Item 1. Unaudited Financial Statements

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Item 1. Unaudited Financial Statements

PERKINELMER, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


	Three Months Ended				Six Months Ended
	July 3, 2022		July 4, 2021		July 3, 2022		July 4, 2021
	(In thousands, except per share data)
Product revenue	$	816,064	$	767,759	$	1,683,009	$	1,579,311
Service revenue	413,505		460,712		806,002		956,849
Total revenue	1,229,569		1,228,471		2,489,011		2,536,160
Cost of product revenue	403,607		365,823		807,258		705,135
Cost of service revenue	159,799		177,454		336,359		360,685
Total cost of revenue	563,406		543,277		1,143,617		1,065,820
Selling, general and administrative expenses	330,025		281,819		664,418		533,229
Research and development expenses	73,352		65,824		149,961		126,040
Restructuring and other costs, net	11,928		5,063		25,312		10,807
Operating income from continuing operations	250,858		332,488		505,703		800,264
Interest and other expense (income), net	26,386		6,431		63,631		(6,275)
Income from continuing operations before income taxes	224,472		326,057		442,072		806,539
Provision for income taxes	45,220		80,089		85,817		181,228
Income from continuing operations	179,252		245,968		356,255		625,311

Loss on disposition of discontinued operations before income taxes	—		—		—		—
Provision for income taxes on discontinued operations and dispositions	40		38		81		76
Loss from discontinued operations and dispositions	(40)		(38)		(81)		(76)
Net income	$	179,212	$	245,930	$	356,174	$	625,235
Basic earnings per share:
Income from continuing operations	$	1.42	$	2.20	$	2.82	$	5.58
Loss from discontinued operations and dispositions	(0.00)		(0.00)		(0.00)		(0.00)
Net income	$	1.42	$	2.20	$	2.82	$	5.58
Diluted earnings per share:
Income from continuing operations	$	1.42	$	2.19	$	2.81	$	5.56
Loss from discontinued operations and dispositions	(0.00)		(0.00)		(0.00)		(0.00)
Net income	$	1.42	$	2.19	$	2.81	$	5.56
Weighted average shares of common stock outstanding:
Basic	126,126		111,973		126,132		112,000
Diluted	126,509		112,417		126,581		112,456
Cash dividends declared per common share	$	0.07	$	0.07	$	0.14	$	0.14

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

PERKINELMER, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(Unaudited)


	Three Months Ended				Six Months Ended
	July 3, 2022		July 4, 2021		July 3, 2022		July 4, 2021
	(In thousands)
Net income	$	179,212	$	245,930	$	356,174	$	625,235
Other comprehensive (loss) income:
Foreign currency translation adjustments, net of income taxes	(212,339)		11,724		(296,350)		(60,581)


Unrealized (loss) gain on securities, net of income taxes	(27)		11		(43)		105
Other comprehensive (loss) income	(212,366)		11,735		(296,393)		(60,476)
Comprehensive (loss) income	$	(33,154)	$	257,665	$	59,781	$	564,759

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

PERKINELMER, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


	July 3, 2022		January 2, 2022
	(In thousands, except share and per share data)
Current assets:
Cash and cash equivalents	$	360,860	$	618,319
Accounts receivable, net	932,131		1,023,792

Inventories	624,297		624,714
Other current assets	190,484		173,955

Total current assets	2,107,772		2,440,780
Property, plant and equipment, net	533,645		545,605
Operating lease right-of-use assets	209,332		207,775
Intangible assets, net	3,771,221		4,063,104
Goodwill	7,243,492		7,416,584
Other assets, net	324,245		326,706

Total assets	$	14,189,707	$	15,000,554
Current liabilities:
Current portion of long-term debt	$	4,180	$	4,240
Accounts payable	333,711		355,458

Accrued expenses and other current liabilities	705,922		854,046

Total current liabilities	1,043,813		1,213,744
Long-term debt	4,484,314		4,979,737
Deferred taxes and long-term liabilities	1,311,435		1,480,469
Operating lease liabilities	182,990		185,359

Total liabilities	7,022,552		7,859,309
Commitments and contingencies (see Note 14)
Stockholders’ equity:
Preferred stock—$1 par value per share, authorized 1,000,000 shares; none issued or outstanding	—		—
Common stock—$1 par value per share, authorized 300,000,000 shares; issued and outstanding 126,218,000 shares and 126,241,000 shares at July 3, 2022 and January 2, 2022, respectively	126,218		126,241
Capital in excess of par value	2,743,456		2,760,522
Retained earnings	4,756,566		4,417,174
Accumulated other comprehensive loss	(459,085)		(162,692)
Total stockholders’ equity	7,167,155		7,141,245
Total liabilities and stockholders’ equity	$	14,189,707	$	15,000,554

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

PERKINELMER, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)


	For the Six-Month Period Ended July 3, 2022
	Common Stock Shares	Common Stock Amount		Capital in Excess of Par Value		Retained Earnings		Accumulated Other Comprehensive Loss		Total Stockholders’ Equity
		(In thousands)
Balance, January 2, 2022	126,241	$	126,241	$	2,760,522	$	4,417,174	$	(162,692)	$	7,141,245
Net income	—	—		—		176,962		—		176,962
Other comprehensive loss	—	—		—		—		(84,027)		(84,027)
Dividends	—	—		—		(8,905)		—		(8,905)
Exercise of employee stock options	18	18		1,379		—		—		1,397

Purchases of common stock	(307)	(307)		(55,285)		—		—		(55,592)
Issuance of common stock for long-term incentive program	188	188		12,282		—		—		12,470
Stock compensation	—	—		2,792		—		—		2,792
Balance, April 3, 2022	126,140	$	126,140	$	2,721,690	$	4,585,231	$	(246,719)	$	7,186,342
Net income	—	—		—		179,212		—		179,212
Other comprehensive loss	—	—		—		—		(212,366)		(212,366)
Dividends	—	—		—		(7,877)		—		(7,877)
Exercise of employee stock options	50	50		4,394		—		—		4,444
Issuance of common stock for employee stock purchase plans	13	13		1,813		—		—		1,826
Purchases of common stock	(3)	(3)		(453)		—		—		(456)
Issuance of common stock for long-term incentive program	12	12		12,260		—		—		12,272
Stock compensation	6	6		3,752		—		—		3,758
Balance, July 3, 2022	126,218	$	126,218	$	2,743,456	$	4,756,566	$	(459,085)	$	7,167,155


	For the Six-Month Period Ended July 4, 2021
	Common Stock Shares	Common Stock Amount		Capital in Excess of Par Value		Retained Earnings		Accumulated Other Comprehensive Loss		Total Stockholders’ Equity
		(In thousands)
Balance, January 3, 2021	112,090	$	112,090	$	148,101	$	3,507,262	$	(31,961)	$	3,735,492

Net income	—	—		—		379,305		—		379,305
Other comprehensive loss	—	—		—		—		(72,211)		(72,211)
Dividends	—	—		—		(7,846)		—		(7,846)
Exercise of employee stock options and related income tax benefits	95	95		4,892		—		—		4,987
Issuance of common stock for employee stock purchase plans	—	—		8		—		—		8
Purchases of common stock	(295)	(295)		(42,484)		—		—		(42,779)
Issuance of common stock for long-term incentive program	176	176		4,274		—		—		4,450
Stock compensation	—	—		899		—		—		899
Balance, April 4, 2021	112,066	$	112,066	$	115,690	$	3,878,721	$	(104,172)	$	4,002,305
Net income	—	—		—		245,930		—		245,930
Other comprehensive income	—	—		—		—		11,735		11,735
Dividends	—	—		—		(7,826)		—		(7,826)
Exercise of employee stock options and related income tax benefits	128	128		9,070		—		—		9,198
Issuance of common stock for employee stock purchase plans	11	11		1,613		—		—		1,624
Purchases of common stock	(209)	(209)		(29,936)		—		—		(30,145)
Issuance of common stock for long-term incentive program	24	24		4,998		—		—		5,022
Stock compensation	5	5		1,959		—		—		1,964
Balance, July 4, 2021	112,025	$	112,025	$	103,394	$	4,116,825	$	(92,437)	$	4,239,807

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

PERKINELMER, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Six Months Ended
	July 3, 2022		July 4, 2021
	(In thousands)
Operating activities:
Net income	$	356,174	$	625,235
Loss from discontinued operations and dispositions, net of income taxes	81		76
Income from continuing operations	356,255		625,311
Adjustments to reconcile income from continuing operations to net cash provided by continuing operations:
Stock-based compensation	31,292		12,361
Restructuring and other costs, net	25,312		10,807
Depreciation and amortization	239,457		145,822


Change in fair value of contingent consideration	1,363		477

Amortization of deferred debt financing costs and accretion of discounts and debt extinguishment costs	4,340		1,724
Change in fair value of financial securities	9,215		(27,931)

Amortization of acquired inventory revaluation	33,724		5,303
Changes in assets and liabilities which provided (used) cash, excluding effects from companies acquired:
Accounts receivable, net	47,485		155,270

Inventories	(70,297)		7,239
Accounts payable	(7,382)		(26,795)

Accrued expenses and other	(290,064)		(148,226)
Net cash provided by operating activities of continuing operations	380,700		761,362


Investing activities:
Capital expenditures	(52,585)		(34,675)
Purchases of investments	(27,245)		(14,507)

Proceeds from disposition of businesses and assets	1,054		—

Cash paid for acquisitions, net of cash acquired	(5,885)		(702,697)
Net cash used in investing activities of continuing operations	(84,661)		(751,879)


Financing activities:
Payments on borrowings	(220,000)		(763,545)
Proceeds from borrowings	220,000		729,000
Payments of term loan	(450,000)		—
Payments of senior unsecured notes	—		(339,605)
Proceeds from sale of senior unsecured notes	—		799,856
Payments of debt financing and equity issuance costs	—		(8,242)
Settlement of cash flow hedges	(762)		(5,935)
Net payments on other credit facilities	(830)		(11,826)

Proceeds from issuance of common stock under stock plans	5,841		14,185
Purchases of common stock	(56,048)		(72,924)
Dividends paid	(17,667)		(15,697)
Net cash (used in) provided by financing activities of continuing operations	(519,466)		325,267


Effect of exchange rate changes on cash, cash equivalents and restricted cash	(33,977)		(10,659)


Net (decrease) increase in cash, cash equivalents and restricted cash	(257,404)		324,091
Cash, cash equivalents and restricted cash at beginning of period	619,337		402,613
Cash, cash equivalents and restricted cash at end of period	$	361,933	$	726,704

Supplemental disclosures of cash flow information
Reconciliation of cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheets that sum to the total shown in the condensed consolidated statements of cash flows:
Cash and cash equivalents	$	360,860	$	572,810
Restricted cash included in other current assets	1,073		1,750
Restricted cash included in other assets	—		152,144
Total cash, cash equivalents and restricted cash shown in the condensed consolidated statements of cash flows	$	361,933	$	726,704

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

PERKINELMER, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1: Basis of Presentation

The condensed consolidated financial statements included herein have been prepared by PerkinElmer, Inc. (the “Company”), in accordance with accounting principles generally accepted in the United States of America (the “U.S.” or the "United States") and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information in the footnote disclosures of the financial statements has been condensed or omitted where it substantially duplicates information provided in the Company’s latest audited consolidated financial statements, in accordance with the rules and regulations of the SEC. These condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes included in its Annual Report on Form 10-K for the fiscal year ended January 2, 2022, filed with the SEC (the “2021 Form 10-K”). The balance sheet amounts at January 2, 2022 in this report were derived from the Company’s audited 2021 consolidated financial statements included in the 2021 Form 10-K. The condensed consolidated financial statements reflect all adjustments that, in the opinion of management, are necessary to present fairly the Company’s financial position, results of operations and cash flows for the periods indicated. The preparation of financial statements in conformity with U.S. Generally Accepted Accounting Principles requires management to make estimates and assumptions that affect the reported amounts and classifications of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The results of operations for the three and six months ended July 3, 2022 and July 4, 2021, respectively, are not necessarily indicative of the results for the entire fiscal year or any future period.

Note 2: Revenue

Disaggregation of revenue

In the following tables, revenue is disaggregated by primary geographical markets, primary end-markets and timing of revenue recognition.


	Reportable Segments
	Three Months Ended
	July 3, 2022						July 4, 2021
	Discovery & Analytical Solutions		Diagnostics		Total		Discovery & Analytical Solutions		Diagnostics		Total
	(In thousands)
Primary geographical markets
Americas	$	302,207	$	325,610	$	627,817	$	206,938	$	368,365	$	575,303
Europe	159,620		116,235		275,855		145,576		200,777		346,353
Asia	198,714		127,183		325,897		160,315		146,500		306,815
	$	660,541	$	569,028	$	1,229,569	$	512,829	$	715,642	$	1,228,471

Primary end-markets
Diagnostics	$	—	$	569,028	$	569,028	$	—	$	715,642	$	715,642
Life sciences	442,654		—		442,654		308,681		—		308,681
Applied markets	217,887		—		217,887		204,148		—		204,148
	$	660,541	$	569,028	$	1,229,569	$	512,829	$	715,642	$	1,228,471

Timing of revenue recognition
Products and services transferred at a point in time	$	516,092	$	505,539	$	1,021,631	$	378,310	$	506,603	$	884,913
Services transferred over time	144,449		63,489		207,938		134,519		209,039		343,558
	$	660,541	$	569,028	$	1,229,569	$	512,829	$	715,642	$	1,228,471


	Reportable Segments
	Six Months Ended
	July 3, 2022						July 4, 2021
	Discovery & Analytical Solutions		Diagnostics		Total		Discovery & Analytical Solutions		Diagnostics		Total
	(In thousands)
Primary geographical markets
Americas	$	575,365	$	653,546	$	1,228,911	$	382,053	$	769,292	$	1,151,345
Europe	317,858		314,403		632,261		281,034		512,520		793,554
Asia	369,684		258,155		627,839		304,351		286,910		591,261
	$	1,262,907	$	1,226,104	$	2,489,011	$	967,438	$	1,568,722	$	2,536,160

Primary end-markets
Diagnostics	$	—	$	1,226,104	$	1,226,104	$	—	$	1,568,722	$	1,568,722
Life sciences	855,063		—		855,063		585,882		—		585,882
Applied markets	407,844		—		407,844		381,556		—		381,556
	$	1,262,907	$	1,226,104	$	2,489,011	$	967,438	$	1,568,722	$	2,536,160

Timing of revenue recognition
Products and services transferred at a point in time	$	977,406	$	1,060,059	$	2,037,465	$	704,972	$	1,121,709	$	1,826,681
Services transferred over time	285,501		166,045		451,546		262,466		447,013		709,479
	$	1,262,907	$	1,226,104	$	2,489,011	$	967,438	$	1,568,722	$	2,536,160

Major Customer Concentration

Revenues from one customer in the Company's Diagnostics segment represent approximately $176.9 million and $289.6 million of the Company's total revenue for the three and six months ended July 3, 2022, respectively, and approximately $192.5 million and $398.0 million of the Company's total revenue for the three and six months ended July 4, 2021, respectively.

During the second quarter of fiscal year 2022, the Company's contract with the California Department of Public Health (“CDPH”) for the supply and operation of the Valencia Branch Laboratory ended and the Valencia Branch Laboratory was closed. The contract required the Company to provide COVID-19 testing for CDPH. The Company recognized the remaining nonrefundable prepayment amounting to $117.8 million as revenue in the second quarter of fiscal year 2022.

Contract Balances

Contract assets: The unbilled receivables (contract assets) primarily relate to the Company's right to consideration for work completed but not billed at the reporting date. The unbilled receivables are transferred to trade receivables when billed to customers. Contract assets are generally classified as current assets and are included in "Accounts receivable, net" in the condensed consolidated balance sheets.


	(In thousands)
Balance at January 2, 2022	$	72,117
Transferred to trade receivables from unbilled receivables recognized at the beginning of the period	(47,716)
Increases as a result of recognition of revenue before billing to customers, excluding amounts transferred to trade receivables during the period	34,286
Balance at July 3, 2022	$	58,687

Contract liabilities: The contract liabilities primarily relate to the advance consideration received from customers for products and related services for which transfer of control has not occurred at the balance sheet date. Contract liabilities are classified as either current in "Accounts payable" or "Accrued expenses and other current liabilities" or as long-term in "Long-term liabilities" in the condensed consolidated balance sheets based on the timing of when the Company expects to recognize revenue.


	(In thousands)
Balance at January 2, 2022	$	201,073
Revenue recognized that was included in the contract liability balance at the beginning of the period	(171,581)
Increases due to cash received, excluding amounts recognized as revenue during the period	21,451
Balance at July 3, 2022	$	50,943

Note 3: Business Combinations

Acquisitions in fiscal year 2022

During the first half of fiscal year 2022, the Company completed the acquisition of two businesses for aggregate consideration of $13.5 million. Identifiable definite-lived intangible assets, such as core technology, acquired as part of these acquisitions had a weighted average amortization period of 5 years.

Acquisitions in fiscal year 2021

Acquisition of BioLegend, Inc. In fiscal year 2021, the Company completed the acquisition of BioLegend, Inc. ("BioLegend") and paid an aggregate consideration of $5.7 billion, net of cash acquired of $292.4 million, reflecting working capital and other adjustments (the "Aggregate Consideration"). The Aggregate Consideration was paid in a combination of $3.3 billion in cash and shares of the Company's common stock having a fair value of approximately $2.6 billion based on the $187.56 per share closing price of the Company's common stock on the New York Stock Exchange on September 17, 2021 (the "Stock Consideration"). The Stock Consideration consisted of 14,066,799 shares of the Company's common stock. BioLegend is recognized as a leading, global provider of life science antibodies and reagents, headquartered in San Diego, California, with approximately 700 employees. The operations for this acquisition is reported within the results of the Company's Discovery & Analytical Solutions segment from the acquisition date. The excess of the purchase price over the fair value of the acquired net assets represents cost and revenue synergies specific to the Company, as well as non-capitalizable intangible assets, such as the employee workforce acquired, and is not tax deductible. Identifiable definite-lived intangible assets, such as core technology, trade names, customer relationships and clone library, acquired as part of this acquisition had a weighted-average amortization period of 16.3 years.

BioLegend's revenue and net loss from the acquisition date to January 2, 2022 were $91.7 million and $25.8 million, respectively. The net loss includes $47.0 million of amortization of intangible assets recognized in the acquisition as well as $16.6 million of amortization of fair value adjustment to acquired inventory. The following unaudited pro forma information presents the combined financial results for the Company and BioLegend as if the acquisition of BioLegend had been completed at the beginning of fiscal year 2020:


	Three Months Ended July 4, 2021		Six Months Ended July 4, 2021
	(In thousands, except per share data)
Pro Forma Statement of Operations Information:
Revenue	$	1,310,191	$	2,695,305
Income from continuing operations	239,940		607,074
Basic earnings per share:
Income from continuing operations	$	1.90	$	4.82
Diluted earnings per share:
Income from continuing operations	$	1.90	$	4.80

The unaudited pro forma information for the second quarter of fiscal year 2021 has been calculated after applying the Company's accounting policies and the impact of acquisition date fair value adjustments. These pro forma condensed consolidated financial results have been prepared for comparative purposes only and include certain adjustments, such as increased interest expense on debt obtained to finance the transaction, and increased amortization expense for the fair value of acquired intangible assets.

The pro forma information does not reflect the effect of costs or synergies that would have been expected to result from the integration of the acquisition. The pro forma information does not purport to be indicative of the results of operations that

actually would have resulted had the combination occurred at the beginning of the period presented, or of future results of the consolidated entities. The actual results of operations may differ significantly from the pro forma amounts reflected herein due to a variety of factors.

Other acquisitions in 2021. During fiscal year 2021, the Company also completed the acquisition of seven other businesses for aggregate consideration of $1.2 billion. The acquired businesses include Oxford Immunotec Global PLC ("Oxford"), a company based in Abingdon, UK with approximately 275 employees, for total consideration of $590.9 million and Nexcelom Bioscience Holdings, LLC, a company based in Lawrence, Massachusetts with approximately 130 employees, for total consideration of $267.3 million, and five other businesses, which were acquired for total consideration of $318.6 million. The excess of the purchase prices over the fair values of the acquired businesses' net assets represents cost and revenue synergies specific to the Company, as well as non-capitalizable intangible assets, such as employee workforces acquired, and has been allocated to goodwill, which is not tax deductible. Identifiable definite-lived intangible assets, such as core technology, trade names, and customer relationships, acquired as part of these acquisitions had a weighted-average amortization period of 12.3 years.

The total purchase price for the acquisitions in fiscal year 2021 has been allocated to the estimated fair value of assets acquired and liabilities assumed as follows:


	BioLegend		Other
	(In thousands)
Fair value of business combination:
Cash payments	$	3,336,115	1,128,584
Common stock issued	2,638,369		—
Other liability	6,857		2,910
Contingent consideration	—		45,031
Working capital and other adjustments	—		183
Less: cash acquired	(292,377)		(195,010)
Total	$	5,688,964	$	981,698
Identifiable assets acquired and liabilities assumed:
Current assets	$	184,704	$	71,916
Property, plant and equipment	147,200		26,507
Other assets	9,330		15,527
Identifiable intangible assets:
Core technology and clone library	782,400		290,089
Trade names and patents	38,000		39,476
Licenses	8,979		—
Customer relationships and backlog	1,714,800		141,670

Goodwill	3,511,485		545,729
Deferred taxes	(668,920)		(81,612)
Deferred revenue	—		(1,197)
Debt assumed	—		(4,628)
Liabilities assumed	(39,014)		(61,779)
Total	$	5,688,964	$	981,698

The preliminary allocations of the purchase prices for acquisitions are based upon initial valuations. The Company's estimates and assumptions underlying the initial valuations are subject to the collection of information necessary to complete its valuations within the measurement periods, which are up to one year from the respective acquisition dates. The primary areas of the preliminary purchase price allocations that are not yet finalized relate to the fair value of certain tangible and intangible assets acquired and liabilities assumed, assets and liabilities related to income taxes and related valuation allowances, and residual goodwill. The Company expects to continue to obtain information to assist in determining the fair values of the net assets acquired at the acquisition dates during the measurement periods. During the measurement periods, the Company will adjust assets or liabilities if new information is obtained about facts and circumstances that existed as of the acquisition dates that, if known, would have resulted in the recognition of those assets and liabilities as of those dates. These adjustments will be made in the periods in which the amounts are determined and the cumulative effect of such adjustments will be calculated as if the adjustments had been completed as of the acquisition dates. All changes that do not qualify as adjustments made during the measurement periods are also included in current period earnings. There were no material measurement period adjustments recognized in the current period.

The allocations of the purchase prices for acquisitions are based on estimates of the fair value of the net assets acquired and are subject to adjustment upon finalization of the purchase price allocations. The accounting for business combinations requires estimates and judgments as to expectations for future cash flows of the acquired business, and the allocation of those cash flows to identifiable intangible assets, in determining the estimated fair values for assets acquired and liabilities assumed.

As of July 3, 2022, the Company may have to pay contingent consideration related to acquisitions with open contingency periods of up to $106.6 million. As of July 3, 2022, the Company has recorded contingent consideration obligations of $48.6 million, of which $1.3 million was recorded in accrued expenses and other current liabilities, and $47.3 million was recorded in long-term liabilities. As of January 2, 2022, the Company had recorded contingent consideration obligations with an estimated fair value of $58.0 million, of which $1.3 million was recorded in accrued expenses and other current liabilities, and $56.7 million was recorded in long-term liabilities. The expected maximum earnout period for acquisitions with open contingency periods does not exceed 6.4 years from July 3, 2022, and the remaining weighted average expected earnout period at July 3, 2022 was 5.4 years. If the actual results differ from the estimates and judgments used in these fair values, the amounts recorded in the condensed consolidated financial statements could result in a possible impairment of the intangible assets and goodwill, require acceleration of the amortization expense of definite-lived intangible assets or the recognition of additional contingent consideration which would be recognized as a component of operating expenses from continuing operations.

Total acquisition and divestiture-related costs for the three and six months ended July 3, 2022 were $21.9 million and $42.4 million, respectively. These amounts included $7.2 million and $14.7 million of stock compensation expense related to awards given to BioLegend employees and $1.0 million and $(0.7) million of incentive award expense (income) associated with the Company's acquisition of Meizheng Group for the three and six months ended July 3, 2022, respectively. Total acquisition and divestiture-related costs for the three and six months ended July 4, 2021 were $10.6 million and $15.1 million, respectively. These amounts included $6.3 million and $11.7 million of incentive award expense associated with the Company's acquisition of Meizheng Group for the three and six months ended July 4, 2021, respectively. Net foreign exchange gain and interest expense related to the Company's acquisition of Oxford for the six months ended July 4, 2021 amounted to $5.4 million and $0.2 million, respectively. These acquisition and divestiture-related costs were expensed as incurred and recorded in selling, general and administrative expenses and interest and other expense, net in the Company's condensed consolidated statements of operations.

Note 4: Restructuring and Other Costs, Net

The Company implemented restructuring plans in the first and second quarters of fiscal year 2022 consisting of workforce reductions principally intended to realign resources to emphasize growth initiatives and integrate new acquisitions (the "Q1 2022 Plan" and "Q2 2022 Plan", respectively). The Company implemented restructuring plans in each quarter 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", "Q3 2021 Plan" and "Q4 2021 Plan", respectively). Details of the plans initiated in previous years (the “Previous Plans”) are discussed more fully in Note 4, Restructuring and Other Costs, Net, to the audited consolidated financial statements in the 2021 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 2022 and 2021:


	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)

Q2 2022 Plan	243	$	7,336	$	2,052	$	—	$	—	$	9,388		Q3 FY2022		—
Q1 2022 Plan	81	5,832		399		—		—		6,231			Q4 FY2022		—
Q4 2021 Plan	31	3,139		77		150		—		3,366			Q3 FY2022		Q1 FY2023
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		—

The Company has terminated various contractual commitments in connection with certain disposal activities and has 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 the Company. The Company recorded net pre-tax charges of $1.8 million and $8.0 million in the Discovery & Analytical Solutions segment during the three and six months ended July 3, 2022, respectively, as a result of these contract terminations. The Company recorded net pre-tax charges (gains) of $0.3 million and $(0.1) million in the Diagnostics segment during the three and six months ended July 3, 2022, respectively, as a result of changes in estimates from prior contract terminations.

The Company recorded pre-tax charges of $0.3 million and $1.7 million associated with closure of facilities during the three and six months ended July 3, 2022, respectively, in the Discovery & Analytical Solutions segment. The Company recorded pre-tax charges of $0.1 million associated with closure of facilities during each of the three and six months ended July 3, 2022 in the Diagnostics segment. The Company expects to make payments on these relocation activities through end of fiscal year 2023.

Note 5: Interest and Other Expense, Net

Interest and other expense, net, consisted of the following:


	Three Months Ended				Six Months Ended
	July 3, 2022		July 4, 2021		July 3, 2022		July 4, 2021
	(In thousands)
Interest income	$	(762)	$	(367)	$	(1,357)	$	(778)
Interest expense	27,128		16,750		55,516		30,876


Change in fair value of financial securities	(2,910)		(8,633)		9,215		(27,931)
Other components of net periodic pension credit	(2,324)		(3,785)		(4,686)		(7,504)
Other expense (income), net	5,254		2,466		4,943		(938)
Total interest and other expense (income), net	$	26,386	$	6,431	$	63,631	$	(6,275)

Note 6: Inventories

Inventories consisted of the following:


	July 3, 2022		January 2, 2022
	(In thousands)
Raw materials	$	249,595	$	229,356
Work in progress	73,297		69,744
Finished goods	301,405		325,614
Total inventories	$	624,297	$	624,714

Note 7: Debt

The Company’s debt consisted of the following:


	July 3, 2022
	Outstanding Principal		Unamortized Debt Discount		Unamortized Debt Issuance Costs		Net Carrying Amount
	(In thousands)
Long-Term Debt:
Senior Unsecured Revolving Credit Facility	$	—	$	—	$	(3,001)	$	(3,001)
Unsecured Term Loan Credit Facility	50,000		—		(74)		49,926
0.550% Senior Unsecured Notes due in 2023 ("2023 Notes")	500,000		(108)		(1,487)		498,405
0.850% Senior Unsecured Notes due in 2024 ("2024 Notes")	800,000		(367)		(4,056)		795,577
€500,000 Principal 1.875% Senior Unsecured Notes due in 2026 ("2026 Notes")	520,400		(2,092)		(2,030)		516,278
1.900% Senior Unsecured Notes due in 2028 ("2028 Notes")	500,000		(324)		(3,915)		495,761
3.3% Senior Unsecured Notes due in 2029 ("2029 Notes")	850,000		(2,121)		(5,871)		842,008
2.55% Senior Unsecured Notes due in March 2031 ("March 2031 Notes")	400,000		(119)		(3,129)		396,752
2.250% Senior Unsecured Notes due in September 2031 ("September 2031 Notes")	500,000		(1,419)		(4,185)		494,396
3.625% Senior Unsecured Notes due in 2051 ("2051 Notes")	400,000		(4)		(4,285)		395,711
Other Debt Facilities, non-current	2,501		—		—		2,501
Total Long-Term Debt	$	4,522,901	$	(6,554)	$	(32,033)	$	4,484,314
Current Portion of Long-term Debt:
Other Debt Facilities, current	4,180		—		—		4,180
Total	$	4,527,081	$	(6,554)	$	(32,033)	$	4,488,494


	January 2, 2022
	Outstanding Principal		Unamortized Debt Discount		Unamortized Debt Issuance Costs		Net Carrying Amount
	(In thousands)
Long-Term Debt:
Senior Unsecured Revolving Credit Facility	$	—	$	—	$	(3,362)	$	(3,362)
Unsecured Term Loan Credit Facility	500,000		(14)		(658)		499,328
2023 Notes	500,000		(152)		(2,093)		497,755
2024 Notes	800,000		(447)		(4,945)		794,608
2026 Notes	568,600		(2,538)		(2,280)		563,782
2028 Notes	500,000		(348)		(4,200)		495,452
2029 Notes	850,000		(2,252)		(6,234)		841,514
March 2031 Notes	400,000		(126)		(3,294)		396,580
September 2031 Notes	500,000		(1,485)		(4,380)		494,135
2051 Notes	400,000		(4)		(4,335)		395,661
Other Debt Facilities, non-current	4,284		—		—		4,284
Total Long-Term Debt	5,022,884		(7,366)		(35,781)		4,979,737
Current Portion of Long-term Debt:
Other Debt Facilities, current	4,240		—		—		4,240
Total	$	5,027,124	$	(7,366)	$	(35,781)	$	4,983,977

Note 8: Earnings Per Share

Basic earnings per share was computed by dividing net income by the weighted-average number of common shares outstanding during the period less restricted unvested shares. Diluted earnings per share was computed by dividing net income by the weighted-average number of common shares outstanding plus all potentially dilutive common stock equivalents, primarily shares issuable upon the exercise of stock options using the treasury stock method. The following table reconciles the number of shares utilized in the earnings per share calculations:


	Three Months Ended		Six Months Ended
	July 3, 2022	July 4, 2021	July 3, 2022	July 4, 2021
	(In thousands)
Number of common shares—basic	126,126	111,973	126,132	112,000
Effect of dilutive securities:
Stock options	259	344	316	352
Restricted stock awards	124	100	133	104
Number of common shares—diluted	126,509	112,417	126,581	112,456
Number of potentially dilutive securities excluded from calculation due to antidilutive impact	662	224	627	193

Antidilutive securities include outstanding stock options with exercise prices and average unrecognized compensation cost in excess of the average fair market value of common stock for the related period. Antidilutive options were excluded from the calculation of diluted net income per share and could become dilutive in the future.

Note 9: Segment Information

The Company discloses information about its operating segments based on the way that management organizes the segments within the Company for making operating decisions and assessing financial performance. The Company evaluates the performance of its operating segments based on revenue and operating income. Intersegment revenue and transfers are not

significant. The accounting policies of the operating segments are the same as those described in Note 1, Nature of Operations and Accounting Policies, to the audited consolidated financial statements in the 2021 Form 10-K.

The principal products and services of the Company's two operating segments are:

Discovery & Analytical Solutions. Provides products and services targeted towards the life sciences and applied markets.
Diagnostics. Develops diagnostics, tools and applications focused on clinically-oriented customers, especially within the reproductive health, immunodiagnostics and applied genomics markets.

The Company has included the expenses for its 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. The Company has 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 the Company’s 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 the Company’s operating segments.

Revenue and operating income (loss) from continuing operations by operating segment are shown in the table below:


	Three Months Ended				Six Months Ended
	July 3, 2022		July 4, 2021		July 3, 2022		July 4, 2021
	(In thousands)
Discovery & Analytical Solutions
Product revenue	$	461,492	$	318,085	$	870,367	$	585,340
Service revenue	199,049		194,744		392,540		382,098
Total revenue	660,541		512,829		1,262,907		967,438
Operating income from continuing operations	70,112		64,155		84,627		107,102
Diagnostics
Product revenue	354,572		449,674		812,642		993,971
Service revenue	214,456		265,968		413,462		574,751
Total revenue	569,028		715,642		1,226,104		1,568,722
Operating income from continuing operations	201,232		286,280		459,244		727,747
Corporate
Operating loss from continuing operations	(20,486)		(17,947)		(38,168)		(34,585)
Continuing Operations
Product revenue	816,064		767,759		1,683,009		1,579,311
Service revenue	413,505		460,712		806,002		956,849
Total revenue	1,229,569		1,228,471		2,489,011		2,536,160
Operating income from continuing operations	250,858		332,488		505,703		800,264
Interest and other expense (income), net	26,386		6,431		63,631		(6,275)
Income from continuing operations before income taxes	$	224,472	$	326,057	$	442,072	$	806,539

Note 10: Stockholders’ Equity

Comprehensive Income:

The components of accumulated other comprehensive loss consisted of the following:


	July 3, 2022		January 2, 2022
	(In thousands)
Foreign currency translation adjustments, net of income taxes	$	(458,160)	$	(161,810)
Unrecognized prior service costs, net of income taxes	(842)		(842)

Unrealized net losses on securities, net of income taxes	(83)		(40)
Accumulated other comprehensive loss	$	(459,085)	$	(162,692)

Stock Repurchases:

On July 31, 2020, the Company's Board of Directors (the "Board") authorized the Company to repurchase shares of common stock for an aggregate amount up to $250.0 million under a stock repurchase program (the "Repurchase Program"). During the six months ended July 3, 2022, the Company repurchased 240,000 shares of common stock under the Repurchase Program for an aggregate cost of $43.4 million. As of July 3, 2022, $144.0 million remained available for aggregate repurchases of shares under the Repurchase Program. On July 22, 2022, the Repurchase Program was terminated by the Board and the Board authorized the Company to repurchase shares of common stock for an aggregate amount up to $300.0 million under a new stock repurchase program (the "New Repurchase Program"). The New Repurchase Program will expire on July 22, 2024 unless terminated earlier by the Board and may be suspended or discontinued at any time.

In addition, the Board has authorized the Company 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 the Company’s equity incentive plans and to satisfy obligations related to the exercise of stock options made pursuant to the Company's equity incentive plans. During the three months ended July 3, 2022, the Company repurchased 2,922 shares of common stock for this purpose at an aggregate cost of $0.5 million. During the six months ended July 3, 2022, the Company repurchased 70,029 shares of common stock for this purpose at an aggregate cost of $12.7 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.

Dividends:

The Board declared a regular quarterly cash dividend of $0.07 per share for each of the first two quarters of fiscal year 2022 and in each quarter of fiscal year 2021. At July 3, 2022, the Company had accrued $8.8 million for dividends declared on April 28, 2022 for the second quarter of fiscal year 2022 that is payable on August 12, 2022. On July 22, 2022, the Company announced that the Board had declared a quarterly dividend of $0.07 per share for the third quarter of fiscal year 2022 that will be payable in November 2022. In the future, the Board may determine to reduce or eliminate the Company’s common stock dividend in order to fund investments for growth, repurchase shares or conserve capital resources.

Note 11: Goodwill and Intangible Assets, Net

The Company tests goodwill and non-amortizing intangible assets at least annually for possible impairment. The Company completes the annual testing of impairment for goodwill and non-amortizing intangible assets on the later of January 1 or the first day of each fiscal year. In addition to its annual test, the Company regularly evaluates whether events or circumstances have occurred that may indicate a potential impairment of goodwill or non-amortizing intangible assets.

The process of testing goodwill for impairment involves the determination of the fair value of the applicable reporting units. The test consists of the comparison of the fair value to the carrying value of the reporting unit to determine if the carrying value exceeds the fair value. If the carrying value of the reporting unit exceeds its fair value, an impairment loss in an amount equal to that excess is recognized up to the amount of goodwill*.* The Company performed its annual impairment testing for its reporting units as of January 3, 2022, its annual impairment testing date for fiscal year 2022. The Company concluded that there was no goodwill impairment, and the fair value exceeded the carrying value by more than 20% for each reporting unit. For the fiscal year 2022 impairment analysis, the range of the long-term terminal growth rates for the Company’s reporting units was 2% to 5% and the range of the discount rates for the reporting units was 7% to 11.5%. Keeping all other variables constant, a 10% change in any one of these input assumptions for the various reporting units would still allow the Company to conclude that there was no impairment of goodwill.

The Company has consistently employed the income approach to estimate the current fair value when testing for impairment of goodwill. A number of significant assumptions and estimates are involved in the application of the income approach to forecast operating cash flows, including markets and market share, sales volumes and prices, costs to produce, tax rates, capital spending, discount rates and working capital changes. Cash flow forecasts are based on approved business unit operating plans for the early years’ cash flows and historical relationships in later years. The income approach is sensitive to changes in long-term terminal growth rates and the discount rates. The long-term terminal growth rates are consistent with the Company’s historical long-term terminal growth rates, as the current economic trends are not expected to affect the long-term terminal growth rates of the Company. The Company corroborates the income approach with a market approach.

The changes in the carrying amount of goodwill for the six months ended July 3, 2022 were as follows:


	Discovery & Analytical Solutions		Diagnostics		Consolidated
	(In thousands)
Balance at January 2, 2022	$	5,446,234	$	1,970,350	$	7,416,584
Foreign currency translation	(126,403)		(45,798)		(172,201)

Acquisitions, earn-outs and other	(4,603)		3,712		(891)
Balance at July 3, 2022	$	5,315,228	$	1,928,264	$	7,243,492

Identifiable intangible asset balances by category were as follows:


	July 3, 2022		January 2, 2022
	(In thousands)
Patents	$	30,814	$	31,033
Less: Accumulated amortization	(28,737)		(28,693)
Net patents	2,077		2,340
Trade names and trademarks	161,784		170,983
Less: Accumulated amortization	(65,717)		(62,441)
Net trade names and trademarks	96,067		108,542
Licenses	67,810		67,887
Less: Accumulated amortization	(55,291)		(54,315)
Net licenses	12,519		13,572
Core technology	1,786,018		1,834,177
Less: Accumulated amortization	(546,848)		(494,310)
Net core technology	1,239,170		1,339,867
Customer relationships	3,104,264		3,195,704
Less: Accumulated amortization	(758,722)		(673,425)
Net customer relationships	2,345,542		2,522,279
In-process research and development	5,262		5,920
Net amortizable intangible assets	3,700,637		3,992,520
Non-amortizing intangible asset:
Trade name	70,584		70,584
Total	$	3,771,221	$	4,063,104

Total amortization expense related to amortizable intangible assets was $100.9 million and $203.5 million for the three and six months ended July 3, 2022, respectively, and $59.6 million and $113.7 million for the three and six months ended July 4, 2021, respectively. Estimated amortization expense related to amortizable intangible assets for each of the next five years is $201.2 million for the remainder of fiscal year 2022, $394.0 million for fiscal year 2023, $383.5 million for fiscal year 2024, $357.5 million for fiscal year 2025, and $344.7 million for fiscal year 2026.

Note 12: Derivatives and Hedging Activities

The Company uses derivative instruments as part of its risk management strategy only, and includes derivatives utilized as economic hedges that are not designated as hedging instruments. By nature, all financial instruments involve market and credit risks. The Company enters into derivative instruments with major investment grade financial institutions and has policies to monitor the credit risk of those counterparties. The Company does not enter into derivative contracts for trading or other speculative purposes, nor does the Company use leveraged financial instruments. Approximately 60% of the Company’s 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, the Company enters into foreign exchange contracts for periods consistent with its 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 the Company’s condensed consolidated balance sheets. The unrealized gains and losses on the Company’s 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 the Company’s condensed consolidated statement of cash flows.

Principal hedged currencies include the Chinese Renminbi, British Pound, Euro, Singapore Dollar and Swedish Krona. The Company held forward foreign exchange contracts, designated as economic hedges, with U.S. dollar equivalent notional amounts totaling $319.6 million, $371.9 million and $444.7 million at July 3, 2022, January 2, 2022 and July 4, 2021, respectively, 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 the six months ended July 3, 2022 and July 4, 2021.

In addition, in connection with certain intercompany loan agreements utilized to finance its acquisitions and stock repurchase program, the Company enters into forward foreign exchange contracts intended to hedge movements in foreign exchange rates prior to settlement of such intercompany loans denominated in foreign currencies. The Company records these hedges at fair value on the Company’s condensed 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 the Company’s condensed 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 U.S. Dollar notional amounts of $360.2 million as of January 2, 2022, and combined U.S. Dollar notional amounts of $309.4 million as of July 4, 2021. 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 three and six months ended July 3, 2022 and July 4, 2021. The Company paid $0.8 million and $5.9 million during the six months ended July 3, 2022 and July 4, 2021, respectively, from the settlement of these hedges.

During fiscal year 2018, the Company designated a portion of the 2026 Notes to hedge its net investments in certain foreign subsidiaries. Unrealized translation adjustments from a portion of the 2026 Notes 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 July 3, 2022, the total notional amount of the 2026 Notes that was designated to hedge net investments in foreign subsidiaries was €497.2 million. The unrealized foreign exchange (gains) losses recorded in AOCI related to the net investment hedge were $(31.2) million and $(47.9) million for the three and six months ended July 3, 2022, respectively, and $2.5 million and $(19.1) million for the three and six months ended July 4, 2021, respectively.

The Company does not expect any material net pre-tax gains or losses to be reclassified from accumulated other comprehensive loss into interest and other expense, net within the next twelve months.

Note 13: Fair Value Measurements

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash equivalents, derivatives, marketable securities and accounts receivable including certain long-term receivables and debt securities. The Company believes it had no significant concentrations of credit risk as of July 3, 2022.

The Company uses the market approach technique to value its financial instruments and there were no changes in valuation techniques during the six months ended July 3, 2022. The Company’s financial assets and liabilities carried at fair value are primarily comprised of marketable securities, derivative contracts used to hedge the Company’s currency risk, and acquisition-related contingent consideration. The Company has not elected to measure any additional financial instruments or other items at fair value.

Valuation Hierarchy: The following summarizes the three levels of inputs required to measure fair value. For Level 1 inputs, the Company utilizes quoted market prices as these instruments have active markets. For Level 2 inputs, the Company utilizes quoted market prices in markets that are not active, broker or dealer quotations, or utilizes alternative pricing sources with reasonable levels of price transparency. For Level 3 inputs, the Company utilizes unobservable inputs based on the best information available, including estimates by management primarily based on information provided by third-party fund managers, independent brokerage firms and insurance companies. A financial asset’s or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement. In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible.

The following tables show the assets and liabilities carried at fair value measured on a recurring basis as of July 3, 2022 and January 2, 2022 classified in one of the three classifications described above:


			Fair Value Measurements at July 3, 2022 Using:
	Total Carrying Value at July 3, 2022		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(In thousands)
Marketable securities	$	18,159	$	18,159	$	—	$	—
Foreign exchange derivative assets	922		—		922		—
Foreign exchange derivative liabilities	(923)		—		(923)		—
Contingent consideration	(48,593)		—		—		(48,593)


			Fair Value Measurements at January 2, 2022 Using:
	Total Carrying Value at January 2, 2022		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(In thousands)
Marketable securities	$	53,073	$	53,073	$	—	$	—
Foreign exchange derivative assets	3,765		—		3,765		—
Foreign exchange derivative liabilities	(3,463)		—		(3,463)		—
Contingent consideration	(57,996)		—		—		(57,996)

Level 1 and Level 2 Valuation Techniques: The Company’s Level 1 and Level 2 assets and liabilities are comprised of investments in equity and fixed-income securities as well as derivative contracts. For financial assets and liabilities that utilize Level 1 and Level 2 inputs, the Company utilizes both direct and indirect observable price quotes, including common stock price quotes, foreign exchange forward prices and bank price quotes. Below is a summary of valuation techniques for Level 1 and Level 2 financial assets and liabilities.

Marketable securities: Include equity and fixed-income securities measured at fair value using the quoted market prices in active markets at the reporting date.

Foreign exchange derivative assets and liabilities: Include foreign exchange derivative contracts that are valued using quoted forward foreign exchange prices at the reporting date. The Company’s foreign exchange derivative contracts are subject to master netting arrangements that allow the Company and its counterparties to net settle amounts owed to each other. Derivative assets and liabilities that can be net settled under these arrangements have been presented in the Company's

condensed consolidated balance sheet on a net basis and are recorded in other assets. As of both July 3, 2022 and January 2, 2022, none of the master netting arrangements involved collateral.

Level 3 Valuation Techniques: The Company’s Level 3 liabilities are comprised of contingent consideration related to acquisitions. For liabilities that utilize Level 3 inputs, the Company uses significant unobservable inputs. Below is a summary of valuation techniques for Level 3 liabilities.

Contingent consideration: Contingent consideration is measured at fair value at the acquisition date using projected milestone dates, discount rates, probabilities of success and projected revenues (for revenue-based considerations). Projected risk-adjusted contingent payments are discounted back to the current period using a discounted cash flow model.

The fair values of contingent consideration are calculated on a quarterly basis based on a collaborative effort of the Company’s operations, finance and accounting groups, as appropriate. Potential valuation adjustments are made as additional information becomes available, including the progress towards achieving the revenue targets as compared to initial projections, with the impact of such adjustments being recorded in the Company's condensed consolidated statements of operations.

A reconciliation of the beginning and ending Level 3 net liabilities for contingent consideration is as follows:


	Three Months Ended				Six Months Ended
	July 3, 2022		July 4, 2021		July 3, 2022		July 4, 2021
	(In thousands)
Balance at beginning of period	$	(49,828)	$	(3,124)	$	(57,996)	$	(2,953)
Additions	—		—		(4,961)		—
Amounts paid and foreign currency translation	1,904		27		3,326		96
Adjustments recognized in goodwill	—		—		12,400		—
Change in fair value (included within selling, general and administrative expenses)	(669)		(237)		(1,362)		(477)
Balance at end of period	$	(48,593)	$	(3,334)	$	(48,593)	$	(3,334)

Financial Instruments Not Recorded at Fair Value

The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses approximate fair value due to the short-term maturities of these assets and liabilities. If measured at fair value, cash and cash equivalents would be classified as Level 1.

The Company's outstanding senior unsecured notes had a fair value of $3,934.8 million and a carrying value of $4,434.9 million as of July 3, 2022. The Company's outstanding senior unsecured notes had a fair value of $4,612.8 million and a carrying value of $4,479.5 million as of January 2, 2022. The fair values of the outstanding senior unsecured notes were estimated using market quotes from brokers and were based on current rates offered for similar debt, which are Level 2 measurements.

The Company’s other debt facilities, including the Company's senior revolving and term loan credit facilities, had an aggregate carrying value of $53.6 million and $504.5 million as of July 3, 2022 and January 2, 2022, respectively. The carrying value approximates fair value and were classified as Level 2.

Note 14: Contingencies

The Company is conducting a number of environmental investigations and remedial actions at current and former locations of the Company and, along with other companies, has been named a potentially responsible party (“PRP”) for certain waste disposal sites. The Company accrues for environmental issues in the accounting period that the Company’s responsibility is established and when the cost can be reasonably estimated. The Company has accrued $12.1 million and $11.9 million as of July 3, 2022 and January 2, 2022, respectively, which represents its 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. These amounts were included in accrued expenses and other current liabilities. The Company's 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 the Company has been

named a PRP, management does not currently anticipate any additional liability to result from the inability of other significant named parties to contribute. The Company expects 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 the Company’s condensed consolidated financial statements. While it is possible that a loss exceeding the amounts recorded in the condensed consolidated financial statements may be incurred, the potential exposure is not expected to be materially different from those amounts recorded.

The Company is subject to various claims, legal proceedings, regulatory matters, and investigations covering a wide range of matters that arise in the ordinary course of its business activities. Although the Company has established accruals for potential losses that it believes are probable and reasonably estimable, in the opinion of the Company’s management, based on its review of the information available at this time, the total cost of resolving these contingencies at July 3, 2022 would not have a material adverse effect on the Company’s consolidated financial statements. However, each of these matters is subject to uncertainties, and it is possible that some of these matters may be resolved unfavorably to the Company.

Note 15: Subsequent Events

On August 1, 2022, the Company announced that it has entered into an agreement with the intention to divest its Analytical, Food and Enterprise Services businesses for total consideration of $2.45 billion in cash, $2.30 billion of which will be received at the closing and $150 million of which will be payable contingent on the exit valuation that the proposed buyer receives on sale or other capital events related to the businesses. The transaction is expected to close in the first quarter of fiscal year 2023, subject to regulatory approvals and other customary closing conditions.

Upon closing of the transaction, the PerkinElmer name, brand and stock ticker ("PKI") are expected to be retained by the Analytical, Food, and Enterprise Services businesses under its new ownership. The Company’s Life Sciences and Diagnostics businesses will adopt a new name and stock ticker that will be announced at a later date.

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