filings.toolsRevvity 10-K 2017-12-31
Filed 2018-02-27. 22 sections, 572K characters. Original on sec.gov · Markdown · JSON
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10-K 1 pki1231201710k.htm FORM 10-K
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 December 31, 2017 |
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, a smaller reporting company, or 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 | ý | Accelerated filer | o | ||
| Non-accelerated filer | o(Do not check if a smaller reporting company) | Smaller reporting company | o | ||
| Emerging growth company | o |
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 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 30, 2017, was $7,366,225,026 based upon the last reported sale of $68.14 per share of common stock on June 30, 2017.
As of February 23, 2018, there were outstanding 110,504,347 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 24, 2018 are incorporated by reference into Part III of this Form 10-K.
TABLE OF CONTENTS
PART I
Item 1. Business
Overview
We are a leading provider of products, services and solutions for the diagnostics, food, environmental, industrial, life sciences research and laboratory services markets. Through our advanced technologies and differentiated solutions, we address critical issues that help to improve lives and the world around us.
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 December 31, 2017, we employed approximately 11,000 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, Discovery & Analytical Solutions and Diagnostics, 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 global 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:
Acquisitions in Fiscal Year 2017:
We completed the acquisition of three businesses in fiscal year 2017 for total consideration of $1.6 billion. The acquired businesses were EUROIMMUN Medizinische Labordiagnostika AG (“EUROIMMUN”) acquired for total consideration of €1.2 billion, Tulip Diagnostics Private Limited (“Tulip”) acquired for total consideration of $127.3 million, and one other business acquired for total consideration of $14.8 million. We have a potential obligation to pay the former shareholders of Tulip up to INR1.6 billion in additional consideration over a two year period, which is currently equivalent to $25.2 million, and is accounted for as compensation expense in our consolidated financial statements over a two year period and is excluded from the purchase price allocation. We reported the operations of EUROIMMUN and Tulip within the results of our Diagnostics segment and the other acquisition within the results of our Discovery & Analytical Solutions segment from the acquisition dates.
Restructuring:
During fiscal year 2017, we recorded pre-tax restructuring charges of $8.0 million in our Discovery & Analytical Solutions segment and $2.9 million in our Diagnostics segment related to a workforce reduction from restructuring activities. Our management approved these plans to realign resources to emphasize growth initiatives. We also 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 pre-tax charges of $3.6 million, in the Discovery & Analytical Solutions segment and $0.5 million in the Diagnostics segment during fiscal year 2017 as a result of these contract terminations.
This pre-tax restructuring activity has been reported as restructuring and contract termination charges and is included as a component of income from continuing operations. We expect no significant impact on future operating results or cash flows from the restructuring activities executed in fiscal year 2017.
Business Segments and Products
We report our business in two segments: Discovery & Analytical Solutions and Diagnostics. We realigned our businesses at the beginning of the fourth quarter of fiscal year 2016 to better position us to grow in attractive end markets and expand share with our core product offerings through an improved customer focus, more value-add collaboration and breakthrough innovations.
Discovery & Analytical Solutions Segment
Our comprehensive portfolio of technologies helps life sciences researchers better understand diseases and develop treatments. In addition, we enable scientists to detect, monitor and manage contaminants and toxic chemicals that impact our environment and food supply. Our Discovery & Analytical Solutions segment serves the environmental, food, industrial, life sciences research and laboratory services markets, and generated revenue of $1,578.5 million in fiscal year 2017.
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 solutions are used to detect and help reduce the impact products and industrial processes have on our environment. For example, our solutions 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.
Food Market:
We offer a variety of solutions that help farmers and food producers provide a growing population with food that is safe, nutritious and appealing, and assist manufacturers with product consistency and maximizing production yield. Our instruments confirm food quality, including the level of moisture in grain or the level of fat in butter, as well as detect 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 to enable customers 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, semiconductor and electronics, energy, lubricant, petrochemical and polymer industries. Our technologies for this market are primarily used by customers focusing on quality assurance standards.
Life Sciences Research Market:
In the life science research market, we provide a broad suite of solutions including reagents, informatics, and detection and imaging technologies that enable scientists to work smarter, make research breakthroughs and transform those breakthroughs to real-world outcomes. These products, solutions and services support pharmaceutical and biotech companies, and academic institutions globally in discovering and developing better treatments and therapeutics to fight disease, faster and more efficiently.
Laboratory Services Market:
We provide services designed to help customers in the laboratory services market increase efficiencies and production time while reducing lab maintenance costs. Our OneSource® laboratory service business is aligned with customers' needs, enabling them to accelerate scientific progress and commercial opportunities.
Principal Products:
Our principal products and services for Discovery & Analytical Solutions applications include the following:
Environmental, Food & Industrial:
| • | The Clarus® series of gas chromatographs, gas chromatographs/mass spectrometers and the TurboMatrix™ family of sample-handling equipment, which 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™ ultra-high performance liquid chromatography (UHPLC) and Flexar advanced liquid chromatography systems, which provide high throughput and resolution chromatographic separations. |
| • | The QSight® Triple Quad LC/MS/MS, a flow-based mass spectrometry system that provides high sensitivity and enables high levels of efficiency and productivity to meet both standard and regulatory requirements. |
| • | 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. |
| • | Our atomic spectroscopy family of instruments, including the PinAAcle® family of atomic absorption spectrometers, the Avio family of inductively coupled plasma (“ICP”) optical emission spectrometers and the NexION® family of ICP mass spectrometers, which are used in the environmental and chemical industries, among others, to determine the elemental content of a sample. |
| • | Our infrared spectroscopy (IR) family of instruments, the Spectrum Two™ IR & NIR spectrometers, which are compact and portable and 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 includes the Frontier™ IR and NIR spectrometers designed to provide high sensitivity and flexibility to address a range of sample types. Spotlight™ IR systems are designed for scientists whose samples demand higher sensitivity and simpler analysis and workflows. |
| • | The LAMBDA™ UV/Vis, a series of spectrophotometers that provide sampling flexibility to enable measurement 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. |
| • | The 2400 Series II CHNS/O Elemental Analyzer, one of the leading organic elemental analyzers. It is ideal for the rapid determination of carbon, hydrogen, nitrogen, sulfur, and oxygen content in organic and other types of materials. |
| • | Our thermal analysis family, including our Differential Scanning Calorimetry (DSC) series that offers exclusive HyperDSC™ capability for unparalleled sensitivity and new insights into material processes, our Thermogravimetric (TGA) and Simultaneous Thermal Analysis (STA) instruments, which can be coupled to Fourier Transform Infrared (FT-IR), Mass Spectrometry (MS), or Gas Chromatography/Mass Spectrometry (GC/MS) to provide greater analysis power and knowledge. |
| • | Perten's Falling Number™ and Glutomatic™ instruments, which determine the bread baking quality of wheat and flour, and Perten's DA NIR bench and in process analyzer determine constituent content for use across the food segment from meat to animal feed. |
| • | The Delta™ range of milk quality analyzers, which help ensure the quality of dairy products and are used at Central Milk Testing labs as well as dairy processing facilities around the world. |
| • | The Bioo Scientific® test kits for detection of toxins, veterinary drug residues and contaminants, which enable rapid and easy testing at different steps in the food value chain. |
Life Sciences Research and Laboratory Services:
| • | Phenoptics™ quantitative pathology research solutions, which 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™, Vectra® 3 or Vectra® Polaris™ multispectral imaging system and inForm® software, 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 radiochemicals and the Tri-carb® and Quantulus™ GCT families of liquid scintillation analyzers, Wizard2® Gamma counters and MicroBeta2® plate based LSA, which 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, which is used for sensitive and high speed phenotypic drug screening of complex cellular models. |
| • | The Operetta® CLS™ high content analysis system, which enables scientists to reveal fine sub-cellular details from everyday assays as well as more complex studies, for example using live cells, 3D and stem cells. |
| • | The EnSight® multimode plate reader benchtop system, offering well plate imaging alongside labeled detection technologies for target-based and phenotypic assays. |
| • | The EnVision® multimode plate reader, designed for high-throughput screening laboratories, 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 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. |
| • | AlphaScreen®, AlphaLISA® and AlphaPlex® research assays, including over 500 no-wash biomarker detection 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, which can increase sensitivity of histochemistry and cytochemistry as much as 10 to 20 times. |
| • | In vivo imaging technologies and reagents for preclinical research, including the IVIS® Spectrum™ series for 2D and 3D optical imaging, the FMT® series for 3D optical tomography and the IVIS® Lumina™ series for 2D imaging, along with a suite of bioluminescent and fluorescent imaging agents, cell lines and dyes. These technologies are designed to provide 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 G8 PET/CT preclinical imaging system, delivering PET imaging with an intuitive user interface and efficient workflows, ensuring subject monitoring throughout preparation and imaging. |
| • | The Quantum GX2, which enables in vivo imaging of multiple species across multiple disease areas by delivering industry leading high resolution imaging. Low dose scanning allows subjects to be imaged over time to evaluate disease progression while minimizing the harmful effects of radiation that could impact the biology of the animal. With Quantum GX2™, data from the IVIS® and FMT® imaging platforms can be seamlessly co-registered with microCT to deliver more information on the disease state. |
| • | AlphaPlex® reagent technology, a homogeneous, all-in-one-well multiplexing reagent system for performing ultra-sensitive immunoassay analyses. |
| • | 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 software, providing 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® technology driven interactive graphical platform, providing 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:
New products introduced or acquired for Discovery & Analytical Solutions applications in fiscal year 2017 include the following:
Environmental, Food & Industrial:
| • | The NexION® 1000 ICP-MS, providing exceptional speed, operational simplicity, and improved laboratory efficiency, designed for high-throughput testing labs running routine, multi-elemental, trace-level analyses to meet regulatory standards. |
| • | The NexION® 2000, a versatile ICP-MS, offering powerful interference removal, high flexibility regardless of matrix, efficient analysis every time, and operational simplicity. |
| • | The Avio® 500, a simultaneous, vertical plasma dual view, and compact ICP-OES engineered to handle even the most difficult samples, delivering productivity, high performance, and fast return on investment. |
| • | The Spectrum Two N™, a high-performance, yet robust and transportable FT-NIR system platform enabling simple, reliable NIR analyses, designed for labs that need to combine high-end performance with the ease-of-use features of a portable instrument. |
| • | The Clarus® 590 and 690 GC instruments, which include a wide-range flame ionization detector and high-performance capillary injector that enable superior sensitivity, capacity and throughput. |
| • | TurboMatrix™ MultiPrep auto samplers, providing expanded sample handling capabilities for a broad range of workflows, including multiple options for liquid injection, headspace and SPME on one system. |
| • | The QSight® LX50 UHPLC system, paired and seamlessly integrated with the QSight® triple quad LC/MS/MS, forming a complete system that delivers high sensitivity and specificity for demanding applications such as pesticide-residue and nutritional-component analysis. |
Life Sciences Research and Laboratory Services:
| • | The Vectra® Polaris™ automated quantitative pathology imaging system, which integrates multispectral imaging and automated slide scanning to better visualize, analyze, quantify, and phenotype immune cells in situ in FFPE tissue sections and TMAs. |
| • | The VICTOR Nivo™ multimode plate reader, a compact, lightweight, benchtop system, equipped with all popular detection modes, designed for life science research laboratories performing everyday biochemical and cell-based assays at relatively low-throughput, or assay development work, with diverse application requirements. |
| • | PerkinElmer SignalsTM notebook, a scientific research data management solution, allowing researchers to record research data and experiments in digital notebooks, drag & drop, store, organize, share, find and filter data easily. |
| • | ChemDraw® 17 chemical structure drawing and visualization application, which is now available on the cloud. |
| • | PerkinElmer Signals Lead DiscoveryTM software, which enables researchers to quickly gain new insights into chemical and biomolecular research data, featuring guided search and analysis workflows and dynamic data visualizations for on-the-fly exploration. |
| • | PerkinElmer Signals Medical ReviewTM software, empowering medical monitors to detect safety signals faster and reduce overall time to submission by combining innovative medical review workflow with advanced analytics. |
| • | The IVIS® LuminaTM S5 and IVIS® LuminaTM X5, which allow researchers to explore molecular and anatomical aspects of disease simultaneously with high sensitivity 2D optical and high resolution X-ray (IVIS® LuminaTM X5) in vivo imaging for faster throughput. Improved imaging workflow solutions include unique animal handling accessories, subject recognition technology and radio frequency ID support increase speed, reproducibility and accuracy of data. |
| • | The Quantum GX2, which enables high-resolution in vivo imaging of multiple species across many applications from bone to cardio-pulmonary to cancer research. Low dose scanning allows researchers to image subjects over time to evaluate disease progression while minimizing the harmful effects of radiation which could impact the biology of the animal. |
| • | OneSource® Insights as a ServiceTM, which leverages comprehensive OneSource® analytics and industry data to develop and deliver customer-need driven recommendations to optimize, integrate and accelerate lab operations. |
| • | OneSource® Asset Genius™ solution, which offers a 360° view of PC-driven laboratory instruments regardless of the manufacturer, correlating instrument usage, age and service data, allowing customers to visually pinpoint under-performing, ideally-performing and over-burdened assets, and to make informed decisions. |
Brand Names:
Our Discovery & Analytical Solutions segment offers additional products under various brand names, including:
Environmental, Food & Industrial:
AAnalyst™, Altus®, Aquamatic™, Avio®, AxION®, Clarus®, DairyGuard™, Falling NumberTM, Frontier™, Glutomatic™, Honigs Regression™, HyperDSCTM, Inframatic™, LAMBDA™, NexION®, OilExpress™, OilPrep™, Optima®, Perten®, Perten Instruments®, PinAAcle®, QSight®, Spectrum™, Spectrum Two™, Spotlight™, Supra-clean®, Supra-d™, Supra-poly®, Syngistix™, Torion®, TurboMatrix™ and Ultraspray®.
Life Sciences Research and Laboratory Services:
AlphaLISA®, AlphaPlex™, AlphaScreen®, Alpha™ SureFire®, AngioSense®, Annexin-Vivo™ , Cell carrier®, cell::explorer®, Chem3D®, ChemDraw®, ChemOffice®, Columbus™ Elements®, EnLite™, EnSight®, EnVision®, FMT®, FolateRSense™, Geospiza®, High Content Profiler™, inForm®, IntegriSense™, IVIS®, LANCE®, Living Image®, Lumina™, Mantra™, MicroBeta2®, MMPSense®, NENTM, Nuance®, OneSource®, Opal®, Opera Phenix®, Operetta® CLS™, OsteoSense®, PerkinElmer Signals™ for Translational, Phenoptics™, ProSense®, Quantulus™ GCT, RediJect™, Spectrum™, Transferrin-Vivo™, Tri-Carb®, Vectra®, Vectra® PolarisTM, VICTOR Nivo™, ViewLux™, VivoTag®, Wizard2®, and XenoLightTM.
Diagnostics Segment
We offer instruments, reagents, assay platforms, and software to hospitals, medical labs, clinicians, and medical research professionals to help improve the health of families. Our Diagnostics segment is especially focused on reproductive
health, emerging market diagnostics, and applied genomics. Our Diagnostics business generated revenue of $678.5 million in fiscal year 2017.
In December 2017, we completed the acquisition of EUROIMMUN. Headquartered in Lubeck, Germany, EUROIMMUN develops, produces and distributes instruments, software and consumables for in vitro diagnostics. EUROIMMUN focuses on IVD analysis systems, including reagents, disposables and software for diagnosing and detecting allergies, autoimmune disorders and infectious diseases.
Diagnostics Market:
We provide early detection for genetic disorders from pregnancy to early childhood, 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. We also develop the technologies that enable and support genomic workflows using PCR and next-generation DNA sequencing for applications in oncology, genetic testing and drug discovery.
Principal Products:
Our principal products and services for Diagnostics applications include the following:
Diagnostics:
| • | The DELFIA® Xpress screening platform, a complete solution for prenatal and maternal health screening, which 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, which is used to support detection of metabolic disorders in newborns through tandem mass spectrometry. |
| • | The NeoBase™ non-derivatized MS/MS kit, which analyzes newborn blood samples for measurement of amino acids and other metabolic analytes for specific diseases. |
| • | The GSP® Neonatal hTSH, T4 17á-OHP, GALT IRT, BTD, PKU, Total Galactose and G6PD kits, used for screening congenital neonatal conditions from a drop of blood. |
| • | The Specimen Gate® informatics data management solution, designed specifically for newborn screening laboratories. |
| • | ViaCord® umbilical cord blood banking services for the banking of stem cells harvested from umbilical cord blood and cord tissue, for potential therapeutic application in transplant and regenerative medicine. |
| • | 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. |
| • | 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. |
Applied Genomics
| • | Automated liquid handling platforms (JANUS®, Sciclone® and Zephyr®) that offer a choice of robotic solutions in genomics, biotherapeutics, high throughput screening and high content analysis to assist life science research from bench to clinic. |
| • | JANUS® BioTx™ workstation for automated small scale purification, offering column, tip and plate based chromatography on a single platform. |
| • | The LabChip GXII® TouchTM platform, which provides a means of characterizing multiple protein product attributes for research labs through QC. |
| • | The explorer® automated workstation, which allows integration of multiple laboratory instrumentation using a centralized robotic interface, allowing high throughput and turnkey-application focused solutions. |
New Products:
Significant new products introduced or acquired for Diagnostics applications in fiscal year 2017 include the following:
Diagnostics:
| • | NeoLSDTM MSMS kit, the first commercial IVD kit for screening of Pompe, MPS-I, Fabry, Gaucher, Niemann-Pick A/B and Krabbe disorders from a single DBS sample. |
| • | QSight® Triple Quad MSMS instrument which is used for newborn screening. |
| • | TRF based Anti HBs/HCV/TP kits for infectious disease testing. |
| • | The chemagic™ Prime™ instrument, a fully automated, LIMS-compatible solution for primary sample transfer, DNA and RNA isolation, optional normalization, and the setup of PCR and NGS applications. |
EUROIMMUN
| • | Immune fluorescence testing (IFT), enzyme-linked immunosorbent assay (ELISA), chemiluminescence-based immunotesting, immunoblots, molecular microarrays, PCR, liquid handlers and software solutions. |
| • | Autoimmune testing covering rheumatology, hepatology, gastroenterology, endocrinology, neurology, nephrology, dermatology and infertility. |
| • | Infectious disease testing covering bacteria, viruses and parasites. |
| • | IFT, ELISA and EUROLINETM for veterinary medical diagnostics. |
Brand Names:
Our Diagnostics segment offers additional products under various brand names, including AutoDELFIA®, BACS-on-Beads®, BIOCHIPs, Bioo Scientific®, BoBs®, chemagic™, Datalytix™, DELFIA® Xpress, EuroImmun®, EUROLINETM, Evolution™, explorer™, FragilEase®, Genoglyphix®, GSP®, iLab™, JANUS®, LabChip®, LifeCycle™, LimsLink™, MultiPROBE®, NEXTFLEX®, NextPrep™, Pannoramic™, QSight®, Sciclone®, Specimen Gate®, SymbioTM, Twister®, VanadisTM, VariSpec™, ViaCord®, and Zephyr®.
Marketing
All of our businesses market their products and services primarily through their own specialized sales forces. As of December 31, 2017, we employed approximately 4,000 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.
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 $139.4 million during fiscal year 2017, $124.3 million during fiscal year 2016, and $112.5 million during fiscal year 2015.
We have a broad product base, and we do not expect any single research and development project to have significant costs. To accelerate our growth initiatives, we directed our research and development efforts in fiscal years 2017, 2016 and 2015 primarily toward our Diagnostics segment, and the environmental, food, life sciences research and laboratory services markets within our Discovery & Analytical Solutions segment. We expect to continue our strong investments in research and development to drive growth during fiscal year 2018, and to continue to emphasize the Diagnostics segment, and the environmental, food, life sciences research and laboratory services markets within our Discovery & Analytical Solutions segment.
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 $9.4 million and $9.9 million as of December 31, 2017 and January 1, 2017, 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. 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 December 31, 2017, we employed approximately 11,000 employees in our continuing operations. Several of our subsidiaries are parties to contracts with labor unions and workers’ councils. As of December 31, 2017, we estimate that we employed an aggregate of approximately 1,700 union and workers’ council employees. We consider our relations with our employees to be satisfactory.
Financial Information About Business 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.
The table below sets forth revenue and operating income (loss) from continuing operations by operating segment for the fiscal years ended:
| December 31, 2017 | January 1, 2017 | January 3, 2016 | |||||||||
| (In thousands) | |||||||||||
| Discovery & Analytical Solutions | |||||||||||
| Product revenue | $ | 941,328 | $ | 934,098 | $ | 968,034 | |||||
| Service revenue | 637,131 | 578,886 | 560,385 | ||||||||
| Total revenue | 1,578,459 | 1,512,984 | 1,528,419 | ||||||||
| Operating income from continuing operations(1) | 206,688 | 196,819 | 162,762 | ||||||||
| Diagnostics | |||||||||||
| Product revenue | 536,086 | 462,798 | 427,068 | ||||||||
| Service revenue | 142,437 | 139,735 | 149,336 | ||||||||
| Total revenue | 678,523 | 602,533 | 576,404 | ||||||||
| Operating income from continuing operations | 149,636 | 149,577 | 146,478 | ||||||||
| Corporate | |||||||||||
| Operating loss from continuing operations(2) | (51,521 | ) | (63,330 | ) | (58,314 | ) | |||||
| Continuing Operations | |||||||||||
| Product revenue | $ | 1,477,414 | $ | 1,396,896 | $ | 1,395,102 | |||||
| Service revenue | 779,568 | 718,621 | 709,721 | ||||||||
| Total revenue | 2,256,982 | 2,115,517 | 2,104,823 | ||||||||
| Operating income from continuing operations | 304,803 | 283,066 | 250,926 | ||||||||
| Interest and other expense, net | 8,085 | 38,998 | 42,119 | ||||||||
| Income from continuing operations before income taxes | $ | 296,718 | $ | 244,068 | $ | 208,807 |
| (1) | Legal costs for a particular case in our Discovery & Analytical Solutions segment were $2.7 million for fiscal year 2017. |
| (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 gain of $2.1 million in fiscal year 2017, a pre-tax loss of $15.3 million in fiscal year 2016, and pre-tax loss of $12.4 million in fiscal year 2015. |
Discontinued operations have not been included in the preceding table.
Additional information relating to our reporting segments is as follows for the fiscal years ended:
| Depreciation and Amortization Expense | Capital Expenditures | ||||||||||||||||||||||
| December 31, 2017 | January 1, 2017 | January 3, 2016 | December 31, 2017 | January 1, 2017 | January 3, 2016 | ||||||||||||||||||
| (In thousands) | (In thousands) | ||||||||||||||||||||||
| Discovery & Analytical Solutions | $ | 72,590 | $ | 72,484 | $ | 74,177 | $ | 26,200 | $ | 21,486 | $ | 18,175 | |||||||||||
| Diagnostics | 31,204 | 25,339 | 29,728 | 11,262 | 8,556 | 6,854 | |||||||||||||||||
| Corporate | 1,206 | 2,149 | 1,459 | 1,627 | 1,660 | 3,189 | |||||||||||||||||
| Continuing operations | $ | 105,000 | $ | 99,972 | $ | 105,364 | $ | 39,089 | $ | 31,702 | $ | 28,218 | |||||||||||
| Discontinued operations | $ | 929 | $ | 6,266 | $ | 6,643 | $ | 182 | $ | 1,302 | $ | 1,414 |
| Total Assets | |||||||||||
| December 31, 2017 | January 1, 2017 | January 3, 2016 | |||||||||
| (In thousands) | |||||||||||
| Discovery & Analytical Solutions | $ | 2,744,370 | $ | 2,612,757 | $ | 2,546,583 | |||||
| Diagnostics | 3,314,804 | 1,505,381 | 1,459,854 | ||||||||
| Corporate | 32,289 | 31,171 | 28,497 | ||||||||
| Current and long-term assets of discontinued operations | — | 127,374 | 131,361 | ||||||||
| Total assets | $ | 6,091,463 | $ | 4,276,683 | $ | 4,166,295 |
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 2017, we had $1,420.0 million in sales from our international operations, representing approximately 60% of our total sales. During fiscal year 2017, we derived approximately 70% of our international sales from our Discovery & Analytical Solutions segment and approximately 30% of our international sales from our Diagnostics 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 and political conditions as well as 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 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 divestitures, license technologies, integrate acquired businesses or licensed technologies into our existing businesses, or make acquired businesses or licensed technologies profitable.
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 acquisitions of EUROIMMUN and Tulip during fiscal year 2017. 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 in-process research and development 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 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, or incur losses for
failing to comply with our contractual obligations. 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, |
| • | 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, |
| • | contract termination and litigation costs, |
| • | 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) that 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.
The manufacture and sale of products and services may expose us to product and other liability claims for which we could have substantial liability.
We face an inherent business risk of exposure to product and other liability claims if our products, services or product candidates are alleged or found to have caused injury, damage or loss. We may 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 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 our products 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 2017. 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, |
| • | 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, |
| • | expanded enforcement of laws related to data protection and personal privacy, |
| • | 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 those of our customers, suppliers or other third parties, allowing inappropriate access to 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, suppliers or other third parties, 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, allowing inappropriate access to 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.
We have a substantial amount of debt and other financial obligations. 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.
Restrictions in our senior unsecured revolving credit facility, senior unsecured term loan credit facility and other debt instruments may limit our activities.
Our senior unsecured revolving credit facility, senior unsecured term loan credit facility, senior unsecured notes due in 2021 ("2021 Notes") and senior unsecured notes due in 2026 ("2026 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, senior unsecured term loan credit facility, the 2021 Notes, the 2026 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.
The United Kingdom's vote in favor of withdrawing from the European Union could adversely impact our results of operations.
Nearly 3% of our net sales from continuing operations in fiscal year 2017 came from the United Kingdom. Following the referendum vote in the United Kingdom in June 2016 in favor of leaving the European Union (commonly referred to as “Brexit”), on March 29, 2017, the country formally notified the European Union of its intention to withdraw. It appears likely that this withdrawal will involve a process of lengthy negotiations between the United Kingdom and European Union member states to determine the future terms of the United Kingdom’s relationship with the European Union. This could lead to a period of considerable uncertainty and volatility, particularly in relation to United Kingdom financial and banking markets. Weakening of economic conditions or economic uncertainties tend to harm our business, and if such conditions emerge in the United Kingdom or in the rest of Europe, it may have a material adverse effect on our operations and sales.
Any significant weakening of the British pound sterling to the U.S. dollar will have an adverse impact on our European revenues due to the importance of our sales in the United Kingdom. Currency exchange rates in the pound sterling and the euro with respect to each other and the U.S. dollar have already been adversely affected by Brexit and that may continue to be the case. In addition, depending on the terms of Brexit, the United Kingdom could lose the benefits of global trade agreements negotiated by the European Union on behalf of its members, which may result in increased trade barriers which could make our doing business in Europe more difficult.
Our results of operations will be adversely affected if we fail to realize the full value of our intangible assets.
As of December 31, 2017, our total assets included $4.3 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 and in-process research and development, 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 Discovery & Analytical Solutions and Diagnostics 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 27, 2017, we announced that our Board had declared a quarterly dividend of $0.07 per share for the fourth quarter of fiscal year 2017 that was paid in February 2018. On January 25, 2018, we announced that our Board had declared a quarterly dividend of $0.07 per share for the first quarter of fiscal year 2018 that will be payable in May 2018. 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 December 31, 2017, our continuing operations occupied 3,651,434 square feet in over 210 locations. We own 911,085 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 14 states and 33 foreign countries.
Facilities outside of the United States account for approximately 2,426,445 square feet of our owned and leased property, or approximately 66% 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 the approximate square footage of real property owned and leased attributable to the continuing operations of our reporting segments as of December 31, 2017:
| Owned | Leased | Total | ||||||
| (In square feet) | ||||||||
| Discovery & Analytical Solutions | 105,020 | 1,669,941 | 1,774,961 | |||||
| Diagnostics | 806,065 | 950,099 | 1,756,164 | |||||
| Corporate offices | — | 120,309 | 120,309 | |||||
| Continuing operations | 911,085 | 2,740,349 | 3,651,434 |
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 December 31, 2017 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.
EXECUTIVE OFFICERS OF THE REGISTRANT
Listed below are our executive officers as of February 27, 2018. 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 | 62 | ||
| Frank A. Wilson | Senior Vice President and Chief Financial Officer | 59 | ||
| Joel S. Goldberg | Senior Vice President, Administration, General Counsel and Secretary | 49 | ||
| James Corbett | Executive Vice President and President, Discovery & Analytical Solutions | 55 | ||
| Prahlad Singh | Senior Vice President and President, Diagnostics | 53 | ||
| Daniel R. Tereau | Senior Vice President, Strategy and Business Development | 51 | ||
| Deborah Butters | Senior Vice President, Chief Human Resources Officer | 48 | ||
| Tajinder Vohra | Senior Vice President, Global Operations | 52 | ||
| Andrew Okun | Vice President and Chief Accounting Officer | 48 |
Robert F. Friel, 62. 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, 59. 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 Aviation 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, 49. Mr. Goldberg currently serves as our Senior Vice President, Administration, General Counsel and Secretary, having joined 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, 55. Mr. Corbett was appointed President of our Discovery & Analytical Solutions business and Executive Vice President of PerkinElmer in October 2016. Mr. Corbett was appointed President of our Human Health business in March 2014 and a Senior Vice President and officer of PerkinElmer in February 2012. Mr. Corbett was previously appointed President of the Diagnostics business in May 2010 and 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 and on the board of directors for the Analytical, Life Science & Diagnostics Association.
Prahlad Singh, 53. Mr. Singh joined PerkinElmer as the President of our Diagnostics business in May 2014. He has been a Senior Vice President and officer of PerkinElmer since September 2016. Prior to joining PerkinElmer, Mr. Singh was General Manager of GE Healthcare’s Women’s Health Business from 2012 to 2014. In this role, he had worldwide responsibility for GE Healthcare’s Mammography and Bone Densitometry businesses. Before that, Mr. Singh held senior executive level roles in Strategy, Business Development and Mergers & Acquisitions at both GE Healthcare from 2011 to 2012 and Philips Healthcare from 2007 to 2011. From 1995 to 2007, he held leadership roles of increasing responsibility at DuPont Pharmaceuticals and subsequently Bristol Myers Squibb Medical Imaging which included managing the Asia Pacific and Middle East region. Mr. Singh holds a doctoral degree in chemistry from the University of Missouri-Columbia and a Master of Business Administration from Northeastern University. His research work has resulted in several issued patents and publications in peer reviewed journals.
Daniel R. Tereau, 51. Mr. Tereau was appointed Senior Vice President, Strategy and Business Development in January 2016, having joined the Company in April 2014 as Vice President, Strategy and Business Development. 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 from 2011 to 2014, where he was responsible for global strategy and business development for the Consumer Health division. Prior to 2011, 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, 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.
Deborah Butters, 48. Ms. Butters joined PerkinElmer in July 2016 as Senior Vice President, Chief Human Resources Officer. Prior to joining us, she served as Head of North America Human Resources at IBM, where she led all aspects of the Human Resource function for IBM’s largest geography, which included 35,000 employees and was responsible for over $30B of IBM’s revenue. During her 17 year career there, she significantly helped shape IBM’s HR programs and practices, including leading its enterprise-wide, people transformation strategy to optimize employee engagement and business performance. Ms. Butters was with Lotus Development for eight years prior to its acquisition by IBM. Ms. Butters’ experiences working in the United Kingdom and Germany for Lotus Development, and in Switzerland and the United States for IBM, ranged from leading functional roles across workforce planning and talent management, to serving in five HR business partner roles in both software and consulting within IBM and Lotus Development, with the largest being IBM’s North America Consulting business. Ms. Butters holds a Bachelor of Science degree from the University of Bath and a diploma in Human Resources from London University.
Tajinder Vohra, 52. Mr. Vohra joined PerkinElmer in October 2015 as Vice President of Global Operations and was appointed Senior Vice President in January 2018. He oversees all of PerkinElmer’s global operations, including manufacturing, supply chain, customer care and distribution. Prior to joining PerkinElmer, Mr. Vohra served at ABB as a Country Operations Leader from 2011 to 2015, where he was responsible for India-wide operations and Supply Chains for India, Middle East and Africa. Prior to 2011, Mr. Vohra was a Senior Vice President with Genpact, managing Supply Chain and IT businesses, and held a number of global management operational positions with GE Healthcare. Mr. Vohra received his Bachelor’s degree in Mechanical Engineering from the University of Delhi, Master’s degree in Industrial Engineering from the University of Alabama and Master’s degree in Manufacturing Engineering from Lehigh University. Mr. Vohra is a certified Six Sigma Black Belt, and was trained in lean manufacturing at the Shingijitsu Training Institute in Japan.
Andrew Okun, 48. 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.
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 2017 and 2016.
| 2017 Fiscal Quarters | |||||||||||||||
| First | Second | Third | Fourth | ||||||||||||
| High | $58.06 | $68.45 | $69.94 | $73.84 | |||||||||||
| Low | 51.57 | 56.95 | 62.95 | 69.36 | |||||||||||
| 2016 Fiscal Quarters | |||||||||||||||
| First | Second | Third | Fourth | ||||||||||||
| High | $53.01 | $55.56 | $56.92 | $56.43 | |||||||||||
| Low | 41.45 | 48.58 | 51.94 | 49.95 |
As of February 23, 2018, we had approximately 3,914 holders of record of our common stock.
Stock Repurchases
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) | Average Price Paid Per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(2) | Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs | ||||||||
| October 2, 2017 - October 29, 2017 | 1,636 | $ | 71.35 | — | 8,000,000 | |||||||
| October 30, 2017 - November 26, 2017 | 3,219 | 71.19 | — | 8,000,000 | ||||||||
| November 27, 2017 - December 31, 2017 | 117 | 71.61 | — | 8,000,000 | ||||||||
| Activity for quarter ended December 31, 2017 | 4,972 | $ | 71.25 | — | 8,000,000 |
| (1) | 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 2017, the Company repurchased 4,972 shares of common stock for this purpose at an aggregate cost of $0.4 million. 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. |
| (2) | On July 27, 2016, 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 July 26, 2018 unless terminated earlier by our Board, and may be suspended or discontinued at any time. During the fourth quarter of fiscal year 2017, we had no stock repurchases under the Repurchase Program. As of December 31, 2017, 8.0 million shares remained available for repurchase under the Repurchase Program. |
Dividends
During fiscal years 2017 and 2016, 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.
| 2017 Fiscal Quarters | 2017 Total | ||||||||||||||||||
| First | Second | Third | Fourth | ||||||||||||||||
| Cash dividends declared per common share | $ | 0.07 | $ | 0.07 | $ | 0.07 | $ | 0.07 | $ | 0.28 | |||||||||
| 2016 Fiscal Quarters | 2016 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.
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 December 30, 2012 to December 31, 2017. Our Peer Group Index consists of Agilent Technologies Inc., Thermo Fisher Scientific Inc., and Waters Corporation. The peer group is the same as the peer group used in the stock performance graph in our Annual Report on Form 10-K for the fiscal year ended January 1, 2017.
Comparison of Five-Year Cumulative Total Return
Among PerkinElmer, Inc. Common Stock, S&P Composite-500 and
Peer Group Index
TOTAL RETURN TO SHAREHOLDERS
(Includes reinvestment of dividends)
| 30-Dec-12 | 29-Dec-13 | 28-Dec-14 | 3-Jan-16 | 1-Jan-17 | 31-Dec-17 | ||||||||||||||||||
| PerkinElmer, Inc. | $ | 100.00 | $ | 133.79 | $ | 144.11 | $ | 176.20 | $ | 172.47 | $ | 242.92 | |||||||||||
| S&P 500 Index | $ | 100.00 | $ | 132.39 | $ | 150.51 | $ | 152.59 | $ | 170.84 | $ | 208.14 | |||||||||||
| Peer Group | $ | 100.00 | $ | 156.47 | $ | 175.06 | $ | 193.74 | $ | 196.90 | $ | 272.88 |
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 December 31, 2017. We derived the selected historical financial information for the balance sheets for the fiscal years ended December 31, 2017 and January 1, 2017 and the statement of operations for each of the fiscal years in the three-year period ended December 31, 2017 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 28, 2014 and December 29, 2013 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 January 3, 2016, December 28, 2014 and December 29, 2013 from our audited consolidated financial statements which are not included in this annual report on Form 10-K.
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 | |||||||||||||||||||
| December 31, 2017 | January 1, 2017 | January 3, 2016 | December 28, 2014 | December 29, 2013 | |||||||||||||||
| (In thousands, except per share data) | |||||||||||||||||||
| Statement of Operations Data: | |||||||||||||||||||
| Revenue | $ | 2,256,982 | $ | 2,115,517 | $ | 2,104,823 | $ | 2,069,880 | $ | 1,996,959 | |||||||||
| Operating income from continuing operations(1)(2) | 304,803 | 283,066 | 250,926 | 165,007 | 180,791 | ||||||||||||||
| Interest and other expense, net(3) | 8,085 | 38,998 | 42,119 | 41,139 | 64,110 | ||||||||||||||
| Income from continuing operations before income taxes | 296,718 | 244,068 | 208,807 | 123,868 | 116,681 | ||||||||||||||
| Income from continuing operations, net of income taxes(4) | 156,890 | 215,706 | 188,785 | 130,139 | 142,206 | ||||||||||||||
| Income from discontinued operations and dispositions, net of income taxes(5) | 135,743 | 18,593 | 23,640 | 27,639 | 25,006 | ||||||||||||||
| Net income | $ | 292,633 | $ | 234,299 | $ | 212,425 | $ | 157,778 | $ | 167,212 | |||||||||
| Basic earnings per share: | |||||||||||||||||||
| Continuing operations | $ | 1.43 | $ | 1.97 | $ | 1.68 | $ | 1.16 | $ | 1.27 | |||||||||
| Discontinued operations | 1.24 | 0.17 | 0.21 | 0.25 | 0.22 | ||||||||||||||
| Net income | $ | 2.67 | $ | 2.14 | $ | 1.89 | $ | 1.40 | $ | 1.49 | |||||||||
| Diluted earnings per share: | |||||||||||||||||||
| Continuing operations | $ | 1.42 | $ | 1.96 | $ | 1.67 | $ | 1.14 | $ | 1.25 | |||||||||
| Discontinued operations | 1.22 | 0.17 | 0.21 | 0.24 | 0.22 | ||||||||||||||
| Net income | $ | 2.64 | $ | 2.12 | $ | 1.87 | $ | 1.39 | $ | 1.47 | |||||||||
| Weighted-average common shares outstanding: | |||||||||||||||||||
| Basic: | 109,857 | 109,478 | 112,507 | 112,593 | 112,254 | ||||||||||||||
| Diluted: | 110,859 | 110,313 | 113,315 | 113,739 | 113,503 | ||||||||||||||
| Cash dividends declared per common share | $ | 0.28 | $ | 0.28 | $ | 0.28 | $ | 0.28 | $ | 0.28 |
| As of | |||||||||||||||||||
| December 31, 2017 | January 1, 2017 | January 3, 2016 | December 28, 2014 | December 29, 2013 | |||||||||||||||
| (In thousands) | |||||||||||||||||||
| Balance Sheet Data: | |||||||||||||||||||
| Total assets | $ | 6,091,463 | $ | 4,276,683 | $ | 4,166,295 | $ | 4,127,576 | $ | 3,940,882 | |||||||||
| Short-term debt | 217,306 | 1,172 | 1,123 | 1,075 | 2,624 | ||||||||||||||
| Long-term debt(3)(6) | 1,788,803 | 1,045,254 | 1,011,762 | 1,045,393 | 926,274 | ||||||||||||||
| Stockholders’ equity(1)(7) | 2,503,188 | 2,153,570 | 2,110,441 | 2,042,102 | 1,994,487 | ||||||||||||||
| Common shares outstanding(7) | 110,361 | 109,617 | 112,034 | 112,481 | 112,626 |
| (1) | Activity related to the mark-to-market adjustment on postretirement benefit plans was a pre-tax gain of $2.1 million in fiscal year 2017, a pre-tax loss of $15.3 million in fiscal year 2016, a pre-tax loss of $12.4 million in fiscal year 2015, a pre-tax loss of $75.4 million in fiscal year 2014 and a pre-tax income of $17.6 million in fiscal year 2013. |
| (2) | We recorded pre-tax restructuring and contract termination charges, net, of $12.7 million in fiscal year 2017, $5.1 million in fiscal year 2016, $13.5 million in fiscal year 2015, $13.3 million in fiscal year 2014 and $33.5 million in fiscal year 2013. |
| (3) | In fiscal years 2017, 2016, 2015, 2014 and 2013, interest expense was $43.9 million, $41.5 million, $38.0 million, $36.3 million and $49.9 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. |
| (4) | In fiscal years 2017 and 2016, provision for income tax on continuing operations was $139.8 million and $28.4 million, respectively. The higher provision for income taxes in fiscal year 2017 compared to that of fiscal year 2016 was primarily due to the $106.5 million discrete tax expense related to the Tax Cuts & Jobs Act of 2017. In fiscal years 2015, 2014 and 2013, tax expense (benefit) on continuing operations was $20.0 million, $(6.3) million and $(25.5) million, respectively. The tax expense in fiscal year 2015 was primarily due to income in high tax rate jurisdictions, partially offset by losses in low tax rate jurisdictions and a tax benefit of $6.4 million related to discrete items. The benefit from income taxes in fiscal year 2014 was primarily due losses in high tax rate jurisdictions and a tax benefit of $7.1 million related to discrete items, partially offset by a provision for income taxes related to profits in low tax rate jurisdictions. 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 high tax rate jurisdictions, partially offset by provision for income taxes related to profits in low tax rate jurisdictions. |
| (5) | In May 2017, we completed the sale of our Medical Imaging business. We recorded a pre-tax gain of $179.6 million and income tax expense of $43.1 million in fiscal year 2017. We accounted for this business as discontinued operations beginning in 2016 and the financial information relating to fiscal years 2015, 2014 and 2013 has been retrospectively adjusted to reflect the inclusion of this business in discontinued operations. |
| (6) | In July 2016, we issued and sold ten-year senior notes at a rate of 1.875% with a face value of €500.0 million and received €492.3 million of net proceeds from the issuance. The debt, which matures in July 2026, is unsecured. |
| (7) | In fiscal year 2017, we did not repurchase any shares of our common stock under the existing stock repurchase program authorized by our Board on July 27, 2016. In fiscal year 2016, we repurchased in the open market 3.2 million shares of our common stock at an aggregate cost of $148.2 million, including commissions under a stock repurchase program originally announced in October 2014 that was terminated in July 2016 (the "October 2014 Repurchase Program"). 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 both the October 2014 Repurchase Program and a stock repurchase program originally announced in October 2012 that expired in October 2014 (the "October 2012 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 the October 2012 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 October 2012 Repurchase Program. 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. |
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. Each of the fiscal years ended December 31, 2017 ("fiscal year 2017") and January 1, 2017 ("fiscal year 2016") included 52 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 the third quarter of our fiscal year 2015. The fiscal year ending December 30, 2018 will include 52 weeks.
Overview of Fiscal Year 2017
During fiscal year 2017, we continued to see good performance from acquisitions, investments in our ongoing technology and sales and marketing initiatives. Our overall revenue in fiscal year 2017 increased $141.5 million, or 7%, as compared to fiscal year 2016, reflecting an increase of $65.5 million, or 4%, in our Discovery & Analytical Solutions segment revenue and an increase of $76.0 million, or 13%, in our Diagnostics segment revenue. The increase in our Discovery & Analytical Solutions segment during fiscal year 2017 was primarily due to an increase of $48.1 million from our laboratory services market revenue and an increase of $21.1 million from our environmental, food and industrial markets revenue, partially offset by a decrease of $3.8 million from our life sciences research market revenue. The increase in our Diagnostics segment revenue during fiscal year 2017 was primarily driven by continued expansion in our newborn, maternal fetal health and infectious diseases screening solutions and applied genomics solutions.
In our Discovery & Analytical Solutions segment, we experienced growth during fiscal year 2017 driven by successful new product introductions and an improving macro-environment. We also experienced strong demand for our laboratory service offerings as well as our environmental and food offerings. In the life sciences research market, we experienced continued decline in sales of radioactive reagents in our radio-nucleotide business.
In our Diagnostics segment, we experienced growth from continued expansion in our newborn and infectious disease screening businesses, particularly in the emerging markets. We also experienced strong growth in our advanced genomics front-end sample preparation business in the Americas. 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 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. During fiscal year 2017, we expanded both the extent and reach of our capabilities to enable earlier treatments and better outcomes, both in terms of diseases and geographies. The acquisition of EUROIMMUN has increased our reagent mix, expanded our technical capabilities and positioned us in more attractive markets.
Our consolidated gross margins decreased 36 basis points in fiscal year 2017, as compared to fiscal year 2016, primarily due to an unfavorable shift in product mix partially offset by benefits from our initiatives to improve our supply chain. Our consolidated operating margin increased 12 basis points in fiscal year 2017, as compared to fiscal year 2016 primarily due to 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 continue to believe that we are 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 diagnostics and discovery and analytical solutions markets, coupled with our deep portfolio of technologies and applications, leading market positions, global scale and financial strength will provide us with a foundation for growth.
Consolidated Results of Continuing Operations
Revenue
2017 Compared to 2016. Revenue for fiscal year 2017 was $2,257.0 million, as compared to $2,115.5 million for fiscal year 2016, an increase of $141.5 million, or 7%, which includes an approximate 2% increase in revenue attributable to acquisitions and divestitures and a 0.4% increase in revenue attributable to changes in foreign exchange rates. The analysis in the remainder of this paragraph compares segment revenue for fiscal year 2017 as compared to fiscal year 2016 and includes the effect of foreign exchange rate fluctuations, and acquisitions and divestitures. The total increase in revenue reflects an increase in our Diagnostics segment revenue of $76.0 million, or 13%, due to continued expansion in our newborn and infectious disease screening solutions and strong growth in applied genomics. Our new acquisitions, EUROIMMUN and Tulip, contributed $13.5 million and $38.5 million, respectively, in revenues during fiscal year 2017. Our Discovery & Analytical Solutions segment revenue increased by $65.5 million, or 4%, due to an increase of $48.1 million from our laboratory services market revenue and an increase of $21.1 million from our environmental, food and industrial markets revenue, partially offset by a decrease of $3.8 million from our life sciences research market revenue. As a result of adjustments to deferred revenue related to certain acquisitions required by business combination rules, we did not recognize $0.7 million of revenue primarily related to our Diagnostics segment for each of the fiscal years 2017 and 2016 that otherwise would have been recorded by the acquired businesses during each of the respective periods.
2016 Compared to 2015. Revenue for fiscal year 2016 was $2,115.5 million, as compared to $2,104.8 million for fiscal year 2015, an increase of $10.7 million, or 1%, which includes an approximate 1% decrease in revenue attributable to changes in foreign exchange rates with minimal impact from acquisitions and divestitures. In addition, our fiscal year 2015 had an additional week, which consisted of 53 weeks, as compared to fiscal year 2016, which consisted of 52 weeks. The analysis in the remainder of this paragraph compares segment revenue for fiscal year 2016 as compared to fiscal year 2015 and includes the effect of foreign exchange rate fluctuations and acquisitions and divestitures. The total increase in revenue reflects an increase in our Diagnostics segment revenue of $26.1 million, or 5%, due to continued expansion in our newborn screening, blood banking and screening businesses. Our Discovery & Analytical Solutions segment revenue decreased by $15.4 million, or 1%, due to a decrease in environmental, food and industrial markets revenue of $20.8 million and life science
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Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Quantitative and Qualitative Disclosures about Market Risk
Financial Instruments
Financial instruments that potentially subject us to concentrations of credit risk consist principally of temporary cash investments, derivatives, marketable securities and accounts receivable. We believe we had no significant concentrations of credit risk as of December 31, 2017.
We use derivative instruments as part of our risk management strategy only, and include derivatives utilized as economic hedges that are not designated as hedging instruments. By nature, all financial instruments involve market and credit risks. We enter into derivative instruments with major investment grade financial institutions and have policies to monitor the credit risk of those counterparties. We do not enter into derivative contracts for trading or other speculative purposes, nor do we use
leveraged financial instruments. Approximately 60% of our business is conducted outside of the United States, generally in foreign currencies. As a result, fluctuations in foreign currency exchange rates can increase the costs of financing, investing and operating the business.
In the ordinary course of business, we enter into foreign exchange contracts for periods consistent with our committed exposures to mitigate the effect of foreign currency movements on transactions denominated in foreign currencies. The intent of these economic hedges is to offset gains and losses that occur on the underlying exposures from these currencies, with gains and losses resulting from the forward currency contracts that hedge these exposures. Transactions covered by hedge contracts include intercompany and third-party receivables and payables. The contracts are primarily in European and Asian currencies, have maturities that do not exceed 12 months, have no cash requirements until maturity, and are recorded at fair value on our consolidated balance sheets. The unrealized gains and losses on our foreign currency contracts are recognized immediately in interest and other expense, net. The cash flows related to the settlement of these hedges are included in cash flows from operating activities within our consolidated statement of cash flows.
Principal hedged currencies include the British Pound, Euro, Swedish Krona, Japanese Yen and Singapore Dollar. We held forward foreign exchange contracts, designated as economic hedges, with U.S. dollar equivalent notional amounts totaling $212.1 million at December 31, 2017, $137.5 million at January 1, 2017 and $127.3 million at January 3, 2016, and the fair value of these foreign currency derivative contracts was insignificant. The gains and losses realized on these foreign currency derivative contracts are not material. The duration of these contracts was generally 30 days or less during each of fiscal years 2017, 2016 and 2015.
In addition, in connection with certain intercompany loan agreements utilized to finance our acquisitions and stock repurchase program, we enter into forward foreign exchange contracts intended to hedge movements in foreign exchange rates prior to settlement of such intercompany loans denominated in foreign currencies. We record these hedges at fair value on our consolidated balance sheets. The unrealized gains and losses on these hedges, as well as the gains and losses associated with the remeasurement of the intercompany loans, are recognized immediately in interest and other expense, net. The cash flows related to the settlement of these hedges are included in cash flows from financing activities within our consolidated statement of cash flows.
The outstanding forward exchange contracts designated as economic hedges, which were intended to hedge movements in foreign exchange rates prior to the settlement of certain intercompany loan agreements, included combined Euro notional amounts of €57.2 million and combined U.S. Dollar notional amounts of $1.3 billion as of December 31, 2017, combined Euro notional amounts of €58.6 million, combined U.S. Dollar notional amounts of $8.7 million and combined Swedish Krona notional amounts of kr969.5 million as of January 1, 2017, and combined Euro notional amounts of €107.4 million as of January 3, 2016. The net gains and losses on these derivatives, combined with the gains and losses on the remeasurement of the hedged intercompany loans were not material for each of the fiscal years 2017 and 2016. We paid $13.8 million and $1.9 million during the fiscal years 2017 and 2016, respectively, from the settlement of these hedges.
During fiscal year 2016, we designated the 2026 Notes to hedge our investments in certain foreign subsidiaries. Realized and unrealized translation adjustments from these hedges were included in the foreign currency translation component of accumulated other comprehensive income ("AOCI"), which offsets translation adjustments on the underlying net assets of foreign subsidiaries. The cumulative translation gains or losses will remain in AOCI until the foreign subsidiaries are liquidated or sold. As of December 31, 2017, the total notional amount of foreign currency denominated debt designated to hedge investments in foreign subsidiaries was €496.1 million. The unrealized foreign exchange loss (gain) recorded in AOCI related to the net investment hedge was $73.0 million and $(23.8) million for the fiscal years 2017 and 2016, respectively. In January 2018, we removed the hedging relationship of our 2026 Notes and our investments in certain foreign subsidiaries and recognized $2.1 million of unrealized foreign exchange gain in AOCI. The translation adjustment of the 2026 Notes will be recognized in other (income) expense, net in our consolidated statement of operations prospectively.
During fiscal year 2017, we entered into several foreign currency forward contracts to purchase Euros to partly mitigate the currency exchange risk associated with the payment of the Euro-denominated purchase price for EUROIMMUN. These currency forward contracts were not designated as hedging instruments and therefore the change in the derivative fair value was marked to market through the consolidated statement of operations. The foreign currency forward contracts were settled during the fourth quarter of fiscal year 2017. We received $36.5 million from the settlement of these foreign currency forward contracts and recorded a net foreign exchange gain included in other (income) expense, net amounting to $36.5 million for the fiscal year 2017. The cash flows related to the settlement of these foreign currency forward contracts are included in cash flows from investing activities within our consolidated statement of cash flows.
Market Risk
Market Risk. We are exposed to market risk, including changes in interest rates and currency exchange rates. To manage the volatility relating to these exposures, we enter into various derivative transactions pursuant to our policies to hedge against known or forecasted market exposures.
Foreign Exchange Risk. The potential change in foreign currency exchange rates offers a substantial risk to us, as approximately 60% of our business is conducted outside of the United States, generally in foreign currencies. Our risk management strategy currently uses forward contracts to mitigate certain balance sheet foreign currency transaction exposures. The intent of these economic hedges is to offset gains and losses that occur on the underlying exposures, with gains and losses resulting from the forward contracts that hedge these exposures. Moreover, we are able to partially mitigate the impact that fluctuations in currencies have on our net income as a result of our manufacturing facilities located in countries outside the United States, material sourcing and other spending which occur in countries outside the United States, resulting in natural hedges.
Although we attempt to manage our foreign currency exchange risk through the above activities, when the U.S. dollar weakens against other currencies in which we transact business, sales and net income will in general be positively but not proportionately impacted. Conversely, when the U.S. dollar strengthens against other currencies in which we transact business, sales and net income will in general be negatively but not proportionately impacted.
Foreign Currency Risk—Value-at-Risk Disclosure. We utilize a Value-at-Risk model to determine the potential earning/fair value exposures presented by our foreign currency related financial instruments. As discussed above, we seek to minimize this exposure through our hedging program. Our Value-at-Risk computation is based on the Monte Carlo simulation, utilizing a 95% confidence interval and a holding period of 30 days. As of December 31, 2017, this computation estimated that there is a 5% chance that the market value of the underlying exposures and the corresponding derivative instruments either increase or decrease due to foreign currency fluctuations by more than $0.4 million. This Value-At-Risk measure is consistent with our financial statement disclosures relative to our foreign currency hedging program. Specifically, during each of the four quarters ended in fiscal year 2017, the Value-At-Risk ranged between $0.1 million and $0.7 million, with an average of approximately $0.4 million.
Interest Rate Risk. As of December 31, 2017, we had $625.0 million outstanding borrowings under our senior unsecured revolving credit facility, and $200.0 million of outstanding borrowings under our senior unsecured term loan credit facility. As described above in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources,” amounts drawn under our senior unsecured revolving credit facility and our senior unsecured term loan credit facility bear interest at variable rates. Our cash and cash equivalents, for which we receive interest at variable rates, were $202.1 million at December 31, 2017. Fluctuations in interest rates can therefore have a direct impact on both our short-term cash flows, as they relate to interest, and our earnings. To manage the volatility relating to these exposures, we periodically enter into various derivative transactions pursuant to our policies to hedge against known or forecasted interest rate exposures.
Interest Rate Risk—Sensitivity. Our current earnings exposure for changes in interest rates can be summarized as follows:
(i) Changes in interest rates can cause our cash flows to fluctuate. An increase of 10%, or approximately 26 basis points, in current interest rates would cause our cash outflows to increase by $2.2 million for fiscal year 2018.
(ii) Changes in interest rates can cause our interest income and cash flows to fluctuate.
Item 8. Financial Statements and Supplemental Data
TABLE OF CONTENTS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Directors of PerkinElmer, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of PerkinElmer, Inc. and subsidiaries (the “Company”) as of December 31, 2017 and January 1, 2017, and the related consolidated statements of operations, comprehensive income, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2017, the related notes, and the schedule listed in the Index at Item 15 (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and January 1, 2017, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2017, in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 27, 2018 expressed an unqualified opinion on the Company’s internal control over financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s / DELOITTE & TOUCHE LLP
Boston, Massachusetts
February 27, 2018
We have served as the Company’s auditor since 2002.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Fiscal Years Ended
| December 31, 2017 | January 1, 2017 | January 3, 2016 | |||||||||
| (In thousands, except per share data) | |||||||||||
| Revenue | |||||||||||
| Product revenue | $ | 1,477,414 | $ | 1,396,896 | $ | 1,395,102 | |||||
| Service revenue | 779,568 | 718,621 | 709,721 | ||||||||
| Total revenue | 2,256,982 | 2,115,517 | 2,104,823 | ||||||||
| Cost of product revenue | 708,685 | 664,803 | 696,461 | ||||||||
| Cost of service revenue | 475,266 | 437,361 | 444,131 | ||||||||
| Selling, general and administrative expenses | 616,167 | 600,885 | 587,219 | ||||||||
| Research and development expenses | 139,404 | 124,278 | 112,539 | ||||||||
| Restructuring and contract termination charges, net | 12,657 | 5,124 | 13,547 | ||||||||
| Operating income from continuing operations | 304,803 | 283,066 | 250,926 | ||||||||
| Interest and other expense, net | 8,085 | 38,998 | 42,119 | ||||||||
| Income from continuing operations before income taxes | 296,718 | 244,068 | 208,807 | ||||||||
| Provision for income taxes | 139,828 | 28,362 | 20,022 | ||||||||
| Income from continuing operations | 156,890 | 215,706 | 188,785 | ||||||||
| Income from discontinued operations before income taxes | 650 | 22,229 | 35,205 | ||||||||
| Gain (loss) on disposition of discontinued operations before income taxes | 179,615 | 619 | (28 | ) | |||||||
| Provision for income taxes on discontinued operations and dispositions | 44,522 | 4,255 | 11,537 | ||||||||
| Income from discontinued operations and dispositions | 135,743 | 18,593 | 23,640 | ||||||||
| Net income | $ | 292,633 | $ | 234,299 | $ | 212,425 | |||||
| Basic earnings per share: | |||||||||||
| Income from continuing operations | $ | 1.43 | $ | 1.97 | $ | 1.68 | |||||
| Income from discontinued operations and dispositions | 1.24 | 0.17 | 0.21 | ||||||||
| Net income | $ | 2.67 | $ | 2.14 | $ | 1.89 | |||||
| Diluted earnings per share: | |||||||||||
| Income from continuing operations | $ | 1.42 | $ | 1.96 | $ | 1.67 | |||||
| Income from discontinued operations and dispositions | 1.22 | 0.17 | 0.21 | ||||||||
| Net income | $ | 2.64 | $ | 2.12 | $ | 1.87 |
The accompanying notes are an integral part of these consolidated financial statements.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Fiscal Years Ended
| December 31, 2017 | January 1, 2017 | January 3, 2016 | |||||||||
| (In thousands) | |||||||||||
| Net income | $ | 292,633 | $ | 234,299 | $ | 212,425 | |||||
| Other comprehensive income (loss) | |||||||||||
| Foreign currency translation adjustments | 54,341 | (54,077 | ) | (70,178 | ) | ||||||
| Unrecognized prior service costs, net of tax | (77 | ) | (860 | ) | (316 | ) | |||||
| Unrealized gains (losses) on securities, net of tax | 79 | 32 | (262 | ) | |||||||
| Other comprehensive income (loss) | 54,343 | (54,905 | ) | (70,756 | ) | ||||||
| Compreh |
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Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Not applicable.
Item 9A. Controls and Procedures
Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2017. The term “disclosure controls and procedures” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), means controls and other procedures of a company that are designed to provide reasonable assurance that information required to be disclosed by the company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of December 31, 2017, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.
During the fiscal quarter ended December 31, 2017, we implemented a plan that called for modifications and additions to our internal control over financial reporting related to the accounting for revenue as a result of the new revenue recognition standard. The modified and new controls have been designed to address risks associated with recognizing revenue under the new standard and disclosures required before the standard's effective date. We have therefore augmented our internal control over financial reporting as follows:
| • | Added new controls related to gathering the information and evaluating the analyses used in the development of disclosures required before the standard's effective date. |
- Enhanced the risk assessment process to take into account risks associated with the new revenue standard.
| • | Added controls that address risks associated with the five-step model for recording revenue, including the revision of our contract review controls. |
There was no other change in our internal control over financial reporting during the fiscal quarter ended December 31, 2017, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, the company’s principal executive and principal financial officers and effected by the company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles, and includes those policies and procedures that:
| • | Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company; |
| • | Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and |
| • | Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements. |
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2017. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in the 2013 Internal Control-Integrated Framework. Our assessment of and conclusion on the effectiveness of internal control over financial reporting excluded the internal controls of EUROIMMUN, acquired on December 18, 2017, which is included in our 2017 consolidated financial statements and represented approximately 30.7% of our total assets as of December 31, 2017 and 0.6% of our total revenues for the fiscal year ended December 31, 2017.
Based on this assessment, our management concluded that, as of December 31, 2017, our internal control over financial reporting was effective based on those criteria.
Our registered public accounting firm has issued an attestation report on our internal control over financial reporting. This report appears below.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and the Board of Directors of PerkinElmer, Inc.
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of PerkinElmer, Inc. and subsidiaries (the “Company”) as of December 31, 2017, based on criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control - Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2017 of the Company and our report dated February 27, 2018 expressed an unqualified opinion on those financial statements.
As described in Management’s Report on Internal Control over Financial Reporting, management excluded from its assessment the internal control over financial reporting at EUROIMMUN, which was acquired on December 19, 2017 and whose financial statements constitute approximately 30.7% of total assets and 0.6% of total revenues of the consolidated financial statement amounts as of and for the year ended December 31, 2017. Accordingly, our audit did not include the internal control over financial reporting at EUROIMMUN.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in the conditions, or that the degree of compliance with policies or procedures may deteriorate.
/s/ DELOITTE & TOUCHE LLP
Boston, Massachusetts
February 27, 2018
Changes in Internal Control Over Financial Reporting
During the fiscal quarter ended December 31, 2017, we implemented a plan that called for modifications and additions to our internal control over financial reporting related to the accounting for revenue as a result of the new revenue recognition standard. The modified and new controls have been designed to address risks associated with recognizing revenue under the new standard and disclosures required before the standard's effective date. We have therefore augmented our internal control over financial reporting as follows:
| • | Added new controls related to gathering the information and evaluating the analyses used in the development of disclosures required before the standard's effective date. |
- Enhanced the risk assessment process to take into account risks associated with the new revenue standard.
| • | Added controls that address risks associated with the five-step model for recording revenue, including the revision of our contract review controls. |
There was no other change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the fiscal quarter ended December 31, 2017 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. Other Information
Not applicable.
PART III
Item 10. Directors, Executive Officers and Corporate Governance
The information required to be disclosed by this Item pursuant to Item 401 of Regulation S-K with respect to our executive officers is contained in Part I of this annual report on Form 10-K under the caption, “Executive Officers of the Registrant.” The remaining information required to be disclosed by the Item pursuant to Item 401 and Item 407 of Regulation S-K is contained in the proxy statement for our annual meeting of stockholders to be held on April 24, 2018 under the captions “Proposal No. 1 Election of Directors” and “Information Relating to Our Board of Directors and Its Committees” and is incorporated in this annual report on Form 10-K by reference.
The information required to be disclosed by this Item pursuant to Item 405 of Regulation S-K is contained in the proxy statement for our annual meeting of stockholders to be held on April 24, 2018 under the caption “Section 16(a) Beneficial Ownership Reporting Compliance,” and is incorporated in this annual report on Form 10-K by reference.
We have adopted a code of ethics, our Standards of Business Conduct, that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, and persons performing similar functions. Our Standards of Business Conduct, as well as our corporate governance guidelines and the charters for the audit, compensation and benefits, nominating and corporate governance, executive and finance committees of our Board of Directors, are each accessible under the “Corporate Governance” heading of the “Investors” section of our website, http://www.perkinelmer.com. This information is also available in print to any stockholder who requests it, by writing to PerkinElmer, Inc., 940 Winter Street, Waltham, Massachusetts 02451, Attention: Investor Relations. We also intend to disclose in the same location on our website, any amendments to, or waivers from, our Standards of Business Conduct that are required to be disclosed pursuant to the disclosure requirements of Item 5.05 of Form 8-K.
Item 11. Executive Compensation
The information required to be disclosed by this Item pursuant to Item 402 and Item 407(e) of Regulation S-K is contained in the proxy statement for our annual meeting of stockholders to be held on April 24, 2018 under the captions “Information Relating to Our Board of Directors and Its Committees—Director Compensation,” “Information Relating to Our Board of Directors and Its Committees—Compensation Committee Interlocks and Insider Participation,” and “Executive Compensation,” and is incorporated in this annual report on Form 10-K by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required to be disclosed by this Item pursuant to Item 403 of Regulation S-K is contained in the proxy statement for our annual meeting of stockholders to be held on April 24, 2018 under the caption “Beneficial Ownership of Common Stock,” and is incorporated in this annual report on Form 10-K by reference.
The information required to be disclosed by this Item pursuant to Item 201(d) of Regulation S-K is contained in the proxy statement for our annual meeting of stockholders to be held on April 24, 2018 under the caption “Executive Compensation—Equity Compensation Plan Information,” and is incorporated in this annual report on Form 10-K by reference.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required to be disclosed by this Item pursuant to Item 404 of Regulation S-K is contained in the proxy statement for our annual meeting of stockholders to be held on April 24, 2018 under the caption “Information Relating to Our Board of Directors and Its Committees—Certain Relationships and Policies on Related Party Transactions,” and is incorporated in this annual report on Form 10-K by reference.
The information required to be disclosed by this Item pursuant to Item 407(a) of Regulation S-K is contained in the proxy statement for our annual meeting of stockholders to be held on April 24, 2018 under the caption “Information Relating to Our Board of Directors and Its Committees—Determination of Independence,” and is incorporated in this annual report on Form 10-K by reference.
Item 14. Principal Accountant Fees and Services
The information required to be disclosed by this Item pursuant to Item 9(e) of Schedule 14A is contained in the proxy statement for our annual meeting of stockholders to be held on April 24, 2018 under the caption “Information Relating to Our Board of Directors and Its Committees—Independent Registered Public Accounting Firm Fees and Other Matters”, and is incorporated in this annual report on Form 10-K by reference.
PART IV
Item 15. Exhibits and Financial Statement Schedules
(a) DOCUMENTS FILED AS PART OF THIS REPORT:
- FINANCIAL STATEMENTS
Included in Part II, Item 8:
Report of Independent Registered Public Accounting Firm
Consolidated Statements of Operations for Each of the Three Fiscal Years in the Period Ended December 31, 2017
Consolidated Statements of Comprehensive Income for Each of the Three Fiscal Years in the Period Ended December 31, 2017
Consolidated Balance Sheets as of December 31, 2017 and January 1, 2017
Consolidated Statements of Stockholders’ Equity for Each of the Three Fiscal Years in the Period Ended December 31, 2017
Consolidated Statements of Cash Flows for Each of the Three Fiscal Years in the Period Ended December 31, 2017
Notes to Consolidated Financial Statements
- FINANCIAL STATEMENT SCHEDULE
Schedule II—Valuation and Qualifying Accounts
We have omitted financial statement schedules, other than those we note above, because of the absence of conditions under which they are required, or because the required information is given in the financial statements or notes thereto.
- EXHIBITS
| (1) | The exhibits and schedules to this agreement have been omitted from this filing pursuant to Item 601(b)(2) of Regulation S-K. The registrant agrees to furnish copies of any of such exhibits or schedules to the SEC upon request. |
| * | Management contract or compensation plan or arrangement required to be filed as an exhibit pursuant to Item 15(b) of Form 10-K. |
Attached as Exhibit 101 to this report are the following formatted in XBRL (Extensible Business Reporting Language):
(i) Consolidated Statements of Operations for each of the three years in the period ended December 31, 2017, (ii) Consolidated Balance Sheets as of December 31, 2017 and January 1, 2017, (iii) Consolidated Statements of Comprehensive Income for each of the three years in the period ended December 31, 2017, (iv) Consolidated Statements of Stockholders' Equity for each of the three years in the period ended December 31, 2017, (v) Consolidated Statements of Cash Flows for each of the three years in the period ended December 31, 2017, (vi) Notes to Consolidated Financial Statements, and (vii) Financial Schedule of Valuation and Qualifying Accounts.
SCHEDULE II
PERKINELMER, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
For the Three Years Ended December 31, 2017
| Description | Balance at Beginning of Year | Provisions | Charges/ Write- offs | Other(1) | Balance at End of Year | |||||||||||||||
| (In thousands) | ||||||||||||||||||||
| Reserve for doubtful accounts: | ||||||||||||||||||||
| Year ended January 3, 2016 | $ | 32,857 | $ | 3,564 | $ | (5,709 | ) | $ | (846 | ) | $ | 29,866 | ||||||||
| Year ended January 1, 2017 | 29,866 | 5,346 | (5,499 | ) | (501 | ) | 29,212 | |||||||||||||
| Year ended December 31, 2017 | 29,212 | 2,038 | (1,900 | ) | 1,931 | 31,281 |
| (1) | Other amounts primarily relate to the impact of acquisitions, discontinued operations and foreign exchange movements. |
Item 16. Form 10-K Summary
Not applicable.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Signature | PERKINELMER, INC. Title | Date | |||
| By: | /S/ ROBERT F. FRIEL | Chairman, Chief Executive Officer | February 27, 2018 | ||
| Robert F. Friel | and President (Principal Executive Officer) | ||||
| By: | /S/ FRANK A. WILSON | Sr. Vice President and | February 27, 2018 | ||
| Frank A. Wilson | Chief Financial Officer (Principal Financial Officer) | ||||
| By: | /S/ ANDREW OKUN | Vice President and | February 27, 2018 | ||
| Andrew Okun | Chief Accounting Officer (Principal Accounting Officer) |
POWER OF ATTORNEY AND SIGNATURES
We, the undersigned officers and directors of PerkinElmer, Inc., hereby severally constitute Robert F. Friel and Frank A. Wilson, and each of them singly, our true and lawful attorneys with full power to them, and each of them singly, to sign for us and in our names, in the capacities indicated below, this Annual Report on Form 10-K and any and all amendments to said Annual Report on Form 10-K, and generally to do all such things in our name and behalf in our capacities as officers and directors to enable PerkinElmer, Inc. to comply with the provisions of the Securities Exchange Act of 1934, and all requirements of the Securities and Exchange Commission, hereby rectifying and confirming signed by our said attorneys, and any and all amendments thereto.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:
| Signature | Title | Date | |||
| By: | /S/ ROBERT F. FRIEL | Chairman, Chief Executive Officer | February 27, 2018 | ||
| Robert F. Friel | and President (Principal Executive Officer) | ||||
| By: | /S/ FRANK A. WILSON | Sr. Vice President and | February 27, 2018 | ||
| Frank A. Wilson | Chief Financial Officer (Principal Financial Officer) | ||||
| By: | /S/ ANDREW OKUN | Vice President and | February 27, 2018 | ||
| Andrew Okun | Chief Accounting Officer (Principal Accounting Officer) | ||||
| By: | /S/ PETER BARRETT | Director | February 27, 2018 | ||
| Peter Barrett | |||||
| By: | /S/ SAMUEL R. CHAPIN | Director | February 27, 2018 | ||
| Samuel R. Chapin | |||||
| By: | /S/ SYLVIE GRÉGOIRE, PharmD | Director | February 27, 2018 | ||
| Sylvie Grégoire, PharmD | |||||
| By: | /S/ NICHOLAS A. LOPARDO | Director | February 27, 2018 | ||
| Nicholas A. Lopardo | |||||
| By: | /S/ ALEXIS P. MICHAS | Director | February 27, 2018 | ||
| Alexis P. Michas | |||||
| By: | /S/ PATRICK J. SULLIVAN | Director | February 27, 2018 | ||
| Patrick J. Sullivan | |||||
| By: | /S/ FRANK WITNEY, PhD | Director | February 27, 2018 | ||
| Frank Witney, PhD | |||||
| By: | /S/ PASCALE WITZ | Director | February 27, 2018 | ||
| Pascale Witz |