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Revvity Announces Financial Results for the Third Quarter of 2026

businesswire.com

Revvity Announces Financial Results for the Third Quarter of 2026 WALTHAM, Mass.--( BUSINESS WIRE)-- Revvity, Inc. (NYSE: RVTY), today reported financial results for the third quarter ended October 4, 2026.

The Company reported GAAP earnings per share from continuing operations of $0.56, as compared to $0.41 in the same period a year ago. Revenue for the quarter was $729 million, as compared to $699 million in the same period a year ago. GAAP operating income from continuing operations for the quarter was $95 million, as compared to $82 million for the same period a year ago. GAAP operating profit margin from continuing operations was 13.1% as a percentage of revenue, as compared to 11.7% in the same period a year ago.

Adjusted earnings per share from continuing operations for the quarter was $1.38, as compared to $1.18 in the same period a year ago. Adjusted operating income was $209 million, as compared to $182 million for the same period a year ago. Adjusted operating profit margin was 28.7% as a percentage of revenue, as compared to 26.1% in the same period a year ago.

As a reminder, the Company entered into a definitive agreement to divest its Immunodiagnostics business in China (“China IDX”), which represented approximately 6% of the Company’s total revenue in fiscal year 2025. The transaction is expected to close by the end of 2027, subject to customary closing conditions and regulatory approvals. The Company is providing third quarter 2026 financial results on a reported and pro forma basis; forward-looking guidance is provided on a pro forma basis only and excludes China IDX.

Pro forma earnings per share from continuing operations for the quarter was $0.60, as compared to $0.40 in the same period a year ago. Pro forma revenue for the quarter was $710 million, as compared to $660 million in the same period a year ago. Pro forma operating income was $102 million, as compared to $77 million in the same period a year ago. Pro forma operating profit margin was 14.3% as a percentage of pro forma revenue, as compared to 11.7% in the same period a year ago.

On a pro forma adjusted basis, earnings per share for the quarter was $1.37, as compared to $1.13 in the same period a year ago. Pro forma adjusted operating income was $209 million, as compared to $172 million for the same period a year ago. Pro forma adjusted operating profit margin was 29.4% as a percentage of pro forma revenue, as compared to 26.0% in the same period a year ago.

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

“Our exceptional third quarter performance demonstrates the momentum building across Revvity, as broad-based growth and strong execution drove results meaningfully ahead of our expectations,” said Prahlad Singh, president and chief executive officer of Revvity. “With end market conditions continuing to improve, a strong pipeline of innovation, and the benefits of our transformation increasingly evident in our results, Revvity is extremely well positioned to capitalize on the opportunities ahead.”

Financial Overview by Reporting Segment

Life Sciences

Diagnostics

Full Year 2026 Guidance

For the full year 2026, on a pro forma basis, the Company forecasts total revenue of approximately $2.86 billion, pro forma organic revenue growth of approximately 5%, and pro forma adjusted earnings per share of $5.40-$5.45.

Guidance for the full year 2026 for pro forma organic revenue growth and pro forma adjusted EPS 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 2026 results and its outlook for business trends during a webcast on November 3, 2026, at 7:30 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.

Investor Day

Revvity will be hosting its 2026 Investor Day on Friday, November 13 beginning at 9:00 a.m. ET. Registration details can be found at ir.revvity.com. Presentations from members of Revvity’s senior management team will provide updates on the Company’s key business initiatives, operational achievements and financial outlook.

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) fluctuations in the global economic and political environments, including as the result of recently implemented and recently threatened tariff increases; (3) our failure to introduce new products in a timely manner; (4) our ability to execute acquisitions and divestitures, license technologies, or to successfully integrate acquired businesses or licensed technologies into our existing businesses or to make them profitable; (5) our ability to compete effectively; (6) fluctuation in our quarterly operating results and our ability to adjust our operations to address unexpected changes; (7) significant disruption in third-party package delivery and import/export services or significant increases in prices for those services; (8) disruptions in the supply of raw materials and supplies; (9) our ability to retain key personnel; (10) significant disruption in our information technology systems, or cybercrime; (11) uncertainties related to the development and use of AI in our product offerings and internal operations; (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) our failure to comply with data privacy and information security laws and regulations; (18) regulatory changes; (19) our failure to comply with healthcare industry regulations; (20) economic, political and other risks associated with foreign operations; (21) our ability to obtain future financing; (22) restrictions in our credit agreements; (23) significant fluctuations in our stock price; (24) reduction or elimination of dividends on our common stock; and (25) 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 2025 revenue of $2.9 billion and approximately 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 160 countries.

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

Revvity, Inc. and Subsidiaries

CONDENSED CONSOLIDATED INCOME STATEMENTS

Three Months Ended October 4, 2026

Three Months Ended September 28, 2025

(In thousands, except per share data)

As Reported

Pro Forma

As Reported

Pro Forma

Revenue

$

728,899

$

709,606

$

698,949

$

660,451

Cost of revenue

310,320

301,251

324,345

302,094

Selling, general and administrative expenses

275,330

259,434

241,911

230,096

Research and development expenses

48,108

47,302

50,797

50,797

Operating income from continuing operations

95,141

101,619

81,896

77,464

Interest income

(3,545

)

(3,533

)

(6,925

)

(6,909

)

Interest expense

20,813

20,813

22,771

22,771

Change in fair value of investments

(1,627

)

(1,627

)

4,602

4,602

Other expense, net

1,817

3,722

5,763

5,088

Income from continuing operations, before income taxes

77,683

82,244

55,685

51,912

Provision for income taxes

15,062

14,868

8,464

6,574

Income from continuing operations

62,621

67,376

47,221

45,338

Loss from discontinued operations

(322

)

(322

)

(569

)

(569

)

Net income

$

62,299

$

67,054

$

46,652

$

44,769

Diluted earnings per share:

Income from continuing operations

$

0.56

$

0.60

$

0.41

$

0.40

Loss from discontinued operations

(0.00

)

(0.00

)

(0.01

)

(0.01

)

Net income

$

0.56

$

0.60

$

0.40

$

0.39

Weighted average diluted shares of common stock outstanding

111,826

111,826

115,463

115,463

ABOVE PREPARED IN ACCORDANCE WITH GAAP

Additional supplemental information (1):

(per share, continuing operations)

Three Months Ended October 4, 2026

Three Months Ended September 28, 2025

As Reported

Pro Forma

As Reported

Pro Forma

GAAP EPS from continuing operations

$

0.56

$

0.60

$

0.41

$

0.40

Amortization of intangible assets

0.76

0.70

0.73

0.68

Purchase accounting adjustments

0.00

0.00

0.00

0.00

Acquisition and divestiture-related costs

0.00

0.00

0.00

0.00

Transformation costs

0.01

0.01

0.04

0.04

Change in fair value of investments

(0.01

)

(0.01

)

0.04

0.04

Significant litigation matters and settlements

—

—

0.01

0.01

Restructuring and other

0.25

0.25

0.09

0.08

Tax on above items

(0.18

)

(0.17

)

(0.17

)

(0.16

)

Significant tax items

—

—

0.03

0.03

Adjusted EPS from continuing operations

$

1.38

$

1.37

$

1.18

$

1.13

(1) amounts may not sum due to rounding

Revvity, Inc. and Subsidiaries

CONDENSED CONSOLIDATED INCOME STATEMENTS

Nine Months Ended October 4, 2026

Nine Months Ended September 28, 2025

(In thousands, except per share data)

As Reported

Pro Forma

As Reported

Pro Forma

Revenue

$

2,169,705

$

2,107,627

$

2,083,995

$

1,969,696

Cost of revenue

946,605

913,293

941,289

880,285

Selling, general and administrative expenses

807,788

764,949

740,156

749,811

Research and development expenses

154,969

153,986

157,664

157,664

Operating income from continuing operations

260,343

275,399

244,886

181,936

Interest income

(15,108

)

(15,068

)

(25,351

)

(25,304

)

Interest expense

68,521

68,521

68,672

68,672

Change in fair value of investments

7,828

7,828

3,484

3,484

Other expense, net

7,896

10,289

21,364

19,384

Income from continuing operations, before income taxes

191,206

203,829

176,717

115,700

Provision for income taxes

34,211

32,682

32,605

30,238

Income from continuing operations

156,995

171,147

144,112

85,462

Loss from discontinued operations

(2,158

)

(2,158

)

(1,275

)

(1,275

)

Net income

$

154,837

$

168,989

$

142,837

$

84,187

Diluted earnings per share:

Income from continuing operations

$

1.40

$

1.53

$

1.22

$

0.73

Loss from discontinued operations

(0.02

)

(0.02

)

(0.01

)

(0.01

)

Net income

$

1.38

$

1.51

$

1.21

$

0.72

Weighted average diluted shares of common stock outstanding

111,764

111,764

117,735

117,735

ABOVE PREPARED IN ACCORDANCE WITH GAAP

Additional supplemental information (1):

(per share, continuing operations)

Nine Months Ended October 4, 2026

Nine Months Ended September 28, 2025

As Reported

Pro Forma

As Reported

Pro Forma

GAAP EPS from continuing operations

$

1.40

$

1.53

$

1.22

$

0.73

Amortization of intangible assets

2.28

2.10

2.14

2.00

Purchase accounting adjustments

0.02

0.02

0.02

0.02

Acquisition and divestiture-related costs

0.01

0.01

0.02

0.02

Transformation costs

0.01

0.01

0.05

0.05

Change in fair value of investments

0.07

0.07

0.03

0.03

Loss from probable dispositions

—

—

—

0.40

Significant litigation matters and settlements

0.00

0.00

0.11

0.11

Significant environmental matters

—

—

(0.01

)

(0.01

)

Disposition of businesses and assets, net

(0.05

)

(0.05

)

—

—

Mark to market on postretirement benefits

(0.02

)

(0.02

)

0.04

0.04

Restructuring and other

0.67

0.65

0.21

0.20

Tax on above items

(0.55

)

(0.51

)

(0.49

)

(0.40

)

Significant tax items

—

—

0.03

0.03

Adjusted EPS from continuing operations

$

3.85

$

3.82

$

3.37

$

3.23

(1) amounts may not sum due to rounding

Revvity, Inc. and Subsidiaries

REVENUE AND OPERATING INCOME (LOSS)

Three Months Ended October 4, 2026

Three Months Ended September 28, 2025

(In thousands, except percentages)

As Reported

Pro Forma

As Reported

Pro Forma

Revenue and adjusted operating income

Revenue

$

728,899

$

709,606

$

698,949

$

660,451

Operating income from continuing operations

$

95,141

$

101,619

$

81,896

$

77,464

OP%

13.1

%

14.3

%

11.7

%

11.7

%

Amortization of intangible assets

84,691

78,144

84,074

78,635

Purchase accounting adjustments

300

300

348

348

Acquisition and divestiture-related costs

70

70

284

284

Transformation costs

612

612

5,103

5,103

Significant litigation matters and settlements

150

150

785

785

Restructuring and other

28,357

27,952

9,926

9,376

Adjusted operating income

$

209,321

$

208,847

$

182,416

$

171,995

OP%

28.7

%

29.4

%

26.1

%

26.0

%

Three Months Ended

October 4,

2026

September 28,

2025

(In thousands, except percentages)

Segment revenue:

Life Sciences

$

379,586

$

342,822

Diagnostics

349,313

356,127

Segment revenue

728,899

698,949

Segment operating income:

Life Sciences

$

119,469

$

101,048

31.5

%

29.5

%

Diagnostics

104,313

89,376

29.9

%

25.1

%

Segment operating income

223,782

190,424

Corporate

(14,461

)

(8,008

)

Adjusted operating income

209,321

182,416

Amortization of intangible assets

(84,691

)

(84,074

)

Purchase accounting adjustments

(300

)

(348

)

Acquisition and divestiture-related costs

(70

)

(284

)

Transformation costs

(612

)

(5,103

)

Significant litigation matters and settlements

(150

)

(785

)

Restructuring and other

(28,357

)

(9,926

)

Reported operating income from continuing operations

$

95,141

$

81,896

REVENUE AND REPORTED OPERATING INCOME (LOSS) PREPARED IN ACCORDANCE WITH GAAP

Revvity, Inc. and Subsidiaries

REVENUE AND OPERATING INCOME (LOSS)

Nine Months Ended October 4, 2026

Nine Months Ended September 28, 2025

(In thousands, except percentages)

As Reported

Pro Forma

As Reported

Pro Forma

Revenue and adjusted operating income

Revenue

$

2,169,705

$

2,107,627

$

2,083,995

$

1,969,696

Operating income from continuing operations

260,343

275,399

244,886

181,936

OP%

12.0

%

13.1

%

11.8

%

9.2

%

Amortization of intangible assets

254,643

235,236

252,063

235,881

Purchase accounting adjustments

2,307

2,307

2,349

2,349

Acquisition and divestiture-related costs

456

394

2,950

2,950

Disposition of businesses and assets, net

(5,074

)

(5,074

)

—

—

Transformation costs

671

670

6,226

6,226

Loss from probable dispositions

—

—

—

46,809

Significant litigation matters and settlements

298

298

12,495

12,495

Significant environmental matters

—

—

(1,208

)

(1,208

)

Restructuring and other

74,540

73,149

24,368

23,818

Adjusted operating income

$

588,184

$

582,379

$

544,129

$

511,256

OP%

27.1

%

27.6

%

26.1

%

26.0

%

Nine Months Ended

October 4,

2026

September 28,

2025

(In thousands, except percentages)

Segment revenue:

Life Sciences

$

1,100,130

$

1,049,115

Diagnostics

1,069,575

1,034,880

Segment revenue

2,169,705

2,083,995

Segment operating income:

Life Sciences

$

334,982

$

322,228

30.4

%

30.7

%

Diagnostics

293,301

252,813

27.4

%

24.4

%

Segment operating income

628,283

575,041

Corporate

(40,099

)

(30,912

)

Adjusted operating income

588,184

544,129

Amortization of intangible assets

(254,643

)

(252,063

)

Purchase accounting adjustments

(2,307

)

(2,349

)

Acquisition and divestiture-related costs

(456

)

(2,950

)

Disposition of businesses and assets, net

5,074

—

Transformation costs

(671

)

(6,226

)

Significant litigation matters and settlements

(298

)

(12,495

)

Significant environmental matters

—

1,208

Restructuring and other

(74,540

)

(24,368

)

Reported operating income from continuing operations

$

260,343

$

244,886

REVENUE AND REPORTED OPERATING INCOME (LOSS) PREPARED IN ACCORDANCE WITH GAAP

Revvity, Inc. and Subsidiaries

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

October 4,

2026

December 28,

2025

Current assets:

Cash and cash equivalents

$

592,799

$

919,860

Accounts receivable, net

687,328

744,671

Inventories, net

388,850

379,497

Other current assets

192,414

195,719

Total current assets

1,861,391

2,239,747

Property, plant and equipment, net

450,870

479,249

Operating lease right-of-use assets, net

146,823

165,439

Intangible assets, net

2,137,551

2,347,003

Goodwill

6,588,150

6,613,493

Other assets, net

305,561

323,480

Total assets

$

11,490,346

$

12,168,411

Current liabilities:

Current portion of long-term debt

$

—

$

588,828

Accounts payable

163,271

185,464

Accrued expenses and other current liabilities

538,206

556,954

Total current liabilities

701,477

1,331,246

Long-term debt

2,634,062

2,631,236

Long-term liabilities

752,731

807,461

Operating lease liabilities

130,970

148,108

Total liabilities

4,219,240

4,918,051

Total stockholders' equity

7,271,106

7,250,360

Total liabilities and stockholders' equity

$

11,490,346

$

12,168,411

PREPARED IN ACCORDANCE WITH GAAP

Revvity, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

Three Months Ended

Nine Months Ended

(In thousands)

October 4,

2026

September 28,

2025

October 4,

2026

September 28,

2025

Operating activities:

Net income

$

62,299

$

46,652

$

154,837

$

142,837

Loss from discontinued operations, net of income taxes

322

569

2,158

1,275

Income from continuing operations

62,621

47,221

156,995

144,112

Adjustments to reconcile income from continuing operations to net cash provided by continuing operations:

Stock-based compensation

9,752

9,054

29,198

26,918

Restructuring and other

28,357

9,926

74,540

24,368

Depreciation and amortization

102,918

102,061

310,013

302,261

Change in fair value of contingent consideration

60

107

1,587

(59

)

Amortization of deferred debt financing costs and accretion of discounts

1,007

1,240

3,447

3,560

Change in fair value of investments

(1,627

)

4,602

7,828

3,484

Unrealized foreign exchange loss

—

82

186

222

Gains on disposition of businesses and assets, net

—

—

(5,074

)

—

Changes in assets and liabilities which (used) provided cash:

Accounts receivable, net

22,489

(19,742

)

66,405

(41,643

)

Inventories, net

(13,354

)

6,851

(18,132

)

12,493

Accounts payable

(1,585

)

(3,008

)

(19,648

)

270

Accrued expenses and other

(43,934

)

(19,813

)

(122,811

)

(68,990

)

Net cash provided by operating activities of continuing operations

166,704

138,581

484,534

406,996

Net cash used in operating activities of discontinued operations

—

(81

)

(10,657

)

(6,023

)

Net cash provided by operating activities

166,704

138,500

473,877

400,973

Investing activities:

Capital expenditures

(14,346

)

(18,501

)

(45,194

)

(53,351

)

Purchases of investments and notes receivables

(1,250

)

(29

)

(4,811

)

(29

)

Proceeds from investments and notes receivables

—

—

7,496

—

Proceeds from dispositions of property, plant and equipment

—

—

12,039

—

Proceeds from disposition of businesses and assets

—

—

158

229

Cash paid for acquisitions, net of cash acquired

—

—

(67,061

)

—

Net cash used in investing activities of continuing operations

(15,596

)

(18,530

)

(97,373

)

(53,151

)

Net cash provided by investing activities of discontinued operations

—

37,500

—

56,250

Net cash (used in) provided by investing activities

(15,596

)

18,970

(97,373

)

3,099

Financing Activities:

Payments on borrowings

$

(25,000

)

$

—

$

(25,000

)

$

—

Proceeds from borrowings

25,000

—

25,000

—

Payments of senior unsecured notes

(571,193

)

—

(571,193

)

—

Payments of debt financing costs

—

—

—

(2,474

)

Payments on other credit facilities

—

(55

)

—

(158

)

Payments for acquisition-related contingent consideration

—

(1,860

)

(350

)

(3,838

)

Proceeds from issuance of common stock under stock plans

3,485

—

9,922

2,632

Purchases of common stock

(95

)

(205,029

)

(102,583

)

(652,530

)

Dividends paid

(7,811

)

(8,130

)

(23,465

)

(24,845

)

Net cash used in financing activities

(575,614

)

(215,074

)

(687,669

)

(681,213

)

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

(5,709

)

(2,811

)

(15,899

)

45,264

Net decrease in cash, cash equivalents, and restricted cash

(430,215

)

(60,415

)

(327,064

)

(231,877

)

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

1,024,181

992,990

921,030

1,164,452

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

$

593,966

$

932,575

$

593,966

$

932,575

Supplemental disclosure 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 consolidated statements of cash flows:

Cash and cash equivalents

$

592,799

$

931,386

$

592,799

$

931,386

Restricted cash included in other current assets

600

1,189

600

1,189

Restricted cash included in other assets

567

—

567

—

Total cash, cash equivalents and restricted cash

$

593,966

$

932,575

$

593,966

$

932,575

PREPARED IN ACCORDANCE WITH GAAP

Revvity, Inc. and Subsidiaries

RECONCILIATION OF FINANCIAL METRICS (1)

Continuing Operations

Three Months Ended

October 4, 2026

Pro forma organic revenue growth:

Pro forma revenue growth from continuing operations

7%

Less: effect of foreign exchange rates

-1%

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

1%

Pro forma organic revenue growth from continuing operations

7%

Life Sciences

Three Months Ended

October 4, 2026

Pro forma organic revenue growth:

Pro forma revenue growth from continuing operations

11%

Less: effect of foreign exchange rates

0%

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

2%

Pro forma organic revenue growth from continuing operations

9%

Diagnostics

Three Months Ended

October 4, 2026

Pro forma organic revenue growth:

Pro forma revenue growth from continuing operations

4%

Less: effect of foreign exchange rates

-1%

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

0%

Pro forma organic revenue growth from continuing operations

5%

(1) amounts may not sum due to rounding

Revvity, Inc. and Subsidiaries

RECONCILIATION OF FINANCIAL METRICS (1)

Continuing Operations

Nine Months Ended

October 4, 2026

Pro forma organic revenue growth:

Pro forma revenue growth from continuing operations

7%

Less: effect of foreign exchange rates

1%

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

1%

Pro forma organic revenue growth from continuing operations

5%

Life Sciences

Nine Months Ended

October 4, 2026

Pro forma organic revenue growth:

Pro forma revenue growth from continuing operations

5%

Less: effect of foreign exchange rates

1%

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

1%

Pro forma organic revenue growth from continuing operations

3%

Diagnostics

Nine Months Ended

October 4, 2026

Pro forma organic revenue growth:

Pro forma 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%

Pro forma organic revenue growth from continuing operations

8%

(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 “organic revenue” to refer to GAAP revenue, excluding the effect of foreign currency changes and revenue from recent acquisitions, 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” or “organic growth” to refer to the measure of comparing current period organic revenue with the corresponding period of the prior year.

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 and asset impairments. We use the related term “adjusted gross margin percentage” to refer to adjusted gross margin as a percentage of 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, transformation costs, significant litigation matters and settlements, asset impairments, significant environmental charges, and restructuring and other charges. We use the related term “adjusted SG&A percentage” to refer to adjusted SG&A expense as a percentage of 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 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 investments and debt extinguishment costs.

We use the term “adjusted operating income” to refer to GAAP operating income, excluding amortization of intangible assets, purchase accounting adjustments, acquisition and divestiture-related expenses, transformation costs, 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,” and “adjusted operating margin” to refer to adjusted operating income as a percentage of revenue.

We use the term “free cash flow” to refer to net cash provided by (used in) operating activities of continuing operations, less payments for additions to property, plant and equipment from continuing operations (“capital expenditures”) plus the proceeds from sales of plant, property and equipment from continuing operations (“capital disposals”).

We use the term “adjusted net income” to refer to GAAP income from continuing operations, excluding amortization of intangible assets, debt extinguishment costs, purchase accounting adjustments, acquisition and divestiture-related expenses, transformation costs, significant litigation matters and settlements, significant environmental charges, changes in the value of investments, 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,” “adjusted earnings per share,” “adjusted EPS,” or “adjusted EPS from continuing operations” to refer to GAAP earnings per share from continuing operations, excluding amortization of intangible assets, debt extinguishment costs, purchase accounting adjustments, acquisition and divestiture-related expenses, transformation costs, significant litigation matters and settlements, significant environmental charges, changes in the value of investments, 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 “pro forma organic revenue” to refer to organic revenue excluding revenue from probable dispositions. We use the related term “pro forma organic revenue growth”, “pro forma organic revenue growth from continuing operations” or “pro forma organic growth” to refer to the measure of comparing current period pro forma organic revenue with the corresponding period of the prior year.

We use the term “pro forma adjusted gross margin” to refer to adjusted gross margin, excluding gross margin from probable dispositions. We use the related term “pro forma adjusted gross margin percentage” to refer to pro forma adjusted gross margin as a percentage of pro forma revenue.

We use the term “pro forma adjusted SG&A expense” to refer to adjusted SG&A expense, excluding SG&A expense from probable dispositions and gains(losses) on sale of probable dispositions. We use the related term “pro forma adjusted SG&A percentage” to refer to pro forma adjusted SG&A expense as a percentage of pro forma revenue.

We use the term “pro forma adjusted R&D expense” to refer to adjusted R&D expense, excluding R&D expense from probable dispositions. We use the related term “pro forma adjusted R&D percentage” to refer to pro forma adjusted R&D expense as a percentage of pro forma revenue.

We use the term “pro forma adjusted net interest and other expense” to refer to adjusted net interest and other expense, excluding net interest and expense from probable dispositions.

We use the term “pro forma adjusted operating income” to refer to adjusted operating income, excluding operating income from probable dispositions. We use the related terms “pro forma adjusted operating profit percentage,” “pro forma adjusted operating profit margin,” and “pro forma adjusted operating margin” to refer to pro forma adjusted operating income as a percentage of pro forma revenue.

We use the term “pro forma adjusted earnings per share from continuing operations,” “pro forma adjusted earnings per share,” “pro forma adjusted EPS,” or “pro forma adjusted EPS from continuing operations” to refer to adjusted earnings per share from continuing operations, excluding net income from probable dispositions and gains (losses) on sale of probable dispositions.

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, transformation costs, loss from probable dispositions, significant litigation matters and settlements, significant environmental charges, changes in the fair value of investments, adjustments for mark-to-market accounting on post-retirement benefits, disposition of businesses and assets, net, and restructuring and other charges is calculated based on operational results and a blended jurisdictional tax rate, 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 a blended jurisdictional tax 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.