filings.toolsItem 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This quarterly report on Form 10-Q, including the following management’s discussion and analysis, contains forward-looking information that you should read in conjunction with the condensed consolidated financial statements and notes to the condensed consolidated financial statements that we have included elsewhere in this report. 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,” “intends,” “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 below under the heading “Risk Factors” in Part II, Item 1A. 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.
Overview
We are a leading provider of products, services and solutions for the diagnostics, life sciences and applied markets. Through our advanced technologies and differentiated solutions, we address critical issues that help to improve lives and the world around us.
The principal products and services of our two operating segments are:
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Discovery & Analytical Solutions. Provides products and services targeted towards the life sciences and applied markets.
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Diagnostics. Develops diagnostics, tools and applications focused on clinically-oriented customers, especially within the reproductive health, immunodiagnostics and applied genomics markets. The Diagnostics segment serves the diagnostics market.
Overview of the Third Quarter of Fiscal Year 2021
Our fiscal year ends on the Sunday nearest December 31. We report fiscal years under a 52/53 week format and as a result, certain fiscal years will contain 53 weeks. The fiscal year ending January 2, 2022 ("fiscal year 2021") will include 52 weeks, and the fiscal year ended January 3, 2021 ("fiscal year 2020") included 53 weeks.
Our overall revenue in the third quarter of fiscal year 2021 was $1,166.7 million and increased $202.7 million, or 21%, as compared to the third quarter of fiscal year 2020, reflecting an increase of $113.4 million, or 21%, in our Diagnostics segment revenue and an increase of $89.3 million, or 21%, in our Discovery & Analytical Solutions segment revenue. The increase in our Diagnostics segment revenue for the third quarter of fiscal year 2021 was driven by growth across our core portfolio and COVID-19 product offerings. The increase in our Discovery & Analytical Solutions segment revenue for the third quarter of fiscal year 2021 was driven by an increase in our life sciences market and applied markets revenue, as well as favorable changes in foreign exchange rates. The increase in our life sciences market revenue was the result of an increase in revenue in our pharmaceutical and biotechnology markets, as well as an increase in revenue from our academia and governmental markets. The increase in our applied markets revenue was driven by increased demand from our industrial, environmental and food markets.
Our consolidated gross margins decreased 56 basis points in the third quarter of fiscal year 2021, as compared to the third quarter of fiscal year 2020, primarily due to increased amortization expense partially offset by a favorable shift in product mix and service productivity. Our consolidated operating margins decreased 670 basis points in the third quarter of fiscal year 2021, as compared to the third quarter of fiscal year 2020, primarily due to increased costs related to amortization of acquired intangible assets, and investments in new product development and growth initiatives, which were partially offset by higher sales volume leverage and increased sales of our COVID-19 products offerings. Costs are also expected to increase in the fourth quarter of fiscal year 2021 mainly as a result of expected amortization expense of $40.7 million related to the acquisition of BioLegend.
Overall, we believe that our strategic priorities and recent portfolio transformations, coupled with our expanded range of product offerings, leading market positions, global scale and financial strength provide us with a foundation for continued growth.
Critical Accounting Policies and Estimates
The preparation of condensed consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses and related disclosure of contingent assets and liabilities. On an
ongoing basis, we evaluate our estimates, including those related to revenue recognition, accounting for business combinations and dispositions, and pensions and other postretirement benefits. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
Critical accounting policies are those policies that affect our more significant judgments and estimates used in the preparation of our condensed consolidated financial statements. We believe our critical accounting policies include our policies regarding revenue recognition, business combinations, value of long-lived assets, including goodwill and other intangibles and employee compensation and benefits.
For a more detailed discussion of our critical accounting policies and estimates, refer to the Notes to our audited consolidated financial statements and Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in our Annual Report on Form 10-K for the fiscal year ended January 3, 2021 (our “2020 Form 10-K”), as filed with the Securities and Exchange Commission. There have been no significant changes in our critical accounting policies and estimates during the nine months ended October 3, 2021.
Consolidated Results of Continuing Operations
Revenue
Revenue for the three months ended October 3, 2021 was $1,166.7 million, as compared to $964.0 million for the three months ended October 4, 2020, an increase of $202.7 million, or approximately 21%, which includes an approximate 8% increase in revenue attributable to acquisitions and divestitures and a 1% increase in revenue attributable to favorable changes in foreign exchange rates. The analysis in the remainder of this paragraph compares segment revenue for the three months ended October 3, 2021 as compared to the three months ended October 4, 2020 and includes the effect of foreign exchange rate fluctuations, acquisitions and divestitures. Our Diagnostics segment revenue was $653.8 million for the three months ended October 3, 2021, as compared to $540.4 million for the three months ended October 4, 2020, an increase of $113.4 million, or 21%, primarily due to growth across our core portfolio and COVID-19 product offerings. Our Discovery & Analytical Solutions segment revenue was $512.9 million for the three months ended October 3, 2021, as compared to $423.6 million for the three months ended October 4, 2020, an increase of $89.3 million, or 21%, driven by an increase in our life sciences market and applied markets revenue, as well as favorable changes in foreign exchange rates. As a result of adjustments to deferred revenue related to certain acquisitions required by business combination accounting rules, we did not recognize $0.2 million of revenue for each of the three months ended October 3, 2021 and October 4, 2020 that otherwise would have been recorded by the acquired businesses during each of the respective periods.
Revenue for the nine months ended October 3, 2021 was $3,702.8 million, as compared to $2,428.1 million for the nine months ended October 4, 2020, an increase of $1,274.7 million, or approximately 52%, which includes an approximate 7% increase in revenue attributable to acquisitions and divestitures and a 3% increase in revenue attributable to favorable changes in foreign exchange rates. The analysis in the remainder of this paragraph compares segment revenue for the nine months ended October 3, 2021 as compared to the nine months ended October 4, 2020 and includes the effect of foreign exchange rate fluctuations, acquisitions and divestitures. Our Diagnostics segment revenue was $2,222.5 million for the nine months ended October 3, 2021, as compared to $1,215.1 million for the nine months ended October 4, 2020, an increase of $1,007.4 million, or 83%, primarily due to growth across our core portfolio and COVID-19 product offerings. Our Discovery & Analytical Solutions segment revenue was $1,480.3 million for the nine months ended October 3, 2021, as compared to $1,213.0 million for the nine months ended October 4, 2020, an increase of $267.3 million, or 22%, driven by an increase in our life sciences market and applied markets revenue, as well as favorable changes in foreign exchange rates. As a result of adjustments to deferred revenue related to certain acquisitions required by business combination accounting rules, we did not recognize $2.4 million of revenue for the nine months ended October 3, 2021 and $0.6 million of revenue for the nine months ended October 4, 2020 that otherwise would have been recorded by the acquired businesses during each of the respective periods.
Cost of Revenue
Cost of revenue for the three months ended October 3, 2021 was $534.8 million, as compared to $436.6 million for the three months ended October 4, 2020, an increase of $98.3 million, or approximately 23%. As a percentage of revenue, cost of revenue increased to 45.8% for the three months ended October 3, 2021, from 45.3% for the three months ended October 4, 2020, resulting in a decrease in gross margin of 56 basis points to 54.2% for the three months ended October 3, 2021, from 54.7% for the three months ended October 4, 2020. Amortization of intangible assets increased and was $32.1 million for the three months ended October 3, 2021, as compared to $16.7 million for the three months ended October 4, 2020. The amortization of purchase accounting adjustments to record the inventory from certain acquisitions added an incremental
expense of $9.4 million for the three months ended October 3, 2021, as compared to $0.3 million for the three months ended October 4, 2020. The overall decrease in gross margin was partially offset by a favorable shift in product mix and service productivity.
Cost of revenue for the nine months ended October 3, 2021 was $1,600.7 million, as compared to $1,145.3 million for the nine months ended October 4, 2020, an increase of $455.3 million, or approximately 40%. As a percentage of revenue, cost of revenue decreased to 43.2% for the nine months ended October 3, 2021, from 47.2% for the nine months ended October 4, 2020, resulting in an increase in gross margin of 394 basis points to 56.8% for the nine months ended October 3, 2021, from 52.8% for the nine months ended October 4, 2020. Amortization of intangible assets increased and was $75.1 million for the nine months ended October 3, 2021, as compared to $48.8 million for the nine months ended October 4, 2020. The amortization of purchase accounting adjustments to record the inventory from certain acquisitions added an incremental expense of $14.7 million for the nine months ended October 3, 2021, as compared to $1.8 million for the nine months ended October 4, 2020. The overall increase in gross margin was primarily the result of higher volume and a favorable shift in product mix and service productivity, partially offset by increased amortization expense.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the three months ended October 3, 2021 were $339.0 million, as compared to $225.2 million for the three months ended October 4, 2020, an increase of $113.8 million, or 50.5%. As a percentage of revenue, selling, general and administrative expenses increased and were 29.1% for the three months ended October 3, 2021, as compared to 23.4% for the three months ended October 4, 2020. Amortization of intangible assets increased and was $38.9 million for the three months ended October 3, 2021, as compared to $32.2 million for the three months ended October 4, 2020. Amortization expense is expected to continue to increase as a result of the recent business combinations. Purchase accounting adjustments added an incremental expense of $1.2 million for the three months ended October 3, 2021, of which $1.1 million was change in contingent consideration and $0.1 million was increased depreciation on property, plant and equipment, as compared to $2.6 million of change in contingent consideration for the three months ended October 4, 2020. Acquisition and divestiture-related expenses added an incremental expense of $49.1 million for the three months ended October 3, 2021, as compared to $0.2 million for the three months ended October 4, 2020. Asset impairment costs added an incremental expense of $3.9 million for the three months ended October 3, 2021. In addition to the above items, the increase in selling, general and administrative expenses was primarily the result of costs related to investments in people, digital capabilities innovation, and recent acquisitions amplified by pandemic-related cost controls and disruptions in the prior year.
Selling, general and administrative expenses for the nine months ended October 3, 2021 were $872.3 million, as compared to $654.8 million for the nine months ended October 4, 2020, an increase of $217.4 million, or 33.2%. As a percentage of revenue, selling, general and administrative expenses decreased and were 23.6% for the nine months ended October 3, 2021, as compared to 27.0% for the nine months ended October 4, 2020. Amortization of intangible assets increased and was $109.6 million for the nine months ended October 3, 2021, as compared to $94.1 million for the nine months ended October 4, 2020. Amortization expense is expected to continue to increase as a result of the recent business combinations. Purchase accounting adjustments added an incremental expense of $1.6 million for the nine months ended October 3, 2021, of which $1.5 million was change in contingent consideration and $0.1 million was increased depreciation on property, plant and equipment, as compared to decreasing expenses by $8.8 million of change in contingent consideration for the nine months ended October 4, 2020. Acquisition and divestiture-related expenses added an incremental expense of $69.4 million for the nine months ended October 3, 2021, as compared to $7.4 million for the nine months ended October 4, 2020. Asset impairment costs added an incremental expense of $3.9 million for the nine months ended October 3, 2021. Legal costs for significant litigation matters and settlements added an incremental expense of $3.6 million for the nine months ended October 4, 2020. Costs for significant environmental matters added an incremental expense of $5.2 million for the nine months ended October 4, 2020. In addition to the above items, the increase in selling, general and administrative expenses was primarily the result of costs related to investments in people, digital capabilities innovation, and recent acquisitions amplified by pandemic-related cost controls and disruptions in the prior year.
Research and Development Expenses
Research and development expenses for the three months ended October 3, 2021 were $68.6 million, as compared to $50.1 million for the three months ended October 4, 2020, an increase of $18.5 million, or 36.9%. As a percentage of revenue, research and development expenses increased and were 5.9% for the three months ended October 3, 2021, as compared to 5.2% for the three months ended October 4, 2020. The increase in research and development expenses was driven by our investments in new product development.
Research and development expenses for the nine months ended October 3, 2021 were $194.6 million, as compared to $148.6 million for the nine months ended October 4, 2020, an increase of $46.1 million, or 31.0%. As a percentage of revenue, research and development expenses decreased and were 5.3% for the nine months ended October 3, 2021, as compared to 6.1%
for the nine months ended October 4, 2020. The increase in research and development expenses was driven by our investments in new product development.
Restructuring and Other Costs, Net
We implemented restructuring plans in the first, second and third quarters of fiscal year 2021 consisting of workforce reductions principally intended to realign resources to emphasize growth initiatives and integrate new acquisitions (the "Q1 2021 Plan", "Q2 2021 Plan" and "Q3 2021 Plan", respectively). We implemented a restructuring plan in the third quarter of fiscal year 2020 consisting of workforce reductions principally intended to realign resources to emphasize growth initiatives (the "Q3 2020 Plan"). We implemented a restructuring plan in the first quarter of fiscal year 2020 consisting of workforce reductions and closure of excess facilities principally intended to realign resources to emphasize growth initiatives (the "Q1 2020 Plan"). Details of the plans initiated in previous years (the “Previous Plans”) are discussed more fully in Note 5 to the audited consolidated financial statements in the 2020 Form 10-K.
The following table summarizes the reductions in headcount, the initial restructuring or contract termination charges by reporting segment, and the dates by which payments were substantially completed, or the dates by which payments are expected to be substantially completed, for restructuring actions implemented during fiscal years 2021 and 2020 in continuing operations:
| Workforce Reductions | Closure of Excess Facility | Total | (Expected) Date Payments Substantially Completed by | |||||||||||||||||||||||||||||||||||||||||||||||
| Headcount Reduction | Discovery & Analytical Solutions | Diagnostics | Discovery & Analytical Solutions | Diagnostics | Severance | Excess Facility | ||||||||||||||||||||||||||||||||||||||||||||
| (In thousands, except headcount data) | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Q3 2021 Plan | 39 | $ | 420 | $ | 366 | $ | — | $ | — | $ | 786 | Q2 FY2022 | — | |||||||||||||||||||||||||||||||||||||
| Q2 2021 Plan | 25 | 968 | 564 | — | — | 1,532 | Q1 FY2022 | — | ||||||||||||||||||||||||||||||||||||||||||
| Q1 2021 Plan | 77 | 3,941 | 1,615 | — | — | 5,556 | Q4 FY2021 | — | ||||||||||||||||||||||||||||||||||||||||||
| Q3 2020 Plan | 23 | 2,080 | 901 | — | — | 2,981 | Q2 FY2021 | — | ||||||||||||||||||||||||||||||||||||||||||
| Q1 2020 Plan | 32 | 2,312 | 1,134 | 92 | 682 | 4,220 | Q4 FY2020 | Q1 FY2022 |
We terminated various contractual commitments in connection with certain disposal activities and have recorded charges 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 net pre-tax charges of $0.4 million in the Discovery & Analytical Solutions segment during the nine months ended October 3, 2021 as a result of these contract terminations.
We recorded pre-tax charges of $1.3 million and $3.7 million associated with relocating facilities during the three and nine months ended October 3, 2021, respectively, in the Discovery & Analytical Solutions segment. We recorded pre-tax charges of $0.2 million and $0.4 million associated with relocating facilities during the three and nine months ended October 3, 2021, respectively, in the Diagnostics segment. We expect to make payments on these relocation activities through end of fiscal year 2022.
Interest and Other Expense, Net
Interest and other expense, net, consisted of the following:
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| October 3, 2021 | October 4, 2020 | October 3, 2021 | October 4, 2020 | ||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
| Interest income | $ | (544) | $ | (205) | $ | (1,322) | $ | (662) | |||||||||||||||
| Interest expense | 43,531 | 12,057 | 74,407 | 37,308 | |||||||||||||||||||
| Change in fair value of financial securities | 19,365 | — | (8,566) | — | |||||||||||||||||||
| Other (income) expense, net | (2,050) | 2,397 | (10,492) | (1,592) | |||||||||||||||||||
| Total interest and other expense, net | $ | 60,302 | $ | 14,249 | $ | 54,027 | $ | 35,054 |
Interest and other expense, net, for the three months ended October 3, 2021 was $60.3 million, as compared to $14.2 million for the three months ended October 4, 2020, an increase of $46.1 million. The increase in interest and other expense, net, for the three months ended October 3, 2021, as compared to the three months ended October 4, 2020, was primarily due to an increase of $31.5 million in interest expense, which was the result of $23.3 million of bridge financing and debt pre-issuance hedging costs that were recognized in expense in the quarter and an overall increase in debt, for the three months ended October 3, 2021, as compared to the three months ended October 4, 2020 and a change in fair value of financial securities of $19.4 million that was recognized during the three months ended October 3, 2021, partially offset by an increase in other (income) expense, net of $4.4 million. The increase of $4.4 million in other (income) expense, net for the three months ended October 3, 2021, as compared to the three months ended October 4, 2020, consisted primarily of higher periodic pension credit, gain on disposal and a lower foreign exchange loss related to foreign currency transactions and translation during the three months ended October 3, 2021. The other components of net periodic pension credit were $3.8 million and $1.6 million for the three months ended October 3, 2021 and October 4, 2020, respectively. These amounts were included in other (income) expense, net. Interest expense will continue to increase in 2022 as a result of increased debt.
Interest and other expense, net, for the nine months ended October 3, 2021 was $54.0 million, as compared to $35.1 million for the nine months ended October 4, 2020, an increase of $19.0 million. The increase in interest and other expense, net, for the nine months ended October 3, 2021, as compared to the nine months ended October 4, 2020, was primarily due to an increase of $37.1 million in interest expense, which was the result of $23.3 million of bridge financing and debt pre-issuance hedging costs that were recognized in expense in the quarter and an overall increase in debt, for the nine months ended October 3, 2021, as compared to the nine months ended October 4, 2020, partially offset by an increase in other (income) expense, net of $8.9 million and a change in fair value of financial securities of $8.6 million that was recognized during the nine months ended October 3, 2021. The increase of $8.9 million in other (income) expense, net for the nine months ended October 3, 2021, as compared to the nine months ended October 4, 2020, consisted primarily of higher periodic pension credit and a lower foreign exchange loss related to foreign currency transactions and translation during the nine months ended October 3, 2021. The other components of net periodic pension credit were $11.3 million and $4.9 million for the nine months ended October 3, 2021 and October 4, 2020, respectively. These amounts were included in other (income) expense, net. Interest expense will continue to increase in 2022 as a result of increased debt.
Provision for Income Taxes
For the three months ended October 3, 2021, the provision for income taxes from continuing operations was $33.9 million, as compared to $57.0 million for the three months ended October 4, 2020. For the nine months ended October 3, 2021, the provision for income taxes from continuing operations was $215.1 million, as compared to $85.6 million for the nine months ended October 4, 2020.
The effective tax rate from continuing operations was 21.0% and 22.2%, for the three and nine months ended October 3, 2021, respectively, as compared to 24.4% and 19.8%, for the three and nine months ended October 4, 2020, respectively. The lower effective tax rate during the three months ended October 3, 2021, as compared to the three months ended October 4, 2020, was due to a one-time discrete expense item recorded in the three months ended October 4, 2020, partially offset by certain higher tax rate jurisdictions projected to have higher income in fiscal year 2021 as compared to fiscal year 2020.
The net tax (benefit) expense related to discrete items was $(0.5) million for the three months ended October 3, 2021, as compared to a $15.2 million accrual for a foreign filing position and other discrete items of $(2.3) million for the three months ended October 4, 2020. The higher effective tax rate during the nine months ended October 3, 2021, as compared to the nine months ended October 4, 2020, was due to certain higher tax rate jurisdictions projected to have higher income in fiscal year 2021 as compared to fiscal year 2020 and a net tax expense related to discrete items of $8.6 million for the nine months ended October 3, 2021, as compared to $7.4 million of net tax expense for the nine months ended October 4, 2020.
During the nine months ended October 3, 2021, the Company recognized discrete tax expense of $13.7 million due to the remeasurement of United Kingdom deferred tax liabilities on long-lived purchase accounting intangibles and a $1.5 million tax benefit related to other net United Kingdom deferred tax assets and liabilities in connection with United Kingdom Finance Act 2021, which increased the United Kingdom corporation tax from 19% to 25%, effective April 1, 2023. The remaining discrete tax benefit for the nine months ended October 3, 2021, excluding the United Kingdom rate change, was $3.6 million primarily related to excess tax benefits on stock compensation of $5.0 million and $6.4 million resulting from a transaction that was completed during the second quarter of fiscal year 2021, offset by an accrual for uncertain tax positions of $4.2 million, and return to provision adjustments of $3.6 million. The discrete tax benefit for the first nine months of fiscal year 2020 was $7.4 million and consisted primarily of a $15.2 million accrual related to a foreign filing position, as well as interest on uncertain tax positions of $1.5 million and $1.2 million related to foreign tax rate changes, partially offset by recognition of excess tax benefits on stock compensation of $7.6 million and a valuation allowance release of $3.8 million.
Reporting Segment Results of Continuing Operations
Discovery & Analytical Solutions
Revenue for the three months ended October 3, 2021 was $512.9 million, as compared to $423.6 million for the three months ended October 4, 2020, an increase of $89.3 million, or 21%, which includes an approximate 10% increase in revenue attributable to acquisitions and divestitures and a 1% increase in revenue attributable to favorable changes in foreign exchange rates. The life sciences market revenue accounted for $68.1 million of the increase while the applied markets revenue was $21.1 million of the increase. The analysis in the remainder of this paragraph compares selected revenue by end market for the three months ended October 3, 2021, as compared to the three months ended October 4, 2020, and includes the effect of foreign exchange fluctuations, acquisitions and divestitures. The increase in our life sciences market revenue was driven by increased demand from our pharmaceutical, biotechnology, academia and governmental markets. The increase in our applied markets revenue was driven by increased demand from our industrial, environmental and food markets.
Revenue for the nine months ended October 3, 2021 was $1,480.3 million, as compared to $1,213.0 million for the nine months ended October 4, 2020, an increase of $267.3 million, or 22%, which includes an approximate 7% increase in revenue attributable to acquisitions and divestitures and a 3% increase in revenue attributable to favorable changes in foreign exchange rates. The life sciences market revenue accounted for $171.2 million of the increase while the applied markets revenue was $96.1 million of the increase. The analysis in the remainder of this paragraph compares selected revenue by end market for the nine months ended October 3, 2021, as compared to the nine months ended October 4, 2020, and includes the effect of foreign exchange fluctuations, acquisitions and divestitures. The increase in our life sciences market revenue was driven by increased demand from our pharmaceutical, biotechnology, academia and governmental markets. The increase in our applied markets revenue was driven by increased demand from our industrial, environmental and food markets.
Operating income from continuing operations for the three months ended October 3, 2021 was $7.1 million, as compared to $42.7 million for the three months ended October 4, 2020, a decrease of $35.5 million, or 83%. Amortization of intangible assets was $33.4 million for the three months ended October 3, 2021, as compared to $17.6 million for the three months ended October 4, 2020. Restructuring and other charges, net, were $1.6 million for the three months ended October 3, 2021, as compared to $2.0 million for the three months ended October 4, 2020. The amortization of purchase accounting adjustments to record the inventory from certain acquisitions was $5.5 million for the three months ended October 3, 2021, as compared to zero for the three months ended October 4, 2020. Acquisition and divestiture-related expenses, contingent consideration and other costs added an incremental expense of $47.2 million for the three months ended October 3, 2021, as compared to $0.2 million for the three months ended October 4, 2020. Excluding the factors noted above, operating income increased for the three months ended October 3, 2021, as compared to the three months ended October 4, 2020, primarily as a result of higher sales volume and favorable product mix, partially offset by increased investments in new product development and growth initiatives.
Operating income from continuing operations for the nine months ended October 3, 2021 was $114.2 million, as compared to $110.6 million for the nine months ended October 4, 2020, an increase of $3.6 million, or 3%. Amortization of intangible assets was $76.9 million for the nine months ended October 3, 2021, as compared to $58.8 million for the nine months ended October 4, 2020. Restructuring and other charges, net, were $9.4 million for the nine months ended October 3, 2021, as compared to $6.7 million for the nine months ended October 4, 2020. The amortization of purchase accounting adjustments to record the inventory from certain acquisitions was $7.2 million for the nine months ended October 3, 2021, as compared to $1.0 million for the nine months ended October 4, 2020. Acquisition and divestiture-related expenses, contingent consideration and other costs added an incremental expense of $63.7 million for the nine months ended October 3, 2021, as compared to decreasing expenses by $5.3 million for the nine months ended October 4, 2020. Legal costs for significant litigation matters and settlements was $2.4 million for the nine months ended October 4, 2020. Excluding the factors noted above, operating income increased for the nine months ended October 3, 2021, as compared to the nine months ended October 4, 2020, primarily as a result of higher sales volume and favorable product mix, partially offset by increased investments in new product development and growth initiatives.
Diagnostics
Revenue for the three months ended October 3, 2021 was $653.8 million, as compared to $540.4 million for the three months ended October 4, 2020, an increase of $113.4 million, or 21%, which includes an approximate 7% increase in revenue attributable to acquisitions and divestitures and a 2% increase in revenue attributable to favorable changes in foreign exchange rates. As a result of adjustments to deferred revenue related to certain acquisitions required by business combination accounting rules, we did not recognize $0.2 million of revenue in our Diagnostics segment for each of the three months ended October 3, 2021 and October 4, 2020 that otherwise would have been recorded by the acquired businesses during each of the respective
periods. The increase in our Diagnostics segment revenue for the three months ended October 3, 2021 was driven by growth across our core portfolio and COVID-19 product offerings.
Revenue for the nine months ended October 3, 2021 was $2,222.5 million, as compared to $1,215.1 million for the nine months ended October 4, 2020, an increase of $1,007.4 million, or 83%, which includes an approximate 6% increase in revenue attributable to acquisitions and divestitures and 3% increase in revenue attributable to favorable changes in foreign exchange rates. As a result of adjustments to deferred revenue related to certain acquisitions required by business combination accounting rules, we did not recognize $0.6 million of revenue in our Diagnostics segment for each of the nine months ended October 3, 2021 and October 4, 2020 that otherwise would have been recorded by the acquired businesses during each of the respective periods. The increase in our Diagnostics segment revenue for the nine months ended October 3, 2021 was driven by growth across our core and COVID-19 portfolio.
Operating income from continuing operations for the three months ended October 3, 2021 was $237.9 million, as compared to $223.8 million for the three months ended October 4, 2020, an increase of $14.1 million, or 6%. Amortization of intangible assets increased and was $37.5 million for the three months ended October 3, 2021, as compared to $31.3 million for the three months ended October 4, 2020. Restructuring and other charges, net, were $0.6 million for the three months ended October 3, 2021, as compared to $2.1 million for the three months ended October 4, 2020. The amortization of purchase accounting adjustments to record the inventory from certain acquisitions was $3.9 million for the three months ended October 3, 2021, as compared to $0.3 million for the three months ended October 4, 2020. Acquisition and divestiture-related expenses, contingent consideration and other costs added an incremental expense of $3.2 million for the three months ended October 3, 2021, as compared to $2.9 million for the three months ended October 4, 2020. Excluding the factors noted above, operating income increased for the three months ended October 3, 2021, as compared to the three months ended October 4, 2020, primarily as a result of higher sales volume and favorable product mix, partially offset by increased investments in new product development and growth initiatives.
Operating income from continuing operations for the nine months ended October 3, 2021 was $965.7 million, as compared to $413.7 million for the nine months ended October 4, 2020, an increase of $551.9 million, or 133%. Amortization of intangible assets increased and was $107.7 million for the nine months ended October 3, 2021, as compared to $84.0 million for the nine months ended October 4, 2020. Restructuring and other charges, net, were $3.7 million for the nine months ended October 3, 2021, as compared to $4.3 million for the nine months ended October 4, 2020. The amortization of purchase accounting adjustments to record the inventory from certain acquisitions was $7.6 million for the nine months ended October 3, 2021, as compared to $0.8 million for the nine months ended October 4, 2020. Acquisition and divestiture-related expenses, contingent consideration and other costs added an incremental expense of $9.8 million for the nine months ended October 3, 2021, as compared to $4.4 million for the nine months ended October 4, 2020. Legal costs for significant litigation matters and settlements was $1.2 million for the nine months ended October 4, 2020. Excluding the factors noted above, operating income increased for the nine months ended October 3, 2021, as compared to the nine months ended October 4, 2020, primarily as a result of higher sales volume and favorable product mix, partially offset by increased investments in new product development and growth initiatives.
Liquidity and Capital Resources
We require cash to pay our operating expenses, make capital expenditures, make strategic acquisitions, service our debt and other long-term liabilities, repurchase shares of our common stock and pay dividends on our common stock. Our principal sources of funds are from our operations and the capital markets, particularly the debt markets. We anticipate that our internal operations will generate sufficient cash to fund our operating expenses, capital expenditures, smaller acquisitions, interest payments on our debt and dividends on our common stock. However, we expect to use external sources to satisfy the balance of our debt when due and fund any larger acquisitions and other long-term liabilities, such as contributions to our postretirement benefit plans.
Principal factors that could affect the availability of our internally generated funds include:
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changes in sales due to weakness in markets in which we sell our products and services, and
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changes in our working capital requirements and capital expenditures.
Principal factors that could affect our ability to obtain cash from external sources include:
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financial covenants contained in the financial instruments controlling our borrowings that limit our total borrowing capacity,
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increases in interest rates applicable to our outstanding variable rate debt,
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a ratings downgrade that could limit the amount we can borrow under our senior unsecured revolving credit facility and our overall access to the corporate debt market,
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increases in interest rates or credit spreads, as well as limitations on the availability of credit, that affect our ability to borrow under future potential facilities on a secured or unsecured basis,
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a decrease in the market price for our common stock, and
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volatility in the public debt and equity markets, including as a result of the COVID-19 pandemic.
At October 3, 2021, we had cash and cash equivalents of $487.4 million, of which $413.0 million was held by our non-U.S. subsidiaries, and we had $1,377.1 million of additional borrowing capacity available under our senior unsecured revolving credit facility. We had no other liquid investments at October 3, 2021.
We utilize a variety of tax planning and financing strategies to ensure that our worldwide cash is available in the locations in which it is needed. We use our non-U.S. cash for needs outside of the U.S. including foreign operations, capital investments, acquisitions and repayment of debt. In addition, we transfer cash to the U.S. using nontaxable returns of capital, distribution of previously taxed income, as well as dividends, where the related income tax cost is managed efficiently. We have accrued tax expense on the unremitted earnings of foreign subsidiaries as required by the Tax Cuts and Jobs Act of 2017 (the "Tax Act") and where the foreign earnings are not considered permanently reinvested. In accordance with the Tax Act, we are making scheduled annual cash payments on our accrued transition tax. The tax cost and related tax payments are not expected to be material to the execution of our business, investment and acquisition strategies.
On July 31, 2020, our Board of Directors (the "Board") authorized us to repurchase shares of common stock for an aggregate amount up to $250.0 million under a stock repurchase program (the "Repurchase Program"). The Repurchase Program will expire on July 27, 2022 unless terminated earlier by the Board and may be suspended or discontinued at any time. During the nine months ended October 3, 2021, we repurchased 433,000 shares of common stock under the Repurchase Program for an aggregate cost of $62.6 million. As of October 3, 2021, $187.4 million remained available for aggregate repurchases of shares under the Repurchase Program.
Distressed global financial markets could adversely impact general economic conditions by reducing liquidity and credit availability, creating increased volatility in security prices, widening credit spreads and decreasing valuations of certain investments. The widening of credit spreads may create a less favorable environment for certain of our businesses and may affect the fair value of financial instruments that we issue or hold. Increases in credit spreads, as well as limitations on the availability of credit at rates we consider to be reasonable, could affect our ability to borrow under future potential facilities on a secured or unsecured basis, which may adversely affect our liquidity and results of operations. In difficult global financial markets, we may be forced to fund our operations at a higher cost, or we may be unable to raise as much funding as we need to support our business activities.
During the nine months ended October 3, 2021 and October 4, 2020, we contributed $5.5 million and $5.2 million, respectively, in the aggregate, to pension plans outside of the United States. During the nine months ended October 3, 2021, we contributed $20.0 million to our defined benefit pension plan in the United States for the plan year 2019. We expect to contribute an additional $1.7 million by the end of fiscal year 2021 to pension plans outside of the United States. We could potentially have to make additional contributions in future periods for all pension plans. We expect to use existing cash and external sources to satisfy future contributions to our pension plans.
Our pension plans have not experienced a material impact on liquidity or counterparty exposure due to the volatility and uncertainty in the credit markets. We recognize actuarial gains and losses in operating results in the fourth quarter of the year in which the gains and losses occur, unless there is an interim remeasurement required for one of our plans. It is difficult to reliably predict the magnitude of such adjustments for gains and losses in fiscal year 2021. These adjustments are primarily driven by events and circumstances beyond our control, including changes in interest rates, the performance of the financial markets and mortality assumptions. To the extent the discount rates decrease or the value of our pension and postretirement investments decrease, a loss to operations will be recorded in fiscal year 2021. Conversely, to the extent the discount rates increase or the value of our pension and postretirement investments increase more than expected, a gain will be recorded in fiscal year 2021.
Cash Flows
Operating Activities. Net cash provided by operating activities was $1,075.2 million for the nine months ended October 3, 2021, as compared to $410.1 million for the nine months ended October 4, 2020, an increase of $665.1 million. The cash provided by operating activities for the nine months ended October 3, 2021 was principally a result of income from continuing operations of $753.1 million, and adjustments for non-cash charges aggregating to $277.7 million, including depreciation and
amortization of $232.9 million, partially offset by a net cash usage in working capital of $44.3 million. During the nine months ended October 3, 2021, we contributed $5.5 million, in the aggregate, to pension plans outside of the United States and $20.0 million to our defined benefit pension plan in the United States for the plan year 2019.
Investing Activities. Net cash used in investing activities was $4,052.8 million for the nine months ended October 3, 2021, as compared to $68.1 million for the nine months ended October 4, 2020, an increase of $3,984.7 million. For the nine months ended October 3, 2021, the net cash used in investing activities was a result of cash used for acquisitions of $3,967.7 million, capital expenditures of $67.5 million and purchases of investments of $19.1 million, which were partially offset by $1.5 million of proceeds from disposition of businesses and assets. Cash used for acquisitions and capital expenditures for the nine months ended October 4, 2020 was $3.7 million and $57.4 million, respectively. The capital expenditures in each period were primarily for manufacturing, software and other capital equipment purchases. During the nine months ended October 4, 2020, we used $9.6 million for purchases of investments, which was partially offset by $2.4 million of proceeds from disposition of businesses and assets and $0.1 million of proceeds from surrender of life insurance policies.
Financing Activities. Net cash provided by financing activities was $3,080.7 million for the nine months ended October 3, 2021, as compared to net cash used in financing activities of $276.3 million for the nine months ended October 4, 2020, an increase in cash provided by financing activities of $3,357.0 million. The cash provided by financing activities during the nine months ended October 3, 2021 was a result of proceeds from the sale of unsecured senior notes, proceeds from borrowings, proceeds from a term loan and proceeds from the issuance of common stock under stock plans. During the nine months ended October 3, 2021, proceeds from the sale of unsecured senior notes were $3,086.1 million, proceeds from term loan were $500.0 million and our debt borrowings totaled $1,144.3 million. These were partially offset by payments on borrowings of $1,191.1 million, payments of senior unsecured notes of $339.6 million and debt issuance costs of $31.0 million during the nine months ended October 3, 2021. This compares to debt borrowings of $257.0 million, which were more than offset by debt payments of $515.2 million during the nine months ended October 4, 2020. Proceeds from the issuance of common stock under our stock plans were $22.8 million during the nine months ended October 3, 2021, as compared to $27.5 million for the nine months ended October 4, 2020. This cash provided by financing activities during the nine months ended October 3, 2021 was partially offset by repurchases of our common stock, payments of dividends, net payments on other credit facilities and settlement of cash flow hedges. During the nine months ended October 3, 2021, we repurchased 433,000 shares of common stock under the Repurchase Program and 70,925 shares of our 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, for a total cost of $73.0 million. This compares to repurchases of 71,350 shares of our common stock pursuant to our equity incentive plans for the nine months ended October 4, 2020, for a total cost of $6.8 million. During the nine months ended October 3, 2021, we paid $23.5 million in dividends as compared to $23.4 million for the nine months ended October 4, 2020. During the nine months ended October 3, 2021, we had net payments on other credit facilities of $12.7 million as compared to $8.1 million for the nine months ended October 4, 2020. We paid $1.5 million in settlement of hedges during the nine months ended October 3, 2021, as compared to $2.1 million in cash paid for settlement of hedges for the nine months ended October 4, 2020. We paid acquisition-related contingent consideration of $5.2 million during the nine months ended October 4, 2020.
Borrowing Arrangements
See Note 7, Debt, in the Notes to Condensed Consolidated Financial Statements for a detailed discussion of our borrowing arrangements.
Dividends
Our Board declared a regular quarterly cash dividend of $0.07 per share for each of the first three quarters of fiscal year 2021 and in each quarter of fiscal year 2020. At October 3, 2021, we had accrued $8.8 million for dividends declared on July 23, 2021 for the third quarter of fiscal year 2021 that will be paid on November 12, 2021. On October 27, 2021, we announced that our Board had declared a quarterly dividend of $0.07 per share for the fourth quarter of fiscal year 2021 that will be payable in February 2022. 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.
Contractual Obligations
Except as discussed in Note 7, Debt, and Note 12, Derivatives and Hedging Activities, in the Notes to Condensed Consolidated Financial Statements, our contractual obligations, as described in Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2020 Form 10-K have not changed materially.
Effects of Recently Adopted and Issued Accounting Pronouncements
See Note 1, Basis of Presentation, in the Notes to Condensed Consolidated Financial Statements for a summary of recently adopted and issued accounting pronouncements.
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