Item 1.Unaudited Financial Statements
PERKINELMER, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
July 4,
2021
|
|
July 5,
2020
|
|
July 4,
2021
|
|
July 5,
2020
|
|
(In thousands, except per share data)
|
Product revenue
|
$
|
767,759
|
|
|
$
|
601,506
|
|
|
$
|
1,579,311
|
|
|
$
|
1,027,035
|
|
Service revenue
|
460,712
|
|
|
210,212
|
|
|
956,849
|
|
|
437,079
|
|
Total revenue
|
1,228,471
|
|
|
811,718
|
|
|
2,536,160
|
|
|
1,464,114
|
|
Cost of product revenue
|
365,823
|
|
|
240,494
|
|
|
705,135
|
|
|
446,684
|
|
Cost of service revenue
|
177,454
|
|
|
123,880
|
|
|
360,685
|
|
|
262,063
|
|
Total cost of revenue
|
543,277
|
|
|
364,374
|
|
|
1,065,820
|
|
|
708,747
|
|
Selling, general and administrative expenses
|
281,819
|
|
|
221,026
|
|
|
533,229
|
|
|
429,595
|
|
Research and development expenses
|
65,824
|
|
|
49,521
|
|
|
126,040
|
|
|
98,435
|
|
Restructuring and other costs, net
|
5,063
|
|
|
1,158
|
|
|
10,807
|
|
|
7,016
|
|
Operating income from continuing operations
|
332,488
|
|
|
175,639
|
|
|
800,264
|
|
|
220,321
|
|
Interest and other expense (income), net
|
6,431
|
|
|
10,812
|
|
|
(6,275)
|
|
|
20,805
|
|
Income from continuing operations before income taxes
|
326,057
|
|
|
164,827
|
|
|
806,539
|
|
|
199,516
|
|
Provision for income taxes
|
80,089
|
|
|
27,614
|
|
|
181,228
|
|
|
28,588
|
|
Income from continuing operations
|
245,968
|
|
|
137,213
|
|
|
625,311
|
|
|
170,928
|
|
|
|
|
|
|
|
|
|
Loss on disposition of discontinued operations before income taxes
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Provision for income taxes on discontinued operations and dispositions
|
38
|
|
|
51
|
|
|
76
|
|
|
101
|
|
Loss from discontinued operations and dispositions
|
(38)
|
|
|
(51)
|
|
|
(76)
|
|
|
(101)
|
|
Net income
|
$
|
245,930
|
|
|
$
|
137,162
|
|
|
$
|
625,235
|
|
|
$
|
170,827
|
|
Basic earnings per share:
|
|
|
|
|
|
|
|
Income from continuing operations
|
$
|
2.20
|
|
|
$
|
1.23
|
|
|
$
|
5.58
|
|
|
$
|
1.54
|
|
Loss from discontinued operations and dispositions
|
(0.00)
|
|
|
(0.00)
|
|
|
(0.00)
|
|
|
(0.00)
|
|
Net income
|
$
|
2.20
|
|
|
$
|
1.23
|
|
|
$
|
5.58
|
|
|
$
|
1.54
|
|
Diluted earnings per share:
|
|
|
|
|
|
|
|
Income from continuing operations
|
$
|
2.19
|
|
|
$
|
1.23
|
|
|
$
|
5.56
|
|
|
$
|
1.53
|
|
Loss from discontinued operations and dispositions
|
(0.00)
|
|
|
(0.00)
|
|
|
(0.00)
|
|
|
(0.00)
|
|
Net income
|
$
|
2.19
|
|
|
$
|
1.23
|
|
|
$
|
5.56
|
|
|
$
|
1.53
|
|
Weighted average shares of common stock outstanding:
|
|
|
|
|
|
|
|
Basic
|
111,973
|
|
|
111,329
|
|
|
112,000
|
|
|
111,225
|
|
Diluted
|
112,417
|
|
|
111,869
|
|
|
112,456
|
|
|
111,756
|
|
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 INCOME
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
July 4,
2021
|
|
July 5,
2020
|
|
July 4,
2021
|
|
July 5,
2020
|
|
(In thousands)
|
Net income
|
$
|
245,930
|
|
|
$
|
137,162
|
|
|
$
|
625,235
|
|
|
$
|
170,827
|
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
Foreign currency translation adjustments, net of income taxes
|
11,724
|
|
|
61,568
|
|
|
(60,581)
|
|
|
(17,025)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gain (loss) on securities, net of income taxes
|
11
|
|
|
87
|
|
|
105
|
|
|
(1)
|
|
Other comprehensive income (loss)
|
11,735
|
|
|
61,655
|
|
|
(60,476)
|
|
|
(17,026)
|
|
Comprehensive income
|
$
|
257,665
|
|
|
$
|
198,817
|
|
|
$
|
564,759
|
|
|
$
|
153,801
|
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
PERKINELMER, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
July 4,
2021
|
|
January 3,
2021
|
|
(In thousands, except share and per share data)
|
Current assets:
|
|
|
|
Cash and cash equivalents
|
$
|
572,810
|
|
|
$
|
402,036
|
|
Accounts receivable, net
|
992,602
|
|
|
1,155,109
|
|
|
|
|
|
Inventories
|
513,429
|
|
|
514,567
|
|
Other current assets
|
181,151
|
|
|
167,208
|
|
|
|
|
|
Total current assets
|
2,259,992
|
|
|
2,238,920
|
|
Property, plant and equipment, net
|
379,065
|
|
|
368,304
|
|
Operating lease right-of-use assets
|
208,494
|
|
|
207,236
|
|
Intangible assets, net
|
1,561,534
|
|
|
1,365,693
|
|
Goodwill
|
3,844,070
|
|
|
3,447,114
|
|
Other assets, net
|
486,306
|
|
|
333,048
|
|
|
|
|
|
Total assets
|
$
|
8,739,461
|
|
|
$
|
7,960,315
|
|
Current liabilities:
|
|
|
|
Current portion of long-term debt
|
$
|
4,669
|
|
|
$
|
380,948
|
|
Accounts payable
|
324,711
|
|
|
327,325
|
|
|
|
|
|
Accrued expenses and other current liabilities
|
793,443
|
|
|
943,916
|
|
|
|
|
|
Total current liabilities
|
1,122,823
|
|
|
1,652,189
|
|
Long-term debt
|
2,348,523
|
|
|
1,609,701
|
|
Long-term liabilities
|
838,974
|
|
|
774,531
|
|
Operating lease liabilities
|
189,334
|
|
|
188,402
|
|
|
|
|
|
Total liabilities
|
4,499,654
|
|
|
4,224,823
|
|
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 112,025,000 shares and 112,090,000 shares at July 4, 2021 and January 3, 2021, respectively
|
112,025
|
|
|
112,090
|
|
Capital in excess of par value
|
103,394
|
|
|
148,101
|
|
Retained earnings
|
4,116,825
|
|
|
3,507,262
|
|
Accumulated other comprehensive loss
|
(92,437)
|
|
|
(31,961)
|
|
Total stockholders’ equity
|
4,239,807
|
|
|
3,735,492
|
|
Total liabilities and stockholders’ equity
|
$
|
8,739,461
|
|
|
$
|
7,960,315
|
|
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 4, 2021
|
|
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
|
|
|
$
|
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
|
|
|
4,892
|
|
|
—
|
|
|
—
|
|
|
4,987
|
|
Issuance of common stock for employee stock purchase plans
|
—
|
|
|
8
|
|
|
—
|
|
|
—
|
|
|
8
|
|
Purchases of common stock
|
(295)
|
|
|
(42,484)
|
|
|
—
|
|
|
—
|
|
|
(42,779)
|
|
Issuance of common stock for long-term incentive program
|
176
|
|
|
4,274
|
|
|
—
|
|
|
—
|
|
|
4,450
|
|
Stock compensation
|
—
|
|
|
899
|
|
|
—
|
|
|
—
|
|
|
899
|
|
Balance, April 4, 2021
|
$
|
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
|
|
|
9,070
|
|
|
—
|
|
|
—
|
|
|
9,198
|
|
Issuance of common stock for employee stock purchase plans
|
11
|
|
|
1,613
|
|
|
—
|
|
|
—
|
|
|
1,624
|
|
Purchases of common stock
|
(209)
|
|
|
(29,936)
|
|
|
—
|
|
|
—
|
|
|
(30,145)
|
|
Issuance of common stock for long-term incentive program
|
24
|
|
|
4,998
|
|
|
—
|
|
|
—
|
|
|
5,022
|
|
Stock compensation
|
5
|
|
|
1,959
|
|
|
—
|
|
|
—
|
|
|
1,964
|
|
Balance, July 4, 2021
|
$
|
112,025
|
|
|
$
|
103,394
|
|
|
$
|
4,116,825
|
|
|
$
|
(92,437)
|
|
|
$
|
4,239,807
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Six-Month Period Ended July 5, 2020
|
|
Common
Stock
Amount
|
|
Capital in
Excess of
Par Value
|
|
Retained
Earnings
|
|
Accumulated
Other
Comprehensive
Loss
|
|
Total
Stockholders’
Equity
|
|
(In thousands)
|
Balance, December 29, 2019
|
$
|
111,140
|
|
|
$
|
90,357
|
|
|
$
|
2,811,973
|
|
|
$
|
(199,646)
|
|
|
$
|
2,813,824
|
|
Impact of adopting ASU 2016-13
|
—
|
|
|
—
|
|
|
(1,328)
|
|
|
—
|
|
|
(1,328)
|
|
Net income
|
—
|
|
|
—
|
|
|
33,665
|
|
|
—
|
|
|
33,665
|
|
Other comprehensive loss
|
—
|
|
|
—
|
|
|
—
|
|
|
(78,681)
|
|
|
(78,681)
|
|
Dividends
|
—
|
|
|
—
|
|
|
(7,779)
|
|
|
—
|
|
|
(7,779)
|
|
Exercise of employee stock options and related income tax benefits
|
21
|
|
|
1,085
|
|
|
—
|
|
|
—
|
|
|
1,106
|
|
Issuance of common stock for employee stock purchase plans
|
14
|
|
|
1,242
|
|
|
—
|
|
|
—
|
|
|
1,256
|
|
Purchases of common stock
|
(66)
|
|
|
(6,276)
|
|
|
—
|
|
|
—
|
|
|
(6,342)
|
|
Issuance of common stock for long-term incentive program
|
197
|
|
|
2,831
|
|
|
—
|
|
|
—
|
|
|
3,028
|
|
Stock compensation
|
—
|
|
|
997
|
|
|
—
|
|
|
—
|
|
|
997
|
|
Balance, April 5, 2020
|
$
|
111,306
|
|
|
$
|
90,236
|
|
|
$
|
2,836,531
|
|
|
$
|
(278,327)
|
|
|
$
|
2,759,746
|
|
Net income
|
—
|
|
|
—
|
|
|
137,162
|
|
|
—
|
|
|
137,162
|
|
Other comprehensive loss
|
—
|
|
|
—
|
|
|
—
|
|
|
61,655
|
|
|
61,655
|
|
Dividends
|
—
|
|
|
—
|
|
|
(7,803)
|
|
|
—
|
|
|
(7,803)
|
|
Exercise of employee stock options and related income tax benefits
|
175
|
|
|
8,792
|
|
|
—
|
|
|
—
|
|
|
8,967
|
|
Issuance of common stock for employee stock purchase plans
|
14
|
|
|
1,291
|
|
|
—
|
|
|
—
|
|
|
1,305
|
|
Purchases of common stock
|
(4)
|
|
|
(323)
|
|
|
—
|
|
|
—
|
|
|
(327)
|
|
Issuance of common stock for long-term incentive program
|
2
|
|
|
5,123
|
|
|
—
|
|
|
—
|
|
|
5,125
|
|
Stock compensation
|
8
|
|
|
1,625
|
|
|
—
|
|
|
—
|
|
|
1,633
|
|
Balance, July 5, 2020
|
$
|
111,501
|
|
|
$
|
106,744
|
|
|
$
|
2,965,890
|
|
|
$
|
(216,672)
|
|
|
$
|
2,967,463
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
PERKINELMER, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
July 4,
2021
|
|
July 5,
2020
|
|
(In thousands)
|
Operating activities:
|
|
|
|
Net income
|
$
|
625,235
|
|
|
$
|
170,827
|
|
Loss from discontinued operations and dispositions, net of income taxes
|
76
|
|
|
101
|
|
Income from continuing operations
|
625,311
|
|
|
170,928
|
|
Adjustments to reconcile income from continuing operations to net cash provided by continuing operations:
|
|
|
|
Stock-based compensation
|
12,361
|
|
|
12,654
|
|
Restructuring and other costs, net
|
10,807
|
|
|
7,016
|
|
Depreciation and amortization
|
145,822
|
|
|
120,047
|
|
Loss on disposition of businesses and assets, net
|
—
|
|
|
485
|
|
|
|
|
|
Change in fair value of contingent consideration
|
477
|
|
|
(11,446)
|
|
|
|
|
|
Amortization of deferred debt financing costs and accretion of discounts
|
1,724
|
|
|
1,642
|
|
Change in fair value of financial securities
|
(27,931)
|
|
|
—
|
|
Amortization of acquired inventory revaluation
|
5,303
|
|
|
1,485
|
|
Changes in assets and liabilities which provided (used) cash, excluding effects from companies acquired:
|
|
|
|
Accounts receivable, net
|
155,270
|
|
|
4,312
|
|
|
|
|
|
Inventories
|
7,239
|
|
|
(126,707)
|
|
Accounts payable
|
(26,795)
|
|
|
20,907
|
|
|
|
|
|
Accrued expenses and other
|
(148,226)
|
|
|
(2,677)
|
|
Net cash provided by operating activities of continuing operations
|
761,362
|
|
|
198,646
|
|
|
|
|
|
|
|
|
|
Investing activities:
|
|
|
|
Capital expenditures
|
(34,675)
|
|
|
(37,138)
|
|
Purchases of investments
|
(14,507)
|
|
|
(7,393)
|
|
|
|
|
|
Proceeds from disposition of businesses and assets
|
—
|
|
|
1,815
|
|
Proceeds from surrender of life insurance policies
|
—
|
|
|
131
|
|
Cash paid for acquisitions, net of cash, cash equivalents and restricted cash acquired
|
(702,697)
|
|
|
(2,990)
|
|
Net cash used in investing activities of continuing operations
|
(751,879)
|
|
|
(45,575)
|
|
|
|
|
|
|
|
|
|
Financing activities:
|
|
|
|
Payments on borrowings
|
(763,545)
|
|
|
(290,000)
|
|
Proceeds from borrowings
|
729,000
|
|
|
188,000
|
|
Payments of senior unsecured notes
|
(339,605)
|
|
|
—
|
|
Proceeds from sale of senior unsecured notes
|
799,856
|
|
|
—
|
|
Payments of debt financing costs
|
(8,242)
|
|
|
—
|
|
Settlement of cash flow hedges
|
(5,935)
|
|
|
5,037
|
|
Net payments on other credit facilities
|
(11,826)
|
|
|
(6,036)
|
|
Payments for acquisition-related contingent consideration
|
—
|
|
|
(5,200)
|
|
Proceeds from issuance of common stock under stock plans
|
14,185
|
|
|
10,074
|
|
Purchases of common stock
|
(72,924)
|
|
|
(6,669)
|
|
Dividends paid
|
(15,697)
|
|
|
(15,572)
|
|
Net cash provided by (used in) financing activities of continuing operations
|
325,267
|
|
|
(120,366)
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash, cash equivalents and restricted cash
|
(10,659)
|
|
|
(4,658)
|
|
Net increase in cash, cash equivalents and restricted cash
|
324,091
|
|
|
28,047
|
|
Cash, cash equivalents and restricted cash at beginning of period
|
402,613
|
|
|
191,894
|
|
Cash, cash equivalents and restricted cash at end of period
|
$
|
726,704
|
|
|
$
|
219,941
|
|
|
|
|
|
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
|
$
|
572,810
|
|
|
$
|
218,536
|
|
Restricted cash included in other current assets
|
1,750
|
|
|
1,405
|
|
Restricted cash included in other assets
|
152,144
|
|
|
—
|
|
Total cash, cash equivalents and restricted cash shown in the condensed consolidated statements of cash flows
|
$
|
726,704
|
|
|
$
|
219,941
|
|
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 3, 2021, filed with the SEC (the “2020 Form 10-K”). The balance sheet amounts at January 3, 2021 in this report were derived from the Company’s audited 2020 consolidated financial statements included in the 2020 Form 10-K. The condensed consolidated financial statements reflect all adjustments that, in the opinion of management, are necessary to present fairly the Company’s financial position, results of operations and cash flows for the periods indicated. The preparation of financial statements in conformity with U.S. Generally Accepted Accounting Principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts and classifications of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The results of operations for the three and six months ended July 4, 2021 and July 5, 2020, respectively, are not necessarily indicative of the results for the entire fiscal year or any future period.
The Company’s fiscal year ends on the Sunday nearest December 31. The Company reports fiscal years under a 52/53 week format and as a result, certain fiscal years will contain 53 weeks. The fiscal year ending January 2, 2022 ("fiscal year 2021") will include 52 weeks, and the fiscal year ended January 3, 2021 ("fiscal year 2020") included 53 weeks.
Recently Adopted and Issued Accounting Pronouncements: From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (the "FASB") and are adopted by the Company as of the specified effective dates. Unless otherwise discussed, such pronouncements did not have or will not have a significant impact on the Company’s consolidated financial position, results of operations and cash flows or do not apply to the Company’s operations.
In December 2019, the FASB issued Accounting Standards Update No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes ("ASU 2019-12"). ASU 2019-12 eliminates certain exceptions and adds guidance to reduce complexity in accounting for income taxes. Specifically, this guidance: (1) removes the intraperiod tax allocation exception to the incremental approach; (2) removes the ownership changes in investments exception in determining when a deferred tax liability is recognized after an investor in a foreign entity transitions to or from the equity method of accounting and applies this provision on a modified retrospective basis through a cumulative-effect adjustment to retained earnings at the beginning of the period of adoption; and (3) removes the exception to using the general methodology for calculating income taxes in an interim period when a year-to-date loss exceeds the anticipated loss for the year. ASU 2019-12 also simplifies accounting principles by making other changes, including requiring an entity to: (1) evaluate whether a step-up in tax basis of goodwill relates to a business combination or a separate transaction; (2) make a policy election to not allocate consolidated income taxes when a member of a consolidated tax return is not subject to income tax and to apply this provision retrospectively to all periods presented; and (3) recognize a franchise tax (or similar tax) that is partially based on income as an income-based tax and apply this provision either retrospectively for all periods presented or on a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the period of adoption. The provisions of this guidance (except as specifically mentioned above) are to be applied prospectively upon their effective date. ASU 2019-12 is effective for annual reporting periods beginning after December 15, 2020, and interim periods within those years. In accordance with ASU 2019-12, the Company adopted the guidance beginning on January 4, 2021. The adoption did not have a material impact on the Company's consolidated financial position, results of operations and cash flows.
Note 2: Revenue
Disaggregation of revenue
In the following tables, revenue is disaggregated by primary geographical markets, primary end-markets and timing of revenue recognition. The tables also include a reconciliation of the disaggregated revenue with the reportable segments' revenue.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reportable Segments
|
|
Three Months Ended
|
|
July 4, 2021
|
|
July 5, 2020
|
|
Discovery & Analytical Solutions
|
|
Diagnostics
|
|
Total
|
|
Discovery & Analytical Solutions
|
|
Diagnostics
|
|
Total
|
|
(In thousands)
|
Primary geographical markets
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
$
|
206,938
|
|
|
$
|
368,365
|
|
|
$
|
575,303
|
|
|
$
|
160,382
|
|
|
$
|
156,609
|
|
|
$
|
316,991
|
|
Europe
|
145,576
|
|
|
200,777
|
|
|
346,353
|
|
|
103,497
|
|
|
149,867
|
|
|
253,364
|
|
Asia
|
160,315
|
|
|
146,500
|
|
|
306,815
|
|
|
127,123
|
|
|
114,240
|
|
|
241,363
|
|
|
$
|
512,829
|
|
|
$
|
715,642
|
|
|
$
|
1,228,471
|
|
|
$
|
391,002
|
|
|
$
|
420,716
|
|
|
$
|
811,718
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Primary end-markets
|
|
|
|
|
|
|
|
|
|
|
|
Diagnostics
|
$
|
—
|
|
|
$
|
715,642
|
|
|
$
|
715,642
|
|
|
$
|
—
|
|
|
$
|
420,716
|
|
|
$
|
420,716
|
|
Life sciences
|
308,681
|
|
|
—
|
|
|
308,681
|
|
|
237,120
|
|
|
—
|
|
|
237,120
|
|
Applied markets
|
204,148
|
|
|
—
|
|
|
204,148
|
|
|
153,882
|
|
|
—
|
|
|
153,882
|
|
|
$
|
512,829
|
|
|
$
|
715,642
|
|
|
$
|
1,228,471
|
|
|
$
|
391,002
|
|
|
$
|
420,716
|
|
|
$
|
811,718
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Timing of revenue recognition
|
|
|
|
|
|
|
|
|
|
|
|
Products and services transferred at a point in time
|
$
|
378,310
|
|
|
$
|
506,603
|
|
|
$
|
884,913
|
|
|
$
|
265,903
|
|
|
$
|
398,646
|
|
|
$
|
664,549
|
|
Services transferred over time
|
134,519
|
|
|
209,039
|
|
|
343,558
|
|
|
125,099
|
|
|
22,070
|
|
|
147,169
|
|
|
$
|
512,829
|
|
|
$
|
715,642
|
|
|
$
|
1,228,471
|
|
|
$
|
391,002
|
|
|
$
|
420,716
|
|
|
$
|
811,718
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reportable Segments
|
|
Six Months Ended
|
|
July 4, 2021
|
|
July 5, 2020
|
|
Discovery & Analytical Solutions
|
|
Diagnostics
|
|
Total
|
|
Discovery & Analytical Solutions
|
|
Diagnostics
|
|
Total
|
|
(In thousands)
|
Primary geographical markets
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
$
|
382,053
|
|
|
$
|
769,292
|
|
|
$
|
1,151,345
|
|
|
$
|
329,498
|
|
|
$
|
261,766
|
|
|
$
|
591,264
|
|
Europe
|
281,034
|
|
|
512,520
|
|
|
793,554
|
|
|
222,154
|
|
|
231,466
|
|
|
453,620
|
|
Asia
|
304,351
|
|
|
286,910
|
|
|
591,261
|
|
|
237,745
|
|
|
181,485
|
|
|
419,230
|
|
|
$
|
967,438
|
|
|
$
|
1,568,722
|
|
|
$
|
2,536,160
|
|
|
$
|
789,397
|
|
|
$
|
674,717
|
|
|
$
|
1,464,114
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Primary end-markets
|
|
|
|
|
|
|
|
|
|
|
|
Diagnostics
|
$
|
—
|
|
|
$
|
1,568,722
|
|
|
$
|
1,568,722
|
|
|
$
|
—
|
|
|
$
|
674,717
|
|
|
$
|
674,717
|
|
Life sciences
|
585,882
|
|
|
—
|
|
|
585,882
|
|
|
482,853
|
|
|
—
|
|
|
482,853
|
|
Applied markets
|
381,556
|
|
|
—
|
|
|
381,556
|
|
|
306,544
|
|
|
—
|
|
|
306,544
|
|
|
$
|
967,438
|
|
|
$
|
1,568,722
|
|
|
$
|
2,536,160
|
|
|
$
|
789,397
|
|
|
$
|
674,717
|
|
|
$
|
1,464,114
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Timing of revenue recognition
|
|
|
|
|
|
|
|
|
|
|
|
Products and services transferred at a point in time
|
$
|
704,972
|
|
|
$
|
1,121,709
|
|
|
$
|
1,826,681
|
|
|
$
|
533,810
|
|
|
$
|
630,299
|
|
|
$
|
1,164,109
|
|
Services transferred over time
|
262,466
|
|
|
447,013
|
|
|
709,479
|
|
|
255,587
|
|
|
44,418
|
|
|
300,005
|
|
|
$
|
967,438
|
|
|
$
|
1,568,722
|
|
|
$
|
2,536,160
|
|
|
$
|
789,397
|
|
|
$
|
674,717
|
|
|
$
|
1,464,114
|
|
Major Customer Concentration
Revenues from one customer in the Company's Diagnostics segment represent approximately $192.5 million and $398.0 million of the Company's total revenue for the three and six months ended July 4, 2021.
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 consolidated balance sheets. The balance of contract assets as of July 4, 2021 and January 3, 2021 were $51.9 million and $59.5 million, respectively. The amount of unbilled receivables recognized at the beginning of the period that were transferred to trade receivables during the six months ended July 4, 2021 was $46.2 million. The increase in unbilled receivables during the six months ended July 4, 2021 as a result of recognition of revenue before billing to customers, excluding amounts transferred to trade receivables during the period, amounted to $38.6 million.
Contract liabilities: The contract liabilities primarily relate to the advance consideration received from customers for products and related installation 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 consolidated balance sheets based on the timing of when the Company expects to recognize revenue. The balance of contract liabilities as of July 4, 2021 and January 3, 2021 were $230.7 million and $238.1 million, respectively. The increase in contract liabilities during the six months ended July 4, 2021 due to cash received, excluding amounts recognized as revenue during the period, was $49.6 million. The amount of revenue recognized during the six months ended July 4, 2021 that was included in the contract liability balance at the beginning of the period was $57.1 million.
Contract costs: The Company recognizes the incremental costs of obtaining a contract with a customer as an asset if it expects the benefit of those costs to be longer than one year. The Company determined that certain sales incentive programs meet the requirements to be capitalized. Total capitalized costs to obtain a contract were immaterial during the period and are included in other current and long-term assets on the consolidated balance sheets. The Company applies a practical expedient to expense costs as incurred for costs to obtain a contract with a customer when the amortization period would have been one year
or less. These costs include the Company's internal sales force compensation program, as the Company determined that annual compensation is commensurate with annual sales activities.
Transaction price allocated to the remaining performance obligations
The Company applies the practical expedient in ASC 606-10-50-14 and does not disclose information about remaining performance obligations that have original expected durations of one year or less. The estimated revenue expected to be recognized beyond one year in the future related to performance obligations that are unsatisfied (or partially unsatisfied) at the end of the period are not material to the Company. The remaining performance obligations primarily include noncancelable purchase orders and noncancelable software subscriptions and cloud service contracts.
Note 3: Business Combinations
Acquisitions in fiscal year 2021
During the first six months of fiscal year 2021, the Company completed the acquisition of three businesses for aggregate consideration of $860.5 million. The acquired businesses include Oxford Immunotec Global PLC ("Oxford"), a company based in Abingdon, UK with approximately 275 employees, for a total consideration of $590.9 million, Nexcelom Bioscience Holdings, LLC ("Nexcelom"), a company based in Lawrence, Massachusetts with approximately 130 employees, for a total consideration of $267.1 million, and one other business, which was acquired for a total consideration of $2.5 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 11.9 years.
The total purchase price for the acquisitions in fiscal year 2021 has been allocated to the estimated fair values of assets acquired and liabilities assumed as follows:
|
|
|
|
|
|
|
Preliminary
|
|
(In thousands)
|
Fair value of business combination:
|
|
Cash payments
|
$
|
859,548
|
|
Other liability
|
910
|
|
|
|
|
|
Less: cash acquired
|
(157,278)
|
|
Total
|
$
|
703,180
|
|
Identifiable assets acquired and liabilities assumed:
|
|
Current assets
|
$
|
35,265
|
|
Property, plant and equipment
|
13,293
|
|
Other assets
|
15,187
|
|
Identifiable intangible assets:
|
|
Core technology
|
193,260
|
|
Trade names
|
26,070
|
|
Patents
|
150
|
|
|
|
Customer relationships
|
104,270
|
|
|
|
Goodwill
|
428,923
|
|
Deferred taxes
|
(68,821)
|
|
|
|
|
|
Liabilities assumed
|
(44,417)
|
|
Total
|
$
|
703,180
|
|
During the second quarter of fiscal year 2021, the Company entered into an agreement to acquire SIRION Biotech GmbH ("Sirion"), a leading, global provider of viral vector-based technologies headquartered in Munich, Germany with approximately 50 employees that drive improved delivery performance for cell and gene therapies. The total consideration is approximately $94.8 million (€80.0 million) in cash and a potential obligation to pay the shareholders of Sirion additional contingent consideration of up to $85.3 million (€72.0 million). The acquisition is expected to close during the third quarter of fiscal year 2021.
Subsequent to July 4, 2021, the Company completed the acquisition of Immunodiagnostic Systems Holdings PLC, a company headquartered in Boldon, the United Kingdom, for a total consideration of approximately $155.0 million (£110.0 million) in cash. The operations for this acquisition will be reported within the results of the Company's Diagnostics segment from the acquisition date.
Subsequent to July 4, 2021, the Company entered into an agreement to acquire BioLegend, Inc. ("BioLegend"), a leading, global provider of life science antibodies and reagents headquartered in San Diego, California with approximately 700 employees, for approximately $5.25 billion in a combination of cash and stock, subject to certain adjustments. The operations for this acquisition will be reported within the results of the Company's Discovery & Analytical Solutions segment from the acquisition date. The acquisition is expected to close by the end of fiscal year 2021, subject to regulatory approvals and other customary closing conditions.
Acquisitions in fiscal year 2020
During the fiscal year 2020, the Company completed the acquisition of four businesses for aggregate consideration of $438.9 million. The acquired businesses were Horizon Discovery Group plc (“Horizon”), a company based in Cambridge, UK with approximately 400 employees, which was acquired on December 23, 2020 for a total consideration of $399.8 million (£296.0 million), and three other businesses, which were acquired for a total consideration of $39.1 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 the 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, customer relationships and in-process research and development, acquired as part of these acquisitions had a weighted average amortization period of 11.0 years.
The total purchase price for the acquisitions in fiscal year 2020 has been allocated to the estimated fair values of assets acquired and liabilities assumed as follows:
|
|
|
|
|
|
|
Preliminary
|
|
(In thousands)
|
Fair value of business combination:
|
|
Cash payments
|
$
|
437,661
|
|
Other liability
|
1,660
|
|
|
|
Working capital and other adjustments
|
(384)
|
|
Less: cash acquired
|
(26,840)
|
|
Total
|
$
|
412,097
|
|
Identifiable assets acquired and liabilities assumed:
|
|
Current assets
|
$
|
35,532
|
|
Property, plant and equipment
|
20,302
|
|
Other assets
|
18,114
|
|
Identifiable intangible assets:
|
|
Core technology
|
65,730
|
|
Trade names
|
5,580
|
|
|
|
|
|
Customer relationships
|
108,523
|
|
|
|
Goodwill
|
221,960
|
|
Deferred taxes
|
(27,142)
|
|
Deferred revenue
|
(2,031)
|
|
|
|
Liabilities assumed
|
(45,171)
|
|
Total
|
$
|
412,097
|
|
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.
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 4, 2021, the Company may have to pay contingent consideration related to acquisitions with open contingency periods of up to $7.2 million. As of July 4, 2021, the Company has recorded contingent consideration obligations of $3.3 million, of which $3.2 million was recorded in accrued expenses and other current liabilities, and $0.1 million was recorded in long-term liabilities. As of January 3, 2021, the Company had recorded contingent consideration obligations with an estimated fair value of $3.0 million, of which $2.9 million was recorded in accrued expenses and other current liabilities, and $0.1 million was recorded in long-term liabilities. The expected maximum earnout period for acquisitions with open contingency periods does not exceed 1.5 years from July 4, 2021, and the remaining weighted average expected earnout period at July 4, 2021 was 0.8 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 4, 2021 were $10.6 million and $15.1 million, respectively. These amounts included $6.3 million and $11.7 million of incentive award 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. Total acquisition and divestiture-related costs (gains) for the three and six months ended July 5, 2020 were $(5.2) million and $7.1 million, respectively. These amounts included $(5.6) million and $6.7 million of incentive award associated with the Company's acquisition of Meizheng Group for the three and six months ended July 5, 2020, 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 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 2021 consisting of workforce reductions principally intended to realign resources to emphasize growth initiatives and integrate new acquisitions (the "Q1 2021 Plan" and "Q2 2021 Plan", respectively). The Company 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"). The Company 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)
|
|
|
|
|
|
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
|
|
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 $0.4 million and $0.7 million in the Discovery & Analytical Solutions segment and Diagnostics segment, respectively, during each of the three and six months ended July 4, 2021 as a result of these contract terminations.
The Company recorded pre-tax charges of $2.3 million and $2.5 million associated with relocating facilities during the three and six months ended July 4, 2021, respectively, in the Discovery & Analytical Solutions segment. The Company recorded pre-tax charges of $0.2 million associated with relocating facilities during each of the three and six months ended July 4, 2021, in the Diagnostics segment. The Company expects to make payments on these relocation activities through end of fiscal year 2022.
Note 5: Interest and Other Expense, Net
Interest and other expense, net, consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
July 4,
2021
|
|
July 5,
2020
|
|
July 4,
2021
|
|
July 5,
2020
|
|
(In thousands)
|
Interest income
|
$
|
(367)
|
|
|
$
|
(192)
|
|
|
$
|
(778)
|
|
|
$
|
(457)
|
|
Interest expense
|
16,750
|
|
|
11,586
|
|
|
30,876
|
|
|
25,251
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in fair value of financial securities
|
(8,633)
|
|
|
—
|
|
|
(27,931)
|
|
|
—
|
|
Other income, net
|
(1,319)
|
|
|
(582)
|
|
|
(8,442)
|
|
|
(3,989)
|
|
Total interest and other (income) expense, net
|
$
|
6,431
|
|
|
$
|
10,812
|
|
|
$
|
(6,275)
|
|
|
$
|
20,805
|
|
Foreign currency transaction (gains) losses were $(0.8) million and $0.6 million for the three and six months ended July 4, 2021, respectively. Foreign currency transaction (gains) losses were $(6.4) million and $3.5 million for the three and six months ended July 5, 2020, respectively. Net losses (gains) from forward currency hedge contracts were $3.3 million and $(1.5) million for the three and six months ended July 4, 2021, respectively. Net losses (gains) from forward currency hedge contracts were $7.6 million and $(4.0) million for the three and six months ended July 5, 2020, respectively.
Note 6: Inventories
Inventories consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
July 4,
2021
|
|
January 3,
2021
|
|
(In thousands)
|
Raw materials
|
$
|
199,770
|
|
|
$
|
205,022
|
|
Work in progress
|
40,646
|
|
|
35,160
|
|
Finished goods
|
273,013
|
|
|
274,385
|
|
Total inventories
|
$
|
513,429
|
|
|
$
|
514,567
|
|
Note 7: Debt
The Company’s debt consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 4,
2021
|
|
Outstanding Principal
|
|
Unamortized Debt Discount
|
|
Unamortized Debt Issuance Costs
|
|
Net Carrying Amount
|
|
(In thousands)
|
Long-Term Debt:
|
|
|
|
|
|
|
|
Senior Unsecured Revolving Credit Facility
|
$
|
125,000
|
|
|
$
|
—
|
|
|
$
|
(2,264)
|
|
|
$
|
122,736
|
|
1.875% Senior Unsecured Notes due in 2026 ("2026 Notes")
|
592,300
|
|
|
(2,904)
|
|
|
(2,531)
|
|
|
586,865
|
|
3.3% Senior Unsecured Notes due in 2029 ("2029 Notes")
|
850,000
|
|
|
(2,368)
|
|
|
(6,556)
|
|
|
841,076
|
|
2.55% Senior Unsecured Notes due in 2031
|
400,000
|
|
|
(136)
|
|
|
(3,563)
|
|
|
396,301
|
|
3.625% Senior Unsecured Notes due in 2051
|
400,000
|
|
|
(4)
|
|
|
(4,545)
|
|
|
395,451
|
|
Other Debt Facilities, non-current
|
6,094
|
|
|
—
|
|
|
—
|
|
|
6,094
|
|
Total Long-Term Debt
|
$
|
2,373,394
|
|
|
$
|
(5,412)
|
|
|
$
|
(19,459)
|
|
|
$
|
2,348,523
|
|
Current Portion of Long-term Debt:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Debt Facilities, current
|
4,669
|
|
|
—
|
|
|
—
|
|
|
4,669
|
|
Total
|
$
|
2,378,063
|
|
|
$
|
(5,412)
|
|
|
$
|
(19,459)
|
|
|
$
|
2,353,192
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 3,
2021
|
|
Outstanding Principal
|
|
Unamortized Debt Discount
|
|
Unamortized Debt Issuance Costs
|
|
Net Carrying Amount
|
|
(In thousands)
|
Long-Term Debt:
|
|
|
|
|
|
|
|
Senior Unsecured Revolving Credit Facility
|
$
|
158,595
|
|
|
$
|
—
|
|
|
$
|
(2,621)
|
|
|
$
|
155,974
|
|
2026 Notes
|
610,750
|
|
|
(3,253)
|
|
|
(2,782)
|
|
|
604,715
|
|
2029 Notes
|
850,000
|
|
|
(2,496)
|
|
|
(6,908)
|
|
|
840,596
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Debt Facilities, non-current
|
8,416
|
|
|
—
|
|
|
—
|
|
|
8,416
|
|
Total Long-Term Debt
|
$
|
1,627,761
|
|
|
$
|
(5,749)
|
|
|
$
|
(12,311)
|
|
|
$
|
1,609,701
|
|
Current Portion of Long-term Debt:
|
|
|
|
|
|
|
|
0.6% Senior Unsecured Notes due in 2021 ("2021 Notes")
|
366,450
|
|
|
(16)
|
|
|
(229)
|
|
|
366,205
|
|
Other Debt Facilities, current
|
14,743
|
|
|
—
|
|
|
—
|
|
|
14,743
|
|
Total
|
$
|
2,008,954
|
|
|
$
|
(5,765)
|
|
|
$
|
(12,540)
|
|
|
$
|
1,990,649
|
|
2.55% Senior Unsecured Notes due in 2031. On March 8, 2021, the Company issued $400.0 million aggregate principal amount of senior unsecured notes due in 2031 (the "2031 Notes”) in a registered public offering and received $399.9 million of net proceeds from the issuance. The 2031 Notes were issued at 99.965% of the principal amount, which resulted in a discount of $0.1 million. As of July 4, 2021, the 2031 Notes had an aggregate carrying value of $396.3 million, net of $0.1 million of unamortized original issue discount and $3.6 million of unamortized debt issuance costs. The 2031 Notes mature in March 2031 and bear interest at an annual rate of 2.55%. Interest on the 2031 Notes is payable semi-annually on March 15th and September 15th each year. Prior to December 15, 2030 (three months prior to their maturity date), the Company may redeem the 2031 Notes in whole at any time or in part from time to time, at its option, at a redemption price equal to the greater of (1) 100% of the principal amount of the 2031 Notes to be redeemed and (2) the sum of the present values of the remaining scheduled payments of principal and interest thereon (not including any portion of such payments of interest accrued but unpaid as of the date of redemption) assuming that the 2031 Notes matured on December 15, 2030, discounted to the date of redemption on a semi-annual basis (assuming a 360-day year of twelve 30-day months), at the Treasury Rate (as defined in the indenture
governing the 2031 Notes) plus 15 basis points, plus accrued and unpaid interest thereon to, but excluding, the date of redemption. At any time on or after December 15, 2030, the Company may redeem the 2031 Notes, in whole or in part, at the Company’s option, at a redemption price equal to 100% of the principal amount of the 2031 Notes due to be redeemed plus accrued and unpaid interest, if any, to, but excluding, the date of redemption. Upon a change of control repurchase event (as defined in the indenture governing the 2031 Notes) of the Company, the Company will, in certain circumstances, make an offer to repurchase the 2031 Notes at a price equal to 101% of their principal amount plus any accrued and unpaid interest, if any, to, but excluding, the date of repurchase.
3.625% Senior Unsecured Notes due in 2051. On March 8, 2021, the Company issued $400.0 million aggregate principal amount of senior unsecured notes due in 2051 (the "2051 Notes”) in a registered public offering and received $400.00 million of net proceeds from the issuance. The 2051 Notes were issued at 99.999% of the principal amount, which resulted in a discount of $4,000. As of July 4, 2021, the 2051 Notes had an aggregate carrying value of $395.5 million, net of $4,000 of unamortized original issue discount and $4.5 million of unamortized debt issuance costs. The 2051 Notes mature in March 2051 and bear interest at an annual rate of 3.625%. Interest on the 2051 Notes is payable semi-annually on March 15th and September 15th each year. Prior to September 15, 2050 (six months prior to their maturity date), the Company may redeem the 2051 Notes in whole at any time or in part from time to time, at its option, at a redemption price equal to the greater of (1) 100% of the principal amount of the 2051 Notes to be redeemed and (2) the sum of the present values of the remaining scheduled payments of principal and interest thereon (not including any portion of such payments of interest accrued but unpaid as of the date of redemption) assuming that the 2051 Notes matured on September 15, 2050, discounted to the date of redemption on a semi-annual basis (assuming a 360-day year of twelve 30-day months), at the Treasury Rate (as defined in the indenture governing the 2051 Notes) plus 20 basis points, plus accrued and unpaid interest thereon to, but excluding, the date of redemption. At any time on or after September 15, 2050, the Company may redeem the 2051 Notes, in whole or in part, at the Company’s option, at a redemption price equal to 100% of the principal amount of the 2051 Notes due to be redeemed plus accrued and unpaid interest, if any, to, but excluding, the date of redemption. Upon a change of control repurchase event (as defined in the indenture governing the 2051 Notes) of the Company, the Company will, in certain circumstances, make an offer to repurchase the 2051 Notes at a price equal to 101% of their principal amount plus any accrued and unpaid interest, if any, to, but excluding, the date of repurchase.
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 4,
2021
|
|
July 5,
2020
|
|
July 4,
2021
|
|
July 5,
2020
|
|
(In thousands)
|
Number of common shares—basic
|
111,973
|
|
|
111,329
|
|
|
112,000
|
|
|
111,225
|
|
Effect of dilutive securities:
|
|
|
|
|
|
|
|
Stock options
|
344
|
|
|
470
|
|
|
352
|
|
|
475
|
|
Restricted stock awards
|
100
|
|
|
70
|
|
|
104
|
|
|
56
|
|
Number of common shares—diluted
|
112,417
|
|
|
111,869
|
|
|
112,456
|
|
|
111,756
|
|
Number of potentially dilutive securities excluded from calculation due to antidilutive impact
|
224
|
|
|
390
|
|
|
193
|
|
|
440
|
|
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: Industry 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 to the audited consolidated financial statements in the 2020 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 Diagnostics segment serves the diagnostics market.
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 4,
2021
|
|
July 5,
2020
|
|
July 4,
2021
|
|
July 5,
2020
|
|
(In thousands)
|
Discovery & Analytical Solutions
|
|
|
|
|
|
|
|
Product revenue
|
$
|
318,085
|
|
|
$
|
225,617
|
|
|
$
|
585,340
|
|
|
$
|
440,973
|
|
Service revenue
|
194,744
|
|
|
165,385
|
|
|
382,098
|
|
|
348,424
|
|
Total revenue
|
512,829
|
|
|
391,002
|
|
|
967,438
|
|
|
789,397
|
|
Operating income from continuing operations
|
64,155
|
|
|
39,430
|
|
|
107,102
|
|
|
67,943
|
|
Diagnostics
|
|
|
|
|
|
|
|
Product revenue
|
449,674
|
|
|
375,889
|
|
|
993,971
|
|
|
586,062
|
|
Service revenue
|
265,968
|
|
|
44,827
|
|
|
574,751
|
|
|
88,655
|
|
Total revenue
|
715,642
|
|
|
420,716
|
|
|
1,568,722
|
|
|
674,717
|
|
Operating income from continuing operations
|
286,280
|
|
|
160,300
|
|
|
727,747
|
|
|
189,891
|
|
Corporate
|
|
|
|
|
|
|
|
Operating loss from continuing operations
|
(17,947)
|
|
|
(24,091)
|
|
|
(34,585)
|
|
|
(37,513)
|
|
Continuing Operations
|
|
|
|
|
|
|
|
Product revenue
|
767,759
|
|
|
601,506
|
|
|
1,579,311
|
|
|
1,027,035
|
|
Service revenue
|
460,712
|
|
|
210,212
|
|
|
956,849
|
|
|
437,079
|
|
Total revenue
|
1,228,471
|
|
|
811,718
|
|
|
2,536,160
|
|
|
1,464,114
|
|
Operating income from continuing operations
|
332,488
|
|
|
175,639
|
|
|
800,264
|
|
|
220,321
|
|
Interest and other expense (income), net (see Note 5)
|
6,431
|
|
|
10,812
|
|
|
(6,275)
|
|
|
20,805
|
|
Income from continuing operations before income taxes
|
$
|
326,057
|
|
|
$
|
164,827
|
|
|
$
|
806,539
|
|
|
$
|
199,516
|
|
Note 10: Stockholders’ Equity
Comprehensive Income:
The components of accumulated other comprehensive loss consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
July 4,
2021
|
|
January 3,
2021
|
|
(In thousands)
|
Foreign currency translation adjustments, net of income taxes
|
$
|
(91,518)
|
|
|
$
|
(30,937)
|
|
Unrecognized prior service costs, net of income taxes
|
(747)
|
|
|
(747)
|
|
|
|
|
|
Unrealized net losses on securities, net of income taxes
|
(172)
|
|
|
(277)
|
|
Accumulated other comprehensive loss
|
$
|
(92,437)
|
|
|
$
|
(31,961)
|
|
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"). 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 three months ended July 4, 2021, the Company repurchased 200,000 shares of common stock under the Repurchase Program for an aggregate cost of $29.0 million. During the six months ended July 4, 2021, the Company repurchased 433,000 shares of common stock under the Repurchase Program for an aggregate cost of $62.6 million. As of July 4, 2021, $187.4 million remained available for aggregate repurchases of shares under the Repurchase Program.
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 4, 2021, the Company repurchased 8,622 shares of common stock for this purpose at an aggregate cost of $1.2 million. During the six months ended July 4, 2021, the Company repurchased 70,413 shares of common stock for this purpose at an aggregate cost of $10.3 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 2021 and in each quarter of fiscal year 2020. At July 4, 2021, the Company had accrued $7.9 million for dividends declared on April 29, 2021 for the second quarter of fiscal year 2021 that were paid on August 6, 2021. On July 23, 2021, the Company announced that the Board had declared a quarterly dividend of $0.07 per share for the third quarter of fiscal year 2021 that will be payable in November 2021. 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. Accordingly, 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 4, 2021, its annual impairment testing date for fiscal year 2021. 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, except for the Company's Tulip reporting unit which had a fair value that was between 10% and 20% more than its carrying value. The range of the long-term terminal growth rates for the Company’s reporting units was 3% to 5% for the fiscal year 2021 impairment analysis. The range for the discount rates for the reporting units was 8.0% to 12.5%. Keeping all other variables constant, a 10% change in any one of these input assumptions for the various reporting units, except for the Tulip reporting unit, would still allow the Company to conclude that there was no impairment of goodwill. As of January 4, 2021, the Company's Tulip reporting unit, which had a goodwill balance of $77.8 million, was at increased risk of an impairment charge given its ongoing weakness due to the impact of COVID-19. Despite the increased risk associated with this reporting unit, the Company does not currently expect a significant change in the key estimates or assumptions driving the fair value of this reporting unit that would lead to a material impairment charge.
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.
Non-amortizing intangibles are also subject to an annual impairment test. The Company has consistently employed the relief from royalty model to estimate the current fair value when testing for impairment of non-amortizing intangible assets. The impairment test consists of a comparison of the fair value of the non-amortizing intangible asset with its carrying amount. If the carrying amount of a non-amortizing intangible asset exceeds its fair value, an impairment loss in an amount equal to that excess is recognized up to the amount of the amortizing intangible asset. In addition, the Company evaluates the remaining useful life of its non-amortizing intangible asset at least annually to determine whether events or circumstances continue to support an indefinite useful life. If events or circumstances indicate that the useful life of the Company's non-amortizing intangible asset is no longer indefinite, the asset will be tested for impairment. This intangible asset will then be amortized prospectively over its estimated remaining useful life and accounted for in the same manner as other intangible assets that are subject to amortization. The Company performed its annual impairment testing as of January 4, 2021 and concluded that there was no impairment of its non-amortizing intangible asset. An assessment of the recoverability of amortizing intangible assets takes place when events have occurred that may give rise to an impairment. No such events occurred during the first six months of fiscal year 2021.
The changes in the carrying amount of goodwill for the six months ended July 4, 2021 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discovery & Analytical Solutions
|
|
Diagnostics
|
|
Consolidated
|
|
(In thousands)
|
Balance at January 3, 2021
|
$
|
1,755,887
|
|
|
$
|
1,691,227
|
|
|
$
|
3,447,114
|
|
Foreign currency translation
|
(19,151)
|
|
|
(17,806)
|
|
|
(36,957)
|
|
|
|
|
|
|
|
Acquisitions, earn-outs and other
|
155,199
|
|
|
278,714
|
|
|
433,913
|
|
Balance at July 4, 2021
|
$
|
1,891,935
|
|
|
$
|
1,952,135
|
|
|
$
|
3,844,070
|
|
Identifiable intangible asset balances by category were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
July 4,
2021
|
|
January 3,
2021
|
|
(In thousands)
|
Patents
|
$
|
31,042
|
|
|
$
|
30,855
|
|
Less: Accumulated amortization
|
(28,590)
|
|
|
(28,440)
|
|
Net patents
|
2,452
|
|
|
2,415
|
|
Trade names and trademarks
|
122,959
|
|
|
98,661
|
|
Less: Accumulated amortization
|
(54,468)
|
|
|
(48,806)
|
|
Net trade names and trademarks
|
68,491
|
|
|
49,855
|
|
Licenses
|
59,015
|
|
|
58,700
|
|
Less: Accumulated amortization
|
(53,391)
|
|
|
(52,452)
|
|
Net licenses
|
5,624
|
|
|
6,248
|
|
Core technology
|
980,388
|
|
|
789,799
|
|
Less: Accumulated amortization
|
(435,709)
|
|
|
(398,992)
|
|
Net core technology
|
544,679
|
|
|
390,807
|
|
Customer relationships
|
1,441,419
|
|
|
1,357,660
|
|
Less: Accumulated amortization
|
(582,624)
|
|
|
(522,820)
|
|
Net customer relationships
|
858,795
|
|
|
834,840
|
|
In-process research and development
|
10,909
|
|
|
10,944
|
|
Net amortizable intangible assets
|
1,490,950
|
|
|
1,295,109
|
|
Non-amortizing intangible asset:
|
|
|
|
Trade name
|
70,584
|
|
|
70,584
|
|
Total
|
$
|
1,561,534
|
|
|
$
|
1,365,693
|
|
Total amortization expense related to definite-lived intangible assets was $59.6 million and $113.7 million for the three and six months ended July 4, 2021, respectively, and $46.7 million and $94.0 million for the three and six months ended July 5, 2020, respectively. Estimated amortization expense related to amortizable intangible assets for each of the next five
years is $116.8 million for the remainder of fiscal year 2021, $224.2 million for fiscal year 2022, $200.9 million for fiscal year 2023, $180.1 million for fiscal year 2024, and $151.3 million for fiscal year 2025.
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 70% 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 Australian Dollar, British Pound, Euro, Indian Rupee, Singapore Dollar and Swedish Krona. The Company held forward foreign exchange contracts, designated as economic hedges, with U.S. dollar equivalent notional amounts totaling $444.7 million, $808.0 million and $358.7 million at July 4, 2021, January 3, 2021 and July 5, 2020, 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 4, 2021 and July 5, 2020.
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 $309.4 million as of July 4, 2021, combined Euro notional amounts of €33.4 million and combined U.S. Dollar notional amounts of $499.0 million as of January 3, 2021, and combined Euro notional amounts of €104.8 million and combined U.S. Dollar notional amounts of $267.0 million as of July 5, 2020. 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 4, 2021 and July 5, 2020. The Company paid $5.9 million and received $5.0 million during the six months ended July 4, 2021 and July 5, 2020, 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 4, 2021, the total notional amount of the 2026 Notes that was designated to hedge net investments in foreign subsidiaries was €299.7 million. The unrealized foreign exchange losses (gains) recorded in AOCI related to the net investment hedge were $2.5 million and $(19.1) million for the three and six months ended July 4, 2021, respectively, and $22.3 million and $1.3 million for the three and six months ended July 5, 2020, respectively.
During fiscal year 2019, the Company entered into a cross-currency swap designated as a net investment hedge to hedge the Euro currency exposure of the Company’s net investment in certain foreign subsidiaries. This agreement is a contract to exchange fixed-rate payments in one currency for fixed-rate payments in another currency. Changes in the fair value of this
swap are recorded in equity as a component of AOCI in the same manner as foreign currency translation adjustments. In assessing the effectiveness of this hedge, the Company uses a method based on changes in spot rates to measure the impact of the foreign currency exchange rate fluctuations on both its foreign subsidiary net investment and the related swap. Under this method, changes in the fair value of the hedging instrument other than those due to changes in the spot rate are initially recorded in AOCI as a translation adjustment, and then are amortized into other (income) expense, net in the condensed consolidated statement of operations using a systematic and rational method over the instrument’s term. Changes in the fair value associated with the effective portion (i.e. those changes due to the spot rate) are recorded in AOCI as a translation adjustment and are released and recognized in earnings only upon the sale or liquidation of the hedged net investment. The cross-currency swap has an initial notional value of €197.4 million, or $220.0 million, and matures on November 15, 2021. Interest on the cross-currency swap is payable semi-annually, in Euro, on May 15th and November 15th of each year based on the Euro notional value and a fixed rate of 2.47%. The Company receives interest in U.S. dollars on May 15th and November 15th of each year based on the U.S. dollar equivalent of the Euro notional value and a fixed rate of 5.00%. At July 4, 2021, the fair value of the cross-currency swap was a $13.0 million loss, which was recorded in AOCI.
During fiscal year 2020, the Company entered into a forward foreign exchange contracts, designated as cash flow hedges, to hedge the 2021 Notes. The effective portion of the gain or loss of the cash flow hedges were reported as a component of other comprehensive income and reclassified into earnings in the same period during which the hedged transaction affected earnings. During the second quarter of fiscal year 2021, the Company redeemed all of its outstanding 2021 Notes and settled the forward foreign exchange contracts that were designated as cash flow hedges. The unrealized foreign exchange (gains) losses recorded in earnings related to the cash flow hedges were $(4.1) million and $9.5 million for the three and six months ended July 4, 2021, respectively, and $(3.8) million for each of the three and six months ended July 5, 2020.
During fiscal year 2021, the Company entered into forward foreign exchange contracts, designated as a cash flow hedge, to hedge a portion of the 2026 Notes. The effective portion of the gain or loss of the cash flow hedge will be reported as a component of other comprehensive income and reclassified into earnings in the same period during which the hedged transaction affects earnings. As of July 4, 2021, the total notional amount of the forward foreign exchange contracts that was designated as cash flow hedges was €197.4 million. The unrealized foreign exchange gains recorded in earnings related to the cash flow hedge were $1.7 million and $0.8 million for the three and six months ended July 4, 2021.
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. The Company believes it had no significant concentrations of credit risk as of July 4, 2021.
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 4, 2021. 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 4, 2021 and January 3, 2021 classified in one of the three classifications described above:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at July 4, 2021 Using:
|
|
Total Carrying Value at July 4, 2021
|
|
Quoted Prices in
Active Markets
(Level 1)
|
|
Significant Other
Observable Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
(In thousands)
|
Marketable securities
|
$
|
50,100
|
|
|
$
|
50,100
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Foreign exchange derivative assets
|
2,663
|
|
|
—
|
|
|
2,663
|
|
|
—
|
|
Foreign exchange derivative liabilities
|
(13,670)
|
|
|
—
|
|
|
(13,670)
|
|
|
—
|
|
Contingent consideration
|
(3,334)
|
|
|
—
|
|
|
—
|
|
|
(3,334)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at January 3, 2021 Using:
|
|
Total Carrying Value at January 3, 2021
|
|
Quoted Prices in
Active Markets
(Level 1)
|
|
Significant Other
Observable Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
(In thousands)
|
Marketable securities
|
$
|
2,154
|
|
|
$
|
2,154
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Foreign exchange derivative assets
|
31,248
|
|
|
—
|
|
|
31,248
|
|
|
—
|
|
Foreign exchange derivative liabilities
|
(21,413)
|
|
|
—
|
|
|
(21,413)
|
|
|
—
|
|
Contingent consideration
|
(2,953)
|
|
|
—
|
|
|
—
|
|
|
(2,953)
|
|
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 4, 2021 and January 3, 2021, 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 consolidated statements of operations.
As of July 4, 2021, the Company may have to pay contingent consideration, related to acquisitions with open contingency periods, of up to $7.2 million. The expected maximum earnout period for the acquisitions with open contingency periods does not exceed 1.5 years from July 4, 2021, and the remaining weighted average expected earnout period at July 4, 2021 was 0.8 years.
A reconciliation of the beginning and ending Level 3 net liabilities for contingent consideration is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
July 4,
2021
|
|
July 5,
2020
|
|
July 4,
2021
|
|
July 5,
2020
|
|
(In thousands)
|
Balance at beginning of period
|
$
|
(3,124)
|
|
|
$
|
(22,777)
|
|
|
$
|
(2,953)
|
|
|
$
|
(35,481)
|
|
|
|
|
|
|
|
|
|
Amounts paid and foreign currency translation
|
27
|
|
|
9,930
|
|
|
96
|
|
|
10,309
|
|
|
|
|
|
|
|
|
|
Change in fair value (included within selling, general and administrative expenses)
|
(237)
|
|
|
(879)
|
|
|
(477)
|
|
|
11,446
|
|
Balance at end of period
|
$
|
(3,334)
|
|
|
$
|
(13,726)
|
|
|
$
|
(3,334)
|
|
|
$
|
(13,726)
|
|
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 $2,411.6 million and a carrying value of $2,219.7 million as of July 4, 2021. The Company's outstanding senior unsecured notes had a fair value of $1,984.3 million and a carrying value of $1,811.5 million as of January 3, 2021. 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 credit facility, had an aggregate carrying value of $133.5 million and $179.1 million as of July 4, 2021 and January 3, 2021, respectively. As of July 4, 2021, these included bank loans in the aggregate amount of $10.7 million bearing fixed interest rates between 1.1% and 8.9% and a bank loan in the amount of $23,000 bearing a variable interest rate based on the Euribor rate plus a margin of 1.5%. The Company had no change in credit standing during the first six months of fiscal year 2021. Consequently, the carrying value approximates fair value and were classified as Level 2.
As of July 4, 2021, there has not been any significant impact to the fair value of the Company’s derivative liabilities due to credit risk. Similarly, there has not been any significant adverse impact to the Company’s derivative assets based on the evaluation of its counterparties’ credit risks.
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 $12.9 million as of July 4, 2021 and January 3, 2021, 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 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 4, 2021 would not have a material adverse effect on the Company’s condensed 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.
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:
•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 Diagnostics segment serves the diagnostics market.
Overview of the Second 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 second quarter of fiscal year 2021 was $1,228.5 million and increased $416.8 million, or 51%, as compared to the second quarter of fiscal year 2020, reflecting an increase of $294.9 million, or 70%, in our Diagnostics segment revenue and an increase of $121.8 million, or 31%, in our Discovery & Analytical Solutions segment revenue. The increase in our Diagnostics segment revenue for the second 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 second 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 increased 67 basis points in the second quarter of fiscal year 2021, as compared to the second quarter of fiscal year 2020, primarily due to higher sales volume, favorable shift in product mix and service productivity, partially offset by increased amortization expense. Our consolidated operating margins increased 543 basis points in the second quarter of fiscal year 2021, as compared to the second quarter of fiscal year 2020, primarily due to higher sales volume leverage and increased sales of our COVID-19 products offerings, which were partially offset by increased costs related to amortization of acquired intangible assets, investments in new product development and growth initiatives.
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 six months ended July 4, 2021.
Consolidated Results of Continuing Operations
Revenue
Revenue for the three months ended July 4, 2021 was $1,228.5 million, as compared to $811.7 million for the three months ended July 5, 2020, an increase of $416.8 million, or approximately 51%, which includes an approximate 6% increase in revenue attributable to acquisitions and divestitures and a 5% 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 July 4, 2021 as compared to the three months ended July 5, 2020 and includes the effect of foreign exchange rate fluctuations, acquisitions and divestitures. Our Diagnostics segment revenue was $715.6 million for the three months ended July 4, 2021, as compared to $420.7 million for the three months ended July 5, 2020, an increase of $294.9 million, or 70%, primarily due to growth across our core portfolio and COVID-19 product offerings. Our Discovery & Analytical Solutions segment revenue was $512.8 million for the three months ended July 4, 2021, as compared to $391.0 million for the three months ended July 5, 2020, an increase of $121.8 million, or 31%, 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 $1.0 million of revenue for the three months ended July 4, 2021 and $0.2 million of revenue for the three months ended July 5, 2020 that otherwise would have been recorded by the acquired businesses during each of the respective periods.
Revenue for the six months ended July 4, 2021 was $2,536.2 million, as compared to $1,464.1 million for the six months ended July 5, 2020, an increase of $1,072.0 million, or approximately 73%, which includes an approximate 5% increase in revenue attributable to acquisitions and divestitures and a 4% increase in revenue attributable to favorable changes in foreign exchange rates. The analysis in the remainder of this paragraph compares segment revenue for the six months ended July 4, 2021 as compared to the six months ended July 5, 2020 and includes the effect of foreign exchange rate fluctuations, acquisitions and divestitures. Our Diagnostics segment revenue was $1,568.7 million for the six months ended July 4, 2021, as compared to $674.7 million for the six months ended July 5, 2020, an increase of $894.0 million, or 133%, primarily due to growth across our core portfolio and COVID-19 product offerings. Our Discovery & Analytical Solutions segment revenue was $967.4 million for the six months ended July 4, 2021, as compared to $789.4 million for the six months ended July 5, 2020, an increase of $178.0 million, or 23%, 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 $2.2 million of revenue for the six months ended July 4, 2021 and $0.4 million of revenue for the six months ended July 5, 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 July 4, 2021 was $543.3 million, as compared to $364.4 million for the three months ended July 5, 2020, an increase of $178.9 million, or approximately 49%. As a percentage of revenue, cost of revenue decreased to 44.2% for the three months ended July 4, 2021, from 44.9% for the three months ended July 5, 2020, resulting in an increase in gross margin of 67 basis points to 55.8% for the three months ended July 4, 2021, from 55.1% for the three months ended July 5, 2020. Amortization of intangible assets increased and was $22.7 million for the three months ended July 4, 2021, as compared to $16.0 million for the three months ended July 5, 2020. The amortization of purchase accounting adjustments to record the inventory from certain acquisitions added an incremental expense of $2.3 million for the three months ended July 4, 2021, as compared to $0.4 million for the three months ended July 5, 2020. In addition to the above items, the
overall increase in gross margin was primarily the result of higher volume, favorable shift in product mix and service productivity, partially offset by increased amortization expense.
Cost of revenue for the six months ended July 4, 2021 was $1,065.8 million, as compared to $708.7 million for the six months ended July 5, 2020, an increase of $357.1 million, or approximately 50%. As a percentage of revenue, cost of revenue decreased to 42.0% for the six months ended July 4, 2021, from 48.4% for the six months ended July 5, 2020, resulting in an increase in gross margin of 638 basis points to 58.0% for the six months ended July 4, 2021, from 51.6% for the six months ended July 5, 2020. Amortization of intangible assets increased and was $43.0 million for the six months ended July 4, 2021, as compared to $32.1 million for the six months ended July 5, 2020. The amortization of purchase accounting adjustments to record the inventory from certain acquisitions added an incremental expense of $5.3 million for the six months ended July 4, 2021, as compared to $1.5 million for the six months ended July 5, 2020. In addition to the above items, the overall increase in gross margin was primarily the result of higher volume, 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 July 4, 2021 were $281.8 million, as compared to $221.0 million for the three months ended July 5, 2020, an increase of $60.8 million, or 27.5%. As a percentage of revenue, selling, general and administrative expenses decreased and were 22.9% for the three months ended July 4, 2021, as compared to 27.2% for the three months ended July 5, 2020. Amortization of intangible assets increased and was $36.9 million for the three months ended July 4, 2021, as compared to $30.7 million for the three months ended July 5, 2020. Other purchase accounting adjustments added an incremental expense of $0.2 million for the three months ended July 4, 2021, as compared to an incremental expense of $0.9 million for the three months ended July 5, 2020. Acquisition and divestiture-related expenses added an incremental expense of $10.6 million for the three months ended July 4, 2021, as compared to decreasing expenses by $5.2 million for the three months ended July 5, 2020. Legal costs for significant litigation matters and settlements added an incremental expense of $3.2 million for the three months ended July 5, 2020. Costs for significant environmental matters added an incremental expense of $5.2 million for the three months ended July 5, 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 and innovation, amplified by pandemic-related cost controls and disruptions in the prior year.
Selling, general and administrative expenses for the six months ended July 4, 2021 were $533.2 million, as compared to $429.6 million for the six months ended July 5, 2020, an increase of $103.6 million, or 24.1%. As a percentage of revenue, selling, general and administrative expenses decreased and were 21.0% for the six months ended July 4, 2021, as compared to 29.3% for the six months ended July 5, 2020. Amortization of intangible assets increased and was $70.7 million for the six months ended July 4, 2021, as compared to $61.9 million for the six months ended July 5, 2020. Other purchase accounting adjustments added an incremental expense of $0.5 million for the six months ended July 4, 2021, as compared to decreasing expenses by $11.4 million for the six months ended July 5, 2020. Acquisition and divestiture-related expenses added an incremental expense of $20.3 million for the six months ended July 4, 2021, as compared to an incremental expense of $7.1 million for the six months ended July 5, 2020. Legal costs for significant litigation matters and settlements added an incremental expense of $3.6 million for the six months ended July 5, 2020. Costs for significant environmental matters added an incremental expense of $5.2 million for the six months ended July 5, 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 and innovation, 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 July 4, 2021 were $65.8 million, as compared to $49.5 million for the three months ended July 5, 2020, an increase of $16.3 million, or 32.9%. As a percentage of revenue, research and development expenses decreased and were 5.4% for the three months ended July 4, 2021, as compared to 6.1% for the three months ended July 5, 2020. The increase in research and development expenses was driven by our investments in new product development.
Research and development expenses for the six months ended July 4, 2021 were $126.0 million, as compared to $98.4 million for the six months ended July 5, 2020, an increase of $27.6 million, or 28.0%. As a percentage of revenue, research and development expenses decreased and were 5.0% for the six months ended July 4, 2021, as compared to 6.7% for the six months ended July 5, 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 and second 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" and "Q2 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)
|
|
|
|
|
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 and $0.7 million in the Discovery & Analytical Solutions segment and Diagnostics segment, respectively, during each of the three and six months ended July 4, 2021 as a result of these contract terminations.
We recorded pre-tax charges of $2.3 million and $2.5 million associated with relocating facilities during the three and six months ended July 4, 2021, respectively, in the Discovery & Analytical Solutions segment. We recorded pre-tax charges of $0.2 million associated with relocating facilities during each of the three and six months ended July 4, 2021, 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
|
|
Six Months Ended
|
|
July 4,
2021
|
|
July 5,
2020
|
|
July 4,
2021
|
|
July 5,
2020
|
|
(In thousands)
|
Interest income
|
$
|
(367)
|
|
|
$
|
(192)
|
|
|
$
|
(778)
|
|
|
$
|
(457)
|
|
Interest expense
|
16,750
|
|
|
11,586
|
|
|
30,876
|
|
|
25,251
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in fair value of financial securities
|
(8,633)
|
|
|
—
|
|
|
(27,931)
|
|
|
—
|
|
Other income, net
|
(1,319)
|
|
|
(582)
|
|
|
(8,442)
|
|
|
(3,989)
|
|
Total interest and other expense (income), net
|
$
|
6,431
|
|
|
$
|
10,812
|
|
|
$
|
(6,275)
|
|
|
$
|
20,805
|
|
Interest and other expense (income), net, for the three months ended July 4, 2021 was $6.4 million, as compared to $10.8 million for the three months ended July 5, 2020, a decrease of $4.4 million. The decrease in interest and other expense (income), net, for the three months ended July 4, 2021, as compared to the three months ended July 5, 2020, was primarily due to a change in fair value of financial securities of $8.6 million that was recognized during the three months ended July 4, 2021 and an increase in other income, net of $0.7 million, partially offset by an increase of $5.2 million in interest expense for the three months ended July 4, 2021, as compared to the three months ended July 5, 2020. The increase of $0.7 million in other income, net for the three months ended July 4, 2021, as compared to the three months ended July 5, 2020, consisted primarily of higher periodic pension credit, partially offset by higher foreign exchange loss related to foreign currency transactions and translation during the three months ended July 4, 2021. The other components of net periodic pension credit were $3.8 million and $1.6 million for the three months ended July 4, 2021 and July 5, 2020, respectively. These amounts were included in other income, net.
Interest and other expense (income), net, for the six months ended July 4, 2021 was $(6.3) million, as compared to $20.8 million for the six months ended July 5, 2020, a decrease of $27.1 million. The decrease in interest and other expense (income), net, for the six months ended July 4, 2021, as compared to the six months ended July 5, 2020, was primarily due to a change in fair value of financial securities of $27.9 million that was recognized during the six months ended July 4, 2021 and an increase in other income, net of $4.5 million, partially offset by an increase of $5.6 million in interest expense for the six months ended July 4, 2021, as compared to the six months ended July 5, 2020. The increase of $4.5 million in other income, net for the six months ended July 4, 2021, as compared to the six months ended July 5, 2020, consisted primarily of higher periodic pension credit, partially offset by higher foreign exchange loss related to foreign currency transactions and translation during the six months ended July 4, 2021. The other components of net periodic pension credit were $7.5 million and $3.3 million for the six months ended July 4, 2021 and July 5, 2020, respectively. These amounts were included in other income, net.
Provision for Income Taxes
For the three months ended July 4, 2021, the provision for income taxes from continuing operations was $80.1 million, as compared to $27.6 million for the three months ended July 5, 2020. For the six months ended July 4, 2021, the provision for income taxes from continuing operations was $181.2 million, as compared to $28.6 million for the six months ended July 5, 2020.
The effective tax rate from continuing operations was 24.6% and 22.5%, for the three and six months ended July 4, 2021, respectively, as compared to 16.8% and 14.3%, for the three and six months ended July 5, 2020, respectively. The higher effective tax rate during the three months ended July 4, 2021, as compared to the three months ended July 5, 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 $7.2 million for the three months ended July 4, 2021, as compared to $0.6 million of net tax benefit for the three months ended July 5, 2020. The higher effective tax rate during the six months ended July 4, 2021, as compared to the six months ended July 5, 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 $9.2 million for the six months ended July 4, 2021, as compared to $5.5 million of net tax benefit for the six months ended July 5, 2020.
During the three months ended July 4, 2021, the Company recognized discrete tax expense of $14.6 million due to the remeasurement of United Kingdom deferred tax liabilities on long-lived purchase accounting intangibles and a $1.2 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 six months ended July 4, 2021, excluding the United Kingdom rate change, was $4.2 million primarily related to excess tax benefits on stock compensation of $4.1 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 $2.6 million and return to provision adjustments of $3.7 million. The discrete tax benefit for the first six months of fiscal year 2020 was $5.5 million, and included recognition of excess tax benefits on stock compensation of $2.8 million and $3.8 million associated with a valuation allowance reversal.
Reporting Segment Results of Continuing Operations
Discovery & Analytical Solutions
Revenue for the three months ended July 4, 2021 was $512.8 million, as compared to $391.0 million for the three months ended July 5, 2020, an increase of $121.8 million, or 31%, which includes an approximate 6% increase in revenue attributable to acquisitions and divestitures and a 4% increase in revenue attributable to favorable changes in foreign exchange rates. The life sciences market revenue accounted for $71.6 million of the increase while the applied markets revenue was $50.3 million of the increase. The analysis in the remainder of this paragraph compares selected revenue by end market for the three months ended July 4, 2021, as compared to the three months ended July 5, 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 six months ended July 4, 2021 was $967.4 million, as compared to $789.4 million for the six months ended July 5, 2020, an increase of $178.0 million, or 23%, which includes an approximate 5% increase in revenue attributable to acquisitions and divestitures and a 4% increase in revenue attributable to favorable changes in foreign exchange rates. The life sciences market revenue accounted for $103.0 million of the increase while the applied markets revenue was $75.0 million of the increase. The analysis in the remainder of this paragraph compares selected revenue by end market for the six months ended July 4, 2021, as compared to the six months ended July 5, 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 July 4, 2021 was $64.2 million, as compared to $39.4 million for the three months ended July 5, 2020, an increase of $24.7 million, or 63%. Amortization of intangible assets was $23.1 million for the three months ended July 4, 2021, as compared to $20.5 million for the three months ended July 5, 2020. Restructuring and other charges, net, were $3.6 million for the three months ended July 4, 2021, as compared to $0.8 million for the three months ended July 5, 2020. The amortization of purchase accounting adjustments to record the inventory from certain acquisitions was $0.6 million for the three months ended July 4, 2021, as compared to $0.1 million for the three months ended July 5, 2020. Acquisition and divestiture-related expenses, contingent consideration and other costs added an incremental expense of $9.5 million for the three months ended July 4, 2021, as compared to decreasing expenses by $5.5 million for the three months ended July 5, 2020. Legal costs for significant litigation matters and settlements was $2.0 million for the three months ended July 5, 2020. In addition to the factors noted above, operating income increased for the three months ended July 4, 2021, as compared to the three months ended July 5, 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 six months ended July 4, 2021 was $107.1 million, as compared to $67.9 million for the six months ended July 5, 2020, an increase of $39.2 million, or 58%. Amortization of intangible assets was $43.5 million for the six months ended July 4, 2021, as compared to $41.2 million for the six months ended July 5, 2020. Restructuring and other charges, net, were $7.7 million for the six months ended July 4, 2021, as compared to $4.8 million for the six months ended July 5, 2020. The amortization of purchase accounting adjustments to record the inventory from certain acquisitions was $1.6 million for the six months ended July 4, 2021, as compared to $1.0 million for the six months ended July 5, 2020. Acquisition and divestiture-related expenses, contingent consideration and other costs added an incremental expense of $16.5 million for the six months ended July 4, 2021, as compared to decreasing expenses by $5.5 million for the six months ended July 5, 2020. Legal costs for significant litigation matters and settlements was $2.4 million for the six months ended July 5, 2020. In addition to the factors noted above, operating income increased for the six months ended July 4, 2021, as compared to the six months ended July 5, 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 July 4, 2021 was $715.6 million, as compared to $420.7 million for the three months ended July 5, 2020, an increase of $294.9 million, or 70%, which includes an approximate 6% increase in revenue attributable to acquisitions and divestitures and a 5% 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 July 4, 2021 and July 5, 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 July 4, 2021 was driven by growth across our core portfolio and COVID-19 product offerings.
Revenue for the six months ended July 4, 2021 was $1,568.7 million, as compared to $674.7 million for the six months ended July 5, 2020, an increase of $894.0 million, or 133%, which includes an approximate 6% increase in revenue attributable to acquisitions and divestitures and 5% 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 $0.4 million of revenue in our Diagnostics segment for each of the six months ended July 4, 2021 and July 5, 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 six months ended July 4, 2021 was driven by growth across our core and COVID-19 portfolio.
Operating income from continuing operations for the three months ended July 4, 2021 was $286.3 million, as compared to $160.3 million for the three months ended July 5, 2020, an increase of $126.0 million, or 79%. Amortization of intangible assets increased and was $36.5 million for the three months ended July 4, 2021, as compared to $26.2 million for the three months ended July 5, 2020. Restructuring and other charges, net, were $1.4 million for the three months ended July 4, 2021, as compared to $0.3 million for the three months ended July 5, 2020. The amortization of purchase accounting adjustments to record the inventory from certain acquisitions was $1.7 million for the three months ended July 4, 2021, as compared to $0.3 million for the three months ended July 5, 2020. Acquisition and divestiture-related expenses, contingent consideration and other costs added an incremental expense of $2.4 million for the three months ended July 4, 2021, as compared to $1.3 million for the three months ended July 5, 2020. Legal costs for significant litigation matters and settlements was $1.2 million for the three months ended July 5, 2020. In addition to the factors noted above, operating income increased for the three months ended July 4, 2021, as compared to the three months ended July 5, 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 six months ended July 4, 2021 was $727.7 million, as compared to $189.9 million for the six months ended July 5, 2020, an increase of $537.9 million, or 283%. Amortization of intangible assets increased and was $70.2 million for the six months ended July 4, 2021, as compared to $52.8 million for the six months ended July 5, 2020. Restructuring and other charges, net, were $3.1 million for the six months ended July 4, 2021, as compared to $2.3 million for the six months ended July 5, 2020. The amortization of purchase accounting adjustments to record the inventory from certain acquisitions was $3.7 million for the six months ended July 4, 2021, as compared to $0.5 million for the six months ended July 5, 2020. Acquisition and divestiture-related expenses, contingent consideration and other costs added an incremental expense of $6.5 million for the six months ended July 4, 2021, as compared to $1.5 million for the six months ended July 5, 2020. Legal costs for significant litigation matters and settlements was $1.2 million for the six months ended July 5, 2020. In addition to the factors noted above, operating income increased for the six months ended July 4, 2021, as compared to the six months ended July 5, 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:
•changes in sales due to weakness in markets in which we sell our products and services, and
•changes in our working capital requirements and capital expenditures.
Principal factors that could affect our ability to obtain cash from external sources include:
•financial covenants contained in the financial instruments controlling our borrowings that limit our total borrowing capacity,
•increases in interest rates applicable to our outstanding variable rate debt,
•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,
•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,
•a decrease in the market price for our common stock, and
•volatility in the public debt and equity markets, including as a result of the COVID-19 pandemic.
At July 4, 2021, we had cash and cash equivalents of $572.8 million, of which $503.1 million was held by our non-U.S. subsidiaries, and we had $864.0 million of additional borrowing capacity available under our senior unsecured revolving credit facility. We had no other liquid investments at July 4, 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 three months ended July 4, 2021, we repurchased 200,000 shares of common stock under the Repurchase Program for an aggregate cost of $29.0 million. During the six months ended July 4, 2021, we repurchased 433,000 shares of common stock under the Repurchase Program for an aggregate cost of $62.6 million. As of July 4, 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 six months ended July 4, 2021 and July 5, 2020, we contributed $3.7 million and $3.4 million, respectively, in the aggregate, to pension plans outside of the United States. During the six months ended July 4, 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 $3.7 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 continuing operations was $761.4 million for the six months ended July 4, 2021, as compared to net cash provided by continuing operations of $198.6 million for the six months ended July 5, 2020, an increase in cash provided by operating activities of $562.7 million. The cash provided by operating activities for the six months ended July 4, 2021 was principally a result of income from continuing operations of $625.3 million, and adjustments for non-cash charges aggregating to $148.6 million, including depreciation and amortization of $145.8 million, partially offset by a net cash usage in working capital of $12.5 million. During the six months ended July 4, 2021, we contributed $3.7 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 $751.9 million for the six months ended July 4, 2021, as compared to $45.6 million for the six months ended July 5, 2020, an increase of $706.3 million. For the six months ended July 4, 2021, the net cash used in investing activities was a result of cash used for acquisitions of $702.7 million, capital expenditures of $34.7 million and purchases of investments of $14.5 million. Cash used for acquisitions and capital expenditures for the six months ended July 5, 2020 was $3.0 million and $37.1 million, respectively. The capital expenditures in each period were primarily for manufacturing, software and other capital equipment purchases. During the six months ended
July 5, 2020, we used $7.4 million for purchases of investments, which was partially offset by $1.8 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 $325.3 million for the six months ended July 4, 2021, as compared to net cash used in financing activities of $120.4 million for the six months ended July 5, 2020, an increase in cash provided by financing activities of $445.6 million. The cash provided by financing activities during the six months ended July 4, 2021 was a result of proceeds from the sale of unsecured senior notes, proceeds from borrowings, and proceeds from the issuance of common stock under stock plans. During the six months ended July 4, 2021, proceeds from the sale of unsecured senior notes were $799.9 million and our debt borrowings totaled $729.0 million. These were partially offset by payments on borrowings of $763.5 million, payments of senior notes of $339.6 million and debt issuance costs of $8.2 million during the six months ended July 4, 2021. This compares to debt borrowings of $188.0 million, which were more than offset by debt payments of $290.0 million during the six months ended July 5, 2020. Proceeds from the issuance of common stock under our stock plans were $14.2 million during the six months ended July 4, 2021, as compared to $10.1 million for the six months ended July 5, 2020. This cash provided by financing activities during the six months ended July 4, 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 six months ended July 4, 2021, we repurchased 433,000 shares of common stock under the Repurchase Program and 70,413 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 $72.9 million. This compares to repurchases of 69,934 shares of our common stock pursuant to our equity incentive plans for the six months ended July 5, 2020, for a total cost of $6.7 million. During the six months ended July 4, 2021, we paid $15.7 million in dividends as compared to $15.6 million for the six months ended July 5, 2020. During the six months ended July 4, 2021, we had net payments on other credit facilities of $11.8 million as compared to $6.0 million for the six months ended July 5, 2020. We paid $5.9 million in settlement of hedges during the six months ended July 4, 2021, as compared to $5.0 million in cash received from settlement of hedges for the six months ended July 5, 2020. We paid acquisition-related contingent consideration of $5.2 million during the six months ended July 5, 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 two quarters of fiscal year 2021 and in each quarter of fiscal year 2020. At July 4, 2021, we had accrued $7.9 million for dividends declared on April 29, 2021 for the second quarter of fiscal year 2021 that were paid on August 6, 2021. On July 23, 2021, we announced that our Board had declared a quarterly dividend of $0.07 per share for the third quarter of fiscal year 2021 that will be payable in November 2021. 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
On April 9, 2021, we redeemed all of our outstanding 2021 Notes and paid an aggregate amount of $339.6 million.
Except as discussed above and in Note 7, Debt, 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.