pki-20201004PERKINELMER INC00000317912020Q3false01/03111,000,0001,000,000————11300,000,000300,000,000111,878,000111,140,000111,878,000111,140,0005352Contingent 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 October 4, 2020 was 101.5 basis points.The weighted average Eurocurrency interest rate as of October 4, 2020 was 0.15%, resulting in a weighted average effective Eurocurrency Rate, including the margin, of 1.16%, which was the interest applicable to the borrowings outstanding as of October 4, 2020.0.501.16Interest 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 $17.7 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 1.5%.The secured bank loans of $0.8 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 October 4, 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 November 5, 2020, there were outstanding 111,974,485 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 | | Nine Months Ended |
| October 4, 2020 | | September 29, 2019 | | October 4, 2020 | | September 29, 2019 |
| (In thousands, except per share data) |
Product revenue | $ | 736,846 | | | $ | 493,320 | | | $ | 1,763,881 | | | $ | 1,434,156 | |
Service revenue | 227,179 | | | 213,603 | | | 664,258 | | | 644,021 | |
Total revenue | 964,025 | | | 706,923 | | | 2,428,139 | | | 2,078,177 | |
Cost of product revenue | 299,785 | | | 236,618 | | | 746,469 | | | 681,349 | |
Cost of service revenue | 136,795 | | | 128,030 | | | 398,858 | | | 398,954 | |
Total cost of revenue | 436,580 | | | 364,648 | | | 1,145,327 | | | 1,080,303 | |
Selling, general and administrative expenses | 225,249 | | | 204,171 | | | 654,844 | | | 604,581 | |
Research and development expenses | 50,131 | | | 45,376 | | | 148,566 | | | 141,700 | |
Restructuring and other costs, net | 4,059 | | | 14,068 | | | 11,075 | | | 27,868 | |
Operating income from continuing operations | 248,006 | | | 78,660 | | | 468,327 | | | 223,725 | |
Interest and other expense, net | 14,249 | | | 15,406 | | | 35,054 | | | 51,879 | |
Income from continuing operations before income taxes | 233,757 | | | 63,254 | | | 433,273 | | | 171,846 | |
Provision for income taxes | 57,021 | | | 4,644 | | | 85,609 | | | 8,642 | |
Income from continuing operations | 176,736 | | | 58,610 | | | 347,664 | | | 163,204 | |
| | | | | | | |
Loss on disposition of discontinued operations before income taxes | — | | | — | | | — | | | — | |
Provision for income taxes on discontinued operations and dispositions | 37 | | | 52 | | | 138 | | | 147 | |
Loss from discontinued operations and dispositions | (37) | | | (52) | | | (138) | | | (147) | |
Net income | $ | 176,699 | | | $ | 58,558 | | | $ | 347,526 | | | $ | 163,057 | |
Basic earnings per share: | | | | | | | |
Income from continuing operations | $ | 1.58 | | | $ | 0.53 | | | $ | 3.12 | | | $ | 1.47 | |
Loss from discontinued operations and dispositions | (0.00) | | | (0.00) | | | (0.00) | | | (0.00) | |
Net income | $ | 1.58 | | | $ | 0.53 | | | $ | 3.12 | | | $ | 1.47 | |
Diluted earnings per share: | | | | | | | |
Income from continuing operations | $ | 1.57 | | | $ | 0.53 | | | $ | 3.11 | | | $ | 1.46 | |
Loss from discontinued operations and dispositions | (0.00) | | | (0.00) | | | (0.00) | | | (0.00) | |
Net income | $ | 1.57 | | | $ | 0.52 | | | $ | 3.10 | | | $ | 1.46 | |
Weighted average shares of common stock outstanding: | | | | | | | |
Basic | 111,684 | | | 110,946 | | | 111,378 | | | 110,778 | |
Diluted | 112,292 | | | 111,559 | | | 111,935 | | | 111,460 | |
Cash dividends declared per common share | $ | 0.07 | | | $ | 0.07 | | | $ | 0.21 | | | $ | 0.21 | |
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 | | Nine Months Ended |
| October 4, 2020 | | September 29, 2019 | | October 4, 2020 | | September 29, 2019 |
| (In thousands) |
Net income | $ | 176,699 | | | $ | 58,558 | | | $ | 347,526 | | | $ | 163,057 | |
Other comprehensive income (loss): | | | | | | | |
Foreign currency translation adjustments | 72,862 | | | (62,700) | | | 55,837 | | | (66,954) | |
| | | | | | | |
| | | | | | | |
Unrealized gain (loss) on securities, net of tax | 43 | | | (5) | | | 42 | | | (22) | |
Other comprehensive income (loss) | 72,905 | | | (62,705) | | | 55,879 | | | (66,976) | |
Comprehensive income (loss) | $ | 249,604 | | | $ | (4,147) | | | $ | 403,405 | | | $ | 96,081 | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
PERKINELMER, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
| | | | | | | | | | | |
| October 4, 2020 | | December 29, 2019 |
| (In thousands, except share and per share data) |
Current assets: | | | |
Cash and cash equivalents | $ | 258,293 | | | $ | 191,877 | |
Accounts receivable, net | 797,911 | | | 725,184 | |
| | | |
Inventories | 486,555 | | | 356,937 | |
Other current assets | 133,062 | | | 100,381 | |
| | | |
Total current assets | 1,675,821 | | | 1,374,379 | |
Property, plant and equipment: | | | |
At cost | 762,661 | | | 701,580 | |
Accumulated depreciation | (426,219) | | | (383,357) | |
Property, plant and equipment, net | 336,442 | | | 318,223 | |
Operating lease right-of-use assets | 193,897 | | | 167,276 | |
Intangible assets, net | 1,181,754 | | | 1,283,286 | |
Goodwill | 3,161,998 | | | 3,111,227 | |
Other assets, net | 315,653 | | | 284,173 | |
| | | |
Total assets | $ | 6,865,565 | | | $ | 6,538,564 | |
Current liabilities: | | | |
Current portion of long-term debt | $ | 360,217 | | | $ | 9,974 | |
Accounts payable | 258,038 | | | 235,855 | |
Short-term accrued restructuring and other costs | 10,344 | | | 11,559 | |
Accrued expenses and other current liabilities | 614,101 | | | 503,332 | |
Current liabilities of discontinued operations | 2,097 | | | 2,112 | |
Total current liabilities | 1,244,797 | | | 762,832 | |
Long-term debt | 1,492,633 | | | 2,064,041 | |
Long-term liabilities | 720,800 | | | 751,468 | |
Operating lease liabilities | 175,654 | | | 146,399 | |
| | | |
Total liabilities | 3,633,884 | | | 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 111,878,000 shares and 111,140,000 shares at October 4, 2020 and December 29, 2019, respectively | 111,878 | | | 111,140 | |
Capital in excess of par value | 128,820 | | | 90,357 | |
Retained earnings | 3,134,750 | | | 2,811,973 | |
Accumulated other comprehensive loss | (143,767) | | | (199,646) | |
Total stockholders’ equity | 3,231,681 | | | 2,813,824 | |
Total liabilities and stockholders’ equity | $ | 6,865,565 | | | $ | 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)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Nine-Month Period Ended October 4, 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 | |
Net income | — | | | — | | | 176,699 | | | — | | | 176,699 | |
Other comprehensive income | — | | | — | | | — | | | 72,905 | | | 72,905 | |
Dividends | — | | | — | | | (7,839) | | | — | | | (7,839) | |
Exercise of employee stock options and related income tax benefits | 369 | | | 17,085 | | | — | | | — | | | 17,454 | |
Issuance of common stock for employee stock purchase plans | — | | | 26 | | | — | | | — | | | 26 | |
Purchases of common stock | (1) | | | (158) | | | — | | | — | | | (159) | |
Issuance of common stock for long-term incentive program | 9 | | | 4,176 | | | — | | | — | | | 4,185 | |
Stock compensation | — | | | 947 | | | — | | | — | | | 947 | |
Balance, October 4, 2020 | $ | 111,878 | | | $ | 128,820 | | | $ | 3,134,750 | | | $ | (143,767) | | | $ | 3,231,681 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Nine-Month Period Ended September 29, 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 | |
Net income | — | | | — | | | 58,558 | | | — | | | 58,558 | |
Other comprehensive loss | — | | | — | | | — | | | (62,705) | | | (62,705) | |
Dividends | — | | | — | | | (7,760) | | | — | | | (7,760) | |
Exercise of employee stock options and related income tax benefits | 19 | | | 990 | | | — | | | — | | | 1,009 | |
Issuance of common stock for employee stock purchase plans | (1) | | | (11) | | | — | | | — | | | (12) | |
Purchases of common stock | (2) | | | (142) | | | — | | | — | | | (144) | |
Issuance of common stock for long-term incentive program | 6 | | | 7,890 | | | — | | | — | | | 7,896 | |
Stock compensation | — | | | 3,088 | | | — | | | — | | | 3,088 | |
Balance, September 29, 2019 | $ | 111,093 | | | $ | 83,996 | | | $ | 2,755,165 | | | $ | (243,457) | | | $ | 2,706,797 | |
The accompanying notes are an integral part of these consolidated financial statements.
PERKINELMER, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| | | | | | | | | | | |
| Nine Months Ended |
| October 4, 2020 | | September 29, 2019 |
| (In thousands) |
Operating activities: | | | |
Net income | $ | 347,526 | | | $ | 163,057 | |
Loss from discontinued operations and dispositions, net of income taxes | 138 | | | 147 | |
Income from continuing operations | 347,664 | | | 163,204 | |
Adjustments to reconcile income from continuing operations to net cash provided by continuing operations: | | | |
Stock-based compensation | 19,770 | | | 25,105 | |
Restructuring and other costs, net | 11,075 | | | 27,868 | |
Depreciation and amortization | 182,521 | | | 157,117 | |
Loss on disposition of businesses and assets, net | 886 | | | 2,469 | |
| | | |
Change in fair value of contingent consideration | (8,807) | | | 4,399 | |
Debt extinguishment costs | — | | | 471 | |
Amortization of deferred debt financing costs and accretion of discounts | 2,559 | | | 2,778 | |
Amortization of acquired inventory revaluation | 1,757 | | | 13,258 | |
Changes in assets and liabilities which provided (used) cash, excluding effects from companies acquired: | | | |
Accounts receivable, net | (67,695) | | | (22,132) | |
| | | |
Inventories | (120,934) | | | (48,367) | |
Accounts payable | 16,391 | | | (34,043) | |
| | | |
Accrued expenses and other | 24,893 | | | (143,869) | |
Net cash provided by operating activities of continuing operations | 410,080 | | | 148,258 | |
Net cash used in operating activities of discontinued operations | — | | | — | |
Net cash provided by operating activities | 410,080 | | | 148,258 | |
Investing activities: | | | |
Capital expenditures | (57,391) | | | (53,082) | |
Purchases of investments | (9,559) | | | (5,387) | |
Purchases of licenses | — | | | (5,000) | |
Proceeds from disposition of businesses and assets | 2,423 | | | 550 | |
Proceeds from surrender of life insurance policies | 131 | | | — | |
Activity related to acquisitions, net of cash and cash equivalents acquired | (3,702) | | | (252,620) | |
Net cash used in investing activities of continuing operations | (68,098) | | | (315,539) | |
Net cash provided by investing activities of discontinued operations | — | | | — | |
Net cash used in investing activities | (68,098) | | | (315,539) | |
Financing activities: | | | |
Payments on borrowings | (515,210) | | | (1,419,489) | |
Proceeds from borrowings | 257,000 | | | 1,034,416 | |
Proceeds from sale of senior unsecured notes | — | | | 847,195 | |
Payments of debt financing costs | — | | | (7,922) | |
Settlement of cash flow hedges | (2,089) | | | (1,587) | |
Net payments on other credit facilities | (8,124) | | | (11,166) | |
Payments for acquisition-related contingent consideration | (5,200) | | | (28,200) | |
Proceeds from issuance of common stock under stock plans | 27,528 | | | 17,563 | |
Purchases of common stock | (6,829) | | | (6,201) | |
Dividends paid | (23,381) | | | (23,282) | |
Net cash (used in) provided by financing activities of continuing operations | (276,305) | | | 401,327 | |
Net cash provided by financing activities of discontinued operations | — | | | — | |
Net cash (used in) provided by financing activities | (276,305) | | | 401,327 | |
Effect of exchange rate changes on cash, cash equivalents and restricted cash | 832 | | | (4,384) | |
Net increase in cash, cash equivalents and restricted cash | 66,509 | | | 229,662 | |
Cash, cash equivalents and restricted cash at beginning of period | 191,894 | | | 166,315 | |
Cash, cash equivalents and restricted cash at end of period | $ | 258,403 | | | $ | 395,977 | |
| | | |
Supplemental disclosures of cash flow information | | | |
Reconciliation of cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheets that sum to the total shown in the condensed consolidated statements of cash flows: | | | |
Cash and cash equivalents | $ | 258,293 | | | $ | 392,969 | |
Restricted cash included in other current assets | 110 | | | 3,008 | |
Total cash, cash equivalents and restricted cash shown in the condensed consolidated statements of cash flows | $ | 258,403 | | | $ | 395,977 | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
PERKINELMER, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1: Basis of Presentation
The condensed consolidated financial statements included herein have been prepared by PerkinElmer, Inc. (the “Company”), in accordance with accounting principles generally accepted in the United States of America (the “U.S.” or the "United States") and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information in the footnote disclosures of the financial statements has been condensed or omitted where it substantially duplicates information provided in the Company’s latest audited consolidated financial statements, in accordance with the rules and regulations of the SEC. These condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes included in its Annual Report on Form 10-K for the fiscal year ended December 29, 2019, filed with the SEC (the “2019 Form 10-K”). The balance sheet amounts at December 29, 2019 in this report were derived from the Company’s audited 2019 consolidated financial statements included in the 2019 Form 10-K. The condensed consolidated financial statements reflect all adjustments that, in the opinion of management, are necessary to present fairly the Company’s financial position, results of operations and cash flows for the periods indicated. The preparation of financial statements in conformity with U.S. Generally Accepted Accounting Principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts and classifications of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The results of operations for the three and nine months ended October 4, 2020 and September 29, 2019, respectively, are not necessarily indicative of the results for the entire fiscal year or any future period.
The Company’s fiscal year ends on the Sunday nearest December 31. The Company reports fiscal years under a 52/53 week format and as a result, certain fiscal years will contain 53 weeks. The fiscal year ending January 3, 2021 ("fiscal year 2020") will include 53 weeks, and the fiscal year ended December 29, 2019 ("fiscal year 2019") included 52 weeks.
Recently Adopted and Issued Accounting Pronouncements: From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (the "FASB") and are adopted by the Company as of the specified effective dates. Unless otherwise discussed, such pronouncements did not have or will not have a significant impact on the Company’s consolidated financial position, results of operations and cash flows or do not apply to the Company’s operations.
In March 2020, the FASB issued Accounting Standards Update No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting ("ASU 2020-04"). This update provides optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. The amendments in ASU 2020-04 provide optional expedients and exceptions for applying generally accepted accounting principles (GAAP) to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The following optional expedients for applying the requirements of certain Topics or Industry Subtopics in the FASB's Accounting Standards Codification ("ASC") are permitted for contracts that are modified because of reference rate reform and that meet certain scope guidance: (1) modifications of contracts within the scope of Topic 310, Receivables, and Topic 470, Debt, should be accounted for by prospectively adjusting the effective interest rate; and (2) modifications of contracts within the scope of Topic 840, Leases, and Topic 842, Leases, should be accounted for as a continuation of the existing contracts with no reassessments of the lease classification and the discount rate or remeasurements of lease payments. For other Topics or Industry Subtopics in the ASC, the amendments also include a general principle that permits an entity to consider contract modification due to reference rate reform to be an event that does not require contract remeasurement at the modification date or reassessment of a previous accounting determination. When elected, the optional expedients for contract modifications must be applied consistently for all eligible contracts or eligible transactions within the relevant Topic or Industry Subtopic. ASU 2020-04 is effective for all entities as of March 12, 2020 through December 31, 2022. The Company is currently evaluating the provisions of this guidance and has not yet determined the impact of its adoption on the Company's consolidated financial position, results of operations and cash flows.
In March 2020, the FASB issued Accounting Standards Update No. 2020-03, Codification Improvements to Financial Instruments ("ASU 2020-03"). This guidance clarifies various ASC Topics related to financial instruments, including the following, among others: (1) Fair Value Option Disclosures: all entities are required to provide the fair value option disclosures in paragraphs 825-10-50-24 through 50-32 of the ASC; (2) Cross-Reference to Line-of-Credit or Revolving-Debt Arrangements Guidance in Subtopic 470-50, Modifications and Extinguishments: the amendments improve the understandability of the guidance; (3) Interaction of Topic 842 and Topic 326:the contractual term of a net investment in a lease determined in
accordance with Topic 842, Leases should be the contractual term used to measure expected credit losses under Topic 326, Financial Instruments - Credit Losses; and (4) Interaction of Topic 326 and Subtopic 860-20: the amendments to Subtopic 860- 20 clarify that when an entity regains control of financial assets sold, an allowance for credit losses should be recorded in accordance with Topic 326. For Fair Value Option Disclosures and Cross-Reference to Line-of-Credit or Revolving-Debt Arrangements Guidance, the provisions are effective upon issuance of this guidance. For Interaction of Topic 842 and Topic 326 and Interaction of Topic 326 and 860-20, the effective dates and transition requirements for the amendments are the same as the effective dates and transition requirements in ASU 2016-13, as described below. In accordance with ASU 2020-03, the Company adopted the guidance as of April 5, 2020. The adoption did not have a material impact on the Company's consolidated financial position, results of operations and cash flows.
In January 2020, the FASB issued Accounting Standards Update No. 2020-01, Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) - Clarifying the Interactions between Topic 321, Topic 323, and Topic 815 ("ASU 2020-01"). This guidance addresses the accounting for the transition into and out of the equity method and provides clarification of the interaction of rules for equity securities, the equity method of accounting, and forward contracts and purchase options on certain types of securities. The amendments clarify that: (a) an entity should consider observable transactions that require it to either apply or discontinue the equity method of accounting for the purposes of applying the measurement alternative in accordance with Topic 321 immediately before applying or upon discontinuing the equity method; and (b) an entity should not consider whether, upon the settlement of the forward contract or exercise of the purchased option, individually or with existing investments, the underlying securities would be accounted for under the equity method in Topic 323 or the fair value option in accordance with the financial instruments guidance in Topic 825. The provisions of this guidance are to be applied prospectively upon their effective date. ASU 2020-01 is effective for annual reporting periods beginning after December 15, 2020, and interim periods within those years. Early adoption is permitted but requires simultaneous adoption of all provisions of this guidance. The Company is currently evaluating the requirements of this guidance and has not yet determined the impact of its adoption on the Company's consolidated financial position, results of operations and cash flows.
In December 2019, the FASB issued Accounting Standards Update No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes ("ASU 2019-12"). ASU 2019-12 eliminates certain exceptions and adds guidance to reduce complexity in accounting for income taxes. Specifically, this guidance: (1) removes the intraperiod tax allocation exception to the incremental approach; (2) removes the ownership changes in investments exception in determining when a deferred tax liability is recognized after an investor in a foreign entity transitions to or from the equity method of accounting and applies this provision on a modified retrospective basis through a cumulative-effect adjustment to retained earnings at the beginning of the period of adoption; and (3) removes the exception to using the general methodology for calculating income taxes in an interim period when a year-to-date loss exceeds the anticipated loss for the year. ASU 2019-12 also simplifies accounting principles by making other changes, including requiring an entity to: (1) evaluate whether a step-up in tax basis of goodwill relates to a business combination or a separate transaction; (2) make a policy election to not allocate consolidated income taxes when a member of a consolidated tax return is not subject to income tax and to apply this provision retrospectively to all periods presented; and (3) recognize a franchise tax (or similar tax) that is partially based on income as an income-based tax and apply this provision either retrospectively for all periods presented or on a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the period of adoption. The provisions of this guidance (except as specifically mentioned above) are to be applied prospectively upon their effective date. ASU 2019-12 is effective for annual reporting periods beginning after December 15, 2020, and interim periods within those years. Early adoption is permitted but requires simultaneous adoption of all provisions of this guidance. The Company is currently evaluating the requirements of this guidance and has not yet determined the impact of its adoption on the Company's consolidated financial position, results of operations and cash flows.
In April 2019, the FASB issued Accounting Standards Update No. 2019-04, Codification Improvements to Topic 326, Financial Instruments - Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments ("ASU 2019-04"). ASU 2019-04 clarifies certain aspects of previously issued accounting standards related to: (1) ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Statements ("ASU 2016-13"), in areas of accrued interest receivable, transfers of loans and debt securities between classifications, recoveries and prepayments, (2) ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities ("ASU 2017-12"), in areas of partial-term fair value hedges, fair value hedge basis adjustments, certain disclosures and transition requirements and (3) ASU 2016-01, Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities ("ASU 2016-01"), in areas of remeasurement of equity securities under ASC 820, Fair Value Measurement, when using the measurement alternative and remeasurement of equity securities at historical exchange rates. The amendments related to ASU 2016-13 are required to be adopted in conjunction with that accounting standards update, as further described below. Since the Company has already adopted ASU 2017-12 and ASU 2016-01, the related amendments in ASU 2019-04 are effective for fiscal years beginning after December 15, 2019, including interim
periods within those fiscal years, with early adoption permitted in any interim period. The amendments to ASU 2017-12 can either be adopted retrospectively as of the date of adoption of ASU 2017-12 or they can be adopted prospectively. The amendments to ASU 2016-01 are required to be applied using a modified-retrospective adoption approach with a cumulative-effect adjustment to retained earnings as of the date of adoption of ASU 2016-01, except for those related to equity securities without readily determinable fair values that are measured using the measurement alternative, which are required to be applied prospectively. The standard was effective for the Company beginning on December 30, 2019, the first day of the Company's fiscal year 2020. The Company applied the provisions of this guidance prospectively. The adoption did not have a material impact on the Company's consolidated financial position, results of operations and cash flows.
In August 2018, the FASB issued Accounting Standards Update No. 2018-15, Intangibles-Goodwill and Other- Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract ("ASU 2018-15"). ASU 2018-15 aligns the accounting for implementation costs incurred in a hosting arrangement that is a service contract with the guidance on capitalizing costs associated with developing or obtaining internal-use software (and hosting arrangements that include an internal-use software license). The provisions of this guidance are to be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. The standard was effective for the Company beginning on December 30, 2019, the first day of the Company's fiscal year 2020. The Company applied the provisions of this guidance prospectively. The adoption did not have a material impact on the Company's consolidated financial position, results of operations and cash flows.
In August 2018, the FASB issued Accounting Standards Update No. 2018-14, Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20): Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans ("ASU 2018-14"). ASU 2018-14 adds, removes, and clarifies disclosure requirements related to defined benefit pension and other postretirement plans. ASU 2018-14 adds requirements for an entity to disclose the weighted-average interest crediting rates used in the entity’s cash balance pension plans and other similar plans; and an explanation of the reasons for significant gains and losses related to changes in the benefit obligation for the period. Further, ASU 2018-14 removes guidance that currently requires the following disclosures: the amounts in accumulated other comprehensive income expected to be recognized as part of net periodic benefit cost over the next year; the amount and timing of plan assets expected to be returned to the employer; information about (1) benefits covered by related-party insurance and annuity contracts and (2) significant transactions between the plan and related parties; and the effects of a one-percentage-point change on the assumed health care costs and the effect of this change in rates on service cost, interest cost, and the benefit obligation for postretirement health care benefits. ASU 2018-14 also clarifies the guidance in Compensation-Retirement Benefits (Topic 715-20-50-3) on defined benefit plans to require disclosure of (1) the projected benefit obligation ("PBO") and fair value of plan assets for pension plans with PBOs in excess of plan assets (the same disclosure with reference to the accumulated postretirement benefit obligation rather than the PBO is required for other postretirement benefit plans) and (2) the accumulated benefit obligation ("ABO") and fair value of plan assets for pension plans with ABOs in excess of plan assets. The provisions of this guidance are to be applied retrospectively to all periods presented upon their effective date. ASU 2018-14 is effective for annual reporting periods beginning after December 15, 2020, and interim periods within those years with early adoption permitted. The Company is currently evaluating the requirements of this guidance and has not yet determined the impact of its adoption on the Company's consolidated financial position, results of operations and cash flows.
In August 2018, the FASB issued Accounting Standards Update No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement ("ASU 2018-13"). ASU 2018-13 adds, removes, and modifies certain disclosures related to fair value measurements. ASU 2018-13 adds requirements for an entity to disclose the changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period; and the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. Further, ASU 2018-13 removes the requirement to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy; the policy for timing of transfers between levels; and the valuation processes for Level 3 fair value measurements. ASU 2018-13 also modifies existing disclosure requirements related to measurement uncertainty. The amendments regarding changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty are to be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments are to be applied retrospectively to all periods presented upon their effective date. The standard was effective for the Company beginning on December 30, 2019, the first day of the Company's fiscal year 2020. The adoption did not have a material impact on the Company's disclosures related to fair value measurements.
In June 2016, the FASB issued Accounting Standards Update No. 2016-13, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments ("ASU 2016-13"). ASU 2016-13 changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net
income. The standard requires entities to use the expected loss impairment model and will apply to most financial assets measured at amortized cost and certain other instruments, including trade and other receivables, loans, held-to-maturity debt securities, net investments in leases and off-balance sheet credit exposures. Entities are required to estimate the lifetime “expected credit loss” for each applicable financial asset and record an allowance that, when deducted from the amortized cost basis of the financial asset, presents the net amount expected to be collected on the financial asset. The standard also amends the impairment model for available-for-sale (“AFS”) debt securities and requires entities to determine whether all or a portion of the unrealized loss on an AFS debt security is a credit loss. An entity will recognize an allowance for credit losses on an AFS debt security as a contra-account to the amortized cost basis rather than as a direct reduction of the amortized cost basis of the investment. The provisions of this guidance are to be applied using a modified-retrospective approach. A prospective transition approach is required for debt securities for which an other-than-temporary impairment had been recognized before the effective date. Subsequent to the issuance of ASU 2016-13, in November 2018, the FASB issued Accounting Standards Update No. 2018-19, Codification Improvements to Topic 326, Financial Instruments - Credit Losses ("ASU 2018-19"), in April 2019, the FASB issued ASU 2019-04, and in May 2019, the FASB issued Accounting Standards Update No. 2019-05, Financial Instruments - Credit Losses (Topic 326), Targeted Transition Relief ("ASU 2019-05"). The amendments in ASU 2018-19 clarify that receivables arising from operating leases are not within the scope of Subtopic 326-20, Financial Instruments - Credit Losses - Measured at Amortized Cost. Instead, impairment of receivables arising from operating leases should be accounted for in accordance with Topic 842, Leases. The amendments in ASU 2019-04 clarify the measurement of allowance for credit losses on accrued interest receivable; the inclusion of expected recoveries in the allowance for credit losses; the permission of a prepayment-adjusted effective interest rate when determining the allowance for credit losses; and the steps entities should take when recording the transfer of loans or debt securities between measurement classifications. The amendments in ASU 2019-05 provide an option to irrevocably elect the fair value option in Subtopic 825-10, Financial Instruments-Overall, on an instrument-by-instrument basis, for eligible financial assets measured at amortized cost basis upon adoption of ASU 2016-13, but this fair value option election does not apply to held-to-maturity debt securities. The effective date and transition requirements for the amendments in ASU 2018-19, ASU 2019-04 and ASU 2019-05 are the same as the effective date and transition requirements of ASU 2016-13, which is effective for annual reporting periods beginning after December 15, 2019, and interim periods within those years. The standards were effective for the Company beginning on December 30, 2019, the first day of the Company's fiscal year 2020. The Company adopted these standards using the modified-retrospective approach. The adoption of the standards resulted in a decrease in retained earnings at December 30, 2019 of approximately $1.3 million from the cumulative effect of initially applying the standards as of that date. In addition, the adoption of the standard resulted in an increase in reserve for doubtful accounts of $1.7 million and an increase in deferred tax assets of $0.4 million from the tax impact of the cumulative adjustments. The adoption did not have an impact on cash from or used in operating, investing or financing activities in the Company's consolidated statement of cash flows at December 30, 2019.
Note 2: Revenue
Disaggregation of revenue
In the following tables, revenue is disaggregated by primary geographical markets, primary end-markets and timing of revenue recognition. The tables also include a reconciliation of the disaggregated revenue with the reportable segments' revenue.
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| Reportable Segments |
| Three Months Ended |
| October 4, 2020 | | September 29, 2019 |
| Discovery & Analytical Solutions | | Diagnostics | | Total | | Discovery & Analytical Solutions | | Diagnostics | | Total |
| (In thousands) |
Primary geographical markets | | | | | | | | | | | |
Americas | $ | 173,992 | | | $ | 213,347 | | | $ | 387,339 | | | $ | 178,493 | | | $ | 96,759 | | | $ | 275,252 | |
Europe | 115,281 | | | 198,205 | | | 313,486 | | | 119,801 | | | 70,225 | | | 190,026 | |
Asia | 134,350 | | | 128,850 | | | 263,200 | | | 128,610 | | | 113,035 | | | 241,645 | |
| $ | 423,623 | | | $ | 540,402 | | | $ | 964,025 | | | $ | 426,904 | | | $ | 280,019 | | | $ | 706,923 | |
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