PerkinElmer, Inc.
PERKINELMER INC (Form: 10-K, Received: 03/01/2016 11:38:05)
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
_____________________________________
Form 10-K
(Mark One)
þ
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the fiscal year ended January 3, 2016
or
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from              to
     
Commission file number 001-5075
_____________________________________  
PerkinElmer, Inc.
(Exact name of registrant as specified in its charter)
Massachusetts
 
04-2052042
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
 
 
 
940 Winter Street, Waltham, Massachusetts
 
02451
(Address of Principal Executive Offices)
 
(Zip Code)
(Registrant’s telephone number, including area code): (781) 663-6900
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
 
Name of Each Exchange on Which Registered
Common Stock, $1 Par Value
 
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes þ        No o
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o  No þ
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or Section 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.        Yes þ         No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).        Yes þ         No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.         þ
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer  þ
 
Accelerated filer  o
 
Non-accelerated filer  o
 
Smaller reporting company  o
 
 
 
 
(Do not check if a smaller reporting company)
 
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o    No þ
The aggregate market value of the common stock, $1 par value per share, held by non-affiliates of the registrant on June 26, 2015 , was $6,101,934,638 based upon the last reported sale of $54.29 per share of common stock on June 26, 2015 .
As of February 25, 2016 , there were outstanding 109,789,094 shares of common stock, $1 par value per share.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of PerkinElmer, Inc.’s Definitive Proxy Statement for its Annual Meeting of Shareholders to be held on April 26, 2016 are incorporated by reference into Part III of this Form 10-K.
 

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TABLE OF CONTENTS
 
 
 
Page
PART I
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
 
 
 
PART II
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
 
 
 
PART III
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
 
 
 
PART IV
Item 15.

 

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PART I

Item 1.
Business

Overview
We are a leading provider of products, services and solutions to the diagnostics, research, environmental, industrial and laboratory services markets. Through our advanced technologies, solutions, and services, we address critical issues that help to improve the health and safety of people and the environment.

We are a Massachusetts corporation, founded in 1947. Our headquarters are in Waltham, Massachusetts, and we market our products and services in more than 150 countries. As of January 3, 2016 , we employed approximately 8,000 employees in our continuing operations. Our common stock is listed on the New York Stock Exchange under the symbol “PKI” and we are a component of the S&P 500 Index.

We maintain a website with the address http://www.perkinelmer.com . We are not including the information contained in our website as part of, or incorporating it by reference into, this annual report on Form 10-K. We make available free of charge through our website our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to these reports, as soon as reasonably practicable after we electronically file these materials with, or otherwise furnish them to, the Securities and Exchange Commission.

Our Strategy
Our strategy is to develop and deliver innovative products, services and solutions in high-growth markets that utilize our knowledge and expertise to address customers’ critical needs and drive scientific breakthroughs. To execute on our strategy and accelerate revenue growth, we focus on broadening our offerings through both the acquisition of innovative technology and investment in research and development. Our strategy includes:
Achieving significant growth in both of our core business segments, Human Health and Environmental Health, through strategic acquisitions and licensing;
Accelerating innovation through both internal research and development and third-party collaborations and alliances;
Strengthening our position within key markets, by expanding our product and service offerings and maintaining superior product quality;
Utilizing our share repurchase programs to help drive shareholder value; and
Attracting, retaining and developing talented and engaged employees.

Recent Developments
As part of our strategy to grow our core businesses, we have recently taken the following actions:

Strategic Business Realignment:
We realigned our organization at the beginning of fiscal year 2015 to enable us to both deliver complete solutions targeted towards certain end markets and develop value-added applications and solutions to foster further expansion of those markets. OneSource, our multivendor laboratory service business that serves the life sciences end market, was moved from our Environmental Health segment into our Human Health segment. The results reported for fiscal year 2015 reflect this new alignment of our operating segments. Financial information in this report relating to fiscal years 2014 and 2013 has been retrospectively adjusted to reflect this change to our operating segments.

Acquisitions in Fiscal Year 2015:
We completed the acquisition of five businesses in fiscal year 2015 for a total consideration of $77.1 million , in cash. The acquired businesses included Vanadis Diagnostics AB (“Vanadis”), which was acquired for total consideration of $35.1 million in cash, as further described in Note 21 to our consolidated financial statements included in this annual report on Form 10-K, and other acquisitions for an aggregate consideration of $42.0 million in cash. We have a potential obligation to pay the shareholders of Vanadis additional contingent consideration of up to $93.0 million , which at closing had an estimated fair value of $56.9 million . We reported the operations for all of these acquisitions within the results of our Human Health and Environmental Health segments from the acquisition dates.

Restructuring:
During fiscal year 2015 , we recorded pre-tax restructuring charges of $4.4 million in our Human Health segment and $13.2 million in our Environmental Health segment related to a workforce reduction from restructuring activities. Our

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management approved these plans principally to realign resources to emphasize growth initiatives and to focus resources on higher growth end markets. We also recorded pre-tax restructuring reversals of $2.3 million in our Human Health segment and $3.9 million in our Environmental Health segment related to lower than expected costs associated with workforce reductions. In fiscal year 2015 , we also recorded a pre-tax restructuring charge of $2.0 million in our Human Health segment relating to the closure of excess facility space and a pre-tax restructuring charge of $0.1 million in our Environmental Health segment primarily as a result of terminating various contractual commitments. This pre-tax restructuring activity has been reported as restructuring and contract termination charges and is included as a component of operating expenses from continuing operations. We expect no significant impact on future operating results or cash flows from the restructuring activities executed in fiscal year 2015 .

As part of our ongoing business strategy, we also took the following actions:

Share Repurchase Program:
On October 23, 2014, our Board of Directors (our "Board") authorized us to repurchase up to  8.0 million  shares of common stock under a stock repurchase program (the "Repurchase Program"). The Repurchase Program will expire on October 23, 2016 unless terminated earlier by our Board, and may be suspended or discontinued at any time. During fiscal year 2015 , we repurchased 1.5 million shares of common stock in the open market at an aggregate cost of $72.0 million , including commissions, under the Repurchase Program. As of January 3, 2016 , 5.9 million shares remained available for repurchase under the Repurchase Program. From January 4, 2016 through February 25, 2016 , we repurchased 2.4 million shares of common stock in the open market at an aggregate cost of $109.7 million , including commissions, under the Repurchase Program.

Business Segments and Products
We report our business in two segments: Human Health and Environmental Health. We performed our annual impairment testing on January 1, 2015 , the annual impairment date for our reporting units, and based on the first step of the impairment process (the comparison of the fair value to the carrying value of the reporting unit to determine if the carrying value exceeds the fair value), we concluded that there was no goodwill impairment.

We realigned our organization at the beginning of fiscal year 2015 to enable us to both deliver complete solutions targeted towards certain end markets and develop value-added applications and solutions to foster further expansion of those markets. OneSource, our multivendor laboratory service business that serves the life sciences end market, was moved from our Environmental Health segment into our Human Health segment. The results reported for fiscal year 2015 reflect this new alignment of our operating segments. Financial information in this report relating to fiscal years 2014 and 2013 has been retrospectively adjusted to reflect this change to our operating segments.

Human Health Segment
Our Human Health segment concentrates on developing diagnostics, tools and applications to help detect diseases earlier and more accurately and to accelerate the discovery and development of critical new therapies. Within our Human Health segment, we serve the diagnostics and research markets. Our Human Health segment generated revenue of $1,376.6 million in fiscal year 2015 .

Diagnostics Market:
We provide early detection for genetic disorders from pregnancy to early childhood, as well as flat panel X-ray detectors and infectious disease testing for the diagnostics market. Our screening products are designed to provide early and accurate insights into the health of expectant mothers during pregnancy and into the health of their babies. Our instruments, reagents and software test and screen for genetic abnormalities, disorders and diseases, including Down syndrome, hypothyroidism, infertility and various metabolic conditions. Our flat panel X-ray detectors are used within X-ray imaging systems to allow physicians to make fast and accurate diagnoses of conditions ranging from broken bones to breast cancer. In addition, our flat panel X-ray detectors are used within oncology radiation therapy systems to support more accurate tumor treatment.

Research Market:
In the research market, we provide a broad suite of solutions including reagents, liquid handling systems, and detection and imaging technologies that enable scientists to improve life sciences research and drug discovery processes. These products, solutions and services support pharmaceutical and biotech companies, and academic institutions globally in creating better therapeutics by helping to bring products to market faster and more efficiently. Our research portfolio includes a wide range of systems consisting of instrumentation for automation and detection for use in vitro and ex vivo, as well as in vivo imaging and analysis hardware and software, plus a range of consumable products, such as drug discovery and research reagents. In addition, our OneSource laboratory service business is aligned with customers' needs to accelerate science by enabling efficiency gains within their labs.

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Principal Products:
Our principal products and services for Human Health applications include the following:

Diagnostics:
The DELFIA ® Xpress screening platform, a complete solution for prenatal and maternal health screening, and includes a fast continuous loading system. It is supported by kits for both first and second trimester analyses for prenatal screening and clinically validated LifeCycle software.
The NeoGram MS/MS AAAC in vitro diagnostic kit is used to support detection of metabolic disorders in newborns through tandem mass spectrometry.
The NeoBase Non-derivatized MS/MS kit analyzes newborn blood samples for measurement of amino acids and other metabolic analytes for specific diseases.
The GSP ® Neonatal hTSH, T4 17α-OHP, GALT IRT, BTD, PKU, Total Galactose and G6PD kits are used for screening congenital neonatal conditions from a drop of blood.
The Specimen Gate ® informatics data management solution is designed specifically for newborn screening laboratories.
The XRpad ® family of amorphous silicon (a-Si) flat panel cassette X-ray detectors enables X-ray system manufacturers to upgrade their systems from film to digital and to produce exceptional image resolution and diagnostic capability for radiography especially when imaging small anatomical features such as bone fractures and lung nodules.
ViaCord ® umbilical cord blood banking services for the banking of stem cells harvested from umbilical cord blood, for potential therapeutic application.
The XRD family of a-Si flat panel X-ray detectors provides imaging for medical applications such as radiation therapy and veterinary imaging as well as industrial imaging applications including pipeline inspection, manufacturing inspection and 3D Cone Beam CT.
The Dexela ® family of CMOS flat panel X-ray detectors provides imaging for orthopedic surgery, mammography, dental, and industrial imaging applications such as PCB inspection and 3D Cone Beam CT.
An expanded portfolio of molecular-based infectious disease screening technologies for blood bank and clinical laboratory settings in China. The tools include a qualitative 3-in-1 assay for the detection of hepatitis B, hepatitis C and HIV, as well as assays for other communicable diseases.

Research:
Phenoptics quantitative pathology research solutions provide oncologists and cancer immunologists a new way to visualize and measure tumor cells and multiple immune-cell phenotypes simultaneously in FFPE tissue by combining the power of Opal multiplexed immunohistochemistry reagents with the Mantra or Vectra ® 3 Multispectral Imaging System, enabling visualization and analysis of complex cell interactions in ways that are difficult to achieve with other methods.
Radiometric detection solutions, including over 1,100 NEN ® radiochemicals and the Tri-carb ® , Quantulus GCT families of liquid scintillation analyzers, Wizard Gamma counters and MicroBeta plate based LSA, are used for beta, gamma and luminescence counting in microplate and vial formats utilized in research, environmental and drug discovery applications.
The Opera ® Phenix high content screening system is used for sensitive and high speed phenotypic drug screening of complex cellular models.
The Operetta ® high content imaging system is used to automate imaging and analysis for cell-based assays for drug discovery and basic cellular science research laboratories.
The Columbus image data storage and analysis system provides a single solution to the storage and analysis of high content data from any major high content screening system, helping to visualize and analyze high content images via the Internet.
The EnSight multimode plate reader benchtop system offers well plate imaging alongside label-free and labeled detection technologies for target-based and phenotypic assays.
The EnVision ® multilabel plate reader is targeted towards a wide range of high-throughput screening applications, including those using AlphaScreen ® , AlphaLISA ® and/or AlphaPlex ® technologies.
A wide range of homogeneous biochemical and cell based assay reagents, including LANCE ® Ultra and Alpha Technology assay platforms are used for the detection of drug discovery targets such as G-protein coupled receptors (“GPCR”), kinases, biomarkers and the modification of epigenetic enzymes.
A broad portfolio of recombinant GPCR and Ion Channel cell lines, including over 300 products and 120 ready-to-use frozen cell lines for a wide range of disease areas.

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AlphaScreen ® , AlphaLISA ® and AlphaPlex ® research assays, including over 200 no-wash biomarker kits for both biotherapeutics and small molecule drug discovery and development in a variety of therapeutic areas including cancer, inflammation, metabolic disorders, neurodegeneration and virology.
TSA ® Plus biotin kits can increase sensitivity of histochemistry and cytochemistry as much as 10 to 20 times.
In vivo imaging technologies for preclinical research, including the IVIS ® Spectrum series and the FMT ® series for 3D imaging, including the Spectrum BL for 2D and 3D optical imaging, and the IVIS ® Lumina series for 2D imaging. These technologies are designed to provide for non-invasive longitudinal monitoring of disease progression, cell trafficking and gene expression patterns in living animals and are complemented by a broad portfolio of fluorescent and bioluminescent in vivo imaging reagents that can be useful for identifying, characterizing and quantifying a range of disease biomarkers and therapeutic efficacy in living animal models.
The G4 PET/X-ray and G8 PET/CT preclinical imaging systems deliver PET imaging with an intuitive user interface and efficient workflows, ensuring subject monitoring throughout preparation and imaging.
Quantum GX microCT platform is an in vivo microCT scanner that offers industry leading microCT resolution for pre-clinical imaging applications or eight second scan times for higher throughput with lower doses of radiation. With Quantum GX , 3D data from the IVIS and FMT imaging platforms can be coregistered with microCT.
Automated liquid handling platforms (JANUS ® , Sciclone ® and Zephyr ® ) that offer a choice of automated solutions in genomics, biotherapeutics, high throughput screening and high content analysis to assist life science research from bench to clinic.
Next-generation sequencing automation and nucleic acid quantitation, including LabChip ® GX Touch electrophoresis, as well as Sciclone ® , Zephyr ® and JANUS ® automated liquid handling workstations for library preparation.
JANUS ® BioTx Workstation for automated small scale purification offers column, tip and plate based chromatography on a single platform.
The LabChip GXII Touch provides a means of characterizing multiple protein product attributes for research labs through QC.
The cell::explorer and plate::explorer automated workstations allow integration of multiple laboratory instrumentation using a centralized robotic interface, allowing high throughput and turnkey-application focused solutions.
High Content Profiler powered by TIBCO ® Spotfire ® provides automated workflows for quality control and hit classification for truly multi-parametric cellular drug screens.
Lead Discovery powered by TIBCO ® Spotfire ® adds chemical intelligence to the TIBCO ® Spotfire ® business intelligence platform, enabling scientific professionals to derive new information from chemical structures relevant to experimental data.
Informatics platforms including E-Notebook for Chemistry and Biology, Elements ® , iLab , ChemDraw ® and ChemOffice ® , integrated suites that focus on the complex and varied needs of understanding and managing data for productivity and collaboration.
ChemDraw ® and Chem3D ® mobile apps for the iPad ® device, chemical structure drawing and visualization apps, available in multiple languages and feature our Flick-to-Share ® technology.
Licensing for the exclusive, worldwide rights to the TIBCO ® Spotfire ® software platform in certain scientific research and development markets, and certain clinical markets through an exclusive strategic relationship with TIBCO ® Software, Inc.
OneSource ® Laboratory Services, a comprehensive portfolio of multivendor instrument management, QA/QC, lab relocation and regulatory compliance services. OneSource ® programs are tailored to the specific needs and goals of individual customers and offer a series of informatics-based consulting, planning and management offerings to assist in laboratory productivity and the optimization of complex Information Technology platforms.
OneSource ® Mobile Application provides instant mobile access to service activity and equipment data including the ability to open a service call, check service history and view future scheduled events.
OneSource ® Dashboard, a TIBCO ® Spotfire ® driven interactive graphical platform provides visibility to a customer’s global asset population, service event and downtime distribution, as well as key performance indicators to assist in asset operation.

New Products:
Significant new products introduced or acquired for Human Health applications in fiscal year 2015 include the following:

Diagnostics:
The EnLite Neonatal TREC System, a screening test for Severe Combined Immunodeficiency, consisting of EnLite Neonatal TREC reagent kits, the Victor EnLite instrument and EnLite Workstation software.


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Research:
Opal ® 5, 6, and 7 color multiplexed staining kits for amplified detection of immunohistochemistry utilized for multiple biomarker assessment in a single FFPE tumor cross section.
Vectra ® 3 and inForm ® software providing the power of multiplexed biomarker imaging and quantitative analysis, all within a familiar digital workflow to accelerate cancer immunology research.
Alpha SureFire ® Ultra Multiplex Assays for the rapid, sensitive and quantitative detection of phosphoproteins from cells, combined with the measurement of the total amount of the same protein in a single well.
AlphaPlex reagent technology, a homogeneous, all-in-one-well multiplexing reagent system for performing ultra-sensitive immunoassay analyses.
CellCarrier ® Ultra 384-well microplates used in high content imaging applications such as phenotypic screening and three-dimensional disease model studies.
Signals for Translational, a cloud-based data management, aggregation and analysis platform, integrates experimental and clinical research data from many sources and relates the data to scientifically meaningful concepts. The platform also enables support for the complete precision medicine workflow, from data acquisition to biomarker discovery and validation.
Clinical Data Review analytical solution provides medical monitors, safety review teams, biostatisticians, data managers, pharmacologists, and others who analyze clinical data, a powerful advanced analytics solution for overcoming data review challenges. The solution enhances clinical data management and medical review workflows, allowing organizations to make informed decisions on the safety and efficacy of therapeutics earlier in their development.

Brand Names:
Our Human Health segment offers additional products under various brand names, including AlphaLISA ® , AlphaPlex , AlphaScreen ® , AlphaLISA ® , Alpha SureFire ® , AutoDELFIA ® , BACS-on-Beads ® , BoBs ® , Cell carrier , cell::explorer ® , Chem3D ® , ChemDraw ® , ChemOffice ® , Columbus , Datalytix , Dexela ® CMOS FPDs , Elements ® , EnLite , EnSight , EnSpire ® , EnVision ® , Evolution , EZ-Reader , FMT ® , FragilEase , Genoglyphix ® , Geospiza ® , GSP ® , High Content Profiler , iLab , inForm ® , IVIS ® , JANUS ® , LabChip ® , LANCE ® , LifeCycle , LimsLink , Living Image ® , Mantra , MicroBeta MultiPROBE ® , NEN ® , Nuance ® , OneSource ® , Opal ® , Opera ® , Operetta ® , Pannoramic , Phenoptics , plate::explorer ® , Quantulus GCT, Quantum , Sciclone ® , Signals for Translational, Specimen Gate ® , Tri-Carb ® , TRIO , Twister ® , VariSpec , Vectra ® , ViaCord ® , VICTOR , VivoTag ® , Volocity ® , Wizard , XRD , XRpad ® and Zephyr ® .

Environmental Health Segment
Our Environmental Health segment provides products, services and solutions to facilitate a cleaner and safer environment, including the creation of secure food and consumer products. Our Environmental Health segment serves the environmental, industrial and laboratory services market, and generated revenue of $885.7 million in fiscal year 2015 .

Environmental Market:
For the environmental market, we develop and provide analytical technologies, solutions and services that enable our customers to understand the characterization and health of many aspects of our environment, including air, water and soil.

Our technologies are used to detect and help reduce the impact products and industrial processes may have on our environment. For example, we have solutions to help ensure compliance with regulatory standards that protect the purity of the world's water supply by detecting harmful substances, including trace metals such as lead, and organic pollutants such as pesticides and benzene. We provide the tools needed to test functionality, meet quality specifications and safety standards, and innovate for next generation products.

We provide a variety of solutions that confirm food quality, including the level of moisture in grain or detecting the presence of potentially dangerous contaminants, such as lead and mercury in milk. Our solutions can also be used to identify the origin of food products such as olive oil, which helps prevent counterfeiting. Our methods and analyses are transferable throughout the supply chain so our customers are able to keep pace with industry standards as well as governmental regulations and certifications.

Industrial Market:
We provide analytical instrumentation for the industrial market which includes the chemical, electronics, energy, food, lubricant, petrochemical and polymer industries. Our industrial instrumentation is primarily used by customers focusing on quality assurance standards.


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Laboratory Services Market:
We have approximately 1,200 service personnel in our Environmental Health segment to support our customers in the laboratory services market throughout the world and to help them improve the productivity of their labs.

Principal Products:
Our principal products and services for Environmental Health applications include the following:

The Clarus ® series of gas chromatographs, gas chromatographs/mass spectrometers and the TurboMatrix family of sample-handling equipment are used to identify and quantify compounds in the environmental, forensics, food and beverage, hydrocarbon processing/biofuels, materials testing, pharmaceutical and semiconductor industries.
The Flexar series of liquid chromatography and mass spectrometry instruments are controlled by the Chromera ® chromatography data system and incorporate an ergonomic industrial design to deliver a wide range of pressure and detector options to address the application needs of high pressure liquid chromatography laboratories. These systems are used to identify and quantify compounds for applications in the environmental, food, beverage, and pharmaceutical industries.
Our atomic spectroscopy family of instruments, including the AAnalyst /PinAAcle ® series of atomic absorption spectrometers, the Optima ® family of inductively coupled plasma (“ICP”) optical emission spectrometers and the NexION ® family of ICP mass spectrometers are used in the environmental and chemical industries, among others, to determine the elemental content of a sample.
Our infrared spectroscopy family, including the Spectrum Two spectrometer, a compact and portable instrument, is used for high-speed infrared analysis for unknown substance identification, material qualification or concentration determination in fuel and lubricant analysis, polymer analysis and pharmaceutical and environmental applications. This family also includes the Frontier IR and NIR spectrometers designed to provide high sensitivity and flexibility to address a range of sample types and safe drug development, and for determining chemical and material properties in a variety of samples, including consumer products.
The LAMBDA UV/Vis, a series of spectrophotometers that provide sampling flexibility to enable measuring of a wide range of sample types, including liquids, powders and solid materials, both in regulated industries as well as QC/QA and research applications.
 
New Products:
New products introduced or acquired for Environmental Health applications in fiscal year 2015 include the following:
 
The Altus ® UPLC ® and HPLC advanced liquid chromatography systems providing high throughput and resolution chromatographic separations.
The PinAAcle ® 500 is a fully-integrated, flame-only atomic absorption spectrometer that can be coupled with a FAST Flame sample automation accessory and is used by laboratories to determine elemental content of a sample.
The Spotlight FT-IR Microscope System, a high performance microscopy platform, designed for scientists whose samples demand high sensitivity and simple analysis and workflows, for use in product defect analysis, impurity identification, forensics and academic research.
The LAMBDA 265 365 465 UV/Vis Systems benchtop UV/Vis instruments offering a variety of spectral bandwidths to accommodate a wide range of analytical functions related to materials testing, QA/QC and R&D.
The Perten ® DA 7250 NIR Analyzer, a diode array based NIR instrument that analyzes samples of grains, flakes, pellet powders, pastes, slurries and liquids and can determine moisture, protein, fat, ash, starch and many other parameters.
The Torion ® T-9 portable GC/MS, a fast person-portable GC/MS system, enabling rapid detection and actionable results to potentially hazardous and emergency environmental conditions.

Brand Names:
Our Environmental Health segment offers additional products under various brand names, including Altus ® , AAnalyst , Chromera ® , Clarus ® , DairyGuard , Flexar , Frontier , HyperDSC ® , LAMBDA , NexION ® , OilExpress , OilPrep , Optima , Perten ® , PinAAcle ® , Spectrum , Spectrum Two , Spotlight , Supra-clean ® , Supra-d , Supra-poly ® , Torion ® and Ultraspray ® .
 
Marketing
All of our businesses market their products and services primarily through their own specialized sales forces. As of January 3, 2016 , we employed approximately 3,700 sales and service representatives operating in approximately 35 countries and marketing products and services in more than 150 countries. In geographic regions where we do not have a sales and service presence, we utilize distributors to sell our products.
 

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Raw Materials, Key Components and Supplies
Each of our businesses uses a wide variety of raw materials, key components and supplies that are generally available from alternate sources of supply and in adequate quantities from domestic and foreign sources. We generally have multi-year contracts, with no minimum purchase requirements, with our suppliers. For certain critical raw materials, key components and supplies required for the production of some of our principal products, we have qualified only a limited or a single source of supply. We periodically purchase quantities of some of these critical raw materials in excess of current requirements, in anticipation of future manufacturing needs. With sufficient lead times, we believe we would be able to qualify alternative suppliers for each of these raw materials and key components. See the applicable risk factor in “Item 1A. Risk Factors” for an additional description of this risk.
 
Intellectual Property
We own numerous United States and foreign patents and have patent applications pending in the United States and abroad. We also license intellectual property rights to and from third parties, some of which bear royalties and are terminable in specified circumstances. In addition to our patent portfolio, we possess a wide array of unpatented proprietary technology and know-how. We also own numerous United States and foreign trademarks and trade names for a variety of our product names, and have applications for the registration of trademarks and trade names pending in the United States and abroad. We believe that patents and other proprietary rights are important to the development of both of our reporting segments, but we also rely upon trade secrets, know-how, continuing technological innovations and licensing opportunities to develop and maintain the competitive position of both of our reporting segments. We do not believe that the loss of any one patent or other proprietary right would have a material adverse effect on our overall business or on any of our reporting segments.
 
In some cases, we may participate in litigation or other proceedings to defend against or assert claims of infringement, to enforce our patents or our licensors’ patents, to protect our trade secrets, know-how or other intellectual property rights, or to determine the scope and validity of our or third parties’ intellectual property rights. Litigation of this type could result in substantial cost to us and diversion of our resources. An adverse outcome in any litigation or proceeding could subject us to significant liabilities or expenses, require us to cease using disputed intellectual property or cease the sale of a product, or require us to license the disputed intellectual property from third parties.
 
Backlog
We believe that backlog is not a meaningful indicator of future business prospects for either of our business segments due to the short lead time required for a majority of our sales. Therefore, we believe that backlog information is not material to an understanding of our business.
 
Competition
Due to the range and diversity of our products and services, we face many different types of competition and competitors. Our competitors range from foreign and domestic organizations, which produce a comprehensive array of goods and services and that may have greater financial and other resources than we do, to more narrowly focused firms producing a limited number of goods or services for specialized market segments.
 
We compete on the basis of service level, price, technological innovation, operational efficiency, product differentiation, product availability, quality and reliability. Competitors range from multinational organizations with a wide range of products to specialized firms that in some cases have well-established market positions. We expect the proportion of large competitors to increase through the continued consolidation of competitors.
 
Research and Development
Research and development expenditures were $125.9 million during fiscal year 2015 , $121.1 million during fiscal year 2014 , and $132.4 million during fiscal year 2013 .
 
We have a broad product base, and we do not expect any single research and development project to have significant costs. We directed our research and development efforts in fiscal years 2015, 2014 and 2013 primarily toward the diagnostics and research markets within our Human Health segment, and the environmental, industrial and laboratory service markets within our Environmental Health segment, in order to help accelerate our growth initiatives. We expect to continue our strong investments in research and development to drive growth during fiscal year 2016 , and to continue to emphasize the diagnostics and research markets within our Human Health segment, and the environmental, industrial and laboratory services markets within our Environmental Health segment.


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Environmental Matters
Our operations are subject to various foreign, federal, state and local environmental and safety laws and regulations. These requirements include those governing uses, emissions and discharges of hazardous substances, the remediation of contaminated soil and groundwater, the regulation of radioactive materials, and the health and safety of our employees.
 
We may have liability under the Comprehensive Environmental Response Compensation and Liability Act and comparable state statutes that impose liability for investigation and remediation of contamination without regard to fault, in connection with materials that we or our former businesses sent to various third-party sites. We have incurred, and expect to incur, costs pursuant to these statutes.
 
We are conducting a number of environmental investigations and remedial actions at our current and former locations and, along with other companies, have been named a potentially responsible party (“PRP”) for certain waste disposal sites. We accrue for environmental issues in the accounting period that our responsibility is established and when the cost can be reasonably estimated. We have accrued $11.8 million and $12.3 million as of January 3, 2016 and December 28, 2014 , respectively, which represents our management’s estimate of the cost of the remediation of known environmental matters, and does not include any potential liability for related personal injury or property damage claims. During fiscal year 2014, we recorded a benefit of $2.3 million for cost reimbursements related to a particular site, of which $1.2 million was for future monitoring and mitigation activities. During fiscal year 2013, we accrued an additional $5.7 million related to a particular site for increased monitoring and mitigation activities, of which $4.6 million was recorded in the fourth quarter of fiscal year 2013. Our environmental accrual is not discounted and does not reflect the recovery of any material amounts through insurance or indemnification arrangements. The cost estimates are subject to a number of variables, including the stage of the environmental investigations, the magnitude of the possible contamination, the nature of the potential remedies, possible joint and several liability, the time period over which remediation may occur, and the possible effects of changing laws and regulations. For sites where we have been named a PRP, our management does not currently anticipate any additional liability to result from the inability of other significant named parties to contribute. We expect that the majority of such accrued amounts could be paid out over a period of up to ten years. As assessment and remediation activities progress at each individual site, these liabilities are reviewed and adjusted to reflect additional information as it becomes available. There have been no environmental problems to date that have had, or are expected to have, a material adverse effect on our consolidated financial statements. While it is possible that a loss exceeding the amounts recorded in the consolidated financial statements may be incurred, the potential exposure is not expected to be materially different from those amounts recorded.
 
We may become subject to new or unforeseen environmental costs or liabilities. Compliance with new or more stringent laws or regulations, stricter interpretations of existing laws, or the discovery of new contamination could cause us to incur additional costs.
 
Employees
As of January 3, 2016 , we employed approximately 8,000 employees in our continuing operations. Several of our subsidiaries are parties to contracts with labor unions and workers’ councils. As of January 3, 2016 , we estimate that we employed an aggregate of approximately 1,600 union and workers’ council employees. We consider our relations with employees to be satisfactory.

Financial Information About Business Segments
We realigned our organization at the beginning of fiscal year 2015 to enable us to both deliver complete solutions targeted towards certain end markets and develop value-added applications and solutions to foster further expansion of those markets. OneSource, our multivendor laboratory service business that serves the life sciences end market, was moved from our Environmental Health segment into our Human Health segment. The results reported for fiscal year 2015 reflect this new alignment of our operating segments. Financial information in this report relating to fiscal years 2014 and 2013 has been retrospectively adjusted to reflect this change to our operating segments.

We have included the expenses for our corporate headquarters, such as legal, tax, audit, human resources, information technology, and other management and compliance costs, as well as the activity related to the mark-to-market adjustment on postretirement benefit plans, as “Corporate” below. We have a process to allocate and recharge expenses to the reportable segments when these costs are administered or paid by the corporate headquarters based on the extent to which the segment benefited from the expenses. These amounts have been calculated in a consistent manner and are included in our calculations of segment results to internally plan and assess the performance of each segment for all purposes, including determining the compensation of the business leaders for each of our operating segments.
 

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The table below sets forth revenue and operating income (loss) from continuing operations by operating segment for the fiscal years ended:
 
 
January 3,
2016
 
December 28,
2014
 
December 29,
2013
 
(In thousands)
Human Health
 
 
 
 
 
Product revenue
$
976,451

 
$
996,767

 
$
957,022

Service revenue
400,193

 
387,456

 
368,872

Total revenue
1,376,644

 
1,384,223

 
1,325,894

Operating income from continuing operations (1)
251,743

 
233,689

 
168,794

Environmental Health
 
 
 
 
 
Product revenue
576,187

 
543,308

 
541,048

Service revenue
309,528

 
309,688

 
290,644

Total revenue
885,715

 
852,996

 
831,692

Operating income from continuing operations
89,544

 
95,605

 
84,710

Corporate
 
 
 
 
 
Operating loss from continuing operations (2)(3)
(55,153
)
 
(118,552
)
 
(25,710
)
Continuing Operations
 
 
 
 
 
Product revenue
$
1,552,638

 
$
1,540,075

 
$
1,498,070

Service revenue
709,721

 
697,144

 
659,516

Total revenue
2,262,359

 
2,237,219

 
2,157,586

Operating income from continuing operations
286,134

 
210,742

 
227,794

Interest and other expense, net
42,119

 
41,139

 
64,110

Income from continuing operations before income taxes
$
244,015

 
$
169,603

 
$
163,684

____________________________
(1)  
Legal costs for a particular case in our Human Health segment were $0.8 million for fiscal year 2015 . We also recognized a $0.2 million pre-tax impairment charge in our Human Health segment in fiscal year 2013. Both of these items have been included in operating income from continuing operations in our Human Health segment.
(2)  
Activity related to the mark-to-market adjustment on postretirement benefit plans has been included in the Corporate operating loss from continuing operations, and in the aggregate constituted a pre-tax loss of $12.4 million in fiscal year 2015 , a pre-tax loss of $75.9 million in fiscal year 2014 , and pre-tax income of $17.6 million in fiscal year 2013 .
(3)  
Includes expenses related to litigation with Enzo Biochem, Inc. and Enzo Life Sciences, Inc. (collectively, “Enzo”). Enzo filed a complaint in 2002 that alleged that we separately and together with other defendants breached distributorship and settlement agreements with Enzo, infringed Enzo's patents, engaged in unfair competition and fraud, and committed torts against Enzo by, among other things, engaging in commercial development and exploitation of Enzo's patented products and technology. We entered into a settlement agreement with Enzo dated June 20, 2014 and during fiscal year 2014 paid $7.0 million into a designated escrow account to resolve this matter, of which $3.7 million had been accrued in previous years and $3.3 million was recorded during fiscal year 2014. In addition, $3.4 million of expenses were incurred and recorded in preparation for the trial during fiscal year 2014.

Additional information relating to our reporting segments is as follows for the fiscal years ended:
 
 
Depreciation and Amortization
Expense
 
Capital Expenditures
 
January 3,
2016
 
December 28,
2014
 
December 29,
2013
 
January 3,
2016
 
December 28,
2014
 
December 29,
2013
 
(In thousands)
 
(In thousands)
Human Health
$
81,335

 
$
92,604

 
$
100,941

 
$
16,091

 
$
16,922

 
$
22,999

Environmental Health
29,213

 
22,101

 
23,556

 
10,352

 
10,428

 
14,433

Corporate
1,459

 
2,031

 
2,382

 
3,189

 
1,722

 
1,549

Continuing operations
112,007

 
116,736

 
126,879

 
29,632

 
29,072

 
38,981

Discontinued operations
$

 
$
339

 
$
1,590

 
$

 
$
213

 
$
10

 

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Total Assets
 
January 3,
2016
 
December 28,
2014
 
December 29,
2013
 
(In thousands)
Human Health
$
2,778,835

 
$
2,737,824

 
$
2,724,254

Environmental Health
1,358,963

 
1,361,270

 
1,182,356

Corporate
28,497

 
28,482

 
28,441

Net current and long-term assets of discontinued operations

 

 
5,831

Total assets
$
4,166,295

 
$
4,127,576

 
$
3,940,882


Financial Information About Geographic Areas
Both of our reporting segments conduct business in, and derive substantial revenue from, various countries outside the United States. During fiscal year 2015 , we had $1,346.0 million in sales from our international operations, representing approximately 60% of our total sales. During fiscal year 2015 , we derived approximately 50% of our international sales from our Human Health segment and approximately 50% of our international sales from our Environmental Health segment. We anticipate that sales from international operations will continue to represent a substantial portion of our total sales in the future.
 
We are exposed to the risks associated with international operations, including exchange rate fluctuations, regional and country-specific political and economic conditions, foreign receivables collection concerns, trade protection measures and import or export licensing requirements, tax risks, staffing and labor law concerns, intellectual property protection risks, and differing regulatory requirements. Additional geographic information is discussed in Note 23 to our consolidated financial statements included in this annual report on Form 10-K.
 
Item 1A.
Risk Factors
The following important factors affect our business and operations generally or affect multiple segments of our business and operations:
If the markets into which we sell our products decline or do not grow as anticipated due to a decline in general economic conditions, or there are uncertainties surrounding the approval of government or industrial funding proposals, or there are unfavorable changes in government regulations, we may see an adverse effect on the results of our business operations.
Our customers include pharmaceutical and biotechnology companies, laboratories, academic and research institutions, public health authorities, private healthcare organizations, doctors and government agencies. Our quarterly revenue and results of operations are highly dependent on the volume and timing of orders received during the quarter. In addition, our revenues and earnings forecasts for future quarters are often based on the expected trends in our markets. However, the markets we serve do not always experience the trends that we may expect. Negative fluctuations in our customers’ markets, the inability of our customers to secure credit or funding, restrictions in capital expenditures, general economic conditions, cuts in government funding or unfavorable changes in government regulations would likely result in a reduction in demand for our products and services. In addition, government funding is subject to economic conditions and the political process, which is inherently fluid and unpredictable. Our revenues may be adversely affected if our customers delay or reduce purchases as a result of uncertainties surrounding the approval of government or industrial funding proposals. Such declines could harm our consolidated financial position, results of operations, cash flows and trading price of our common stock, and could limit our ability to sustain profitability.
Our growth is subject to global economic and political conditions, and operational disruptions at our facilities.
Our business is affected by global economic conditions and the state of the financial markets, particularly as the United States and other countries balance concerns around debt, inflation, growth and budget allocations in their policy initiatives. There can be no assurance that global economic conditions and financial markets will not worsen and that we will not experience any adverse effects that may be material to our consolidated cash flows, results of operations, financial position or our ability to access capital, such as the adverse effects resulting from a prolonged shutdown in government operations both in the United States and internationally. Our business is also affected by local economic environments, including inflation, recession, financial liquidity and currency volatility or devaluation. Political changes, some of which may be disruptive, could interfere with our supply chain, our customers and all of our activities in a particular location.
While we take precautions to prevent production or service interruptions at our global facilities, a major earthquake, fire, flood, power loss or other catastrophic event that results in the destruction or delay of any of our critical business operations

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could result in our incurring significant liability to customers or other third parties, cause significant reputational damage or have a material adverse effect on our business, operating results or financial condition.
Certain of these risks can be hedged to a limited degree using financial instruments, or other measures, and some of these risks are insurable, but any such mitigation efforts are costly and may not always be fully successful. Our ability to engage in such mitigation efforts has decreased or become even more costly as a result of recent market developments.
If we do not introduce new products in a timely manner, we may lose market share and be unable to achieve revenue growth targets.
We sell many of our products in industries characterized by rapid technological change, frequent new product and service introductions, and evolving customer needs and industry standards. Many of the businesses competing with us in these industries have significant financial and other resources to invest in new technologies, substantial intellectual property portfolios, substantial experience in new product development, regulatory expertise, manufacturing capabilities, and established distribution channels to deliver products to customers. Our products could become technologically obsolete over time, or we may invest in technology that does not lead to revenue growth or continue to sell products for which the demand from our customers is declining, in which case we may lose market share or not achieve our revenue growth targets. The success of our new product offerings will depend upon several factors, including our ability to:
accurately anticipate customer needs,
innovate and develop new reliable technologies and applications,
successfully commercialize new technologies in a timely manner,
price our products competitively, and manufacture and deliver our products in sufficient volumes and on time, and
differentiate our offerings from our competitors’ offerings.
Many of our products are used by our customers to develop, test and manufacture their products. We must anticipate industry trends and consistently develop new products to meet our customers’ expectations. In developing new products, we may be required to make significant investments before we can determine the commercial viability of the new product. If we fail to accurately foresee our customers’ needs and future activities, we may invest heavily in research and development of products that do not lead to significant revenue. We may also suffer a loss in market share and potential revenue if we are unable to commercialize our technology in a timely and efficient manner.
In addition, some of our licensed technology is subject to contractual restrictions, which may limit our ability to develop or commercialize products for some applications.
We may not be able to successfully execute acquisitions or license technologies, integrate acquired businesses or licensed technologies into our existing businesses, make acquired businesses or licensed technologies profitable, or successfully divest businesses.
We have in the past supplemented, and may in the future supplement, our internal growth by acquiring businesses and licensing technologies that complement or augment our existing product lines, such as our acquisition of Perten Instruments Group AB in the fourth quarter of fiscal year 2014. However, we may be unable to identify or complete promising acquisitions or license transactions for many reasons, such as:
competition among buyers and licensees,
the high valuations of businesses and technologies,
the need for regulatory and other approval, and
our inability to raise capital to fund these acquisitions.
Some of the businesses we acquire may be unprofitable or marginally profitable, or may increase the variability of our revenue recognition. If, for example, we are unable to successfully commercialize products and services related to significant IPR&D that we have capitalized, we may have to impair the value of such assets. Accordingly, the earnings or losses of acquired businesses may dilute our earnings. For these acquired businesses to achieve acceptable levels of profitability, we would have to improve their management, operations, products and market penetration. We may not be successful in this regard and may encounter other difficulties in integrating acquired businesses into our existing operations, such as incompatible management, information or other systems, cultural differences, loss of key personnel, unforeseen regulatory requirements, previously undisclosed liabilities or difficulties in predicting financial results. Additionally, if we are not successful in selling businesses we seek to divest, the activity of such businesses may dilute our earnings and we may not be able to achieve the

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expected benefits of such divestitures. As a result, our financial results may differ from our forecasts or the expectations of the investment community in a given quarter or over the long term.
To finance our acquisitions, we may have to raise additional funds, either through public or private financings. We may be unable to obtain such funds or may be able to do so only on terms unacceptable to us. We may also incur expenses related to completing acquisitions or licensing technologies, or in evaluating potential acquisitions or technologies, which may adversely impact our profitability.
We may not be successful in adequately protecting our intellectual property.
Patent and trade secret protection is important to us because developing new products, processes and technologies gives us a competitive advantage, although it is time-consuming and expensive. We own many United States and foreign patents and intend to apply for additional patents. Patent applications we file, however, may not result in issued patents or, if they do, the claims allowed in the patents may be narrower than what is needed to protect fully our products, processes and technologies. The expiration of our previously issued patents may cause us to lose a competitive advantage in certain of the products and services we provide. Similarly, applications to register our trademarks may not be granted in all countries in which they are filed. For our intellectual property that is protected by keeping it secret, such as trade secrets and know-how, we may not use adequate measures to protect this intellectual property.
Third parties may also challenge the validity of our issued patents, may circumvent or “design around” our patents and patent applications, or may claim that our products, processes or technologies infringe their patents. In addition, third parties may assert that our product names infringe their trademarks. We may incur significant expense in legal proceedings to protect our intellectual property against infringement by third parties or to defend against claims of infringement by third parties. Claims by third parties in pending or future lawsuits could result in awards of substantial damages against us or court orders that could effectively prevent us from manufacturing, using, importing or selling our products in the United States or other countries.
If we are unable to renew our licenses or otherwise lose our licensed rights, we may have to stop selling products or we may lose competitive advantage.
We may not be able to renew our existing licenses, or licenses we may obtain in the future, on terms acceptable to us, or at all. If we lose the rights to a patented or other proprietary technology, we may need to stop selling products incorporating that technology and possibly other products, redesign our products or lose a competitive advantage. Potential competitors could in-license technologies that we fail to license and potentially erode our market share.
Our licenses typically subject us to various economic and commercialization obligations. If we fail to comply with these obligations, we could lose important rights under a license, such as the right to exclusivity in a market. In some cases, we could lose all rights under the license. In addition, rights granted under the license could be lost for reasons out of our control. For example, the licensor could lose patent protection for a number of reasons, including invalidity of the licensed patent, or a third-party could obtain a patent that curtails our freedom to operate under one or more licenses.
If we do not compete effectively, our business will be harmed.
We encounter aggressive competition from numerous competitors in many areas of our business. We may not be able to compete effectively with all of these competitors. To remain competitive, we must develop new products and periodically enhance our existing products. We anticipate that we may also have to adjust the prices of many of our products to stay competitive. In addition, new competitors, technologies or market trends may emerge to threaten or reduce the value of entire product lines.
Our quarterly operating results could be subject to significant fluctuation, and we may not be able to adjust our operations to effectively address changes we do not anticipate, which could increase the volatility of our stock price and potentially cause losses to our shareholders.
Given the nature of the markets in which we participate, we cannot reliably predict future revenue and profitability. Changes in competitive, market and economic conditions may require us to adjust our operations, and we may not be able to make those adjustments or make them quickly enough to adapt to changing conditions. A high proportion of our costs are fixed, due in part to our research and development and manufacturing costs. As a result, small declines in sales could disproportionately affect our operating results in a quarter. Factors that may affect our quarterly operating results include:
demand for and market acceptance of our products,
competitive pressures resulting in lower selling prices,

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changes in the level of economic activity in regions in which we do business,
changes in general economic conditions or government funding,
settlements of income tax audits,
expenses incurred in connection with claims related to environmental conditions at locations where we conduct or formerly conducted operations,
differing tax laws and changes in those laws, or changes in the countries in which we are subject to taxation,
changes in our effective tax rate,
changes in industries, such as pharmaceutical and biomedical,
changes in the portions of our revenue represented by our various products and customers,
our ability to introduce new products,
our competitors’ announcement or introduction of new products, services or technological innovations,
costs of raw materials, energy or supplies,
changes in healthcare or other reimbursement rates paid by government agencies and other third parties for certain of our products and services,
our ability to realize the benefit of ongoing productivity initiatives,
changes in the volume or timing of product orders,
fluctuation in the expense related to the mark-to-market adjustment on postretirement benefit plans,
changes in our assumptions underlying future funding of pension obligations,
changes in assumptions used to determine contingent consideration in acquisitions, and
changes in foreign currency exchange rates.
A significant disruption in third-party package delivery and import/export services, or significant increases in prices for those services, could interfere with our ability to ship products, increase our costs and lower our profitability.
We ship a significant portion of our products to our customers through independent package delivery and import/export companies, including UPS and Federal Express in the United States; TNT, UPS and DHL in Europe; and UPS in Asia. We also ship our products through other carriers, including national trucking firms, overnight carrier services and the United States Postal Service. If one or more of the package delivery or import/export providers experiences a significant disruption in services or institutes a significant price increase, we may have to seek alternative providers and the delivery of our products could be prevented or delayed. Such events could cause us to incur increased shipping costs that could not be passed on to our customers, negatively impacting our profitability and our relationships with certain of our customers.
Disruptions in the supply of raw materials, certain key components and other goods from our limited or single source suppliers could have an adverse effect on the results of our business operations, and could damage our relationships with customers.
The production of our products requires a wide variety of raw materials, key components and other goods that are generally available from alternate sources of supply. However, certain critical raw materials, key components and other goods required for the production and sale of some of our principal products are available from limited or single sources of supply. We generally have multi-year contracts with no minimum purchase requirements with these suppliers, but those contracts may not fully protect us from a failure by certain suppliers to supply critical materials or from the delays inherent in being required to change suppliers and, in some cases, validate new raw materials. Such raw materials, key components and other goods can usually be obtained from alternative sources with the potential for an increase in price, decline in quality or delay in delivery. A prolonged inability to obtain certain raw materials, key components or other goods is possible and could have an adverse effect on our business operations, and could damage our relationships with customers.
We are subject to the rules of the Securities and Exchange Commission requiring disclosure as to whether certain materials known as conflict minerals (tantalum, tin, gold, tungsten and their derivatives), which may be contained in our products are mined from the Democratic Republic of the Congo and adjoining countries. As a result of these rules, we may incur additional costs in complying with the disclosure requirements and in satisfying those customers who require that the components used in our products be certified as conflict-free, and the potential lack of availability of these materials at competitive prices could increase our production costs.

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The manufacture and sale of products and services may expose us to product liability claims for which we could have substantial liability.
We face an inherent business risk of exposure to product liability claims if our products, services or product candidates are alleged or found to have caused injury, damage or loss. We may in the future be unable to obtain insurance with adequate levels of coverage for potential liability on acceptable terms or claims of this nature may be excluded from coverage under the terms of any insurance policy that we can obtain. If we are unable to obtain such insurance or the amounts of any claims successfully brought against us substantially exceed our coverage, then our business could be adversely impacted.
If we fail to maintain satisfactory compliance with the regulations of the United States Food and Drug Administration and other governmental agencies in the United States and abroad, we may be forced to recall products and cease their manufacture and distribution, and we could be subject to civil, criminal or monetary penalties.
Our operations are subject to regulation by different state and federal government agencies in the United States and other countries, as well as to the standards established by international standards bodies. If we fail to comply with those regulations or standards, we could be subject to fines, penalties, criminal prosecution or other sanctions. Some of the products produced by our Human Health segment are subject to regulation by the United States Food and Drug Administration and similar foreign and domestic agencies. These regulations govern a wide variety of product activities, from design and development to labeling, manufacturing, promotion, sales and distribution. If we fail to comply with those regulations or standards, we may have to recall products, cease their manufacture and distribution, and may be subject to fines or criminal prosecution.
We are also subject to a variety of laws, regulations and standards that govern, among other things, the importation and exportation of products, the handling, transportation and manufacture of toxic or hazardous substances, and our business practices in the United States and abroad such as anti-bribery, anti-corruption and competition laws. This requires that we devote substantial resources to maintaining our compliance with those laws, regulations and standards. A failure to do so could result in the imposition of civil, criminal or monetary penalties having a material adverse effect on our operations.
Changes in governmental regulations may reduce demand for our products or increase our expenses.
We compete in markets in which we or our customers must comply with federal, state, local and foreign regulations, such as environmental, health and safety, and food and drug regulations. We develop, configure and market our products to meet customer needs created by these regulations. Any significant change in these regulations could reduce demand for our products or increase our costs of producing these products.
The healthcare industry is highly regulated and if we fail to comply with its extensive system of laws and regulations, we could suffer fines and penalties or be required to make significant changes to our operations which could have a significant adverse effect on the results of our business operations.
The healthcare industry, including the genetic screening market, is subject to extensive and frequently changing international and United States federal, state and local laws and regulations. In addition, legislative provisions relating to healthcare fraud and abuse, patient privacy violations and misconduct involving government insurance programs provide federal enforcement personnel with substantial powers and remedies to pursue suspected violations. We believe that our business will continue to be subject to increasing regulation as the federal government continues to strengthen its position on healthcare matters, the scope and effect of which we cannot predict. If we fail to comply with applicable laws and regulations, we could suffer civil and criminal damages, fines and penalties, exclusion from participation in governmental healthcare programs, and the loss of various licenses, certificates and authorizations necessary to operate our business, as well as incur liabilities from third-party claims, all of which could have a significant adverse effect on our business.
Economic, political and other risks associated with foreign operations could adversely affect our international sales and profitability.
Because we sell our products worldwide, our businesses are subject to risks associated with doing business internationally. Our sales originating outside the United States represented the majority of our total revenue in fiscal year 2015 . We anticipate that sales from international operations will continue to represent a substantial portion of our total revenue. In addition, many of our manufacturing facilities, employees and suppliers are located outside the United States. Accordingly, our future results of operations could be harmed by a variety of factors, including:
changes in actual, or from projected, foreign currency exchange rates,
changes in a country’s or region’s political or economic conditions, particularly in developing or emerging markets,
longer payment cycles of foreign customers and timing of collections in foreign jurisdictions,

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embargoes, trade protection measures and import or export licensing requirements,
policies in foreign countries benefiting domestic manufacturers or other policies detrimental to companies headquartered in the United States,
differing tax laws and changes in those laws, or changes in the countries in which we are subject to tax,
adverse income tax audit settlements or loss of previously negotiated tax incentives,
differing business practices associated with foreign operations,
difficulty in transferring cash between international operations and the United States,
difficulty in staffing and managing widespread operations,
differing labor laws and changes in those laws,
differing protection of intellectual property and changes in that protection,
increasing global enforcement of anti-bribery and anti-corruption laws, and
differing regulatory requirements and changes in those requirements.
If we do not retain our key personnel, our ability to execute our business strategy will be limited.
Our success depends to a significant extent upon the continued service of our executive officers and key management and technical personnel, particularly our experienced engineers and scientists, and on our ability to continue to attract, retain, and motivate qualified personnel. The competition for these employees is intense. The loss of the services of key personnel could have a material adverse effect on our operating results. In addition, there could be a material adverse effect on us should the turnover rates for key personnel increase significantly or if we are unable to continue to attract qualified personnel. We do not maintain any key person life insurance policies on any of our officers or employees.
Our success also depends on our ability to execute leadership succession plans. The inability to successfully transition key management roles could have a material adverse effect on our operating results.
If we experience a significant disruption in, or breach in security of our information technology systems, or inadvertent transfer of information, or if we fail to implement new systems, software and technologies successfully, our business could be adversely affected.
We rely on several centralized information technology systems throughout our company to develop, manufacture and provide products and services, keep financial records, process orders, manage inventory, process shipments to customers and operate other critical functions. Our information technology systems may be susceptible to damage, disruptions or shutdowns due to power outages, hardware failures, computer viruses, attacks by computer hackers, telecommunication failures, user errors, catastrophes or other unforeseen events. If we were to experience a prolonged system disruption in the information technology systems that involve our interactions with customers or suppliers, it could result in the loss of sales and customers and significant incremental costs, which could adversely affect our business. In addition, security breaches of our information technology systems or inadvertent transfer of information could result in the misappropriation or unauthorized disclosure of confidential information belonging to us or to our employees, partners, customers or suppliers, which could result in our suffering significant financial or reputational damage.
We have a substantial amount of outstanding debt, which could impact our ability to obtain future financing and limit our ability to make other expenditures in the conduct of our business.
Our debt level and related debt service obligations could have negative consequences, including:
requiring us to dedicate significant cash flow from operations to the payment of principal and interest on our debt, which reduces the funds we have available for other purposes, such as acquisitions and stock repurchases;
reducing our flexibility in planning for or reacting to changes in our business and market conditions; and
exposing us to interest rate risk since a portion of our debt obligations are at variable rates.
In addition, we may incur additional indebtedness in the future to meet future financing needs. If we add new debt, the risks described above could increase.

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Restrictions in our senior unsecured revolving credit facility and other debt instruments may limit our activities.
Our senior unsecured revolving credit facility and our 5% senior unsecured notes due in 2021 (the "2021 Notes") include restrictive covenants that limit our ability to engage in activities that could otherwise benefit our company. These include restrictions on our ability and the ability of our subsidiaries to:
pay dividends on, redeem or repurchase our capital stock,
sell assets,
incur obligations that restrict our subsidiaries’ ability to make dividend or other payments to us,
guarantee or secure indebtedness,
enter into transactions with affiliates, and
consolidate, merge or transfer all, or substantially all, of our assets and the assets of our subsidiaries on a consolidated basis.
We are also required to meet specified financial ratios under the terms of certain of our existing debt instruments. Our ability to comply with these financial restrictions and covenants is dependent on our future performance, which is subject to prevailing economic conditions and other factors, including factors that are beyond our control, such as foreign exchange rates, interest rates, changes in technology and changes in the level of competition. In addition, if we are unable to maintain our investment grade credit rating, our borrowing costs would increase and we would be subject to different and potentially more restrictive financial covenants under some of our existing debt instruments.
Any future indebtedness that we incur may include similar or more restrictive covenants. Our failure to comply with any of the restrictions in our senior unsecured revolving credit facility, our 2021 Notes or any future indebtedness may result in an event of default under those debt instruments, which could permit acceleration of the debt under those debt instruments, and require us to prepay that debt before its scheduled due date under certain circumstances.
Our results of operations will be adversely affected if we fail to realize the full value of our intangible assets.
As of January 3, 2016 , our total assets included $2.8 billion of net intangible assets. Net intangible assets consist principally of goodwill associated with acquisitions and costs associated with securing patent rights, trademark rights, customer relationships, core technology and technology licenses, net of accumulated amortization. We test certain of these items—specifically all of those that are considered “non-amortizing”—at least annually for potential impairment by comparing the carrying value to the fair market value of the reporting unit to which they are assigned. All of our amortizing intangible assets are also evaluated for impairment should events occur that call into question the value of the intangible assets.
Adverse changes in our business, adverse changes in the assumptions used to determine the fair value of our reporting units, or the failure to grow our Human Health and Environmental Health segments may result in impairment of our intangible assets, which could adversely affect our results of operations.
Our share price will fluctuate.
Over the last several years, stock markets in general and our common stock in particular have experienced significant price and volume volatility. Both the market price and the daily trading volume of our common stock may continue to be subject to significant fluctuations due not only to general stock market conditions but also to a change in sentiment in the market regarding our operations and business prospects. In addition to the risk factors discussed above, the price and volume volatility of our common stock may be affected by:
operating results that vary from our financial guidance or the expectations of securities analysts and investors,
the financial performance of the major end markets that we target,
the operating and securities price performance of companies that investors consider to be comparable to us,
announcements of strategic developments, acquisitions and other material events by us or our competitors, and
changes in global financial markets and global economies and general market conditions, such as interest or foreign exchange rates, commodity and equity prices and the value of financial assets.
Dividends on our common stock could be reduced or eliminated in the future.
On October 29, 2015 , we announced that our Board had declared a quarterly dividend of $0.07 per share for the fourth quarter of fiscal year 2015 that was paid in February 2016 . On January 28, 2016 , we announced that our Board had declared a

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quarterly dividend of $0.07 per share for the first quarter of fiscal year 2016 that will be payable in May 2016 . In the future, our Board may determine to reduce or eliminate our common stock dividend in order to fund investments for growth, repurchase shares or conserve capital resources.
 
Item 1B.
Unresolved Staff Comments
 
Not applicable.
 
Item 2.
Properties
 
As of January 3, 2016 , our continuing operations occupied 2,539,386 square feet in over 126 locations. We own 318,601 square feet of this space, and lease the balance. We conduct our operations in manufacturing and assembly plants, research laboratories, administrative offices and other facilities located in 15 states and 36 foreign countries.
 
Facilities outside of the United States account for approximately 1,548,497 square feet of our owned and leased property, or approximately 60% of our total occupied space.
 
Our real property leases are both short-term and long-term. We believe that our properties are well-maintained and are adequate for our present requirements.
 
The following table indicates, as of January 3, 2016 , the approximate square footage of real property owned and leased attributable to the continuing operations of our reporting segments:
 
 
Owned
 
Leased
 
Total
 
(In square feet)
Human Health
305,620

 
1,177,378

 
1,482,998

Environmental Health
12,981

 
983,100

 
996,081

Corporate offices

 
60,307

 
60,307

Continuing operations
318,601

 
2,220,785

 
2,539,386

 
Item 3.
Legal Proceedings
 
We are subject to various claims, legal proceedings and investigations covering a wide range of matters that arise in the ordinary course of our business activities. Although we have established accruals for potential losses that we believe are probable and reasonably estimable, in the opinion of our management, based on its review of the information available at this time, the total cost of resolving these contingencies at January 3, 2016 should not have a material adverse effect on our consolidated financial statements included in this annual report on Form 10-K. However, each of these matters is subject to uncertainties, and it is possible that some of these matters may be resolved unfavorably to us.

Item 4.
Mine Safety Disclosures
 
Not applicable.
 

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EXECUTIVE OFFICERS OF THE REGISTRANT
 
Listed below are our executive officers as of March 1, 2016 . No family relationship exists between any one of these executive officers and any of the other executive officers or directors.
 
Name
 
Position
 
Age
Robert F. Friel
 
Chairman, Chief Executive Officer and President
 
60
Frank A. Wilson
 
Senior Vice President and Chief Financial Officer
 
57
Joel S. Goldberg
 
Senior Vice President, Administration, General Counsel and Secretary
 
47
James Corbett
 
Senior Vice President and President, Human Health
 
53
Jon DiVincenzo
 
Senior Vice President and President, Environmental Health
 
50
Daniel R. Tereau
 
Senior Vice President, Strategy and Business Development
 
49
Andrew Okun
 
Vice President and Chief Accounting Officer
 
46
 
Robert F. Friel, 60.  Mr. Friel currently serves as our Chairman, Chief Executive Officer and President. Prior to being appointed President and Chief Executive Officer in February 2008 and Chairman in April 2009, Mr. Friel had served as President and Chief Operating Officer since August 2007, and as Vice Chairman and President of our Life and Analytical Sciences unit since January 2006. Mr. Friel was our Executive Vice President and Chief Financial Officer, with responsibility for business development and information technology in addition to his oversight of the finance functions, from October 2004 until January 2006. Mr. Friel joined PerkinElmer in February 1999 as our Senior Vice President and Chief Financial Officer. Prior to joining PerkinElmer, he held several senior management positions with AlliedSignal, Inc., now Honeywell International. He received a Bachelor of Arts degree in economics from Lafayette College and a Master of Science degree in taxation from Fairleigh Dickinson University. Mr. Friel is currently a director of NuVasive, Inc. and Xylem Inc., and previously served as a director of CareFusion Corporation until its acquisition by Becton, Dickinson and Company in March 2015. He also previously served on the national board of trustees for the March of Dimes Foundation.
 
Frank A. Wilson, 57. Mr. Wilson joined us in May 2009 as our Senior Vice President and Chief Financial Officer. Prior to joining us, Mr. Wilson held key financial and business management roles over 12 years at the Danaher Corporation, including Corporate Vice President of Investor Relations; Group Vice President of Business Development; Group Vice President of Finance for Danaher Motion Group; President of Gems Sensors; and Group Vice President of Finance for the Industrial Controls Group. Mr. Wilson is currently a director of Sparton Corporation. Previously, Mr. Wilson worked for several years at AlliedSignal Inc., now Honeywell International, where he last served as Vice President of Finance and Chief Financial Officer for Commercial Aviations Systems. His earlier experience includes PepsiCo Inc. in financial and controllership positions of increasing responsibility, E.F. Hutton and Company, and KPMG Peat Marwick. Mr. Wilson received a Bachelor’s degree in business administration from Baylor University and is also a Certified Public Accountant.
 
Joel S. Goldberg , 47 . Mr. Goldberg joined us as our Senior Vice President, General Counsel and Secretary in July 2008. Prior to joining us, Mr. Goldberg spent seven years at Millennium Pharmaceuticals, Inc., where he most recently served as Vice President, Chief Compliance Officer and Secretary. During his seven years with Millennium, he focused in the areas of mergers and acquisitions, strategic alliances, investment and financing transactions, securities and healthcare related compliance, and employment law. Previously, he was an associate of the law firm Edwards & Angell, LLP. Mr. Goldberg graduated from the Northeastern University School of Law and also holds a Master of Business Administration from Northeastern University. He completed his undergraduate degree at the University of Wisconsin-Madison.
 
James Corbett, 53. Mr. Corbett was appointed President of our Human Health business in March 2014 and has been a Senior Vice President and officer of PerkinElmer since February 2012. Mr. Corbett was appointed President of the Diagnostics business in May 2010 and was appointed President of the Life Sciences and Technology business in May 2013. Mr. Corbett joined the Company in October of 2007 through our acquisition of ViaCord, where he served as President. Prior to joining ViaCord, he co-founded CADx Systems, a company focused on the oncology market, where he held the position of Executive Vice President and Director with responsibility for worldwide sales and marketing, technical support and business development. Following the 2004 acquisition of CADx by iCAD, Inc., he was named Chief Commercial Officer. In addition, Mr. Corbett worked for Abbott Laboratories for 14 years in a variety of sales and marketing positions including Worldwide Marketing Manager for Abbott Diagnostics Immunoassay Systems and Region Manager for Abbott Diagnostics. Mr. Corbett holds a Bachelor of Science degree in business from the University of Massachusetts. Mr. Corbett also serves on the national board of trustees for the March of Dimes Foundation.


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Jon DiVincenzo, 50. Mr. DiVincenzo was appointed Senior Vice President and President of our Environmental Health business in November 2013. Prior to joining us, Mr. DiVincenzo served as the President and Chief Executive Officer of Enzymatics, now a part of Qiagen, a provider of molecular biology reagents, from 2012 to 2013. He previously worked at Millipore for 18 years, where he last served as President of the Bioscience division and also led the company's Lab Water business. Mr. DiVincenzo holds a Bachelor of Science in mechanical engineering from Northeastern University where he currently serves on the College of Engineering's Advisory Council. He is also a member of the Corporate Executive Board for Innovation and member of the Board of Directors of the Analytical Life Sciences and Diagnostics Association.
 
Daniel R. Tereau, 49. Mr. Tereau was appointed Senior Vice President, Strategy and Business Development in January 2016 and has been a Vice President, Strategy and Business Development since he joined PerkinElmer in April 2014. He is responsible for leading PerkinElmer’s overall strategic planning, business development, and corporate marketing activities. Prior to joining PerkinElmer, Mr. Tereau served on Novartis’ leadership team as Senior Vice President and Global Head of Strategy, Business Development and Licensing, where he was responsible for global strategy and business development for the Consumer Health division. Mr. Tereau held similar roles at Thermo Fisher Scientific and GE Healthcare. Mr. Tereau holds a Bachelor of Science degree in finance from Ferris State University and a Juris Doctorate from Wayne State University, and earned his Master of Business Administration from Yale University.  He also serves on the Board of Directors for SeraCare Life Sciences, Inc.

Andrew Okun, 46. Mr. Okun serves as our Vice President and Chief Accounting Officer, a position in which he has served since April 2011. Mr. Okun joined us in 2001 and has served in financial and controllership positions of increasing responsibility, including Director of Finance for the Optoelectronics business from 2001 through 2005, Vice President of Finance from 2005 through 2009 and Vice President and Corporate Controller from 2009 through 2011. Prior to joining us, Mr. Okun most recently worked for Honeywell International as a Site Controller as well as for Coopers & Lybrand. Mr. Okun is a Certified Public Accountant and earned his Master of Business Administration from the University of Virginia. He completed his undergraduate degree at the University of Santa Barbara .


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PART II

Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market Price of Common Stock
Our common stock is listed and traded on the New York Stock Exchange. The following table sets forth the high and low per share closing sale prices for our common stock on that exchange for each quarter in fiscal years 2015 and 2014 .
 
 
2015 Fiscal Quarters
 
First
 
Second
 
Third
 
Fourth
High

$51.09

 

$54.29

 

$53.00

 

$54.36

Low
42.66

 
50.30

 
44.45

 
46.74

 
 
 
 
 
 
 
 
 
2014 Fiscal Quarters
 
First
 
Second
 
Third
 
Fourth
High

$46.21

 

$47.52

 

$48.25

 

$45.76

Low
40.94

 
41.97

 
43.51

 
39.83

 
As of February 25, 2016 , we had approximately 4,263 holders of record of our common stock.
 
Stock Repurchase Program
The following table provides information with respect to the shares of common stock repurchased by us for the periods indicated.
 
 
Issuer Repurchases of Equity Securities
Period
Total Number of
Shares
Purchased (1)(2)
 
Average Price
Paid Per
Share
 
Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or
Programs
 
Maximum Number of
Shares that May Yet
Be Purchased
Under the Plans or
Programs
October 5, 2015—November 1, 2015
496

 
$
47.16

 

 
5,900,000

November 2, 2015—November 29, 2015
1,523

 
50.96

 

 
5,900,000

November 30, 2015—January 3, 2016
3,552

 
50.80

 

 
5,900,000

Activity for quarter ended January 3, 2016
5,571

 
$
50.52

 

 
5,900,000

____________________________
(1)  
On October 23, 2014, our Board authorized us to repurchase up to  8.0 million  shares of common stock under a stock repurchase program (the "Repurchase Program"). The Repurchase Program will expire on October 23, 2016 unless terminated earlier by our Board, and may be suspended or discontinued at any time. During the fourth quarter of fiscal year 2015 , we did no t repurchase shares of common stock in the open market. As of January 3, 2016 , 5.9 million shares remained available for repurchase under the Repurchase Program. From January 4, 2016 through February 25, 2016 , we repurchased 2.4 million shares of common stock in the open market at an aggregate cost of $109.7 million , including commissions, under the Repurchase Program.
(2)  
Our Board has authorized us to repurchase shares of common stock to satisfy minimum statutory tax withholding obligations in connection with the vesting of restricted stock awards and restricted stock unit awards granted pursuant to our equity incentive plans and to satisfy obligations related to the exercise of stock options made pursuant to our equity incentive plans. During the fourth quarter of fiscal year 2015 , we repurchased 5,571 shares of common stock for this purpose. The repurchased shares have been reflected as additional authorized but unissued shares, with the payments reflected in common stock and capital in excess of par value.
 

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Dividends
During fiscal years 2015 and 2014 , we declared regular quarterly cash dividends on our common stock. The table below sets forth the cash dividends per share that we declared on our common stock during each of those fiscal years, by quarter.
 
 
2015 Fiscal Quarters
 
2015 Total
First
 
Second
 
Third
 
Fourth
 
 
Cash dividends declared per common share
$
0.07

 
$
0.07

 
$
0.07

 
$
0.07

 
$
0.28

 
 
 
 
 
 
 
 
 
 
 
2014 Fiscal Quarters
 
2014 Total
 
First
 
Second
 
Third
 
Fourth
 
 
Cash dividends declared per common share
$
0.07

 
$
0.07

 
$
0.07

 
$
0.07

 
$
0.28

 
While it is our current intention to pay regular quarterly cash dividends, any decision to pay future cash dividends will be made by our Board and will depend on our earnings, financial condition and other factors. Our Board may reduce or eliminate our common stock dividend in order to fund investments for growth, repurchase shares or conserve capital resources. For further information related to our stockholders’ equity, see Note 19 to our consolidated financial statements included in this annual report on Form 10-K.


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Stock Performance Graph
Set forth below is a line graph comparing the cumulative total shareholder return on our common stock against the cumulative total return of the S&P Composite-500 Index and a Peer Group Index for the five fiscal years from January 2, 2011 to January 3, 2016 . Our Peer Group Index consists of Affymetrix, Inc., Agilent Technologies Inc., Thermo Fisher Scientific Inc., and Waters Corporation.

Comparison of Five-Year Cumulative Total Return
PerkinElmer, Inc. Common Stock, S&P Composite-500 and
Peer Group Index

TOTAL RETURN TO SHAREHOLDERS
(Includes reinvestment of dividends)

 
02-Jan-11
 
01-Jan-12
 
30-Dec-12
 
29-Dec-13
 
28-Dec-14
 
3-Jan-16
PerkinElmer, Inc.
$
100.00

 
$
78.38

 
$
122.92

 
$
164.45

 
$
177.14

 
$
216.58

S&P 500 Index
$
100.00

 
$
102.11

 
$
118.45

 
$
156.82

 
$
178.29

 
$
180.75

Peer Group
$
100.00

 
$
84.52

 
$
107.65

 
$
169.08

 
$
189.24

 
$
209.25




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Item 6.
Selected Financial Data
 
The following table sets forth selected historical financial information as of and for each of the fiscal years in the five-year period ended January 3, 2016 . We derived the selected historical financial information for the balance sheets for the fiscal years ended January 3, 2016 and December 28, 2014 and the statement of operations for each of the fiscal years in the three-year period ended January 3, 2016 from our audited consolidated financial statements which are included elsewhere in this annual report on Form 10-K. We derived the selected historical financial information for the statements of operations for the fiscal years ended December 30, 2012 and January 1, 2012 from our audited consolidated financial statements which are not included in this annual report on Form 10-K. We derived the selected historical financial information for the balance sheets as of December 29, 2013 , December 30, 2012 and January 1, 2012 from our audited consolidated financial statements which are not included in this annual report on Form 10-K. We adjusted the information in the consolidated financial statements, where appropriate, to account for the adoption of new guidance related to debt issuance costs and the provision for bad debts applicable for certain of our health care businesses, and for discontinued operations.
 
Our historical financial information may not be indicative of our future results of operations or financial position.
 
The following selected historical financial information should be read together with our “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements, including the related notes, included elsewhere in this annual report on Form 10-K.
 
 
Fiscal Years Ended
 
January 3,
2016
 
December 28,
2014
 
December 29,
2013
 
December 30,
2012
 
January 1,
2012
 
(In thousands, except per share data)
Statement of Operations Data:
 
 
 
 
 
 
 
 
 
Revenue
$
2,262,359

 
$
2,237,219

 
$
2,157,586

 
$
2,105,188

 
$
1,906,190

Operating income from continuing
operations (1)(2)(3)
286,134

 
210,742

 
227,794

 
103,120

 
94,777

Interest and other expense, net (4)
42,119

 
41,139

 
64,110

 
47,956

 
26,774

Income from continuing operations before income taxes
244,015

 
169,603

 
163,684

 
55,164

 
68,003

Income from continuing operations, net of income taxes (5)
212,688

 
161,166

 
174,267

 
71,289

 
3,383

(Loss on) income from discontinued operations and dispositions, net of income taxes (6)
(263
)
 
(3,388
)
 
(7,055
)
 
(1,349
)
 
4,272

Net income
$
212,425

 
$
157,778

 
$
167,212

 
$
69,940

 
$
7,655

Basic earnings per share:
 
 
 
 
 
 
 
 
 
Continuing operations
$
1.89

 
$
1.43

 
$
1.55

 
$
0.63

 
$
0.03

Discontinued operations
0.00

 
(0.03
)
 
(0.06
)
 
(0.01
)
 
0.04

Net income
$
1.89

 
$
1.40

 
$
1.49

 
$
0.61

 
$
0.07

Diluted earnings per share:
 
 
 
 
 
 
 
 
 
Continuing operations
$
1.88

 
$
1.42

 
$
1.54

 
$
0.62

 
$
0.03

Discontinued operations
0.00

 
(0.03
)
 
(0.06
)
 
(0.01
)
 
0.04

Net income
$
1.87

 
$
1.39

 
$
1.47

 
$
0.61

 
$
0.07

Weighted-average common shares outstanding:
 
 
 
 
 
 
 
 
 
Basic:
112,507

 
112,593

 
112,254

 
113,728

 
112,976

Diluted:
113,315

 
113,739

 
113,503

 
114,860

 
113,864

Cash dividends declared per common share
$
0.28

 
$
0.28

 
$
0.28

 
$
0.28

 
$
0.28



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As of
 
January 3,
2016
 
December 28,
2014
 
December 29,
2013
 
December 30,
2012
 
January 1,
2012
 
(In thousands)
Balance Sheet Data:
 
 
 
 
 
 
 
 
 
Total assets (6)(7)
$
4,166,295

 
$
4,127,576

 
$
3,940,882

 
$
3,894,451

 
$
3,847,130

Short-term debt
1,123

 
1,075

 
2,624

 
1,772

 

Long-term debt (4)(7)(8)
1,011,762

 
1,045,393

 
926,274

 
931,513

 
936,397

Stockholders’ equity (1)(9)
2,110,441

 
2,042,102

 
1,994,487

 
1,939,812

 
1,842,216

Common shares outstanding (9)
112,034

 
112,481

 
112,626

 
115,036

 
113,157

____________________________
(1)  
Activity related to the mark-to-market adjustment on postretirement benefit plans was a pre-tax loss of $12.4 million in fiscal year 2015 , a pre-tax loss of $75.9 million in fiscal year 2014 , pre-tax income of $17.6 million in fiscal year 2013 , a pre-tax loss of $31.8 million in fiscal year 2012 and a pre-tax loss of $67.9 million in fiscal year 2011 .
(2)  
We recorded pre-tax restructuring and contract termination charges, net, of $13.6 million in fiscal year 2015 , $13.4 million in fiscal year 2014 , $33.9 million in fiscal year 2013 , $25.1 million in fiscal year 2012 and $13.4 million in fiscal year 2011 .
(3)  
In fiscal year 2013, we recorded pre-tax impairment charges of $0.2 million as the carrying amounts of certain long-lived assets were not recoverable and exceeded their fair value. In fiscal year 2012, we recorded pre-tax impairment charges of $74.2 million as a result of a review of certain of our trade names within our portfolio as part of a realignment of our marketing strategy. In fiscal year 2011, we recorded a pre-tax impairment charge of $3.0 million for the full impairment of license agreements that we no longer intend to use.
(4)  
In fiscal years 2015 , 2014 , 2013 , 2012 and 2011 , interest expense was $38.0 million , $36.3 million , $49.9 million , $45.8 million and $24.8 million , respectively. In fiscal year 2013, we redeemed all of our 6% senior unsecured notes due in 2015 (the “2015 Notes”) that included a prepayment premium of $11.1 million , which is included in other expense, net, the write-off of $2.8 million for the remaining unamortized derivative losses for previously settled cash flow hedges, which is included in interest expense, and the write-off of $0.2 million for the remaining deferred debt issuance costs, which is included in interest expense. During fiscal year 2011, acquisition related financing costs added an additional expense of $3.1 million , which is included in interest expense, and interest expense was lower due to less debt outstanding throughout the year.
(5)  
The fiscal year 2015 effective tax rate on continuing operations of 12.8% was primarily due to higher income in higher tax rate jurisdictions, partially offset by a tax benefit of $7.2 million related to discrete items. The fiscal year 2014 effective tax rate on continuing operations of 5.0% was primarily due to income in lower tax rate jurisdictions, partially offset by losses in higher tax rate jurisdictions and a tax benefit of $7.0 million related to discrete items. The benefit from income taxes in fiscal year 2013 was primarily due to a tax benefit of $24.0 million related to discrete items and losses in higher tax rate jurisdictions, offset by a provision from income taxes related to profits in lower tax rate jurisdictions. The benefit from income taxes in fiscal year 2012 was primarily due to a tax benefit of $7.0 million related to discrete items and losses in higher tax rate jurisdictions, which included pre-tax impairment charges of $74.2 million , partially offset by a provision from income taxes related to profits in lower tax rate jurisdictions. The fiscal year 2011 effective tax rate on continuing operations of 95.0% was primarily due to the fiscal year 2011 provision of $79.7 million related to our planned $350.0 million repatriation of previously unremitted earnings.
(6)  
In May 2014, we approved the shutdown of our microarray-based diagnostic testing laboratory in the United States. The shutdown resulted in a $0.1 million net pre-tax loss primarily related to the disposal of fixed assets, which was partially offset by the sale of a building in fiscal year 2014.
(7)  
In fiscal year 2015, we adopted Accounting Standards Update No. 2015-03,  Interest - Imputation of Interest - Simplifying the Presentation of Debt Issuance Costs , which caused the reclassification of debt issuance costs of $6.5 million in fiscal year 2014, $5.8 million in 2013, $7.3 million in fiscal year 2012 and $8.5 million in fiscal year 2011 from other long-term assets to long-term debt.
(8)  
In October 2011, we issued and sold ten-year senior notes at a rate of 5% with a face value of $500.0 million and received $496.9 million of net proceeds from the issuance. The debt, which matures in November 2021, is unsecured.
(9)  
In fiscal year 2015 , we repurchased in the open market 1.5 million shares of our common stock at an aggregate cost of $72.0 million , including commissions under the Repurchase Program. In fiscal year 2014 , we repurchased in the open market 1.4 million shares of our common stock at an aggregate cost of $61.3 million , including commissions under both the Repurchase Program and a stock repurchase program originally announced in October 2012 that expired in October 2014 (the "Former Repurchase Program"). In fiscal year 2013 , we repurchased in the open market 3.6 million shares of our common stock at an aggregate cost of $123.0 million , including commissions, under the Former Repurchase Program. In fiscal year 2012 , we did no t repurchase any shares of our common. In fiscal year 2011 , we repurchased in the open market 4.0 million shares of our common stock at an aggregate cost of $107.8 million ,

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including commissions under our stock repurchase program originally announced in October 2008 that expired in October 2012. The repurchased shares have been reflected as additional authorized but unissued shares, with the payments reflected in common stock and capital in excess of par value.


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Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
 
This annual report on Form 10-K, including the following management’s discussion and analysis, contains forward-looking information that you should read in conjunction with the consolidated financial statements and notes to consolidated financial statements that we have included elsewhere in this annual report on Form 10-K. For this purpose, any statements contained in this report that are not statements of historical fact may be deemed to be forward-looking statements. Words such as “believes,” “plans,” “anticipates,” “expects,” “will” and similar expressions are intended to identify forward-looking statements. Our actual results may differ materially from the plans, intentions or expectations we disclose in the forward-looking statements we make. We have included important factors above under the heading “Risk Factors” in Item 1A above that we believe could cause actual results to differ materially from the forward-looking statements we make. We are not obligated to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.
 
Accounting Period
Our fiscal year ends on the Sunday nearest December 31. We report fiscal years under a 52/53 week format and as a result, certain fiscal years will contain 53 weeks. The fiscal year ended January 3, 2016 ("fiscal year 2015") included 53 weeks. The additional week in fiscal year 2015 has been reflected in our third quarter. Each of the fiscal years ended December 28, 2014 ("fiscal year 2014") and  December 29, 2013 ("fiscal year 2013") included 52 weeks. The fiscal year ending January 1, 2017 will include 52 weeks.
 
Overview of Fiscal Year 2015
We realigned our organization at the beginning of fiscal year 2015 to enable us to both deliver complete solutions targeted towards certain end markets and develop value-added applications and solutions to foster further expansion of those markets. OneSource, our multivendor laboratory service business that serves the life sciences end market, was moved from our Environmental Health segment into our Human Health segment. The results reported for fiscal year 2015 reflect this new alignment of our operating segments. Financial information in this report relating to fiscal years 2014 and 2013 has been retrospectively adjusted to reflect this change to our operating segments.
As a result of the realignment, we reallocated goodwill from our Environmental Health segment to our Human Health segment based on the relative fair value, determined using the income approach, of the OneSource business within the historical Environmental Health segment. The realignment resulted in $41.2 million of goodwill being reallocated from our Environmental Health segment to our Human Health segment as of December 28, 2014.
During fiscal year 2015 , we continued to see good performance from acquisitions, investments in our ongoing technology and sales and marketing initiatives. Our overall revenue in fiscal year 2015 increase d $25.1 million , or 1% , as compared to fiscal year 2014 , reflecting an increase of $32.7 million , or 4% , in our Environmental Health segment revenue, which was partially offset by a decrease of $7.6 million , or 1% , in our Human Health segment revenue. The increase in our Environmental Health segment revenue during fiscal year 2015 was primarily due to revenue from our acquisition of Perten Instruments Group AB ("Perten") in December 2014, as well as increased demand in our laboratory services business, which was partially offset by unfavorable impacts from foreign currency. During fiscal year 2015 , our Human Health segment revenue decreased due to unfavorable impacts from foreign currency, however we experienced increased demand for our OneSource laboratory service and informatics businesses, within our research market, as well as increased demand in our newborn and infectious disease screening business within our diagnostics market. In addition, new product introductions within our research market, such as the Opera Phenix, increased revenue in our Human Health segment.
In our Human Health segment, excluding the unfavorable impact of foreign currency exchange, we experienced growth during fiscal year 2015 in several of our products within both our research and diagnostics end markets, as compared to fiscal year 2014 . In our research market, we experienced increased demand for our OneSource laboratory service and informatics businesses, as well as an increase in revenue from new product introductions, such as the Opera Phenix. Our OneSource laboratory service business offers services designed to enable our customers to increase efficiencies and production time while reducing maintenance costs, all of which continue to be critical for them. In our diagnostics market, we continued to expand our newborn and infectious disease screening solutions in emerging markets such as China. Birth rates in the United States continue to stabilize and demand for greater access to newborn screening in rural areas outside the United States is also increasing, as evidenced by prenatal trends we saw during fiscal year 2015 . Our medical imaging business experienced slight growth due to increased demand for our CMOS and cassette panels, which was partially offset by a decrease in demand in our radiography and radiation oncology end markets. The growth in our Human Health segment was more than offset by unfavorable impacts from foreign currency as the U.S. dollar strengthened, particularly versus the Euro. As the rising cost of healthcare continues to be one of the critical issues facing our customers, we anticipate that the benefits of providing earlier

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Table of Contents


detection of disease, which can result in a reduction of long-term health care costs as well as create better outcomes for patients, are increasingly valued and we expect to see continued growth in these markets.
In our Environmental Health segment, we had an increase in revenue in fiscal year 2015 , as compared to fiscal year 2014 , despite unfavorable impacts from foreign currency. The increase in revenue was primarily due to revenue from our acquisition of Perten in December 2014, as well as growth in our materials characterization product family within our environmental and industrial markets, which was partially offset by unfavorable impacts from foreign currency. In addition, we had an increased demand in our laboratory services business, despite unfavorable impacts from foreign currency. We anticipate that the continued development of contaminant regulations and corresponding testing protocols will result in increased demand for efficient, analytically sensitive and information rich testing solutions.
Our consolidated gross margins increase d 38 basis points in fiscal year 2015 , as compared to fiscal year 2014 , due to increased sales volume, benefits from initiatives to improve our supply chain, as well as a lower mark-to-market loss for our postretirement benefit plans in fiscal year 2015 as compared to fiscal year 2014 . These items were partially offset by unfavorable changes in product mix, with an increase in sales of lower gross margin product offerings, and negative impacts from foreign currency exchange rates. Our consolidated operating margin increase d 323 basis points in fiscal year 2015 , as compared to fiscal year 2014 , primarily due to a pre-tax loss of $12.4 million in fiscal year 2015 as compared to a pre-tax loss of $75.9 million in fiscal year 2014 for the mark-to-market adjustments for our postretirement plans, higher gross margins, and lower costs as a result of cost containment and productivity initiatives, which were partially offset by increased costs related to investments in new product development.
We believe we continue to be well positioned to take advantage of the spending trends in our end markets and to promote efficiencies in markets where current conditions may increase demand for certain services. Overall, we believe that our strategic focus on Human Health and Environmental Health coupled with our deep portfolio of technologies and applications, leading market positions, global scale and financial strength will provide us with a solid foundation for growth.
 
Consolidated Results of Continuing Operations
 
Revenue
2015 Compared to 2014 .  Revenue for fiscal year 2015 was $2,262.4 million , as compared to $2,237.2 million for fiscal year 2014 , an increase of $25.1 million , or 1% , which includes an approximate 3% increase in revenue attributable to acquisitions, an approximate 6% decrease in revenue attributable to changes in foreign exchange rates and revenue attributable to an additional week during fiscal year 2015. The analysis in the remainder of this paragraph compares segment revenue for fiscal year 2015 as compared to fiscal year 2014 and includes the effect of foreign exchange rate fluctuations and acquisitions. The total increase in revenue reflects an increase in our Environmental Health segment of $32.7 million , or 4% , due to an increase in environmental and industrial markets revenue of $44.9 million , which was partially offset by a decrease in laboratory services market revenue of $12.2 million . Our Human Health segment revenue decrease d $7.6 million , or 1% , due to a decrease in research market revenue of $4.0 million and a decrease in diagnostics market revenue of $3.6 million . As a result of adjustments to deferred revenue related to certain acquisitions required by business combination rules, we did not recognize $0.8 million of revenue primarily related to our Human Health segment for fiscal year 2015 and $2.9 million for fiscal year 2014 that otherwise would have been recorded by the acquired businesses during each of the respective periods. The effect of foreign currency changes from prior year period on revenue is approximately $142.0 million in fiscal year 2015.

2014 Compared to 2013 .  Revenue for fiscal year 2014 was $2,237.2 million , as compared to $2,157.6 million for fiscal year 2013 , an increase of $79.6 million , or 4% , which includes an approximate 1% increase in revenue attributable to acquisitions and an approximate 1% decrease in revenue attributable to changes in foreign exchange rates. The analysis in the remainder of this paragraph compares segment revenue for fiscal year 2014 as compared to fiscal year 2013 and includes the effect of foreign exchange rate fluctuations and acquisitions. The total increase in revenue reflects a $58.3 million , or 4% , increase in our Human Health segment revenue, due to an increase in diagnostics market revenue of $39.8 million and an increase in research market revenue of $18.5 million . Our Environmental Health segment revenue increase d $21.3 million , or 3% , due to an increase in laboratory services market revenue of $17.8 million and an increase in environmental and industrial markets revenue of $3.5 million . As a result of adjustments to deferred revenue related to certain acquisitions required by business combination rules, we did not recognize $2.9 million of revenue primarily related to our informatics business in our Human Health segment for fiscal year 2014 and $7.3 million for fiscal year 2013 that otherwise would have been recorded by the acquired businesses during each of the respective periods.

Cost of Revenue
2015 Compared to 2014 .  Cost of revenue for fiscal year 2015 was $1,237.9 million , as compared to $1,232.6 million for fiscal year 2014 , an increase of approximately $5.2 million , or 0.4% . As a percentage of revenue, cost of revenue decrease d to 54.7% in fiscal year 2015 from 55.1% in fiscal year 2014 , resulting in an increase in gross margin of approximately 38 basis

29



points to 45.3% in fiscal year 2015 from 44.9% in fiscal year 2014 . Amortization of intangible assets decrease d and was $43.5 million for fiscal year 2015 , as compared to $49.7 million for fiscal year 2014 . The mark-to-market adjustment for postretirement benefit plans was a loss of $1.2 million for fiscal year 2015 , as compared to a loss of $8.4 million for fiscal year 2014 . Stock-based compensation expense was $1.3 million for fiscal year 2015 , as compared to $1.5 million for fiscal year 2014 . The amortization of purchase accounting adjustments to record the inventory from certain acquisitions added an incremental expense of $7.3 million for fiscal year 2015 , as compared to $2.4 million for fiscal year 2014 . Acquisition related costs for integration, contingent consideration and other costs added an incremental expense of $0.1 million for each of fiscal years 2015 and 2014 . In addition to the factors noted above, the increase in gross margin was primarily the result of benefits from our initiatives to improve our supply chain, which was partially offset by unfavorable changes in product mix, with an increase in sales of lower gross margin product offerings, and negative impacts from foreign currency exchange rates. The effect of foreign currency changes from prior year period on cost of revenue is approximately $66.0 million in fiscal year 2015.

2014 Compared to 2013 .  Cost of revenue for fiscal year 2014 was $1,232.6 million , as compared to $1,181.4 million for fiscal year 2013 , an increase of approximately $51.2 million , or 4% . As a percentage of revenue, cost of revenue increase d to 55.1% in fiscal year 2014 from 54.8% in fiscal year 2013 , resulting in a decrease in gross margin of approximately 34 basis points to 44.9% in fiscal year 2014 from 45.2% in fiscal year 2013 . Amortization of intangible assets decrease d and was $49.7 million for fiscal year 2014 , as compared to $52.0 million for fiscal year 2013 . The mark-to-market adjustment for postretirement benefit plans was a loss of $8.4 million for fiscal year 2014 , as compared to a loss of $0.8 million for fiscal year 2013 . Stock-based compensation expense was $1.5 million for fiscal year 2014 , as compared to $1.3 million for fiscal year 2013 . The amortization of purchase accounting adjustments to record the inventory from certain acquisitions was $2.4 million for fiscal year 2014 , as compared to $0.2 million for fiscal year 2013 . Acquisition related costs for integration, contingent consideration and other costs added an incremental expense of $0.1 million for fiscal year 2014 , as compared to $0.2 million for fiscal year 2013 . In addition to the factors noted above, the decrease in gross margin was primarily the result of unfavorable changes in product mix, with an increase in sales of lower gross margin product offerings, pricing pressure, and negative impacts from foreign exchange rates. These items were partially offset by increased sales volume and lower costs as a result of cost containment and productivity initiatives.

Selling, General and Administrative Expenses
2015 Compared to 2014 .  Selling, general and administrative expenses for fiscal year 2015 were $598.8 million , as compared to $659.3 million for fiscal year 2014 , a decrease of approximately $60.5 million , or 9% . As a percentage of revenue, selling, general and administrative expenses decrease d and were 26.5% in fiscal year 2015 , compared to 29.5% in fiscal year 2014 . Amortization of intangible assets increase d and was $34.6 million for fiscal year 2015 , as compared to $33.1 million for fiscal year 2014 . The mark-to-market adjustment for postretirement benefit plans was a loss of $11.1 million for fiscal year 2015 , as compared to a loss of $67.1 million for fiscal year 2014 . Stock-based compensation expense increase d and was $15.8 million for fiscal year 2015 , as compared to $12.5 million for fiscal year 2014 . During fiscal year 2015 we recorded $0.8 million in legal costs for a particular case. During fiscal year 2014 , we recorded a benefit of $2.3 million for cost reimbursements related to a particular site, of which $1.2 million was for future monitoring and mitigation activities. Acquisition related costs for integration, contingent consideration and other costs added an incremental expense of $0.8 million for fiscal year 2015 and $0.4 million for fiscal year 2014 . In addition to the above items, the decrease in selling, general and administrative expenses was primarily the result of lower costs as a result of cost containment and productivity initiatives, which was partially offset by the impact from foreign currency exchange rates, and the impact of an additional week during fiscal year 2015. The effect of foreign currency changes from prior year period on selling, general and administrative expense is approximately $31.6 million in fiscal year 2015.

2014 Compared to 2013 .  Selling, general and administrative expenses for fiscal year 2014 were $659.3 million , as compared to $581.9 million for fiscal year 2013 , an increase of approximately $77.4 million , or 13% . As a percentage of revenue, selling, general and administrative expenses increase d and were 29.5% in fiscal year 2014 , compared to 27.0% in fiscal year 2013 . Amortization of intangible assets decrease d and was $33.1 million for fiscal year 2014 , as compared to $36.9 million for fiscal year 2013 . The mark-to-market adjustment for postretirement benefit plans was a loss of $67.1 million for fiscal year 2014 , as compared to income of $18.1 million for fiscal year 2013 . Stock-based compensation expense increase d and was $12.5 million for fiscal year 2014 , as compared to $11.9 million for fiscal year 2013 . During fiscal year 2014 , we recorded a benefit of $2.3 million for cost reimbursements related to a particular site, of which $1.2 million was for future monitoring and mitigation activities, as compared to expense of $4.6 million for environmental costs for fiscal year 2013 . Acquisition related costs for integration, contingent consideration and other costs added an incremental expense of $0.4 million for fiscal year 2014 and $1.1 million for fiscal year 2013 . In addition to the above items, the increase in selling, general and administrative expenses was primarily the result of costs related to growth investments, particularly in emerging territories, partially offset by lower costs as a result of cost containment and productivity initiatives.
 

30



Research and Development Expenses
2015 Compared to 2014 .  Research and development expenses for fiscal year 2015 were $125.9 million , as compared to $121.1 million for fiscal year 2014 , an increase of $4.8 million , or 4% . As a percentage of revenue, research and development expenses increase d to 5.6% in fiscal year 2015 , as compared to 5.4% in fiscal year 2014 . Amortization of intangible assets decrease d and was $0.5 million for fiscal year 2015 , as compared to $0.6 million for fiscal year 2014 . The mark-to-market adjustment for postretirement benefit plans was a loss of $0.1 million for fiscal year 2015 , as compared to a loss of $0.4 million for fiscal year 2014 . Stock-based compensation expense increase d and was $0.6 million for fiscal year 2015 , as compared to $0.5 million for fiscal year 2014 . In addition to the above items, the increase in research and development expenses was primarily due to investments in new product development, the impact from foreign currency exchange rates and the impact of an additional week in fiscal year 2015. We directed research and development efforts similarly during fiscal years 2015 and 2014 , primarily toward the diagnostics and research markets within our Human Health segment, and the environmental, industrial and laboratory services markets within our Environmental Health segment, in order to help accelerate our growth initiatives. The effect of foreign currency changes from prior year period on research and development expenses is approximately $8.6 million in fiscal year 2015. We have a broad product base, and we do not expect any single research and development project to have significant costs.

2014 Compared to 2013 .  Research and development expenses for fiscal year 2014 were $121.1 million , as compared to $132.4 million for fiscal year 2013 , a decrease of $11.3 million , or 9% . As a percentage of revenue, research and development expenses decrease d to 5.4% in fiscal year 2014 , as compared to 6.1% in fiscal year 2013 . Amortization of intangible assets increase d and was $0.6 million for fiscal year 2014 , as compared to $0.3 million for fiscal year 2013 . The mark-to-market adjustment for postretirement benefit plans was a loss of $0.4 million for fiscal year 2014 , as compared to income of $0.3 million for fiscal year 2013 . Stock-based compensation expense decrease d and was $0.5 million for fiscal year 2014 , as compared to $0.9 million for fiscal year 2013 . Acquisition related costs added an incremental expense of $0.2 million for fiscal year 2013 . In addition to the above items, the decrease in research and development expenses was primarily the result of the consolidation of research and development activities into our newly opened Center for Innovation. We directed research and development efforts similarly during fiscal years 2014 and 2013 , primarily toward the diagnostics and research markets within our Human Health segment, and the environmental, industrial and laboratory services markets within our Environmental Health segment, in order to help accelerate our growth initiatives.

Restructuring and Contract Termination Charges, Net
We have undertaken a series of restructuring actions related to the impact of acquisitions and divestitures, the alignment of our operations with our growth strategy, the integration of our business units and productivity initiatives. Restructuring and contract termination charges for fiscal year 2015 were $13.6 million , as compared to $13.4 million for fiscal year 2014 and $33.9 million for fiscal year 2013 .

We implemented restructuring plans in the fourth quarter of fiscal year 2015, the second and first quarters of fiscal year 2014, and the first quarter of fiscal year 2013 consisting of workforce reductions and the closure of excess facility space principally intended to focus resources on higher growth end markets (the "Q4 2015 Plan", "Q2 2014 Plan", "Q1 2014 Plan" and "Q1 2013 Plan", respectively). We implemented restructuring plans in the second quarter of fiscal year 2015 and the third quarter of fiscal year 2014 consisting of workforce reductions principally intended to realign resources to emphasize growth initiatives (the "Q2 2015 Plan" and "Q3 2014 Plan", respectively). We implemented restructuring plans in the fourth and third quarters of fiscal year 2013 consisting of workforce reductions and the closure of excess facility space principally intended to shift certain of our research and development resources into our newly opened Center for Innovation (the "Q4 2013 Plan" and "Q3 2013 Plan", respectively). We implemented a restructuring plan in the second quarter of fiscal year 2013 consisting of workforce reductions and the closure of excess facility space principally intended to shift certain of our operations into a newly established shared service center, as well as realign operations, research and development resources, and production resources as a result of previous acquisitions (the "Q2 2013 Plan"). All other previous restructuring plans were workforce reductions or the closure of excess facility space principally intended to integrate our businesses in order to realign operations, reduce costs, achieve operational efficiencies and shift resources into geographic regions and end markets that are more consistent with our growth strategy (the "Previous Plans"). We expect no significant impact on future operating results or cash flows from the restructuring activities executed in fiscal year 2015 .


31



The following table summarizes the number of employees reduced, the initial restructuring or contract termination charges by operating segment, and the dates by which payments were substantially completed, or the expected dates by which payments will be substantially completed, for restructuring actions implemented during fiscal years 2015, 2014 and 2013 :

 
Workforce Reductions
 
Closure of Excess Facility
 
Total
 
(Expected) Date Payments Substantially Completed by
 
Headcount Reduction
 
Human Health
 
Environmental Health
 
Human Health
 
Environmental Health
 
 
Severance
 
Excess Facility
 
(In thousands, except headcount data)
 
 
 
 
Q4 2015 Plan
174

 
$
2,230

 
$
9,065

 
$
285

 
$

 
$
11,580

 
Q1 FY2017
 
Q4 FY2017
Q2 2015 Plan
97

 
1,850

 
4,160

 

 

 
6,010

 
Q2 FY2016
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Q3 2014 Plan
152

 
7,126

 
5,925

 

 

 
13,051

 
Q4 FY2015
 
Q2 2014 Plan
22

 
545

 
190

 

 

 
735

 
Q2 FY2015
 
Q1 2014 Plan
17

 
370

 
197

 

 

 
567

 
Q4 FY2014
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Q4 2013 Plan
73

 
955

 
2,953

 
7,271

 

 
11,179

 
Q4 FY2014
 
Q1 FY2019
Q3 2013 Plan
29

 
394

 

 
138

 

 
532

 
Q1 FY2014
 
Q4 FY2013
Q2 2013 Plan (1)
264

 
9,523

 
8,609

 
522

 
50

 
18,704

 
Q4 FY2014
 
Q3 FY2014
Q1 2013 Plan
62

 
2,340

 
245

 

 

 
2,585

 
Q3 FY2013
 
____________________________
(1)  
Subsequent to the initial charge, during fiscal year 2013, we recorded an additional $0.6 million pre-tax restructuring charge in our Human Health segment for the Q2 2013 Plan for services that were provided for one-time termination benefits in which the employee was required to render service beyond the legal notification period.

We expect to make payments under the Previous Plans for remaining residual lease obligations, with terms varying in length, through fiscal year 2022 .

We also have terminated various contractual commitments in connection with certain disposal activities and have recorded charges, to the extent applicable, for the costs of terminating these contracts before the end of their terms and the costs that will continue to be incurred for the remaining terms without economic benefit to us. We recorded additional pre-tax charges of $0.1 million , $1.5 million and $0.7 million in our Environmental Health segment during fiscal years 2015, 2014 and 2013 , respectively, as a result of these contract terminations.


32



At January 3, 2016 , we had $22.2 million recorded for accrued restructuring and contract termination charges, of which $17.1 million was recorded in short-term accrued restructuring and $5.1 million was recorded in long-term liabilities. At December 28, 2014 , we had $23.8 million recorded for accrued restructuring and contract termination charges, of which $17.1 million was recorded in short-term accrued restructuring and $6.7 million was recorded in long-term liabilities. The following table summarizes our restructuring accrual balances and related activity by restructuring plan, as well as contract termination accrual balances and related activity, during fiscal years 2015, 2014 and 2013 :

 
Balance at December 30, 2012
 
2013 Charges and Changes in Estimates, Net
 
2013 Amounts Paid
 
Balance at December 29, 2013
 
2014 Charges and Changes in Estimates, Net
 
2014 Amounts Paid
 
Balance at December 28, 2014
 
2015 Charges and Changes in Estimates, Net
 
2015 Amounts Paid
 
Balance at January 3, 2016
 
(In thousands)
Severance:
Q4 2015 Plan
$

 
$

 
$

 
$

 
$

 
$

 
$

 
$
11,295

 
$
(925
)
 
$
10,370

Q2 2015 Plan (1)

 

 

 

 

 

 

 
5,471

 
(4,322
)
 
1,149

Q3 2014 Plan (2)

 

 

 

 
13,051

 
(2,992
)
 
10,059

 
(3,064
)
 
(5,460
)
 
1,535

Q2 2014 Plan (3)

 

 

 

 
735

 
(484
)
 
251

 
(179
)
 
(13
)
 
59

Q1 2014 Plan (4)

 

 

 

 
567

 
(475
)
 
92

 
(92
)
 

 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Facility:
Q4 2015 Plan

 

 

 

 

 

 

 
285

 
(26
)
 
259

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Previous Plans including 2013 plans (5)
27,151

 
33,196

 
(25,112
)
 
35,235

 
(2,508
)
 
(19,603
)
 
13,124

 
(209
)
 
(4,222
)
 
8,693

Restructuring
27,151

 
33,196

 
(25,112
)
 
35,235

 
11,845

 
(23,554
)
 
23,526

 
13,507

 
(14,968
)
 
22,065

Contract Termination
596

 
696

 
(992
)
 
300

 
1,545

 
(1,541
)
 
304

 
83

 
(255
)
 
132

Total Restructuring and Contract Termination
$
27,747

 
$
33,892

 
$
(26,104
)
 
$
35,535

 
$
13,390

 
$
(25,095
)
 
$
23,830

 
$
13,590

 
$
(15,223
)
 
$
22,197

____________________________
(1)  
During fiscal year 2015 , we recognized pre-tax restructuring reversals of $0.2 million in our Human Health segment and $0.3 million in our Environmental Health segment related to lower than expected costs associated with workforce reductions for the Q2 2015 Plan.
(2)  
During fiscal year 2015 , we recognized pre-tax restructuring reversals of $1.2 million in our Human Health segment and $1.9 million in our Environmental Health segment related to lower than expected costs associated with workforce reductions for the Q3 2014 Plan.
(3)  
During fiscal year 2015 , we recognized pre-tax restructuring reversals of $0.1 million in each of our Human Health and Environmental Health segments related to lower than expected costs associated with workforce reductions for the Q2 2014 Plan.
(4)  
During fiscal year 2015 , we recognized a pre-tax restructuring reversal of $0.1 million in our Human Health segment related to lower than expected costs associated with workforce reductions for the Q1 2014 Plan.
(5)  
During fiscal year 2015 , we recognized a pre-tax restructuring charge of $1.4 million in our Human Health segment primarily related to higher than expected costs associated with the closure of the excess facility space, which was offset by a pre-tax restructuring reversal of $1.6 million in our Environmental Health segment primarily related to lower than expected costs associated with workforce reductions for the previous restructuring plans. During fiscal year 2014 , we recognized pre-tax restructuring reversals of $0.8 million in our Human Health segment and $1.7 million in our Environmental Health segment primarily related to lower than expected costs associated with workforce reductions, which was partially offset by higher than expected costs associated with the closure of the excess facility space for the previous restructuring plans.

Impairment of Assets
2015 Compared to 2014 .  We had no impairment of assets in either fiscal year 2015 or fiscal year 2014 .


33



2014 Compared to 2013 .  Impairment of assets was zero in fiscal year 2014 , as compared to $0.2 million in fiscal year 2013 . The fiscal year 2013 pre-tax impairment charge was $0.2 million for the impairment of certain long-lived assets within our Human Health segment as the carrying amounts of the long-lived assets were not recoverable and exceeded their fair value. Additional information regarding impairment of assets is discussed in Note 12 to our consolidated financial statements included in this annual report on Form 10-K.

Interest and Other Expense, Net
Interest and other expense, net, consisted of the following:

 
January 3,
2016
 
December 28,
2014
 
December 29,
2013
 
(In thousands)
Interest income
$
(673
)
 
$
(667
)
 
$
(650
)
Interest expense
37,997

 
36,270

 
49,924

Other expense, net
4,795

 
5,536

 
14,836

Total interest and other expense, net
$
42,119

 
$
41,139

 
$
64,110


2015 Compared to 2014 .  Interest and other expense, net, for fiscal year 2015 was an expense of $42.1 million , as compared to an expense of $41.1 million for fiscal year 2014 , an increase of $1.0 million . The increase in interest and other expense, net, in fiscal year 2015 as compared to fiscal year 2014 was primarily due to an increase in interest expense. Interest expense increase d by $1.7 million in fiscal year 2015 as compared to fiscal year 2014 , primarily due to increased debt outstanding on our senior unsecured revolving credit facility and higher variable interest rates, as well as an additional week during fiscal year 2015 . Other expenses for fiscal year 2015 decrease d by $0.7 million as compared to fiscal year 2014 , primarily due to expenses related to foreign currency transactions and translation of non-functional currency assets and liabilities. A more complete discussion of our liquidity is set forth below under the heading “Liquidity and Capital Resources.”
 
2014 Compared to 2013 .  Interest and other expense, net, for fiscal year 2014 was an expense of $41.1 million , as compared to an expense of $64.1 million for fiscal year 2013 , a decrease of $23.0 million . The decrease in interest and other expense, net, in fiscal year 2014 as compared to fiscal year 2013 was primarily due to a decrease in interest expense. Interest expense decrease d by $13.7 million in fiscal year 2014 as compared to fiscal year 2013 , primarily due to the redemption of our fixed rate 2015 Notes in fiscal year 2013, resulting in lower debt outstanding and an increased mix of variable rate debt with lower interest rates during fiscal year 2014. In addition, during fiscal year 2013, we wrote-off $2.8 million for the remaining unamortized derivative losses for previously settled cash flow hedges and wrote-off $0.2 million for the remaining deferred debt issuance costs related to the prepayment of our 2015 Notes. Other expenses for fiscal year 2014 decrease d by $9.3 million as compared to fiscal year 2013 , primarily due to a prepayment premium of $11.1 million for the redemption of our 2015 Notes in fiscal year 2013, which was partially offset by expenses related to foreign currency transactions and translation of non-functional currency assets and liabilities.

Provision for (Benefit from) Income Taxes
2015 Compared to 2014 .  The fiscal year 2015 provision for income taxes on continuing operations was $31.3 million , as compared to $8.4 million for fiscal year 2014 . The effective tax rate on continuing operations was 12.8% for fiscal year 2015 as compared to 5.0% for fiscal year 2014 . The higher provision for income taxes in fiscal year 2015 was primarily due to higher income in higher tax rate jurisdictions, as compared to fiscal year 2014 .

2014 Compared to 2013 .  The fiscal year 2014 provision for income taxes on continuing operations was $8.4 million , as compared to a benefit of $10.6 million for fiscal year 2013 . The effective tax rate on continuing operations was a provision of 5.0% for fiscal year 2014 as compared to a benefit of 6.5% for fiscal year 2013 . The provision for income taxes in fiscal year 2014 was primarily due to income in lower tax rate jurisdictions, partially offset by losses in higher rate jurisdictions and a tax benefit of $7.0 million related to discrete items. The benefit from income taxes in fiscal year 2013 was primarily due to a tax benefit of $24.0 million related to discrete items and losses in higher tax rate jurisdictions, partially offset by a provision from income taxes related to profits in lower tax rate jurisdictions. The $24.0 million of discrete items includes $9.4 million for lapses in statutes of limitations during the first quarter of fiscal year 2013 and $9.2 million primarily for lapses in statutes of limitations and audit settlements in the fourth quarter of fiscal year 2013.

Discontinued Operations
As part of our continuing efforts to focus on higher growth opportunities, we have discontinued certain businesses. We have accounted for these businesses as discontinued operations and, accordingly, have presented the results of operations and related cash flows as discontinued operations for all periods presented. Any remaining assets and liabilities of these businesses

34



have been presented separately, and are reflected within assets and liabilities from discontinued operations in the accompanying consolidated balance sheets as of January 3, 2016 and December 28, 2014 .

In May 2014, our management approved the shutdown of our microarray-based diagnostic testing laboratory in the United States, which had been reported within our Human Health segment. We determined that, with the lack of adequate reimbursement from health care payers, the microarray-based diagnostic testing laboratory in the United States would need significant investment in its operations to reduce costs in order to effectively compete in the market. The shutdown of the microarray-based diagnostic testing laboratory in the United States resulted in a $0.1 million net pre-tax loss primarily related to the disposal of fixed assets, which was partially offset by the sale of a building in fiscal year 2014.

In August 1999, we sold the assets of our Technical Service business. We recorded pre-tax losses of $0.03 million in fiscal year 2015 , $0.2 million in fiscal year 2014 and $2.1 million in fiscal year 2013 for a contingency related to this business. These losses were recognized as a loss on disposition of discontinued operations before income taxes.

During fiscal year 2013, we settled various commitments related to the divestiture of other discontinued operations and recognized a pre-tax gain of $0.3 million . This gain was recognized as a gain on disposition of discontinued operations before income taxes.

Summary pre-tax operating results of the discontinued operations, which include the periods prior to disposition and a $1.0 million pre-tax restructuring charge related to workforce reductions in the microarray-based diagnostic testing laboratory in the United States during fiscal year 2014, were as follows during the three fiscal years ended:

 
January 3,
2016
 
December 28,
2014
 
December 29,
2013
 
(In thousands)
Revenue
$
98

 
$
348

 
$
8,646

Costs and expenses
101

 
5,307

 
18,998

Loss from discontinued operations before income taxes
$
(3
)
 
$
(4,959
)
 
$
(10,352
)

We recorded a tax provision of $0.2 million on discontinued operations and dispositions in fiscal year 2015 , a tax benefit of $1.8 million on discontinued operations and dispositions in fiscal year 2014 and a tax benefit of $5.1 million on discontinued operations and dispositions in fiscal year 2013 .

Business Combinations
Acquisitions in fiscal year 2015
During fiscal year 2015, we completed the acquisition of five businesses for a total consideration of $77.1 million in cash. The acquired businesses included Vanadis, which was acquired for total consideration of $35.1 million in cash, as further described in Note 21 to our consolidated financial statements included in this annual report on Form 10-K, and other acquisitions for an aggregate consideration of $42.0 million in cash. We have a potential obligation to pay the shareholders of Vanadis additional contingent consideration of up to $93.0 million , which at closing had an estimated fair value of $56.9 million . The excess of the purchase prices over the fair values of each of the acquired businesses' net assets represents cost and revenue synergies specific to us, as well as non-capitalizable intangible assets, such as the employee workforce acquired, and has been allocated to goodwill, of which $9.2 million is tax deductible. We reported the operations for all of these acquisitions within the results of our Human Health and Environmental Health segments from the acquisition dates.

Acquisitions in fiscal year 2014
Acquisition of Perten Instruments Group AB. In December 2014, we acquired all of the outstanding stock of Perten. Perten is a provider of analytical instruments and services for quality control of food, grain, flour and feed. We expect this acquisition to enhance our industrial, environmental and safety business by expanding our product offerings to the academic and industrial end markets. We paid the shareholders of Perten $269.9 million in cash for the stock of Perten. The excess of the purchase price over the fair value of the acquired net assets represents cost and revenue synergies specific to us, as well as non-capitalizable intangible assets, such as the employee workforce acquired, and has been allocated to goodwill, none of which is tax deductible. We have reported the operations for this acquisition within the results of our Environmental Health segment from the acquisition date.

Other acquisitions in fiscal year 2014. In addition to the Perten acquisition, we completed the acquisition of two businesses in fiscal year 2014 for total consideration of $17.6 million in cash and $4.3 million of assumed debt. The excess of the purchase price over the fair value of each of the acquired businesses' net assets represents cost and revenue synergies specific to us, as well as non-capitalizable intangible assets, such as the employee workforce acquired, and has been allocated

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to goodwill, none of which is tax deductible. We reported the operations for these acquisitions within the results of our Human Health and Environmental Health segments from the acquisition dates.

Acquisitions in fiscal year 2013
During fiscal year 2013, we completed the acquisition of four businesses for total consideration of $11.4 million , in cash. As of the closing dates, we potentially had to pay additional contingent consideration for the four acquired businesses of up to $2.2 million , which at closing had an estimated fair value of $1.1 million . During fiscal year 2014, we paid $0.4 million in additional deferred consideration for one of these acquisitions. The excess of the purchase price over the fair value of each of the acquired businesses' net assets represents cost and revenue synergies specific to us, as well as non-capitalizable intangible assets, such as the employee workforce acquired, and has been allocated to goodwill, none of which is tax deductible. We reported the operations for these acquisitions within the results of our Human Health and Environmental Health segments from the acquisition dates.

We do not consider the acquisitions completed during fiscal years 2015, 2014 and 2013 , to be material to our consolidated results of operations; therefore, we are not presenting pro forma financial information of operations. During fiscal year 2015 , we recognized $65.7 million of revenue for Perten. We have determined that the presentation of the results of operations for each of the other acquisitions, from the date of acquisition, is impracticable due to the integration of the operations upon acquisition.

As of January 3, 2016 , the allocations of purchase prices for acquisitions completed in fiscal years 2014 and 2013 were final. The preliminary allocations of the purchase prices for acquisitions completed in fiscal year 2015 were based upon initial valuations. Our estimates and assumptions underlying the initial valuations are subject to the collection of information necessary to complete our valuations within the measurement periods, which are up to one year from the respective acquisition dates. The primary areas of the preliminary purchase price allocations that are not yet finalized relate to the fair value of certain tangible and intangible assets acquired and liabilities assumed, assets and liabilities related to income taxes and related valuation allowances, and residual goodwill. We expect to continue to obtain information to assist in determining the fair values of the net assets acquired at the acquisition dates during the measurement periods. During the measurement periods, we will adjust assets or liabilities if new information is obtained about facts and circumstances that existed as of the acquisition dates that, if known, would have resulted in the recognition of those assets and liabilities as of those dates. With our adoption of Accounting Standards Update No. 2015-16,  Simplifying the Accounting for Measurement-Period Adjustments ("ASU No. 2015-16") during 2015, these adjustments will be made in the periods in which the amounts are determined and the cumulative effect of such adjustments will be calculated as if the adjustments had been completed as of the acquisition dates. The portion of the adjustment which relates to a prior period should either be presented separately on the consolidated statement of operations or disclosed in the notes to the consolidated financial statements. All changes that do not qualify as adjustments made during the measurement periods are also included in current period earnings.

During fiscal year 2015 , we obtained information to assist in determining the fair values of certain tangible and intangible assets acquired and liabilities assumed as part of our acquisitions and adjusted our purchase price allocations. Based on this information, for acquisitions completed during fiscal year 2015, we recognized a decrease in deferred taxes of $0.5 million , with a corresponding decrease in goodwill. For the Perten acquisition, we recognized increases in intangible assets of $2.0 million and liabilities assumed of $1.2 million , which were offset by a decrease in goodwill of $3.4 million , deferred taxes of $2.8 million , and other current assets of $0.2 million . For other acquisitions completed during fiscal year 2014, we recognized a decrease in working capital and other adjustments of $0.5 million with a corresponding decrease in goodwill. In addition, during the third quarter of fiscal year 2015 , in connection with updating the provisional purchase accounting for the Perten acquisition, we adjusted goodwill and intangible assets which had been preliminarily recorded in U.S. dollars to Swedish Krona. This resulted in a decrease in intangible assets and goodwill of $21.4 million and a corresponding increase in other comprehensive loss through increased foreign currency translation adjustments as a result of the change in the exchange rate between the acquisition date and June 28, 2015. Of the $21.4 million decrease, $8.2 million related to changes in the exchange rate from the acquisition date through December 28, 2014. During fiscal year 2015 , there was an immaterial impact on the current period net income as a result of the change to the provisional amounts for items that would have been recognized in previous periods if the adjustments to provisional amounts had been recognized as of the acquisition date.

Allocations of the purchase price for acquisitions are based on estimates of the fair value of the net assets acquired and are subject to adjustment upon finalization of the purchase price allocations. The accounting for business combinations requires estimates and judgments as to expectations for future cash flows of the acquired business, and the allocation of those cash flows to identifiable intangible assets, in determining the estimated fair values for assets acquired and liabilities assumed. The fair values assigned to tangible and intangible assets acquired and liabilities assumed, including contingent consideration, are based on management’s estimates and assumptions, as well as other information compiled by management, including valuations that utilize customary valuation procedures and techniques. Contingent consideration is measured at fair value at the acquisition

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date, based on the probability that revenue thresholds or product development milestones will be achieved during the earnout period, with changes in the fair value after the acquisition date affecting earnings to the extent it is to be settled in cash. Increases or decreases in the fair value of contingent consideration liabilities primarily result from changes in the estimated probabilities of achieving revenue thresholds or product development milestones during the earnout period.

As of January 3, 2016 , we may have to pay contingent consideration, related to acquisitions with open contingency periods, of up to $95.4 million . As of January 3, 2016 , we have recorded contingent consideration obligations of $57.4 million , of which $9.4 million was recorded in accrued expenses and other current liabilities, and $48.0 million was recorded in long-term liabilities. As of December 28, 2014 , we have recorded contingent consideration obligations of $0.1 million , which was recorded in accrued expenses and other current liabilities. The expected maximum earnout period for acquisitions with open contingency periods does not exceed 6 years from the respective acquisition dates, and the remaining weighted average expected earnout period at January 3, 2016 was 2 years. If the actual results differ from the estimates and judgments used in these fair values, the amounts recorded in the consolidated financial statements could result in a possible impairment of the intangible assets and goodwill, require acceleration of the amortization expense of definite-lived intangible assets or the recognition of additional contingent consideration which would be recognized as a component of operating expenses from continuing operations.

In connection with the purchase price allocations for acquisitions, we estimate the fair value of deferred revenue assumed with our acquisitions. The estimated fair value of deferred revenue is determined by the legal performance obligation at the date of acquisition, and is generally based on the nature of the activities to be performed and the related costs to be incurred after the acquisition date. The fair value of an assumed liability related to deferred revenue is estimated based on the current market cost of fulfilling the obligation, plus a normal profit margin thereon. The estimated costs to fulfill the deferred revenue are based on the historical direct costs related to providing the services. We do not include any costs associated with selling effort, research and development, or the related fulfillment margins on these costs. In most acquisitions, profit associated with selling effort is excluded because the acquired businesses would have concluded the selling effort on the support contracts prior to the acquisition date. The estimated research and development costs are not included in the fair value determination, as these costs are not deemed to represent a legal obligation at the time of acquisition. The sum of the costs and operating income approximates, in theory, the amount that we would be required to pay a third-party to assume the obligation.

Contingencies, Including Tax Matters
We are conducting a number of environmental investigations and remedial actions at our current and former locations and, along with other companies, have been named a potentially responsible party (“PRP”) for certain waste disposal sites. We accrue for environmental issues in the accounting period that our responsibility is established and when the cost can be reasonably estimated. We have accrued $11.8 million and $12.3 million as of January 3, 2016 and December 28, 2014 , respectively, which represents our management’s estimate of the cost of the remediation of known environmental matters, and does not include any potential liability for related personal injury or property damage claims. During fiscal year 2014, we recorded a benefit of $2.3 million for cost reimbursements related to a particular site, of which $1.2 million was for future monitoring and mitigation activities. During fiscal year 2013, we accrued an additional $5.7 million related to a particular site for increased monitoring and mitigation activities, of which $4.6 million was recorded in the fourth quarter of fiscal year 2013. Our environmental accrual is not discounted and does not reflect the recovery of any material amounts through insurance or indemnification arrangements. The cost estimates are subject to a number of variables, including the stage of the environmental investigations, the magnitude of the possible contamination, the nature of the potential remedies, possible joint and several liability, the time period over which remediation may occur, and the possible effects of changing laws and regulations. For sites where we have been named a PRP, our management does not currently anticipate any additional liability to result from the inability of other significant named parties to contribute. We expect that the majority of such accrued amounts could be paid out over a period of up to ten years. As assessment and remediation activities progress at each individual site, these liabilities are reviewed and adjusted to reflect additional information as it becomes available. There have been no environmental problems to date that have had, or are expected to have, a material adverse effect on our consolidated financial statements. While it is possible that a loss exceeding the amounts recorded in the consolidated financial statements may be incurred, the potential exposure is not expected to be materially different from those amounts recorded.

Various tax years after 2009 remain open to examination by certain jurisdictions in which we have significant business operations, such as Finland, Germany, Italy, Netherlands, Singapore, the United Kingdom and the United States. The tax years under examination vary by jurisdiction. We regularly review our tax positions in each significant taxing jurisdiction in the process of evaluating our unrecognized tax benefits. We make adjustments to our unrecognized tax benefits when: (i) facts and circumstances regarding a tax position change, causing a change in management’s judgment regarding that tax position; (ii) a tax position is effectively settled with a tax authority; and/or (iii) the statute of limitations expires regarding a tax position.


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We are subject to various claims, legal proceedings and investigations covering a wide range of matters that arise in the ordinary course of our business activities. Although we have established accruals for potential losses that we believe are probable and reasonably estimable, in our opinion, based on our review of the information available at this time, the total cost of resolving these contingencies at January 3, 2016 should not have a material adverse effect on our consolidated financial statements included in this annual report on Form 10-K. However, each of these matters is subject to uncertainties, and it is possible that some of these matters may be resolved unfavorably to us.

Reporting Segment Results of Continuing Operations
We realigned our organization at the beginning of fiscal year 2015 to enable us to both deliver complete solutions targeted towards certain end markets and develop value-added applications and solutions to foster further expansion of those markets. OneSource, our multivendor laboratory service business that serves the life sciences end market, was moved from our Environmental Health segment into our Human Health segment. The results reported for fiscal year 2015 reflect this new alignment of our operating segments. Financial information in this report relating to fiscal years 2014 and 2013 has been retrospectively adjusted to reflect this change to our operating segments.

Human Health
2015 Compared to 2014 .  Revenue for fiscal year 2015 was $1,376.6 million , as compared to $1,384.2 million for fiscal year 2014 , a decrease of $7.6 million , or 1% , which includes an approximate 0.4% increase in revenue attributable to acquisitions, an approximate 5% decrease in revenue attributable to changes in foreign exchange rates and revenue attributable to an additional week in fiscal year 2015. The analysis in the remainder of this paragraph compares selected revenue by product type for fiscal year 2015 , as compared to fiscal year 2014 , and includes the effect of foreign exchange fluctuations and acquisitions. The decrease in revenue in our Human Health segment was a result of a decrease in research market revenue of $4.0 million and a decrease in diagnostics market revenue of $3.6 million . As a result of adjustments to deferred revenue related to certain acquisitions required by business combination rules, we did not recognize $0.8 million of revenue in our Human Health segment for fiscal year 2015 and $2.9 million of revenue in our Human Health segment for fiscal year 2014 that otherwise would have been recorded by the acquired businesses during each of the respective periods. In our research market, we experienced increased demand for our OneSource laboratory service and informatics businesses, as well as an increase in revenue from new product introductions, such as the Opera Phenix. Our OneSource laboratory service business offers services designed to enable our customers to increase efficiencies and production time while reducing maintenance costs, all of which continue to be critical for our customers. In our diagnostics market, we continued to expand our newborn and infectious disease screening solutions in emerging markets such as China. Birth rates in the United States continue to stabilize and demand for greater access to newborn screening in rural areas outside the United States is also increasing, as evidenced by prenatal trends we saw during fiscal year 2015 . Our medical imaging business experienced slight growth due to increased demand for our CMOS and cassette panels, which was partially offset by a decrease in demand in our radiography and radiation oncology end markets. The growth in our Human Health segment was more than offset by unfavorable impacts from foreign currency as the U.S. dollar strengthened, particularly versus the Euro.

Operating income from continuing operations for fiscal year 2015 was $251.7 million , as compared to $233.7 million for fiscal year 2014 , an increase of $18.1 million , or 8% . Amortization of intangible assets decrease d and was $61.9 million for fiscal year 2015 as compared to $73.2 million for fiscal year 2014 . Restructuring and contract termination charges, net decrease d and were $4.2 million for fiscal year 2015 as compared to $7.2 million for fiscal year 2014 . Acquisition related costs for integration, contingent consideration and other costs added an incremental expense of $0.5 million for fiscal year 2015 , as compared to decreasing expenses by $1.7 million for fiscal year 2014 . Legal costs for a particular case were $0.8 million for fiscal year 2015 . In addition to the factors noted above, increase d operating income for fiscal year 2015 , was primarily the result of increased sales volume in the diagnostics and research markets and lower costs as a result of cost containment and productivity initiatives, which was partially offset by unfavorable changes in product mix, with an increase in sales of lower gross margin product offerings and unfavorable impacts from foreign currency.
 
2014 Compared to 2013 .  Revenue for fiscal year 2014 was $1,384.2 million , as compared to $1,325.9 million for fiscal year 2013 , an increase of $58.3 million , or 4% , which includes an approximate 0.5% increase in revenue attributable to acquisitions and an approximate 0.5% decrease in revenue attributable to changes in foreign exchange rates. The analysis in the remainder of this paragraph compares selected revenue by product type for fiscal year 2014 , as compared to fiscal year 2013 , and includes the effect of foreign exchange fluctuations and acquisitions. The increase in revenue in our Human Health segment was a result of an increase in diagnostics market revenue of $39.8 million and an increase in research market revenue of $18.5 million . As a result of adjustments to deferred revenue related to certain acquisitions required by business combination rules, we did not recognize $2.9 million of revenue in our Human Health segment for fiscal year 2014 and $7.3 million of revenue in our Human Health segment for fiscal year 2013 that otherwise would have been recorded by the acquired businesses during each of the respective periods. This increase in our Human Health segment revenue during fiscal year 2014 was primarily due to growth in our diagnostics business as birth rates increased and from continued expansion of our prenatal,

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newborn and infectious disease screening solutions in emerging markets such as China and Brazil, as well as from increased demand for our medical imaging business' new wireless cassette detector used in diagnostic imaging and veterinary applications. In the research market we experienced growth related to our OneSource laboratory service, informatics, radiometric detection, and high-content screening offerings, as well as our microfluidics technology licensing program. This growth in the research market was partially offset by declines in some products in our research market due to weakness in the global academic end market, specifically in Europe, as well as the expiration of certain patents in our licensing portfolio.

Operating income from continuing operations for fiscal year 2014 was $233.7 million , as compared to $168.8 million for fiscal year 2013 , an increase of $64.9 million , or 38% . Amortization of intangible assets decrease d and was $73.2 million for fiscal year 2014 as compared to $79.5 million for fiscal year 2013 . Restructuring and contract termination charges, net decrease d and were $7.2 million for fiscal year 2014 as compared to $22.3 million for fiscal year 2013 . Impairment of assets was a charge of $0.2 million for fiscal year 2013 as the carrying amounts of certain long-lived assets were not recoverable and exceeded their fair value. Acquisition related costs for integration, contingent consideration and other costs decreased expenses by $1.7 million for fiscal year 2014 , as compared to adding an incremental expense of $1.4 million for fiscal year 2013 . The amortization of purchase accounting adjustments to record the inventory from certain acquisitions was $0.2 million for fiscal year 2013 . In addition to the factors noted above, increased sales volume in the diagnostics and research markets and lower costs as a result of cost containment and productivity initiatives increase d operating income for fiscal year 2014 .

Environmental Health
2015 Compared to 2014 .  Revenue for fiscal year 2015 was $885.7 million , as compared to $853.0 million for fiscal year 2014 , an increase of $32.7 million , or 4% , which includes an approximate 8% decrease in revenue attributable to changes in foreign exchange rates, an approximate 8% increase in revenue attributable to acquisitions and revenue attributable to an additional week in fiscal year 2015. The analysis in the remainder of this paragraph compares selected revenue by product type for fiscal year 2015 , as compared to fiscal year 2014 , and includes the effect of foreign exchange fluctuations and acquisitions. The increase in revenue in our Environmental Health segment was a result of an increase in revenue of $44.9 million from the environmental and industrial markets, which was partially offset by a decrease in revenue of $12.2 million from the laboratory services market. The increase in revenue was primarily due to revenue from our acquisition of Perten in December 2014, as well as growth in our materials characterization product family within our environmental and industrial markets, which was partially offset by unfavorable impacts from foreign currency. In addition, we had an increased demand in our laboratory services business, despite unfavorable impacts from foreign currency.

Operating income from continuing operations for fiscal year 2015 was $89.5 million , as compared to $95.6 million for fiscal year 2014 , a decrease of $6.1 million , or 6% . Amortization of intangible assets increase d and was $16.7 million for fiscal year 2015 as compared to $10.2 million for fiscal year 2014 . Restructuring and contract termination charges, net increase d and were $9.4 million for fiscal year 2015 as compared to $6.2 million for fiscal year 2014 . Acquisition related costs for contingent consideration and other costs added an incremental expense of $0.3 million in fiscal year 2015 , as compared to an incremental expense of $2.1 million for fiscal year 2014 . The amortization of purchase accounting adjustments to record the inventory from certain acquisitions added an incremental expense of $7.3 million in fiscal year 2015 , as compared to $2.4 million for fiscal year 2014 . In addition to the factors noted above, decrease d operating income for fiscal year 2015 , as compared to fiscal year 2014 was primarily due to increased costs related to investments in new product development, which was partially offset by lower costs as a result of cost containment initiatives and benefits from our initiatives to improve our supply chain.

2014 Compared to 2013 .  Revenue for fiscal year 2014 was $853.0 million , as compared to $831.7 million for fiscal year 2013 , an increase of $21.3 million or 3% , which includes an approximate 1% decrease in revenue attributable to changes in foreign exchange rates and an approximate 1% increase in revenue attributable to acquisitions. The analysis in the remainder of this paragraph compares selected revenue by product type for fiscal year 2014 , as compared to fiscal year 2013 , and includes the effect of foreign exchange fluctuations and acquisitions. The increase in revenue in our Environmental Health segment was a result of an increase in revenue of $17.8 million from the laboratory services market and an increase in revenue of $3.5 million from the environmental and industrial markets. As a result of adjustments to deferred revenue related to certain acquisitions required by business combination rules, we did not recognize $0.01 million of revenue for fiscal year 2013 that otherwise would have been recorded by the acquired businesses during each of the respective periods. This increase in our Environmental Health segment revenue during fiscal year 2014 was primarily due to continued growth in our laboratory services business. This growth was partially offset by decreased demand across some of our products in the environmental and industrial markets, primarily in the Asian industrial end markets.

Operating income from continuing operations for fiscal year 2014 was $95.6 million , as compared to $84.7 million for fiscal year 2013 , an increase of $10.9 million , or 13% . Amortization of intangible assets increase d and was $10.2 million for fiscal year 2014 as compared to $9.8 million for fiscal year 2013 . Restructuring and contract termination charges, net decrease d and were $6.2 million for fiscal year 2014 as compared to $11.6 million for fiscal year 2013 . Acquisition related costs for

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contingent consideration and other costs added an incremental expense of $2.1 million in fiscal year 2014 , as compared to an incremental expense of $0.2 million for fiscal year 2013 . The amortization of purchase accounting adjustments to record the inventory from certain acquisitions was $2.4 million for fiscal year 2014 and zero in fiscal year 2013 . In addition to the factors noted above, savings related to cost containment initiatives increase d operating income for fiscal year 2014 , which was partially offset by unfavorable changes in product mix, with an increase in sales of lower gross margin product offerings, and pricing pressure.

Liquidity and Capital Resources
 
We require cash to pay our operating expenses, make capital expenditures, make strategic acquisitions, service our debt and other long-term liabilities, repurchase shares of our common stock and pay dividends on our common stock. Our principal sources of funds are from our operations and the capital markets, particularly the debt markets. We anticipate that our internal operations will generate sufficient cash to fund our operating expenses, capital expenditures, smaller acquisitions, interest payments on our debt and dividends on our common stock. However, we expect to use external sources to satisfy the balance of our debt when due, any larger acquisitions and other long-term liabilities, such as contributions to our postretirement benefit plans.
Principal factors that could affect the availability of our internally generated funds include: