Months Ended

October 2, 2016

October 4, 2015

 
Revenue:
Revenue $ 635.2 $ 643.1
 
Adjusted operating income:
Operating income $ 78.9 12.4 % $ 53.6 8.3 %
Amortization of intangible assets 14.1 2.2 % 12.5 1.9 %
Purchase accounting adjustments 0.4 0.1 % 7.3 1.1 %
Acquisition and divestiture-related expenses 0.1 0.0 % 0.2 0.0 %
Restructuring and contract termination charges, net   1.0       0.2 %         2.8       0.4 %
Adjusted operating income $ 94.5       14.9 %       $ 76.4       11.9 %

(1) amounts may not sum due to rounding

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

October 2, 2016

Organic revenue growth:
Reported revenue growth -3%
Less: effect of foreign exchange rates 0%
Less: effect of acquisitions including purchase accounting adjustments and impact of divested businesses -1%
Organic revenue growth -2%
 
   
Human Health
Three Months Ended

October 2, 2016

Organic revenue growth:
Reported revenue growth -2%
Less: effect of foreign exchange rates 0%
Less: effect of acquisitions including purchase accounting adjustments and impact of divested businesses -2%
Organic revenue growth 0%
 
   
Environmental Health
Three Months Ended

October 2, 2016

Organic revenue growth:
Reported revenue growth -5%
Less: effect of foreign exchange rates -1%
Less: effect of acquisitions including purchase accounting adjustments and impact of divested businesses 1%
Organic revenue growth -5%

(1) amounts may not sum due to rounding

Explanation of Non-GAAP Financial Measures

We report our financial results in accordance with U. S. generally accepted accounting principles ("GAAP"). However, management believes that, in order to more fully understand our short-term and long-term financial and operational trends, investors may wish to consider the impact of certain non-cash, non-recurring or other items, which result from facts and circumstances that vary in frequency and impact on continuing operations. Accordingly, we present non-GAAP financial measures as a supplement to the financial measures we present in accordance with GAAP. These non-GAAP financial measures provide management with additional means to understand and evaluate the operating results and trends in our ongoing business by adjusting for certain non-cash expenses and other items that management believes might otherwise make comparisons of our ongoing business with prior periods more difficult, obscure trends in ongoing operations, or reduce management's ability to make useful forecasts. Management believes these non-GAAP financial measures provide additional means of evaluating period-over-period operating performance. In addition, management understands that some investors and financial analysts find this information helpful in analyzing our financial and operational performance and comparing this performance to our peers and competitors.

We use the term "adjusted revenue" to refer to GAAP revenue, including purchase accounting adjustments for revenue from contracts acquired in acquisitions that will not be fully recognized due to 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 use the term "organic revenue" to refer to GAAP revenue, excluding the effect of foreign currency changes and acquisitions, and including purchase accounting adjustments for revenue from contracts acquired in acquisitions that will not be fully recognized due to accounting rules. We also exclude the impact of sales from divested businesses by deducting the effects of divested business revenue from the current and prior periods. 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 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 purchase accounting adjustments for revenue from contracts acquired in 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 use the term "adjusted SG&A expense" to refer to GAAP SG&A expense, excluding amortization of intangible assets, purchase accounting adjustments, acquisition and divestiture-related expenses, significant litigation matters and significant environmental charges. 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 SG&A percentage" to refer to adjusted SG&A expense as a percentage of adjusted revenue.

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 use the term "adjusted operating income," to refer to GAAP operating income, including revenue from contracts acquired in acquisitions that will not be fully recognized due to accounting rules, and excluding amortization of intangible assets, other purchase accounting adjustments, acquisition and divestiture-related expenses, significant litigation matters, significant environmental charges, and restructuring and contract termination charges. 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 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 use the term "adjusted earnings per share," or "adjusted EPS," to refer to GAAP earnings per share, including revenue from contracts acquired in acquisitions that will not be fully recognized due to accounting rules, and excluding discontinued operations, amortization of intangible assets, other purchase accounting adjustments, acquisition and divestiture-related expenses, significant litigation matters, significant environmental charges, gain on disposition of businesses and assets, net, and restructuring and contract termination charges. 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 also adjust for any tax impact related to the above items.

Management includes or excludes the effect of each of the items identified below in the applicable non-GAAP financial measure referenced above for the reasons set forth below with respect to that item:

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 and divestitures, significant litigation matters, significant environmental charges, adjustments for mark-to-market accounting on post-retirement benefits, gain on disposition of businesses and assets, restructuring and contract termination charges, and the revenue from contracts acquired with various acquisitions is calculated based on operational results and applicable jurisdictional law, which contemplates tax rates currently in effect to determine our tax provision. The tax effect for the impact from foreign currency exchange rates on the current period is calculated based on the average rate currently in effect to determine our tax provision.

The non-GAAP financial measures described above are not meant to be considered superior to, or a substitute for, our financial statements prepared in accordance with GAAP. There are material limitations associated with non-GAAP financial measures because they exclude charges that have an effect on our reported results and, therefore, should not be relied upon as the sole financial measures by which 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 is 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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