pki-20200705PERKINELMER INC00000317912020Q2false01/03111,000,0001,000,000————11300,000,000300,000,000111,501,000111,140,000111,501,000111,140,0005352Contingent consideration is measured at fair value at the acquisition 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.The interest rates on the Eurocurrency Rate loans are based on the Eurocurrency Rate at the time of borrowing, plus a percentage spread based on the credit rating of the Company's debt. The interest rates on the US Dollar Base Rate loans are based on the US Dollar Base Rate at the time of borrowing, plus a percentage spread based on the credit rating of the Company's debt. The base rate is the higher of (i) the Federal Funds Rate (as defined in the credit agreement) plus 50 basis points (ii) the rate of interest in effect for such day as publicly announced from time to time by Bank of America as its "prime rate," or (iii) the Eurocurrency Rate plus 1.00%. The Eurocurrency margin as of July 5, 2020 was 101.5 basis points.The weighted average Eurocurrency interest rate as of July 5, 2020 was 0.15%, resulting in a weighted average effective Eurocurrency Rate, including the margin, of 1.17%, which was the interest applicable to the borrowings outstanding as of July 5, 2020.0.501.02Interest on the 2026 Notes is payable annually on July 19th each year0.35Interest on the 2021 Notes is payable annually on April 9th each year.0.15Interest on the 2029 Notes is payable semi-annually on March 15th and September 15th each year0.25Of these bank loans, loans in the aggregate amount of $18.7 million bear fixed interest rates between 1.1% and 4.3% and a loan in the amount of $0.1 million bears a variable interest rate based on the Euribor rate plus a margin of 1.5The secured bank loans of $1.1 million bear fixed annual interest rates between 1.95% and 20.0% and are required to be repaid in monthly installments until 2027.0.070.070.070.070.0730Contingent consideration is measured at fair value at the acquisition 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 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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________________________
FORM 10-Q
_______________________________________
(Mark One)
| | | | | |
☑ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended July 5, 2020
or
| | | | | |
☐ | 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) |
(781) 663-6900
(Registrant’s telephone number, including area code)
______________________________________
Securities registered pursuant to Section 12(b) of the Act:
| | | | | | | | |
Title of each class | Trading Symbol (s) | Name of each exchange on which registered |
Common stock, $1 par value per share | PKI | The New York Stock Exchange |
1.875% Notes due 2026 | PKI 21A | The New York Stock Exchange |
0.60% Notes due 2021 | PKI 21B | The New York Stock Exchange |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 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 ☑ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes ☑ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| | | | | | | | | | | | | | | | | |
Large accelerated filer | | ☑ | Accelerated filer | | ☐ |
Non-accelerated filer | | ☐ | Smaller reporting company | | ☐ |
| |
| Emerging growth company
| | ☐ |
If an emerging growth company, indicate by check mark whether the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑
As of August 6, 2020, there were outstanding 111,814,516 shares of common stock, $1 par value per share.
TABLE OF CONTENTS
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PART I. FINANCIAL INFORMATION | | |
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Item 1. | | |
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Item 2. | | |
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Item 3. | | |
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Item 4. | | |
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PART II. OTHER INFORMATION | | |
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Item 1. | | |
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Item 1A. | | |
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Item 2. | | |
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Item 6. | | |
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PART I. FINANCIAL INFORMATION
Item 1.Unaudited Financial Statements
PERKINELMER, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | | | Six Months Ended | | |
| July 5, 2020 | | June 30, 2019 | | July 5, 2020 | | June 30, 2019 |
| (In thousands, except per share data) | | | | | | |
Product revenue | $ | 601,506 | | | $ | 502,114 | | | $ | 1,027,035 | | | $ | 940,836 | |
Service revenue | 210,212 | | | 220,403 | | | 437,079 | | | 430,418 | |
Total revenue | 811,718 | | | 722,517 | | | 1,464,114 | | | 1,371,254 | |
Cost of product revenue | 240,494 | | | 238,455 | | | 446,684 | | | 444,731 | |
Cost of service revenue | 123,880 | | | 136,269 | | | 262,063 | | | 270,924 | |
Total cost of revenue | 364,374 | | | 374,724 | | | 708,747 | | | 715,655 | |
Selling, general and administrative expenses | 221,026 | | | 201,553 | | | 429,595 | | | 400,410 | |
Research and development expenses | 49,521 | | | 48,344 | | | 98,435 | | | 96,324 | |
Restructuring and other costs, net | 1,158 | | | 6,161 | | | 7,016 | | | 13,800 | |
Operating income from continuing operations | 175,639 | | | 91,735 | | | 220,321 | | | 145,065 | |
Interest and other expense, net | 10,812 | | | 19,908 | | | 20,805 | | | 36,473 | |
Income from continuing operations before income taxes | 164,827 | | | 71,827 | | | 199,516 | | | 108,592 | |
Provision for income taxes | 27,614 | | | 2,686 | | | 28,588 | | | 3,998 | |
Income from continuing operations | 137,213 | | | 69,141 | | | 170,928 | | | 104,594 | |
| | | | | | | |
Loss on disposition of discontinued operations before income taxes | — | | | — | | | — | | | — | |
Provision for income taxes on discontinued operations and dispositions | 51 | | | 54 | | | 101 | | | 95 | |
Loss from discontinued operations and dispositions | (51) | | | (54) | | | (101) | | | (95) | |
Net income | $ | 137,162 | | | $ | 69,087 | | | $ | 170,827 | | | $ | 104,499 | |
Basic earnings per share: | | | | | | | |
Income from continuing operations | $ | 1.23 | | | $ | 0.62 | | | $ | 1.54 | | | $ | 0.94 | |
Loss from discontinued operations and dispositions | (0.00) | | | (0.00) | | | (0.00) | | | (0.00) | |
Net income | $ | 1.23 | | | $ | 0.62 | | | $ | 1.54 | | | $ | 0.94 | |
Diluted earnings per share: | | | | | | | |
Income from continuing operations | $ | 1.23 | | | $ | 0.62 | | | $ | 1.53 | | | $ | 0.94 | |
Loss from discontinued operations and dispositions | (0.00) | | | (0.00) | | | (0.00) | | | (0.00) | |
Net income | $ | 1.23 | | | $ | 0.62 | | | $ | 1.53 | | | $ | 0.94 | |
Weighted average shares of common stock outstanding: | | | | | | | |
Basic | 111,329 | | | 110,845 | | | 111,225 | | | 110,694 | |
Diluted | 111,869 | | | 111,528 | | | 111,756 | | | 111,411 | |
Cash dividends declared per common share | $ | 0.07 | | | $ | 0.07 | | | $ | 0.14 | | | $ | 0.14 | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
PERKINELMER, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | | | Six Months Ended | | |
| July 5, 2020 | | June 30, 2019 | | July 5, 2020 | | June 30, 2019 |
| (In thousands) | | | | | | |
Net income | $ | 137,162 | | | $ | 69,087 | | | $ | 170,827 | | | $ | 104,499 | |
Other comprehensive income (loss): | | | | | | | |
Foreign currency translation adjustments | 61,568 | | | (7,320) | | | (17,025) | | | (4,254) | |
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Unrealized gain (loss) on securities, net of tax | 87 | | | 103 | | | (1) | | | (17) | |
Other comprehensive income (loss) | 61,655 | | | (7,217) | | | (17,026) | | | (4,271) | |
Comprehensive income | $ | 198,817 | | | $ | 61,870 | | | $ | 153,801 | | | $ | 100,228 | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
PERKINELMER, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
| | | | | | | | | | | |
| July 5, 2020 | | December 29, 2019 |
| (In thousands, except share and per share data) | | |
Current assets: | | | |
Cash and cash equivalents | $ | 218,536 | | | $ | 191,877 | |
Accounts receivable, net | 708,799 | | | 725,184 | |
| | | |
Inventories | 477,707 | | | 356,937 | |
Other current assets | 126,371 | | | 100,381 | |
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Total current assets | 1,531,413 | | | 1,374,379 | |
Property, plant and equipment: | | | |
At cost | 729,596 | | | 701,580 | |
Accumulated depreciation | (406,807) | | | (383,357) | |
Property, plant and equipment, net | 322,789 | | | 318,223 | |
Operating lease right-of-use assets
| 195,222 | | | 167,276 | |
Intangible assets, net | 1,188,464 | | | 1,283,286 | |
Goodwill | 3,107,373 | | | 3,111,227 | |
Other assets, net | 291,555 | | | 284,173 | |
| | | |
Total assets | $ | 6,636,816 | | | $ | 6,538,564 | |
Current liabilities: | | | |
Current portion of long-term debt | $ | 346,342 | | | $ | 9,974 | |
Accounts payable | 255,137 | | | 235,855 | |
Short-term accrued restructuring and other costs | 9,613 | | | 11,559 | |
Accrued expenses and other current liabilities | 550,067 | | | 503,332 | |
Current liabilities of discontinued operations | 2,097 | | | 2,112 | |
Total current liabilities | 1,163,256 | | | 762,832 | |
Long-term debt | 1,624,996 | | | 2,064,041 | |
Long-term liabilities | 703,208 | | | 751,468 | |
Operating lease liabilities
| 177,893 | | | 146,399 | |
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Total liabilities | 3,669,353 | | | 3,724,740 | |
Commitments and contingencies (see Note 18) | | | |
Stockholders’ equity: | | | |
Preferred stock—$1 par value per share, authorized 1,000,000 shares; none issued or outstanding | — | | | — | |
Common stock—$1 par value per share, authorized 300,000,000 shares; issued and outstanding 111,501,000 shares and 111,140,000 shares at July 5, 2020 and December 29, 2019, respectively | 111,501 | | | 111,140 | |
Capital in excess of par value | 106,744 | | | 90,357 | |
Retained earnings | 2,965,890 | | | 2,811,973 | |
Accumulated other comprehensive loss | (216,672) | | | (199,646) | |
Total stockholders’ equity | 2,967,463 | | | 2,813,824 | |
Total liabilities and stockholders’ equity | $ | 6,636,816 | | | $ | 6,538,564 | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
PERKINELMER, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited)
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| For the Six-Month Period Ended July 5, 2020 | | | | | | | | |
| Common Stock Amount | | Capital in Excess of Par Value | | Retained Earnings | | Accumulated Other Comprehensive Loss | | Total Stockholders’ Equity |
| (In thousands) | | | | | | | | |
Balance, December 29, 2019 | $ | 111,140 | | | $ | 90,357 | | | $ | 2,811,973 | | | $ | (199,646) | | | $ | 2,813,824 | |
Impact of adopting ASU 2016-13 (see Note 1)
| — | | | — | | | (1,328) | | | — | | | (1,328) | |
Net income | — | | | — | | | 33,665 | | | — | | | 33,665 | |
Other comprehensive loss | — | | | — | | | — | | | (78,681) | | | (78,681) | |
Dividends | — | | | — | | | (7,779) | | | — | | | (7,779) | |
Exercise of employee stock options and related income tax benefits | 21 | | | 1,085 | | | — | | | — | | | 1,106 | |
Issuance of common stock for employee stock purchase plans | 14 | | | 1,242 | | | — | | | — | | | 1,256 | |
Purchases of common stock | (66) | | | (6,276) | | | — | | | — | | | (6,342) | |
Issuance of common stock for long-term incentive program | 197 | | | 2,831 | | | — | | | — | | | 3,028 | |
Stock compensation | — | | | 997 | | | — | | | — | | | 997 | |
Balance, April 5, 2020 | $ | 111,306 | | | $ | 90,236 | | | $ | 2,836,531 | | | $ | (278,327) | | | $ | 2,759,746 | |
Net income | — | | | — | | | 137,162 | | | — | | | 137,162 | |
Other comprehensive income | — | | | — | | | — | | | 61,655 | | | 61,655 | |
Dividends | — | | | — | | | (7,803) | | | — | | | (7,803) | |
Exercise of employee stock options and related income tax benefits | 175 | | | 8,792 | | | — | | | — | | | 8,967 | |
Issuance of common stock for employee stock purchase plans | 14 | | | 1,291 | | | — | | | — | | | 1,305 | |
Purchases of common stock | (4) | | | (323) | | | — | | | — | | | (327) | |
Issuance of common stock for long-term incentive program | 2 | | | 5,123 | | | — | | | — | | | 5,125 | |
Stock compensation | 8 | | | 1,625 | | | — | | | — | | | 1,633 | |
Balance, July 5, 2020 | $ | 111,501 | | | $ | 106,744 | | | $ | 2,965,890 | | | $ | (216,672) | | | $ | 2,967,463 | |
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| For the Six-Month Period Ended June 30, 2019 | | | | | | | | |
| Common Stock Amount | | Capital in Excess of Par Value | | Retained Earnings | | Accumulated Other Comprehensive Income (Loss) | | Total Stockholders’ Equity |
| (In thousands) | | | | | | | | |
Balance, December 30, 2018 | $ | 110,597 | | | $ | 48,772 | | | $ | 2,602,067 | | | $ | (176,481) | | | $ | 2,584,955 | |
Impact of adopting ASU 2016-02
| — | | | — | | | 13,289 | | | — | | | 13,289 | |
Net income | — | | | — | | | 35,412 | | | — | | | 35,412 | |
Other comprehensive income | — | | | — | | | — | | | 2,946 | | | 2,946 | |
Dividends | — | | | — | | | (7,742) | | | — | | | (7,742) | |
Exercise of employee stock options and related income tax benefits | 186 | | | 8,424 | | | — | | | — | | | 8,610 | |
Issuance of common stock for employee stock purchase plans | 19 | | | 1,367 | | | — | | | — | | | 1,386 | |
Purchases of common stock | (57) | | | (5,236) | | | — | | | — | | | (5,293) | |
Issuance of common stock for long-term incentive program | 146 | | | 3,392 | | | — | | | — | | | 3,538 | |
Stock compensation | — | | | 1,371 | | | — | | | — | | | 1,371 | |
Balance, March 31, 2019 | $ | 110,891 | | | $ | 58,090 | | | $ | 2,643,026 | | | $ | (173,535) | | | $ | 2,638,472 | |
Net income | — | | | — | | | 69,087 | | | — | | | 69,087 | |
Other comprehensive loss | — | | | — | | | — | | | (7,217) | | | (7,217) | |
Dividends | — | | | — | | | (7,746) | | | — | | | (7,746) | |
Exercise of employee stock options and related income tax benefits | 167 | | | 7,777 | | | — | | | — | | | 7,944 | |
Issuance of common stock for employee stock purchase plans | 15 | | | 1,387 | | | — | | | — | | | 1,402 | |
Purchases of common stock | (7) | | | (757) | | | — | | | — | | | (764) | |
Issuance of common stock for long-term incentive program | 5 | | | 4,384 | | | — | | | — | | | 4,389 | |
Stock compensation | — | | | 1,300 | | | — | | | — | | | 1,300 | |
Balance, June 30, 2019 | $ | 111,071 | | | $ | 72,181 | | | $ | 2,704,367 | | | $ | (180,752) | | | $ | 2,706,867 | |
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The accompanying notes are an integral part of these consolidated financial statements.
PERKINELMER, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| | | | | | | | | | | |
| Six Months Ended | | |
| July 5, 2020 | | June 30, 2019 |
| (In thousands) | | |
Operating activities: | | | |
Net income | $ | 170,827 | | | $ | 104,499 | |
Loss from discontinued operations and dispositions, net of income taxes | 101 | | | 95 | |
Income from continuing operations | 170,928 | | | 104,594 | |
Adjustments to reconcile income from continuing operations to net cash provided by (used in) continuing operations: | | | |
Stock-based compensation | 12,654 | | | 12,801 | |
Restructuring and other costs, net | 7,016 | | | 13,800 | |
Depreciation and amortization | 120,047 | | | 103,793 | |
Loss on disposition of businesses and assets, net | 485 | | | 2,469 | |
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Change in fair value of contingent consideration | (11,446) | | | 3,161 | |
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Amortization of deferred debt financing costs and accretion of discounts | 1,642 | | | 1,790 | |
Amortization of acquired inventory revaluation | 1,485 | | | 5,565 | |
Changes in assets and liabilities which provided (used) cash, excluding effects from companies acquired: | | | |
Accounts receivable, net | 4,312 | | | (9,604) | |
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Inventories | (126,707) | | | (50,450) | |
Accounts payable | 20,907 | | | (39,951) | |
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Accrued expenses and other | (2,677) | | | (106,425) | |
Net cash provided by operating activities of continuing operations | 198,646 | | | 41,543 | |
Net cash used in operating activities of discontinued operations | — | | | — | |
Net cash provided by operating activities | 198,646 | | | 41,543 | |
Investing activities: | | | |
Capital expenditures | (37,138) | | | (36,461) | |
Purchases of investments | (7,393) | | | (868) | |
Purchases of licenses | — | | | (5,000) | |
Proceeds from disposition of businesses and assets | 1,815 | | | 550 | |
Proceeds from surrender of life insurance policies | 131 | | | — | |
Activity related to acquisitions, net of cash and cash equivalents acquired | (2,990) | | | (244,738) | |
Net cash used in investing activities of continuing operations | (45,575) | | | (286,517) | |
Net cash provided by investing activities of discontinued operations | — | | | — | |
Net cash used in investing activities | (45,575) | | | (286,517) | |
Financing activities: | | | |
Payments on borrowings | (290,000) | | | (578,000) | |
Proceeds from borrowings | 188,000 | | | 849,550 | |
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Payments of debt financing costs | — | | | (181) | |
Settlement of cash flow hedges | 5,037 | | | (1,659) | |
Net payments on other credit facilities | (6,036) | | | (9,806) | |
Payments for acquisition-related contingent consideration | (5,200) | | | (23,700) | |
Proceeds from issuance of common stock under stock plans | 10,074 | | | 16,554 | |
Purchases of common stock | (6,669) | | | (6,057) | |
Dividends paid | (15,572) | | | (15,507) | |
Net cash (used in) provided by financing activities of continuing operations | (120,366) | | | 231,194 | |
Net cash provided by financing activities of discontinued operations | — | | | — | |
Net cash (used in) provided by financing activities | ( |