PERKINELMER INC - 10-Q Quarterly Report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended April 3, 2005

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

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.)

45 William Street, Wellesley, Massachusetts		02481
(Address of principal executive offices)		(Zip Code)

(781) 237-5100

(Registrant’s telephone number, including area code)

NONE

(Former name, former address and former fiscal year, if changed since last report)

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. x Yes ¨ No

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

x Yes ¨ No

Number of shares outstanding of each of the issuer’s classes of common stock:


Class		Outstanding at May 9, 2005
Common Stock, $1 par value per share		129,653,593

TABLE OF CONTENTS


		Page
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements	3
	Consolidated Income Statements	3
	Consolidated Balance Sheets	4
	Consolidated Statements of Cash Flows	5
	Notes to Consolidated Financial Statements	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
	Overview	21
	Consolidated Results of Continuing Operations	21
	Reporting Segment Results of Continuing Operations	25
	Liquidity and Capital Resources	26
	Off Balance Sheet Arrangements	29
	Application of Critical Accounting Policies and Estimates	29
	Forward-Looking Information and Factors Affecting Future Performance	30

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	35

Item 4.	Controls and Procedures	36

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	37

Item 4.	Submission of Matters to a Vote of Security Holders	37

Item 6.	Exhibits	38

Signature		39

Exhibit Index		40

PART I. FINANCIAL INFORMATION

Item 1.

Financial Statements

PERKINELMER, INC. AND SUBSIDIARIES

CONSOLIDATED INCOME STATEMENTS


	Three Months Ended
	April 3, 2005		March 28, 2004
	(Unaudited) (In thousands except per share data)
Sales	$	416,252	$	392,607
Cost of sales		246,919		239,980
Research and development expenses		23,658		20,196
Selling, general and administrative expenses		102,555		95,762
Amortization of intangible assets		7,332		7,101
In-process research and development charge		194		—
Gains on dispositions, net		—		(363	)

Operating income from continuing operations		35,594		29,931
Interest and other expense, net		8,274		9,546

Income from continuing operations before income taxes		27,320		20,385
Provision for income taxes		7,568		6,128

Income from continuing operations		19,752		14,257
Loss from discontinued operations, net of income taxes		—		(788	)
Gain (loss) on dispositions of discontinued operations, net of income taxes		77		(198	)

Net income	$	19,829	$	13,271

Basic and diluted earnings (loss) per share:
Continuing operations	$	0.15	$	0.11
(Loss) from discontinued operations, net of income taxes		—		(0.01	)

Net income	$	0.15	$	0.10

Weighted average shares of common stock outstanding:
Basic		128,828		126,685
Diluted		131,056		128,933
Cash dividends per common share	$	0.07	$	0.07

The accompanying unaudited notes are an integral part of these consolidated financial statements.

PERKINELMER, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS


	April 3, 2005			January 2, 2005
	(Unaudited) (In thousands except share and per share data)
Current assets:
Cash and cash equivalents	$	184,213		$	197,513
Accounts receivable, net		286,710			287,299
Inventories		201,302			193,556
Other current assets		71,006			69,119
Current assets of discontinued operations		—			143

Total current assets		743,231			747,630

Property, plant and equipment:
At cost		637,063			631,693
Accumulated depreciation		(406,414	)		(395,777	)

Net property, plant and equipment		230,649			235,916
Marketable securities and investments		10,302			10,479
Intangible assets, net		399,215			397,445
Goodwill		1,078,266			1,073,869
Other assets		104,847			110,016
Long-term assets of discontinued operations		—			152

Total assets	$	2,566,510		$	2,575,507

Current liabilities:
Short-term debt	$	9,663		$	9,714
Accounts payable		146,514			146,630
Accrued restructuring costs and integration costs		1,987			3,045
Accrued expenses		275,523			286,460
Current liabilities of discontinued operations		45			118

Total current liabilities		433,732			445,967

Long-term debt		364,761			364,874
Long-term liabilities		307,327			304,581

Total liabilities		1,105,820			1,115,422

Commitments and contingencies
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 129,566,000 and 129,059,000 at April 3, 2005 and January 2, 2005, respectively		129,566			129,059
Capital in excess of par value		552,473			545,000
Unearned compensation		(8,858	)		(4,202	)
Retained earnings		743,670			732,878
Accumulated other comprehensive income		43,839			57,350

Total stockholders’ equity		1,460,690			1,460,085

Total liabilities and stockholders’ equity	$	2,566,510		$	2,575,507

The accompanying unaudited notes are an integral part of these consolidated financial statements.

PERKINELMER, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS


	Three Months Ended
	April 3, 2005			March 28, 2004
	(Unaudited) (In thousands)
Operating activities:
Net income	$	19,829		$	13,271
Add loss from discontinued operations, net of income taxes		—			788
Add (gain) loss on disposition of discontinued operations, net of income taxes		(77	)		198

Net income from continuing operations		19,752			14,257
Adjustments to reconcile net income from continuing operations to net cash provided by continuing operations:
Stock-based compensation		921			806
Amortization of debt discount and issuance costs		818			2,211
Depreciation and amortization		19,233			19,256
In-process research and development		194			—
Gains on dispositions and sales of investments, net		—			(363	)
Changes in operating assets and liabilities which (used) provided cash, excluding effects from companies purchased and divested:
Accounts receivable		(3,485	)		5,334
Inventories		(8,141	)		(7,030	)
Accounts payable		568			(11,967	)
Accrued restructuring costs		(1,058	)		(2,039	)
Accrued expenses and other		(15,390	)		4,562

Net cash provided by operating activities from continuing operations		13,412			25,027
Net cash provided by operating activities from discontinued operations		83			1,529

Net cash provided by operating activities		13,495			26,556
Investing activities:
Capital expenditures		(4,925	)		(3,297	)
Proceeds from dispositions of property, plant and equipment, net		322			2,056
Proceeds from disposition or settlement of businesses, net		250			—
Cash paid for acquisitions, net of cash acquired		(13,138	)		—

Net cash used in continuing operations investing activities		(17,491	)		(1,241	)
Net cash provided by discontinued operations investing activities		395			—

Net cash used in investing activities		(17,096	)		(1,241	)
Financing activities:
Prepayment of term loan debt		(175	)		(45,000	)
Decrease in other credit facilities		(243	)		(464	)
Proceeds from issuance of common stock		2,643			3,658
Dividends paid		(9,037	)		(8,904	)

Net cash used in financing activities		(6,812	)		(50,710	)

Effect of exchange rate changes on cash and cash equivalents		(2,887	)		(633	)

Net decrease in cash and cash equivalents		(13,300	)		(26,028	)
Cash and cash equivalents at beginning of period		197,513			191,499

Cash and cash equivalents at end of period	$	184,213		$	165,471

The accompanying unaudited notes are an integral part of these consolidated financial statements.

PERKINELMER, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(1) Basis of Presentation

The consolidated financial statements included herein have been prepared by PerkinElmer, Inc. (the “Company”), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information in footnote disclosures normally included in financial statements has been condensed or omitted in accordance with the rules and regulations of the SEC. These statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the fiscal year ended January 2, 2005, filed with the SEC (the “2004 Form 10-K”). The balance sheet amounts at January 2, 2005 in this report were derived from the Company’s audited 2004 financial statements included in the 2004 Form 10-K. Certain prior period amounts related to discontinued operations have been reclassified to conform to the current-year financial statement presentation. The reclassified information reflects all adjustments that, in the opinion of management, are necessary to present fairly the Company’s results of operations, financial position and cash flows for the periods indicated. The preparation of financial statements in conformity with generally accepted accounting principles 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 months ended April 3, 2005 and March 28, 2004 are not necessarily indicative of the results for the entire fiscal year.

(2) Acquisitions

In February 2005, the Company acquired the capital stock of Elcos AG, a leading European designer and manufacturer of custom light emitting diodes, or LED, solutions for biomedical and industrial applications. Consideration for the transaction was approximately $15.4 million in cash at the time of closing with additional cash consideration of approximately $1.4 million due through fiscal 2007. In addition, potential cash earn out payments of up to approximately $8.4 million are expected to be made based on the future performance of the business. The Company has accrued for such payments due to the high likelihood that the payments will be made.

Elcos’ operations are reported within the results of the Company’s Optoelectronics reporting segment. The acquisition was accounted for as a purchase in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 141, and the Company has accordingly allocated the purchase price of Elcos based upon the fair values of the assets acquired and liabilities assumed. In connection with the fair valuing of the assets acquired and liabilities assumed, management, assisted by valuation consultants, performed an assessment of intangible assets using customary valuation procedures and techniques. Identifiable intangible assets included $0.2 million in acquired in-process research and development for projects that had not yet reached technological feasibility as of the acquisition date and for which no future alternative use existed. These costs were expensed on the date of the acquisition.

PERKINELMER, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The components of the preliminary purchase price and allocation are as follows (in thousands):


Consideration and acquisition costs:
Cash payments	$	15,429
Deferred consideration		1,444

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