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The following table sets forth selected historical financial information as of and for each of the fiscal years in the five-year period ended December 29, 2013. We derived the selected historical financial information for the balance sheets for the fiscal years ended December 29, 2013 and December 30, 2012 and the statement of operations for each of the fiscal years in the three-year period ended December 29, 2013 from our audited consolidated financial statements which are included elsewhere in this annual report on Form 10-K. We derived the selected historical financial information for the statements of operations for the fiscal years ended January 2, 2011 and January 3, 2010 from our audited consolidated financial statements which are not included in this annual report on Form 10-K. We derived the selected historical financial information for the balance sheets as of January 1, 2012, January 2, 2011 and January 3, 2010 from our audited consolidated financial statements which are not included in this annual report on Form 10-K. We adjusted the information in the consolidated financial statements, where appropriate, to account for the adoption of new guidance applicable to certain of our health care businesses, our change in accounting for pension and other postretirement benefit plans and for discontinued operations.
Our historical financial information may not be indicative of our future results of operations or financial position.
(1) Activity related to the mark-to-market adjustment on postretirement benefit plans was pre-tax income of $17.6 million in fiscal year 2013, a pre-tax loss of $31.8 million in fiscal year 2012, a pre-tax loss of $67.9 million in fiscal year 2011, a pre-tax loss of $0.2 million in fiscal year 2010 and a pre-tax loss of $6.4 million in fiscal year 2009.
(2) We adopted the authoritative guidance for stock compensation on January 2, 2006. The total incremental pre-tax compensation expense recorded in continuing operations related to stock options was $4.4 million in fiscal year 2013, $5.1 million in fiscal year 2012, $4.5 million in fiscal year 2011, $6.2 million in fiscal year 2010 and $7.9 million in fiscal year 2009.
(3) We recorded pre-tax restructuring and contract termination charges, net, of $33.9 million in fiscal year 2013, $25.1 million in fiscal year 2012, $13.5 million in fiscal year 2011, $19.0 million in fiscal year 2010 and $18.0 million in fiscal year 2009.
(4) On April 27, 2010 we sold a building which provided net proceeds of $11.0 million. We recorded a pre-tax gain of $3.4 million in operating income.
(5) In fiscal year 2013, we recorded pre-tax impairment charges of $6.7 million as the carrying amounts of certain long-lived assets were not recoverable and exceeded their fair value. In fiscal year 2012, we recorded pre-tax impairment charges of $74.2 million as a result of a review of certain of our trade names within our portfolio as part of a realignment of our marketing strategy. In fiscal year 2011, we recorded a pre-tax impairment charge of $3.0 million for the full impairment of license agreements that we no longer intend to use.
(6) In fiscal year 2013, 2012 and fiscal year 2011, interest expense was $49.9 million, $45.8 million and $24.8 million, respectively, with higher interest expense in fiscal years 2013 and 2012 due primarily to increased debt and the higher interest rates on those debt balances with the issuance in fiscal year 2011 of the senior unsecured notes due in 2021. In fiscal year 2013, we redeemed all of our 6% senior unsecured notes due in 2015 (the “2015 Notes”) that included a prepayment premium of $11.1 million, which is included in other expense, net, the write-off of $2.8 million for the remaining unamortized derivative losses for previously settled cash flow hedges, which is included in interest expense, and the write-off of $0.2 million for the remaining deferred debt issuance costs, which is included in interest expense. For fiscal year 2011, acquisition related financing costs added an additional expense of $3.1 million, and is included in interest expense.
(7) In fiscal year 2010, we acquired the remaining fifty percent equity interest in our joint venture (the “ICPMS Joint Venture”) with the company previously known as MDS, Inc. for the development and manufacturing of our Inductively Coupled Plasma Mass Spectrometry product line. The fair value of the acquisition was $67.7 million, including cash consideration of $35.0 million, non-cash consideration of $2.6 million for certain non-exclusive rights to intangible assets we own, and $30.4 million representing the fair value of our fifty percent equity interest in the ICPMS Joint Venture held prior to the acquisition. We recognized a pretax gain of $25.6 million from the re-measurement to fair value of our previously held equity interest in the ICPMS Joint Venture. This pre-tax gain is reported in interest and other expense (income), net, for fiscal year 2010.
(8) The benefit from income taxes in fiscal year 2013 was primarily due to a tax benefit of $24.0 million related to discrete items and losses in higher tax rate jurisdictions, offset by a provision from income taxes related to profits in lower tax rate jurisdictions.
(9) The benefit from income taxes in fiscal year 2012 was primarily due to a tax benefit of $7.0 million related to discrete items and losses in higher tax rate jurisdictions, which included pre-tax impairment charges of $74.2 million, partially offset by a provision from income taxes related to profits in lower tax rate jurisdictions.
(10) The fiscal year 2011 effective tax rate on continuing operations of 98.2% was primarily due to the fiscal year 2011 provision of $79.7 million related to our planned $350.0 million repatriation of previously unremitted earnings.
(11) The fiscal year 2010 effective tax rate on continuing operations of 16.3% was primarily due to the favorable impact related to the gain on the previously held equity interest in the ICPMS Joint Venture.
(12) In November 2010, we sold our Illumination and Detection Solutions (“IDS”) business for approximately $500.0 million, $482.0 million net of payments for acquired cash balances, subject to an adjustment for working capital as of the closing date. We recognized a pre-tax gain of $315.3 million, inclusive of the net working capital adjustment, in fiscal year 2010 as a result of the sale of our IDS business. The gain was recognized as a gain on the disposition of discontinued operations.
(13) In October 2011, we issued and sold ten-year senior notes at a rate of 5% with a face value of $500.0 million and received $496.9 million of net proceeds from the issuance. The debt, which matures in November 2021, is unsecured.
(14) In fiscal year 2013, we repurchased in the open market approximately 3.6 million shares of our common stock at an aggregate cost of $123.0 million, including commissions under the Stock Repurchase Program.
In fiscal year 2012, we did not repurchase any shares of our common stock under any stock repurchase program. In fiscal year 2011, we repurchased in the open market approximately 4.0 million shares of our common stock at an aggregate cost of $107.8 million, including commissions. In fiscal year 2010, we repurchased in the open market approximately 3.0 million shares of our common stock at an aggregate cost of $71.5 million, including commissions. In fiscal year 2009, we repurchased in the open market approximately 1.0 million shares of our common stock at an aggregate cost of $14.2 million, including commissions. The repurchases made during fiscal years 2011, 2010, and 2009 were made pursuant to our stock repurchase program originally announced in October 2008 that expired in October 2012. 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.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations This annual report on Form 10-K, including the following management’s discussion and analysis, contains forward-looking information that you should read in conjunction with the consolidated financial statements and notes to consolidated financial statements that we have included elsewhere in this annual report on Form 10-K.
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,” “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 above under the heading “Risk Factors” in Item 1A above 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.
Accounting Period Our fiscal year ends on the Sunday nearest December 31. We report fiscal years under a 52/53 week format.
Under this method, certain years will contain 53 weeks. Each of the fiscal years ended December 29, 2013, December 30, 2012 and January 1, 2012 included 52 weeks. The fiscal year ending December 28, 2014 will also include 52 weeks.
Overview of Fiscal Year 2013 We realigned our organization at the beginning of fiscal year 2013, to allow us to implement our strategy and propel our vision to improve global health by innovating technologies that help make healthcare more effective, affordable and accessible around the world. Our Informatics business, as well as our field service on products previously sold by our former Bio-discovery business, were moved from our Environmental Health segment into our Human Health segment. The results reported for fiscal year 2013 reflect this new alignment of our operating segments. Financial information relating to fiscal years 2012 and 2011 has been retrospectively adjusted to reflect
the changes to the operating segments. The principal products and services of our two operating segments are:
• Human Health. Develops diagnostics, tools and applications to help detect diseases earlier and more accurately and to accelerate the discovery and development of critical new therapies. The Human Health segment serves both the diagnostics and research markets.
• Environmental Health. Provides products, services and solutions to facilitate the creation of safer food and consumer products, more secure surroundings and efficient energy resources. The Environmental Health segment serves the environmental, industrial and laboratory services markets.
As a result of the realignment, we reallocated goodwill from the Environmental Health segment to the Human Health segment based on the relative fair value, determined using the income approach, of the businesses within the historical Environmental Health segment. The change resulted in $215.7 million of goodwill being allocated from the Environmental Health segment to the Human Health segment.
During fiscal year 2013, we continued to see good performance from acquisitions, investments in our ongoing technology and sales and marketing initiatives. Our overall revenue in fiscal year 2013 increased $51.0 million, or 2%, as compared to fiscal year 2012, reflecting an increase of $35.1 million, or 3%, in our Human Health segment revenue and an increase of $15.9 million, or 2%, in our Environmental Health segment revenue.
The increase in our Human Health segment revenue during fiscal year 2013 was due to growth in our diagnostics business from continued expansion of our prenatal, newborn and infectious disease screening solutions, as well as increased demand for our informatics offerings and in-vivo imaging systems in the research market. The increase in our Environmental Health segment revenue during fiscal year 2013 was due to growth in our laboratory services business, partially offset by decreased demand for some of our products in the environmental and industrial markets.