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Exhibit 99.1
RISK FACTORS
This Quarterly Report contains "forward-looking statements." For this
purpose, any statements contained in this Quarterly Report that are not
statements of historical fact may be deemed to be forward-looking statements.
Words such as "believes," "anticipates," "plans," "expects," "will" and similar
expressions are intended to identify forward-looking statements. There are a
number of important factors that could cause the results of PerkinElmer to
differ materially from those indicated by these forward-looking statements.
These factors include, without limitation, those discussed below, as well as
those set forth in "Item 7. Management's Discussions and Analysis of Financial
Condition and Results of Operations -- Forward-Looking Information and Factors
Affecting Future Performance" of the Company's 1999 Form 10-K.
OUR OPERATING RESULTS COULD BE HARMED IF THE INDUSTRIES INTO WHICH WE SELL OUR
PRODUCTS ARE IN DOWNWARD CYCLES.
Some of the industries and markets into which we sell our products are
cyclical. Industry downturns often are characterized by reduced product demand,
excess manufacturing capacity and erosion of average selling prices. Any
significant downturn in our customers' markets or in general economic conditions
would likely result in a reduction in demand for our products and could harm our
business. For example, in 1998 the operating results of our fluid sciences
segment were adversely affected by the downturn in the semiconductor market.
IF WE DO NOT INTRODUCE NEW PRODUCTS IN A TIMELY MANNER, OUR PRODUCTS COULD
BECOME OBSOLETE, AND OUR OPERATING RESULTS WOULD SUFFER.
We sell many of our products in industries characterized by rapid
technological changes, frequent new product and service introductions and
evolving industry standards. Without the timely introduction of new products and
enhancements, our products could become technologically obsolete over time, in
which case our revenue and operating results would suffer. The success of our
new product offerings will depend upon several factors, including our ability
to:
- accurately anticipate customer needs;
- innovate and develop new technologies and applications;
- successfully commercialize new technologies in a timely manner;
- price our products competitively and manufacture and deliver our
products in sufficient volumes and on time; and
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- differentiate our offerings from our competitors' offerings.
Many of our products are used by our customers to develop, test and
manufacture their products. We therefore must anticipate industry trends and
develop products in advance of the commercialization of our customers' products.
In developing any new product, we may be required to make a substantial
investment before we can determine the commercial viability of the new product.
If we fail to accurately foresee our customers' needs and future activities, we
may invest heavily in research and development of products that do not lead to
significant revenue.
ECONOMIC, POLITICAL AND OTHER RISKS ASSOCIATED WITH INTERNATIONAL SALES AND
OPERATIONS COULD ADVERSELY AFFECT OUR SALES.
Since we sell our products worldwide, our businesses are subject to
risks associated with doing business internationally. In 1999, 51% of our total
revenue was derived from sales to customers located outside the United States.
We anticipate that revenue from international operations will continue to
represent a substantial portion of our total revenue. In addition, many of our
manufacturing facilities, employees and suppliers are located outside the United
States. Accordingly, our future results could be harmed by a variety of factors,
including:
- changes in foreign currency exchange rates;
- changes in a country's or region's political or economic conditions,
particularly in developing or emerging markets;
- longer payment cycles of foreign customers and difficulty of
collecting receivables in foreign jurisdictions;
- trade protection measures and import or export licensing
requirements;
- differing tax laws and changes in those laws;
- difficulty in staffing and managing widespread operations;
- differing labor laws and changes in those laws;
- differing protection of intellectual property and changes in that
protection; and
- differing regulatory requirements and changes in those requirements.
FLUCTUATIONS IN OUR QUARTERLY OPERATING RESULTS MAY CAUSE OUR STOCK PRICE TO
DECLINE.
Given the nature of the markets in which we participate, we cannot
reliably predict future revenue and profitability. Changes in competitive,
market and economic conditions may cause us to adjust our operations. A high
proportion of our costs are fixed, due in part to our significant
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sales, research and development and manufacturing costs. Thus, small declines in
revenue could disproportionately affect our operating results in a quarter.
Factors that may affect our quarterly operating results and the market price of
our common stock include:
- demand for and market acceptance of our products;
- competitive pressures resulting in lower selling prices;
- adverse changes in the level of economic activity in regions in which
we do business;
- adverse changes in industries, such as pharmaceutical discovery,
telecommunications, semiconductors and electronics, on which we are
particularly dependent;
- changes in the portions of our revenue represented by our various
products and customers;
- delays or problems in the introduction of new products;
- our competitors' announcement or introduction of new products,
services or technological innovations;
- increased costs of raw materials or supplies; and
- changes in the volume or timing of product orders.
In addition, the stock market has experienced extreme price and volume
fluctuations. This volatility has significantly affected the market prices of
securities for reasons frequently unrelated to or disproportionate to the
operating performance of specific companies. These broad market fluctuations may
adversely affect the market price of our common stock.
WE MAY NOT BE ABLE TO SUCCESSFULLY IMPLEMENT OUR ACQUISITION STRATEGY, INTEGRATE
ACQUIRED BUSINESSES INTO OUR EXISTING BUSINESS OR MAKE ACQUIRED BUSINESSES
PROFITABLE.
One of our strategies is to supplement our internal growth by acquiring
businesses and technologies that complement or augment our existing product
lines. We may be unable to identify or complete promising acquisitions for many
reasons, including:
- competition among buyers;
- the need for regulatory approvals, including antitrust approvals; and
- the high valuations of businesses.
Some of the businesses we may seek to acquire may be marginally
profitable or unprofitable. For these acquired businesses to achieve acceptable
levels of profitability, we must
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improve their management, operations, products and market penetration. We may
not be successful in this regard and may encounter other difficulties in
integrating acquired businesses into our existing operations.
To finance our acquisitions, we may have to raise additional funds,
either through public or private financings. We may be unable to obtain such
funds or may be able to do so only on unfavorable terms.
WE FACE AGGRESSIVE COMPETITION IN MANY AREAS OF OUR BUSINESS; IF WE DO NOT
COMPETE EFFECTIVELY, OUR BUSINESS WILL BE HARMED.
We encounter aggressive competition from numerous competitors in many
areas of our business. We may not be able to compete effectively with all of
these competitors. To remain competitive, we must develop new products and
periodically enhance our existing products in a timely manner. We anticipate
that we may have to adjust prices of many of our products to stay competitive.
In addition, new competitors may emerge, and entire product lines may be
threatened by new technologies or market trends that reduce the value of these
product lines.
IF WE FAIL TO MAINTAIN SATISFACTORY COMPLIANCE WITH THE FOOD AND DRUG
ADMINISTRATION'S REGULATIONS AND THOSE OF OTHER GOVERNMENTAL AGENCIES, WE MAY BE
FORCED TO RECALL PRODUCTS AND CEASE THEIR MANUFACTURE AND DISTRIBUTION, AND WE
COULD BE SUBJECT TO CIVIL OR CRIMINAL PENALTIES.
Some of the products produced by our life sciences segment are subject
to regulation by the United States Food and Drug Administration and similar
international agencies. These regulations govern a wide variety of product
activities, from design and development to labeling, manufacturing, promotion,
sales and distribution. If we fail to comply with the FDA's regulations or those
of similar international agencies, we may have to recall products and cease
their manufacture and distribution. In addition, we could be subject to fines or
criminal prosecution.
CHANGES IN GOVERNMENTAL REGULATIONS MAY REDUCE DEMAND FOR OUR PRODUCTS OR
INCREASE OUR EXPENSES.
We compete in markets in which we or our customers must comply with
federal, state, local and foreign regulations, such as environmental, health and
safety and food and drug regulations. We develop, configure and market our
products to meet customer needs created by these regulations. Any significant
change in these regulations could reduce demand for our products.
OBTAINING AND ENFORCING PATENT PROTECTION FOR OUR PROPRIETARY PRODUCTS,
PROCESSES AND TECHNOLOGIES MAY BE DIFFICULT AND EXPENSIVE; WE MAY INFRINGE
INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES.
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Patent and trade secret protection is important to us because
developing and marketing new technologies and products is time-consuming and
expensive. We own many U.S. and foreign patents and intend to apply for
additional patents to cover our products. We may not obtain issued patents from
any pending or future patent applications owned by or licensed to us. The claims
allowed under any issued patents may not be broad enough to protect our
technology.
Third parties may seek to challenge, invalidate or circumvent issued
patents owned by or licensed to us or claim that our products and operations
infringe their patent or other intellectual property rights. We may incur
significant expense in any legal proceedings to protect our proprietary rights
or to defend infringement claims by third parties. In addition, claims of third
parties against us could result in awards of substantial damages or court orders
that could effectively prevent us from making, using or selling our products in
the U.S. or abroad.
WE HAVE SUBSTANTIAL EXISTING DEBT AND MAY INCUR ADDITIONAL DEBT IN THE FUTURE.
We have substantial amounts of outstanding indebtedness. Our
substantial level of indebtedness increases the possibility that we may be
unable to generate cash sufficient to pay the principal of, interest on and
other amounts due in respect of our indebtedness when due. We may also obtain
additional long-term debt and working capital lines of credit and issue
additional commercial paper to meet future financing needs, which would have the
effect of increasing our total leverage.
Our substantial leverage could have significant negative consequences,
including:
- increasing our vulnerability to general adverse economic and industry
conditions;
- limiting our ability to obtain additional financing;
- requiring the dedication of a substantial portion of our cash flow
from operations to service our indebtedness, thereby reducing the
amount of our cash flow available for other purposes, including
capital expenditures;
- limiting our flexibility in planning for, or reacting to, changes in
our business and the industries in which we compete; and
- placing us at a possible competitive disadvantage with less
leveraged competitors and competitors that may have better access to
capital resources.
A significant portion of our outstanding indebtedness bears interest at
floating rates. As a result, our interest payment obligations on such
indebtedness will increase if interest rates increase.
