Le Lézard
Classified in: Health, Science and technology, Business, Covid-19 virus
Subjects: EARNINGS, Conference Call, Webcast

Revvity Announces Financial Results for the Third Quarter of 2023


Revvity, Inc. (NYSE: RVTY), today reported financial results for the third quarter ended October 1, 2023.

The Company reported GAAP earnings per share of $0.08, as compared to $0.67 in the same period a year ago. GAAP revenue for the quarter was $671 million, as compared to $712 million in the same period a year ago. GAAP operating income from continuing operations for the quarter was $69 million, as compared to $111 million for the same period a year ago. GAAP operating profit margin from continuing operations was 10.3% as a percentage of revenue, as compared to 15.6% in the same period a year ago.

Adjusted earnings per share from continuing operations for the quarter was $1.18, as compared to $1.21 in the same period a year ago. Adjusted revenue for the quarter was $671 million, as compared to $712 million in the same period a year ago. Adjusted operating income was $185 million, as compared to $224 million for the same period a year ago. Adjusted operating profit margin was 27.5% as a percentage of adjusted revenue, as compared to 31.4% in the same period a year ago.

Adjustments for the Company's non-GAAP financial measures have been noted in the attached reconciliations.

"We executed well during the third quarter in an increasingly challenging end market environment," said Prahlad Singh, president and chief executive officer of Revvity. "During this period of increased market uncertainty, we will focus our efforts on those factors we can control to ensure the Company emerges from this period in an even stronger and more agile position."

Financial Overview by Reporting Segment for the Third Quarter

Life Sciences

Diagnostics

Updates Full Year 2023 Guidance

For the full year 2023, the Company now forecasts total revenue of $2.72-$2.74 billion and adjusted earnings per share of $4.53-$4.57. This guidance assumes no additional contribution from COVID related revenues.

Guidance for the full year 2023 is provided on a non-GAAP basis and cannot be reconciled to the closest GAAP measures without unreasonable effort due to the unpredictability of the amounts and timing of events affecting the items the Company excludes from these non-GAAP measures. The timing and amounts of such events and items could be material to the Company's results prepared in accordance with GAAP.

Webcast Information

The Company will discuss its third quarter 2023 results and its outlook for business trends during a webcast on October 30, 2023, at 8:00 a.m. Eastern Time. A live audio webcast and presentation will be available on the Investors section of the Company's website, ir.revvity.com.

Use of Non-GAAP Financial Measures

In addition to financial measures prepared in accordance with generally accepted accounting principles (GAAP), this earnings announcement also contains non-GAAP financial measures. The reasons that we use these measures, a reconciliation of these measures to the most directly comparable GAAP measures, and other information relating to these measures are included below following our GAAP financial statements.

Factors Affecting Future Performance

This press release contains "forward-looking" statements within the meaning of the Private Securities Litigation Reform Act of 1995, including, but not limited to, statements relating to estimates and projections of future earnings per share, cash flow and revenue growth and other financial results, developments relating to our customers and end-markets, and plans concerning business development opportunities, acquisitions and divestitures. Words such as "believes," "intends," "anticipates," "plans," "expects," "estimates", "projects," "forecasts," "will" and similar expressions, and references to guidance, are intended to identify forward-looking statements. Such statements are based on management's current assumptions and expectations and no assurances can be given that our assumptions or expectations will prove to be correct. A number of important risk factors could cause actual results to differ materially from the results described, implied or projected in any forward-looking statements. These factors include, without limitation: (1) markets into which we sell our products declining or not growing as anticipated; (2) the effect of the COVID-19 pandemic on our sales and operations; (3) fluctuations in the global economic and political environments; (4) our failure to introduce new products in a timely manner; (5) our ability to execute acquisitions and divestitures, license technologies, or to successfully integrate acquired businesses and licensed technologies into our existing business or to make them profitable; (6) our ability to compete effectively; (7) fluctuation in our quarterly operating results and our ability to adjust our operations to address unexpected changes; (8) significant disruption in third-party package delivery and import/export services or significant increases in prices for those services; (9) disruptions in the supply of raw materials and supplies; (10) our ability to retain key personnel; (11) significant disruption in our information technology systems, or cybercrime; (12) our ability to realize the full value of our intangible assets; (13) our failure to adequately protect our intellectual property; (14) the loss of any of our licenses or licensed rights; (15) the manufacture and sale of products exposing us to product liability claims; (16) our failure to maintain compliance with applicable government regulations; (17) regulatory changes; (18) our failure to comply with healthcare industry regulations; (19) economic, political and other risks associated with foreign operations; (20) our ability to obtain future financing; (21) restrictions in our credit agreements; (22) significant fluctuations in our stock price; (23) reduction or elimination of dividends on our common stock; and (24) other factors which we describe under the caption "Risk Factors" in our most recent quarterly report on Form 10-Q and in our other filings with the Securities and Exchange Commission. We disclaim any intention or obligation to update any forward-looking statements as a result of developments occurring after the date of this press release.

About Revvity

At Revvity, "impossible" is inspiration, and "can't be done" is a call to action. Revvity provides health science solutions, technologies, expertise and services that deliver complete workflows from discovery to development, and diagnosis to cure. Revvity is revolutionizing what's possible in healthcare, with specialized focus areas in translational multi-omics technologies, biomarker identification, imaging, prediction, screening, detection and diagnosis, informatics and more.

With 2022 revenue of more than $3 billion and over 11,000 employees, Revvity serves customers across pharmaceutical and biotech, diagnostic labs, academia and governments. It is part of the S&P 500 index and has customers in more than 190 countries.

Stay updated by following our Newsroom, LinkedIn, X, YouTube, Facebook and Instagram.

Revvity, Inc. and Subsidiaries
CONDENSED CONSOLIDATED INCOME STATEMENTS
 
 

Three Months Ended

Nine Months Ended

(In thousands, except per share data) October 1, 2023 October 2, 2022 October 1, 2023 October 2, 2022
 
 
Revenue

$

670,739

 

$

711,803

 

$

2,054,670

 

$

2,570,608

 

 
Cost of revenue

 

298,223

 

 

304,759

 

 

898,457

 

 

1,017,108

 

Selling, general and administrative expenses

 

250,249

 

 

242,743

 

 

765,828

 

 

781,189

 

Research and development expenses

 

53,039

 

 

53,521

 

 

166,982

 

 

167,081

 

 
Operating income from continuing operations

 

69,228

 

 

110,780

 

 

223,403

 

 

605,230

 

 
Interest income

 

(23,450

)

 

(667

)

 

(53,768

)

 

(2,024

)

Interest expense

 

25,486

 

 

25,931

 

 

74,231

 

 

81,447

 

Change in fair value of financial securities

 

13,587

 

 

5,106

 

 

12,842

 

 

14,321

 

Other expense (income), net

 

3,002

 

 

(1,732

)

 

38,501

 

 

(1,904

)

 
Income from continuing operations, before income taxes

 

50,603

 

 

82,142

 

 

151,597

 

 

513,390

 

 
Provision for income taxes

 

18,134

 

 

12,634

 

 

35,661

 

 

98,211

 

 
Income from continuing operations

 

32,469

 

 

69,508

 

 

115,936

 

 

415,179

 

 
(Loss) income from discontinued operations

 

(22,972

)

 

15,839

 

 

498,595

 

 

26,342

 

 
Net income

$

9,497

 

$

85,347

 

$

614,531

 

$

441,521

 

 
 
Diluted earnings per share:
Income from continuing operations

$

0.26

 

$

0.55

 

$

0.93

 

$

3.28

 

 
(Loss) income from discontinued operations

 

(0.18

)

 

0.13

 

 

3.98

 

 

0.21

 

 
Net income

$

0.08

 

$

0.67

 

$

4.90

 

$

3.49

 

 
 
Weighted average diluted shares of common stock outstanding

 

124,203

 

 

126,540

 

 

125,335

 

 

126,544

 

 
 
ABOVE PREPARED IN ACCORDANCE WITH GAAP
 
 
Additional supplemental information (1):
(per share, continuing operations)
 
GAAP EPS from continuing operations

$

0.26

 

$

0.55

 

$

0.93

 

$

3.28

 

Amortization of intangible assets

 

0.73

 

 

0.72

 

 

2.20

 

 

2.22

 

Debt extinguishment costs

 

(0.00

)

 

(0.00

)

 

(0.03

)

 

(0.00

)

Purchase accounting adjustments

 

0.01

 

 

0.08

 

 

0.02

 

 

0.36

 

Acquisition and divestiture-related costs

 

0.09

 

 

0.07

 

 

0.63

 

 

0.20

 

Change in fair value of financial securities

 

0.11

 

 

0.04

 

 

0.10

 

 

0.11

 

Significant litigation matters and settlements

 

-

 

 

0.00

 

 

-

 

 

(0.00

)

Significant environmental matters

 

-

 

 

-

 

 

0.01

 

 

-

 

Restructuring and other, net

 

0.09

 

 

0.02

 

 

0.13

 

 

0.12

 

Tax on above items

 

(0.25

)

 

(0.24

)

 

(0.73

)

 

(0.77

)

Significant tax items

 

0.14

 

 

(0.03

)

 

0.13

 

 

(0.03

)

Adjusted EPS from continuing operations

$

1.18

 

$

1.21

 

$

3.39

 

$

5.50

 

 
(1) amounts may not sum due to rounding
 
 
Revvity, Inc. and Subsidiaries
REVENUE AND OPERATING INCOME (LOSS)
 
 
 
Three Months Ended Nine Months Ended
(In thousands, except percentages) October 1, 2023 October 2, 2022 October 1, 2023 October 2, 2022
 
Adjusted revenue and operating income
 
Reported revenue

$

670,739

 

$

711,803

 

$

2,054,670

 

$

2,570,608

 

Revenue purchase accounting adjustments

 

206

 

 

203

 

 

618

 

 

609

 

Adjusted revenue

 

670,945

 

 

712,006

 

 

2,055,288

 

 

2,571,217

 

 
Reported operating income from continued operations

 

69,228

 

 

110,780

 

 

223,403

 

 

605,230

 

OP%

 

10.3

%

 

15.6

%

 

10.9

%

 

23.5

%

Amortization of intangible assets

 

90,920

 

 

91,525

 

 

275,489

 

 

280,469

 

Purchase accounting adjustments

 

1,080

 

 

9,621

 

 

3,057

 

 

45,594

 

Acquisition and divestiture-related costs

 

12,550

 

 

8,475

 

 

59,080

 

 

25,865

 

Significant litigation matters and settlements

 

-

 

 

629

 

 

-

 

 

(632

)

Significant environmental matters

 

-

 

 

-

 

 

1,132

 

 

-

 

Restructuring and other, net

 

10,832

 

 

2,774

 

 

15,936

 

 

15,443

 

Adjusted operating income

$

184,610

 

$

223,804

 

$

578,097

 

$

971,969

 

OP%

 

27.5

%

 

31.4

%

 

28.1

%

 

37.8

%

 
Segment revenue and segment operating income
 
Life Sciences

$

307,855

 

$

312,783

 

$

972,649

 

$

945,484

 

Diagnostics

 

363,090

 

 

399,223

 

 

1,082,639

 

 

1,625,733

 

Revenue purchase accounting adjustments

 

(206

)

 

(203

)

 

(618

)

 

(609

)

Reported revenue

 

670,739

 

 

711,803

 

 

2,054,670

 

 

2,570,608

 

 
 
Life Sciences

 

114,192

 

 

116,881

 

 

371,410

 

 

357,661

 

 

37.1

%

 

37.4

%

 

38.2

%

 

37.8

%

Diagnostics

 

81,741

 

 

123,428

 

 

241,414

 

 

668,981

 

 

22.5

%

 

30.9

%

 

22.3

%

 

41.1

%

Corporate

 

(11,323

)

 

(16,505

)

 

(34,727

)

 

(54,673

)

Subtotal reportable segments operating income

 

184,610

 

 

223,804

 

 

578,097

 

 

971,969

 

 
Amortization of intangible assets

 

(90,920

)

 

(91,525

)

 

(275,489

)

 

(280,469

)

Purchase accounting adjustments

 

(1,080

)

 

(9,621

)

 

(3,057

)

 

(45,594

)

Acquisition and divestiture-related costs

 

(12,550

)

 

(8,475

)

 

(59,080

)

 

(25,865

)

Significant litigation matters and settlements

 

-

 

 

(629

)

 

-

 

 

632

 

Significant environmental matters

 

-

 

 

-

 

 

(1,132

)

 

-

 

Restructuring and other, net

 

(10,832

)

 

(2,774

)

 

(15,936

)

 

(15,443

)

Reported operating income from continued operations

$

69,228

 

$

110,780

 

$

223,403

 

$

605,230

 

 
 
REPORTED REVENUE AND REPORTED OPERATING INCOME (LOSS) PREPARED IN ACCORDANCE WITH GAAP
 
Revvity, Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
 
 
 
(In thousands) October 1, 2023 January 1, 2023
 
Current assets:
Cash and cash equivalents

$

1,136,721

$

454,358

Marketable securities

 

292,971

 

-

Accounts receivable, net

 

644,574

 

612,780

Inventories, net

 

435,696

 

405,462

Other current assets

 

403,275

 

122,254

Current assets of discontinued operations

 

-

 

1,693,704

Total current assets

 

2,913,237

 

3,288,558

 
Property, plant and equipment, net

 

489,747

 

482,950

Operating lease right-of-use assets

 

156,143

 

188,351

Intangible assets, net

 

3,085,253

 

3,377,174

Goodwill

 

6,470,139

 

6,481,768

Other assets, net

 

307,029

 

311,054

Total assets

$

13,421,548

$

14,129,855

 
Current liabilities:
Current portion of long-term debt

$

727,539

$

470,929

Accounts payable

 

188,302

 

272,826

Accrued expenses and other current liabilities

 

532,004

 

527,863

Current liabilities of discontinued operations

 

-

 

272,865

Total current liabilities

 

1,447,845

 

1,544,483

 
Long-term debt

 

3,152,454

 

3,923,347

Long-term liabilities

 

993,046

 

1,109,181

Operating lease liabilities

 

133,922

 

169,968

Total liabilities

 

5,727,267

 

6,746,979

 
Total stockholders' equity

 

7,694,281

 

7,382,876

Total liabilities and stockholders' equity

$

13,421,548

$

14,129,855

 
 
PREPARED IN ACCORDANCE WITH GAAP
 
Revvity, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
 
 
Three Months Ended Nine Months Ended
October 1, 2023 October 2, 2022 October 1, 2023 October 2, 2022
(In thousands) (In thousands)
 
 
Operating activities:
Net income

$

9,497

 

$

85,347

 

$

614,531

 

$

441,521

 

Loss (income) from discontinued operations, net of income taxes

 

22,972

 

 

(15,839

)

 

(498,595

)

 

(26,342

)

Income from continuing operations

 

32,469

 

 

69,508

 

 

115,936

 

 

415,179

 

Adjustments to reconcile income from continuing operations
to net cash provided by (used in) continuing operations:
Stock-based compensation

 

10,703

 

 

10,112

 

 

34,229

 

 

39,776

 

Restructuring and other, net

 

10,832

 

 

2,774

 

 

15,936

 

 

15,443

 

Depreciation and amortization

 

108,263

 

 

104,735

 

 

326,201

 

 

322,766

 

Change in fair value of contingent consideration

 

633

 

 

(2,132

)

 

1,718

 

 

(769

)

Amortization of deferred debt financing costs and accretion of discounts

 

1,982

 

 

2,194

 

 

5,800

 

 

6,046

 

Change in fair value of financial securities

 

13,587

 

 

5,106

 

 

12,842

 

 

14,321

 

Debt extinguishment income

 

(77

)

 

(580

)

 

(3,422

)

 

(92

)

Unrealized foreign exchange loss

 

-

 

 

-

 

 

23,679

 

 

-

 

Amortization of acquired inventory revaluation

 

-

 

 

11,315

 

 

-

 

 

45,039

 

Changes in assets and liabilities which provided (used) cash, excluding
effects from companies acquired:
Accounts receivable, net

 

(20,697

)

 

39,803

 

 

(30,913

)

 

120,138

 

Inventories

 

(8,059

)

 

(12,681

)

 

(34,834

)

 

(44,475

)

Accounts payable

 

(36,169

)

 

(18,308

)

 

(85,394

)

 

(27,968

)

Accrued expenses and other

 

(82,710

)

 

(89,881

)

 

(322,995

)

 

(360,089

)

Net cash provided by (used in) operating activities of continuing operations

 

30,757

 

 

121,965

 

 

58,783

 

 

545,315

 

Net cash (used in) provided by operating activities of discontinued operations

 

(64,242

)

 

37,987

 

 

(164,124

)

 

(4,663

)

Net cash (used in) provided by operating activities

 

(33,485

)

 

159,952

 

 

(105,341

)

 

540,652

 

 
Investing activities:
Capital expenditures

 

(22,357

)

 

(13,030

)

 

(57,252

)

 

(59,502

)

Purchases of investments

 

(1,000

)

 

(22,760

)

 

(6,000

)

 

(45,010

)

Purchases of US Treasury Securities

 

-

 

 

-

 

 

(831,219

)

 

-

 

Proceeds from US Treasury Securities

 

450,000

 

 

550,000

 

Proceeds from notes receivables

 

-

 

 

8,890

 

 

-

 

 

8,890

 

Proceeds from disposition of businesses and assets

 

153

 

 

4,610

 

 

153

 

 

5,664

 

Cash paid for acquisitions, net of cash, cash equivalents and restricted cash acquired

 

(1,400

)

 

(2,133

)

 

(2,086

)

 

(7,768

)

Net cash provided by (used in) investing activities of continuing operations

 

425,396

 

 

(24,423

)

 

(346,404

)

 

(97,726

)

Net cash provided by (used in) investing activities of discontinued operations

 

9,473

 

 

1,917

 

 

2,074,734

 

 

(9,441

)

Net cash provided by (used in) investing activities

 

434,869

 

 

(22,506

)

 

1,728,330

 

 

(107,167

)

 
Financing Activities:
Payments on borrowings

 

-

 

 

-

 

 

-

 

 

(220,000

)

Proceeds from borrowings

 

-

 

 

-

 

 

-

 

 

220,000

 

Payments of term loan

 

-

 

 

(50,000

)

 

-

 

 

(500,000

)

Payments of senior debt

 

(467,138

)

 

(7,472

)

 

(517,973

)

 

(7,472

)

Payment of debt issuance costs

 

-

 

 

(15

)

Settlement of cash flow hedges

 

-

 

 

-

 

 

-

 

 

(762

)

Net (payments) proceeds on other credit facilities

 

(13

)

 

343

 

 

7,218

 

 

(482

)

Payments for acquisition-related contingent consideration

 

-

 

 

-

 

 

(10,117

)

 

(5

)

Proceeds from issuance of common stock under stock plans

 

506

 

 

413

 

 

3,721

 

 

6,254

 

Purchases of common stock

 

(110,715

)

 

(89

)

 

(384,014

)

 

(56,137

)

Dividends paid

 

(8,689

)

 

(8,835

)

 

(26,327

)

 

(26,502

)

Net cash used in financing activities of continuing operations

 

(586,049

)

 

(65,640

)

 

(927,507

)

 

(585,106

)

 
Effect of exchange rate changes on cash, cash equivalents, and restricted cash

 

(10,699

)

 

(17,427

)

 

(28,270

)

 

(51,404

)

 
Net (decrease) increase in cash, cash equivalents, and restricted cash

 

(195,364

)

 

54,379

 

 

667,212

 

 

(203,025

)

Cash, cash equivalents, and restricted cash at beginning of period

 

1,333,322

 

 

361,933

 

 

470,746

 

 

619,337

 

Cash, cash equivalents, and restricted cash at end of period

$

1,137,958

 

$

416,312

 

$

1,137,958

 

$

416,312

 

 
 
Supplemental disclosure of cash flow information:
Reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets that sum to the total shown in the consolidated statements of cash flows:
Cash and cash equivalents

$

1,136,721

 

$

400,741

 

$

1,136,721

 

$

400,741

 

Restricted cash included in other current assets

 

1,237

 

 

284

 

 

1,237

 

 

284

 

Restricted cash included in other assets

 

-

 

 

288

 

 

-

 

 

288

 

Cash and cash equivalents included in current assets of discontinued operations

 

-

 

 

14,999

 

 

-

 

 

14,999

 

Total cash, cash equivalents and restricted cash

$

1,137,958

 

$

416,312

 

$

1,137,958

 

$

416,312

 

 
PREPARED IN ACCORDANCE WITH GAAP
 
Revvity, Inc. and Subsidiaries
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES (1)
 
 
Revvity
Three Months Ended
October 1, 2023
Organic revenue growth:
Reported revenue growth from continuing operations

-6%

Less: effect of foreign exchange rates

1%

Less: effect of acquisitions including purchase accounting adjustments and impact of divested businesses

0%

Organic revenue growth from continuing operations

-7%

Less: effect of COVID products

-8%

Non-COVID organic revenue growth from continuing operations

1%

 
 
Life Sciences
Three Months Ended
October 1, 2023
Organic revenue growth:
Reported revenue growth from continuing operations

-2%

Less: effect of foreign exchange rates

1%

Less: effect of acquisitions including purchase accounting adjustments and impact of divested businesses

0%

Organic revenue growth from continuing operations

-3%

 
 
Diagnostics
Three Months Ended
October 1, 2023
Organic revenue growth:
Reported revenue growth from continuing operations

-9%

Less: effect of foreign exchange rates

1%

Less: effect of acquisitions including purchase accounting adjustments and impact of divested businesses

0%

Organic revenue growth from continuing operations

-10%

 
 
(1) amounts may not sum due to rounding
 
 

Explanation of Non-GAAP Financial Measures

We report our financial results in accordance with GAAP. However, management believes that, in order to more fully understand our short-term and long-term financial and operational trends, investors may wish to consider the impact of certain non-cash, non-recurring or other items, which result from facts and circumstances that vary in frequency and impact on continuing operations. Accordingly, we present non-GAAP financial measures as a supplement to the financial measures we present in accordance with GAAP. These non-GAAP financial measures provide management with additional means to understand and evaluate the operating results and trends in our ongoing business by adjusting for certain non-cash expenses and other items that management believes might otherwise make comparisons of our ongoing business with prior periods more difficult, obscure trends in ongoing operations, or reduce management's ability to make useful forecasts. Management believes these non-GAAP financial measures provide additional means of evaluating period-over-period operating performance. In addition, management understands that some investors and financial analysts find this information helpful in analyzing our financial and operational performance and comparing this performance to our peers and competitors.

We use the term "adjusted revenue" to refer to GAAP revenue, including purchase accounting adjustments for revenue from contracts acquired in acquisitions that will not be fully recognized due to accounting rules. We use the related term "adjusted revenue growth" to refer to the measure of comparing current period adjusted revenue with the corresponding period of the prior year.

We use the term "organic revenue" to refer to GAAP revenue, excluding the effect of foreign currency changes and revenue from recent acquisitions and divestitures and including purchase accounting adjustments for revenue from contracts acquired in acquisitions that will not be fully recognized due to accounting rules. We use the related term "organic revenue growth" to refer to the measure of comparing current period organic revenue with the corresponding period of the prior year. We use the related term "non-COVID organic revenue growth" to refer to the measure of comparing current period organic revenue excluding revenue from COVID related products and services with the corresponding period of the prior year excluding revenue from COVID related products and services.

We use the term "adjusted gross margin" to refer to GAAP gross margin, excluding amortization of intangible assets and inventory fair value adjustments related to business acquisitions, asset impairments, and including purchase accounting adjustments for revenue from contracts acquired in acquisitions that will not be fully recognized due to business combination accounting rules. We use the related term "adjusted gross margin percentage" to refer to adjusted gross margin as a percentage of adjusted revenue.

We use the term "adjusted SG&A expense" to refer to GAAP SG&A expense, excluding amortization of intangible assets, purchase accounting adjustments, acquisition and divestiture-related expenses, significant litigation matters and settlements, asset impairments, and significant environmental charges. We use the related term "adjusted SG&A percentage" to refer to adjusted SG&A expense as a percentage of adjusted revenue.

We use the term "adjusted R&D expense" to refer to GAAP R&D expense, excluding amortization of intangible assets and purchase accounting adjustments. We use the related term "adjusted R&D percentage" to refer to adjusted R&D expense as a percentage of adjusted revenue.

We use the term "adjusted net interest and other expense" to refer to GAAP net interest and other expense, excluding adjustments for mark-to-market accounting on post-retirement benefits, changes in foreign exchange and interest associated with acquisitions and divestitures, changes in the value of financial securities and debt extinguishment costs.

We use the term "adjusted operating income," to refer to GAAP operating income, including revenue from contracts acquired in acquisitions that will not be fully recognized due to accounting rules, and excluding amortization of intangible assets, other purchase accounting adjustments, acquisition and divestiture-related expenses, significant litigation matters and settlements, significant environmental charges, asset impairments, and restructuring and other charges. We use the related terms "adjusted operating profit percentage," "adjusted operating profit margin," or "adjusted operating margin" to refer to adjusted operating income as a percentage of adjusted revenue.

We use the term "adjusted earnings per share," or "adjusted EPS," to refer to GAAP earnings per share, including revenue from contracts acquired in acquisitions that will not be fully recognized due to accounting rules, and excluding discontinued operations, amortization of intangible assets, debt extinguishment costs, other purchase accounting adjustments, acquisition and divestiture-related expenses, significant litigation matters and settlements, significant environmental charges, changes in the value of financial securities, disposition of businesses and assets, net, changes in foreign exchange and interest associated with acquisitions and divestitures, asset impairments and restructuring and other charges. We also exclude adjustments for mark-to-market accounting on post-retirement benefits, therefore only our projected costs have been used to calculate this non-GAAP measure. We also adjust for any tax impact related to the above items and exclude the impact of significant tax events.

We use the term "adjusted earnings per share from continuing operations," to refer to GAAP earnings per share from continuing operations, including revenue from contracts acquired in acquisitions that will not be fully recognized due to accounting rules, amortization of intangible assets, debt extinguishment costs, other purchase accounting adjustments, acquisition and divestiture-related expenses, significant litigation matters and settlements, significant environmental charges, changes in the value of financial securities, disposition of businesses and assets, net, changes in foreign exchange and interest associated with acquisitions and divestitures, asset impairments and restructuring and other charges. We also exclude adjustments for mark-to-market accounting on post-retirement benefits, therefore only our projected costs have been used to calculate this non-GAAP measure. We also adjust for any tax impact related to the above items and exclude the impact of significant tax events.

Management includes or excludes the effect of each of the items identified below in the applicable non-GAAP financial measure referenced above for the reasons set forth below with respect to that item:

# # #

The tax effect for discontinued operations is calculated based on the authoritative guidance in the Financial Accounting Standards Board's Accounting Standards Codification 740, Income Taxes. The tax effect for amortization of intangible assets, inventory fair value adjustments related to business acquisitions, changes to the fair values assigned to contingent consideration, debt extinguishment costs, other costs related to business acquisitions and divestitures, significant litigation matters and settlements, significant environmental charges, changes in the fair value of financial securities, adjustments for mark-to-market accounting on post-retirement benefits, disposition of businesses and assets, net, restructuring and other charges, and the revenue from contracts acquired with various acquisitions is calculated based on operational results and applicable jurisdictional law, which contemplates tax rates currently in effect to determine our tax provision. The tax effect for the impact from foreign currency exchange rates on the current period is calculated based on the average rate currently in effect to determine our tax provision.

The non-GAAP financial measures described above are not meant to be considered superior to, or a substitute for, our financial statements prepared in accordance with GAAP. There are material limitations associated with non-GAAP financial measures because they exclude charges that have an effect on our reported results and, therefore, should not be relied upon as the sole financial measures by which to evaluate our financial results. Management compensates and believes that investors should compensate for these limitations by viewing the non-GAAP financial measures in conjunction with the GAAP financial measures. In addition, the non-GAAP financial measures included in this earnings announcement may be different from, and therefore may not be comparable to, similar measures used by other companies.

Each of the non-GAAP financial measures listed above is also used by our management to evaluate our operating performance, communicate our financial results to our Board of Directors, benchmark our results against our historical performance and the performance of our peers, evaluate investment opportunities including acquisitions and discontinued operations, and determine the bonus payments for senior management and employees.


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