REVVITY, INC. 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 nearestDecember 31 . We report fiscal years under a 52/53 week format and as a result, certain fiscal years will contain 53 weeks. The fiscal year endedJanuary 3, 2021 ("fiscal year 2020") included 53 weeks. The additional week in fiscal year 2021 has been reflected in our first quarter. Each of the fiscal years endedDecember 29, 2019 ("fiscal year 2019") andDecember 30, 2018 ("fiscal year 2018") included 52 weeks. The fiscal year endingJanuary 2, 2022 ("fiscal year 2021") will include 52 weeks. Overview of Fiscal Year 2020 During fiscal year 2020, we continued to see strong returns from our acquisitions as well as our organic investments across technology, marketing and people. Our overall revenue in fiscal year 2020 increased$899.1 million , or 31%, as compared to fiscal year 2019, reflecting an increase of$929.4 million , or 82%, in our Diagnostics segment revenue partially offset by a decrease of$30.4 million , or 2%, in our Discovery & Analytical Solutions segment revenue. The increase in our Diagnostics segment revenue during fiscal year 2020 was primarily driven by increased demand for our COVID-19 product offerings resulting in an increase of$547.4 million from our immunodiagnostics revenue and an increase of$398.3 million from our applied genomics revenue partially offset by a decrease of$16.2 million from our reproductive health revenue. The decrease in our Discovery & Analytical Solutions segment during fiscal year 2020 was driven by a decrease of$85.4 million from our applied markets revenue partially offset by an increase of$55.0 million from our life sciences market revenue. In our Diagnostics segment, we experienced tremendous demand for our immunodiagnostics and applied genomics COVID-19 product and service offerings across all regions. In our reproductive health business, an expanded range of product offerings and increased geographic reach partially offset the impact of declining birthrates. In our Discovery & Analytical Solutions segment, the decrease in our applied markets revenue was driven by reduced demand as a result of the COVID-19 pandemic, resulting in a decrease in revenue from our industrial, environmental and food markets. The increase in our life sciences market revenue was the result of an increase in revenue in our pharmaceutical and biotechnology markets driven by continued growth of our Informatics and OneSource businesses, partially offset by a decrease in revenue from our academia and governmental markets. Our consolidated gross margins increased 736 basis points in fiscal year 2020, as compared to fiscal year 2019, primarily due to higher sales volume, favorable shift in product mix and continued productivity initiatives to improve our supply chain, partially offset by increased amortization expense. Our consolidated operating margin increased 1,332 basis points in fiscal year 2020, as compared to fiscal year 2019, primarily due to higher sales volume, which was partially offset by increased amortization of intangible assets, investments in new product development and growth initiatives. Overall, we believe that our strategic priorities and recent portfolio transformations, coupled with our expanded range of product offerings, leading market positions, global scale and financial strength provides us with a foundation for continued growth. 29
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Consolidated Results of Operations
Fiscal Year 2020 Compared to Fiscal Year 2019 Revenue Revenue for fiscal year 2020 was$3.8 billion , as compared to$2.9 billion for fiscal year 2019, an increase of$899.1 million , or 31%, which includes an approximate 2% increase in revenue attributable to acquisitions and divestitures. The analysis in the remainder of this paragraph compares segment revenue for fiscal year 2020 as compared to fiscal year 2019 and includes the effect of foreign exchange rate fluctuations, and acquisitions and divestitures. The total increase in revenue reflects an increase in our Diagnostics segment revenue of$929.4 million , or 82%, due to increased demand for our COVID-19 product offerings resulting in an increase of$547.4 million from our immunodiagnostics revenue and an increase of$398.3 million from our applied genomics revenue, partially offset by a decrease of$16.2 million in our reproductive health revenue. Our Discovery & Analytical Solutions segment revenue decreased by$30.4 million , or 2%, due to a decrease of$85.4 million from our applied markets revenue, partially offset by an increase of$55.0 million from our life sciences market revenue. As a result of adjustments to deferred revenue related to certain acquisitions required by business combination rules, we did not recognize$0.8 million of revenue primarily related to our Diagnostics segment for each of fiscal years 2020 and 2019 and$0.3 million of revenue primarily related to our Discovery & Analytical Solutions segment in fiscal year 2020 that otherwise would have been recorded by the acquired businesses during each of the respective periods. Cost of Revenue Cost of revenue for fiscal year 2020 was$1.7 billion , as compared to$1.5 billion for fiscal year 2019, an increase of approximately$185.3 million , or 12%. As a percentage of revenue, cost of revenue decreased to 44.2% in fiscal year 2020 from 51.6% in fiscal year 2019, resulting in an increase in gross margin of approximately 736 basis points to 55.8% in fiscal year 2020 from 48.4% in fiscal year 2019. Amortization of intangible assets increased and was$65.3 million for fiscal year 2020, as compared to$61.4 million for fiscal year 2019. Stock-based compensation expense was$1.4 million for fiscal year 2020, as compared to$1.6 million for fiscal year 2019. The amortization of purchase accounting adjustments to record the inventory from certain acquisitions added an incremental expense of$2.8 million for fiscal year 2020, as compared to$21.6 million for fiscal year 2019. Asset impairment added an incremental expense of$7.9 million for fiscal year 2020. In addition to the factors noted above, the overall increase in gross margin is primarily the result of higher sales volume, favorable shift in product mix and continued productivity initiatives to improve our supply chain partially offset by increased amortization expense. Selling, General and Administrative Expenses Selling, general and administrative expenses for fiscal year 2020 were$917.9 million , as compared to$815.3 million for fiscal year 2019, an increase of approximately$102.6 million , or 12.6%. As a percentage of revenue, selling, general and administrative expenses decreased to 24.3% in fiscal year 2020 from 28.3% in fiscal year 2019. Amortization of intangible assets increased to$127.3 million for fiscal year 2020, as compared to$103.0 million for fiscal year 2019. Stock-based compensation expense decreased to$26.5 million for fiscal year 2020, as compared to$28.8 million for fiscal year 2019. Acquisition and divestiture-related expenses added an incremental expense of$8.7 million for fiscal year 2020 as compared to$4.0 million for fiscal year 2019. Other purchase accounting adjustments decreased expenses by$8.8 million for fiscal year 2020, as compared to increasing expenses by$3.9 million for fiscal year 2019. Legal costs for significant litigation matters and settlements were$7.1 million for fiscal year 2020, as compared to$2.3 million for fiscal year 2019. Costs for significant environmental matters added an incremental expense of$5.2 million for fiscal year 2020. Acceleration of executive compensation was$7.7 million for fiscal year 2019. In addition to the above items, the increase in selling, general and administrative expenses was primarily the result of costs related to investments in people, digital capabilities and innovation and the extra fiscal week, which were partially offset by lower costs resulting from cost containment and productivity initiatives. Research and Development Expenses Research and development expenses for fiscal year 2020 were$205.4 million , as compared to$189.3 million for fiscal year 2019, an increase of$16.1 million , or 8.5%. As a percentage of revenue, research and development expenses decreased to 5.4% in fiscal year 2020, as compared to 6.6% in fiscal year 2019, primarily driven by outsized volume increases. Stock-based compensation expense was$1.2 million in fiscal year 2020, as compared to$1.1 million in fiscal year 2019. In addition to the above items, the increase in research and development expenses was driven by investments in new product development. 30
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Restructuring and Other Costs, Net We have undertaken a series of restructuring actions related to the impact of acquisitions and divestitures, the alignment of our operations with our growth strategy and the integration of our business units and productivity initiatives. Restructuring and other costs, net were$8.0 million for fiscal year 2020 as compared to$29.4 million for fiscal year 2019. We implemented a restructuring plan in the first quarter of fiscal year 2020 consisting of workforce reductions and closure of excess facilities principally intended to realign resources to emphasize growth initiatives (the "Q1 2020 Plan"). We implemented a restructuring plan in the third quarter of fiscal year 2020 consisting of workforce reductions principally intended to realign resources to emphasize growth initiatives ("Q3 2020 Plan"). We implemented a restructuring plan in each quarter of fiscal year 2019 consisting of workforce reductions principally intended to realign resources to emphasize growth initiatives (the "Q1 2019 Plan", "Q2 2019 Plan", "Q3 2019 Plan" and "Q4 2019 Plan", respectively). All other previous restructuring plans were workforce reductions or the closure of excess facility space principally intended to integrate our businesses in order to realign operations, reduce costs, achieve operational efficiencies and shift resources into geographic regions and end markets that are more consistent with our growth strategy (the "Previous Plans"). The following table summarizes the number of employees reduced, the initial restructuring or contract termination charges by operating segment, and the dates by which payments were substantially completed, or the expected dates by which payments will be substantially completed, for restructuring actions implemented during fiscal years 2020 and 2019 in continuing operations: Workforce Reductions Closure of Excess Facility (Expected) Date Payments Substantially Completed by Discovery & Discovery & Headcount Analytical Analytical Reduction Diagnostics Solutions Diagnostics Solutions Total Severance Excess Facility (In thousands, except headcount data) Q3 2020 Plan 23$ 901 $ 2,080 $ - $ -$ 2,981 Q2 FY2021 - Q1 2020 Plan 32 1,134 2,312 682 92 4,220 Q4 FY2020 Q1 FY2022 Q4 2019 Plan 22 2,404 177 - - 2,581 Q3 FY2020 - Q3 2019 Plan 259 2,641 11,156 - - 13,797 Q2 FY2020 - Q2 2019 Plan 44 1,129 4,461 - - 5,590 Q1 FY2020 - Q1 2019 Plan 105 1,459 6,001 - - 7,460 Q4 FY2019 - We expect to make payments under the Previous Plans for remaining residual lease obligations, with terms varying in length, through fiscal year 2022. We also have terminated various contractual commitments in connection with certain disposal activities and have recorded charges, to the extent applicable, for the costs of terminating these contracts before the end of their terms and the costs that will continue to be incurred for the remaining terms without economic benefit to us. We recorded additional pre-tax charges of$0.2 million during each of fiscal years 2020 and 2019 in the Discovery & Analytical Solutions segment and$0.1 million and$0.2 million during fiscal years 2020 and 2019, respectively, in the Diagnostics segment, as a result of these contract terminations. We recorded pre-tax charges of$4.3 million and$0.8 million associated with relocating facilities during fiscal years 2020 and 2019. 31
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Interest and Other Expense, Net
Interest and other expense, net, consisted of the following:
January 3, December 29,
2021 2019
(In thousands)
Interest income $ (1,010) $ (1,495)
Interest expense 49,712 63,627
Loss on disposition of businesses and assets, net - 2,469
Debt extinguishment costs - 32,541
Other expense, net 23,515 27,689
Total interest and other expense, net $ 72,217 $ 124,831
Interest and other expense, net, for fiscal year 2020 was$72.2 million , as compared to$124.8 million for fiscal year 2019, a decrease of$52.6 million . The decrease in interest and other expense, net, in fiscal year 2020 as compared to fiscal year 2019 was largely due to a decrease in debt extinguishment costs of$32.5 million primarily associated with the redemption of theNovember 2021 Notes in the fourth quarter of fiscal year 2019; a decrease of$13.9 million in interest expense related to the full year benefit of the lower interest rate on the 2029 Notes that replaced theNovember 2021 Notes; a decrease in other expense, net of$4.2 million primarily due to a decrease in pension-related expenses; and a decrease in loss on disposition of businesses and assets, net of$2.5 million . A more complete discussion of our liquidity is set forth below under the heading "Liquidity and Capital Resources." Provision for Income Taxes The effective tax rates on continuing operations were 19.7% and 4.0% for fiscal years 2020 and 2019, respectively. Certain of our subsidiaries have, at various times, been granted tax relief in their respective countries, resulting in lower income taxes than would otherwise be the case under ordinary tax rates. A reconciliation of income tax expense at theU.S. federal statutory income tax rate to the recorded tax provision is as follows for the fiscal years ended: January 3, December 29, 2021 2019 (In thousands) Tax at statutory rate$ 190,339 $ 49,799 Non-U.S. rate differential, net (40,216) (32,124) U.S. taxation of multinational operations 9,050 4,251 State income taxes, net 13,306 1,941 Prior year tax matters 8,262 (5,103) Effect of stock compensation (8,818) (2,053) General business tax credits (4,136) (4,325) Change in valuation allowance 10 (1,117) Foreign consolidations 15,222 - Tax elections - (3,700) Impact of U.S. Tax Act - 2,718 Others, net (4,753) (898) Total$ 178,266 $ 9,389 The variation in our effective tax rate for each year is primarily a result of the recognition of earnings in foreign jurisdictions, predominantlyFinland ,Singapore and theUnited Kingdom in fiscal year 2020 andFinland ,Singapore andThe Netherlands in fiscal years 2019 and 2018, which are taxed at rates lower than theU.S. federal statutory rate, resulting in a benefit from income taxes of$42.5 million in fiscal year 2020 and$16.7 million in fiscal year 2019. These amounts include$21.8 million in fiscal year 2020 and$10.4 million in fiscal year 2019 of benefits derived from tax holidays inChina andSingapore . The effect of these benefits, derived from tax holidays, on basic and diluted earnings per share for fiscal year 2020 was$0.20 and$0.19 , respectively, and for fiscal year 2019 was$0.09 and$0.09 , respectively. The tax holiday inChina is renewed every three years. The Company expects to renew the tax holiday for two of our subsidiaries inChina that expired in fiscal year 2020. The tax holiday for one of our subsidiaries inSingapore is scheduled to expire in fiscal year 2023. 32
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Disposition of Businesses and Assets As part of our continuing efforts to focus on higher growth opportunities, we have discontinued certain businesses. When the discontinued operations represented a strategic shift that will have a major effect on our operations and financial statements, we accounted for these businesses as discontinued operations and accordingly, have presented the results of operations and related cash flows as discontinued operations. Any business deemed to be a discontinued operation prior to the adoption of Accounting Standards Update 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of An Entity, continues to be reported as a discontinued operation, and the results of operations and related cash flows are presented as discontinued operations for all periods presented. Any remaining assets and liabilities of these businesses have been presented separately, and are reflected within assets and liabilities from discontinued operations in the accompanying consolidated balance sheets as ofJanuary 3, 2021 andDecember 29, 2019 . We recorded a provision for income taxes of$0.1 million and$0.2 million on discontinued operations and dispositions in fiscal years 2020 and 2019. Fiscal Year 2019 Compared to Fiscal Year 2018 For a discussion of our results of operations for fiscal year 2019 as compared to fiscal year 2018, see Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations in our annual report on Form 10-K for the fiscal year endedDecember 29, 2019 filed with theSecurities and Exchange Commission onFebruary 25, 2020 . Business Combinations Acquisitions in fiscal year 2020 During the fiscal year 2020, we completed the acquisition of four businesses for aggregate consideration of$438.7 million . The acquired businesses include Horizon Discovery Group plc ("Horizon"), a company based inCambridge, UK with approximately 400 employees, which was acquired onDecember 23, 2020 for a total consideration of$399.4 million (£296.0 million), and three other businesses which were acquired for a total consideration of$39.3 million . The excess of the purchase prices over the fair values of the acquired businesses' net assets represents cost and revenue synergies specific to us, as well as non-capitalizable intangible assets, such as the employee workforces acquired, and has been allocated to goodwill, which is not tax deductible. We reported the operations for these acquisitions within the results of our Diagnostics and Discovery & Analytical Solutions segments, as applicable, from the acquisition dates. Identifiable definite-lived intangible assets, such as core technology, trade names, customer relationships and in-process research and development ("IPR&D"), acquired as part of these acquisitions had a weighted average amortization period of 11.0 years. Acquisitions in Fiscal Year 2019 During the fiscal year 2019, we completed the acquisition of five businesses for aggregate consideration of$433.1 million . The acquired businesses include Cisbio Bioassays SAS, a company based in Codolet,France , which was acquired for a total consideration of$219.9 million ,Shandong Meizheng Bio-Tech Co., Ltd. , a company headquartered inBeijing, China , for a total consideration of$166.5 million , and three other businesses were acquired for a total consideration of$46.6 million . We have a potential obligation to pay the former shareholders of certain of these acquired businesses additional contingent consideration of up to$31.8 million . The excess of the purchase prices over the fair values of the acquired businesses' net assets represents cost and revenue synergies specific to us, as well as non-capitalizable intangible assets, such as the employee workforces acquired, and has been allocated to goodwill, which is not tax deductible. We have reported the operations for these acquisitions within the results of our Diagnostics and Discovery & Analytical Solutions segments, as applicable, from the acquisition dates. Identifiable definite-lived intangible assets, such as core technology, trade names and customer relationships, acquired as part of these acquisitions had a weighted average amortization period of 11.0 years. Acquisitions in Fiscal Year 2018 For a discussion of our acquisitions for fiscal year 2018, see Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations in our annual report on Form 10-K for the fiscal year endedDecember 29, 2019 filed with theSecurities and Exchange Commission onFebruary 25, 2020 . As ofJanuary 3, 2021 , the allocations of purchase prices for acquisitions completed in fiscal years 2019 and 2018 were final. The preliminary allocations of the purchase prices for acquisitions completed in fiscal year 2020 were based upon initial valuations. Our estimates and assumptions underlying the initial valuations are subject to the collection of information necessary to complete our valuations within the measurement periods, which are up to one year from the respective acquisition dates. The primary areas of the preliminary purchase price allocations that are not yet finalized relate to the fair value of certain 33
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tangible and intangible assets acquired and liabilities assumed, assets and liabilities related to income taxes and related valuation allowances, and residual goodwill. We expect to continue to obtain information to assist in determining the fair values of the net assets acquired at the acquisition dates during the measurement periods. During the measurement periods, we will adjust assets or liabilities if new information is obtained about facts and circumstances that existed as of the acquisition dates that, if known, would have resulted in the recognition of those assets and liabilities as of those dates. These adjustments will be made in the periods in which the amounts are determined and the cumulative effect of such adjustments will be calculated as if the adjustments had been completed as of the acquisition dates. All changes that do not qualify as adjustments made during the measurement periods are also included in current period earnings. During fiscal year 2020, we obtained information relevant to determining the fair values of certain tangible and intangible assets acquired, and liabilities assumed, related to recent acquisitions and adjusted our purchase price allocations. Based on this information, we recognized an increase in intangible assets of$1.9 million , an increase in deferred tax liabilities of$0.4 million , a decrease in goodwill of$1.8 million , and a decrease in liabilities assumed of$0.4 million . Allocations of the purchase price for acquisitions are based on estimates of the fair value of the net assets acquired and are subject to adjustment upon finalization of the purchase price allocations. The accounting for business combinations requires estimates and judgments as to expectations for future cash flows of the acquired business, and the allocation of those cash flows to identifiable intangible assets, in determining the estimated fair values for assets acquired and liabilities assumed. The fair values assigned to tangible and intangible assets acquired and liabilities assumed, including contingent consideration, are based on management's estimates and assumptions, as well as other information compiled by management, including valuations that utilize customary valuation procedures and techniques. Contingent consideration is measured at fair value at the acquisition date, based on the probability that revenue thresholds or product development milestones will be achieved during the earnout period, with changes in the fair value after the acquisition date affecting earnings to the extent it is to be settled in cash. Increases or decreases in the fair value of contingent consideration liabilities primarily result from changes in the estimated probabilities of achieving revenue thresholds or product development milestones during the earnout period. As ofJanuary 3, 2021 , we may have to pay contingent consideration, related to acquisitions with open contingency periods, of up to$7.3 million . As ofJanuary 3, 2021 , we have recorded contingent consideration obligations of$3.0 million , of which$2.9 million was recorded in accrued expenses and other current liabilities, and$0.1 million was recorded in long-term liabilities. As ofDecember 29, 2019 , we have recorded contingent consideration obligations of$35.5 million , of which$20.8 million was recorded in accrued expenses and other current liabilities, and$14.7 million was recorded in long-term liabilities. The expected maximum earnout period for acquisitions with open contingency periods does not exceed 2.9 years fromJanuary 3, 2021 , and the remaining weighted average expected earnout period atJanuary 3, 2021 was 1.9 years. If the actual results differ from the estimates and judgments used in these fair values, the amounts recorded in the consolidated financial statements could result in a possible impairment of the intangible assets and goodwill, require acceleration of the amortization expense of definite-lived intangible assets or the recognition of additional contingent consideration which would be recognized as a component of operating expenses from continuing operations. In connection with the purchase price allocations for acquisitions, we estimate the fair value of deferred revenue assumed with our acquisitions. The estimated fair value of deferred revenue is determined by the legal performance obligation at the date of acquisition, and is generally based on the nature of the activities to be performed and the related costs to be incurred after the acquisition date. The fair value of an assumed liability related to deferred revenue is estimated based on the current market cost of fulfilling the obligation, plus a normal profit margin thereon. The estimated costs to fulfill the deferred revenue are based on the historical direct costs related to providing the services. We do not include any costs associated with selling effort, research and development, or the related margins on these costs. In most acquisitions, profit associated with selling effort is excluded because the acquired businesses would have concluded the selling effort on the support contracts prior to the acquisition date. The estimated research and development costs are not included in the fair value determination, as these costs are not deemed to represent a legal obligation at the time of acquisition. The sum of the costs and operating income approximates, in theory, the amount that we would be required to pay a third-party to assume the obligation. Contingencies, Including Tax Matters We are conducting a number of environmental investigations and remedial actions at our current and former locations and, along with other companies, have been named a potentially responsible party ("PRP") for certain waste disposal sites. We accrue for environmental issues in the accounting period that our responsibility is established and when the cost can be reasonably estimated. We have accrued$12.9 million and$7.7 million as ofJanuary 3, 2021 andDecember 29, 2019 , respectively, in accrued expenses and other current liabilities, which represents our management's estimate of the cost of the remediation of known environmental matters, and does not include any potential liability for related personal injury or property damage claims. Our environmental accrual is not discounted and does not reflect the recovery of any material amounts through insurance or indemnification arrangements. The cost estimates are subject to a number of variables, including the stage of the 34
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environmental investigations, the magnitude of the possible contamination, the nature of the potential remedies, possible joint and several liability, the time period over which remediation may occur, and the possible effects of changing laws and regulations. For sites where we have been named a PRP, our management does not currently anticipate any additional liability to result from the inability of other significant named parties to contribute. We expect that the majority of such accrued amounts could be paid out over a period of up to ten years. As assessment and remediation activities progress at each individual site, these liabilities are reviewed and adjusted to reflect additional information as it becomes available. There have been no environmental problems to date that have had, or are expected to have, a material adverse effect on our consolidated financial statements. While it is possible that a loss exceeding the amounts recorded in the consolidated financial statements may be incurred, the potential exposure is not expected to be materially different from those amounts recorded. Various tax years after 2010 remain open to examination by certain jurisdictions in which we have significant business operations, such asChina ,Finland ,Germany , Luxembourg,The Netherlands ,Singapore , theUnited Kingdom andthe United States . The tax years under examination vary by jurisdiction. We regularly review our tax positions in each significant taxing jurisdiction in the process of evaluating our unrecognized tax benefits. We make adjustments to our unrecognized tax benefits when: (i) facts and circumstances regarding a tax position change, causing a change in management's judgment regarding that tax position; (ii) a tax position is effectively settled with a tax authority; and/or (iii) the statute of limitations expires regarding a tax position. We are subject to various claims, legal proceedings and investigations covering a wide range of matters that arise in the ordinary course of our business activities. Although we have established accruals for potential losses that we believe are probable and reasonably estimable, in our opinion, based on our review of the information available at this time, the total cost of resolving these contingencies atJanuary 3, 2021 should not have a material adverse effect on our consolidated financial statements included in this annual report on Form 10-K. However, each of these matters is subject to uncertainties, and it is possible that some of these matters may be resolved unfavorably to us. Reporting Segment Results of Continuing Operations Discovery & Analytical Solutions Fiscal Year 2020 Compared to Fiscal Year 2019 Revenue for fiscal year 2020 was$1,715.8 million , as compared to$1,746.2 million for fiscal year 2019, a decrease of$30.4 million , or 2%, which includes an approximate 2% increase in revenue attributable to acquisitions and divestitures. As a result of adjustments to deferred revenue related to certain acquisitions required by business combination rules, we did not recognize$0.3 million of revenue primarily related to our Discovery & Analytical Solutions segment for fiscal year 2020 that otherwise would have been recorded by the acquired businesses during the period. The analysis in the remainder of this paragraph compares revenue by end-market for fiscal year 2020, as compared to fiscal year 2019, and includes the effect of foreign exchange fluctuations and acquisitions and divestitures. The decrease in revenue in our Discovery & Analytical Solutions segment was a result of a decrease of$85.4 million from our applied markets revenue, partially offset by an increase of$55.0 million from our life sciences market revenue. The decrease in our applied markets revenue was driven by reduced demand as a result of the COVID-19 pandemic, resulting in a decrease in revenue from our industrial, environmental and food markets. The increase in our life sciences market revenue was the result of an increase in revenue in our pharmaceutical and biotechnology markets driven by continued growth in our Informatics and OneSource businesses, which were partially offset by a decrease in revenue from our academia and governmental markets. Operating income from continuing operations for fiscal year 2020 was$183.5 million , as compared to$238.3 million for fiscal year 2019, a decrease of$54.9 million , or 23%. Amortization of intangible assets increased to$76.3 million for fiscal year 2020 as compared to$52.9 million for fiscal year 2019. The amortization of purchase accounting adjustments to record the inventory from certain acquisitions added an incremental expense of$1.3 million in fiscal year 2020, as compared to$20.5 million for fiscal year 2019. Acquisition and divestiture-related costs, contingent consideration and other costs decreased expenses by$4.0 million for fiscal year 2020, as compared to incremental expense of$2.1 million for fiscal year 2019. Legal costs for significant litigation matters and settlements were$5.9 million for fiscal year 2020, as compared to$2.2 million for fiscal year 2019. Restructuring and other costs, net decreased to$3.8 million for fiscal year 2020 as compared to$22.0 million for fiscal year 2019. In addition to the factors noted above, the overall decrease in operating income for fiscal year 2020 as compared to fiscal year 2019, was primarily as a result of lower sales volume and increased investments in new product development and growth initiatives, partially offset by pricing initiatives and services productivity. 35
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Fiscal Year 2019 Compared to Fiscal Year 2018
For a discussion of our results of operations for fiscal year 2019 as compared to fiscal year 2018, see Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations in our annual report on Form 10-K for the fiscal year endedDecember 29, 2019 filed with theSecurities and Exchange Commission onFebruary 25, 2020 .
Diagnostics
Fiscal Year 2020 Compared to Fiscal Year 2019 Revenue for fiscal year 2020 was$2,066.9 million , as compared to$1,137.5 million for fiscal year 2019, an increase of$929.4 million , or 82%. As a result of adjustments to deferred revenue related to certain acquisitions required by business combination rules, we did not recognize$0.8 million of revenue for each of fiscal years 2020 and 2019 that otherwise would have been recorded by the acquired businesses during each of the respective periods. The increase in our Diagnostics segment was driven by increased demand for our immunodiagnostics and applied genomics COVID-19 product offerings, partially offset by a decrease in revenue from our reproductive health business. Operating income from continuing operations for fiscal year 2020 was$874.2 million , as compared to$189.3 million for fiscal year 2019, an increase of$684.9 million , or 362%. Amortization of intangible assets increased and was$116.3 million for fiscal year 2020 as compared to$111.4 million for fiscal year 2019. Restructuring and other costs, net decreased and were$4.3 million for fiscal year 2020 as compared to$7.5 million for fiscal year 2019. Acquisition and divestiture-related expenses, contingent consideration and other costs added an incremental expense of$5.0 million in fiscal year 2020, as compared to an incremental expense of$6.6 million for fiscal year 2019. The amortization of purchase accounting adjustments to record the inventory from certain acquisitions added an incremental expense of$1.5 million in fiscal year 2020, as compared to$1.1 million for fiscal year 2019. Legal costs for significant litigation matters and settlements were$1.2 million for fiscal year 2020, as compared to$0.1 million for fiscal year 2019. Asset impairment was$7.9 million for fiscal year 2020. In addition to the factors noted above, operating income increased during fiscal year 2020, as compared to fiscal year 2019, primarily as a result of higher sales volume and favorable product mix, partially offset by increased investments in new product development and growth initiatives. Fiscal Year 2019 Compared to Fiscal Year 2018 For a discussion of our results of operations for fiscal year 2019 as compared to fiscal year 2018, see Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations in our annual report on Form 10-K for the fiscal year endedDecember 29, 2019 filed with theSecurities and Exchange Commission onFebruary 25, 2020 . Liquidity and Capital Resources We require cash to pay our operating expenses, make capital expenditures, make strategic acquisitions, service our debt and other long-term liabilities, repurchase shares of our common stock and pay dividends on our common stock. Our principal sources of funds are from our operations and the capital markets, particularly the debt markets. We anticipate that our internal operations will generate sufficient cash to fund our operating expenses, capital expenditures, smaller acquisitions, interest payments on our debt and dividends on our common stock. However, we expect to use external sources to satisfy the balance of our debt when due, any larger acquisitions and other long-term liabilities, such as contributions to our postretirement benefit plans. Principal factors that could affect the availability of our internally generated funds include: •changes in sales due to weakness in markets in which we sell our products and services, and •changes in our working capital requirements. Principal factors that could affect our ability to obtain cash from external sources include: •financial covenants contained in the financial instruments controlling our borrowings that limit our total borrowing capacity, •increases in interest rates applicable to our outstanding variable rate debt, •a ratings downgrade that could limit the amount we can borrow under our senior unsecured revolving credit facility and our overall access to the corporate debt market, 36
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•increases in interest rates or credit spreads, as well as limitations on the availability of credit, that affect our ability to borrow under future potential facilities on a secured or unsecured basis, •a decrease in the market price for our common stock, and •volatility in the public debt and equity markets. Cash Flows Fiscal Year 2020 Compared to Fiscal Year 2019 Operating Activities. Net cash provided by continuing operations was$892.2 million for fiscal year 2020, as compared to$363.5 million for fiscal year 2019, an increase of$528.7 million . The cash provided by operating activities for fiscal year 2020 was principally a result of income from continuing operations of$728.1 million , and non-cash charges, including depreciation and amortization of$246.5 million , stock based compensation expense of$29.1 million , a non-cash expense of$18.0 million related to our postretirement benefit plans, including the mark-to-market adjustment in the fourth quarter of fiscal year 2020, restructuring and other costs, net, of$8.0 million , asset impairment of$7.9 million , amortization of deferred debt issuance costs and accretion of discounts of$3.4 million , loss on disposition of businesses and assets, net, of$0.9 million and a net cash increase of$321.8 million in accrued expenses, other assets and liabilities and other items. The change in accrued expenses, other assets and liabilities and other items increased cash provided by operating activities by$321.8 million for fiscal year 2020, whereas the changes in accrued expenses, other assets and liabilities and other items decreased cash provided by operating activities by$40.6 million for fiscal year 2019. These changes primarily related to the timing of payments for pensions, taxes, restructuring, and salary and benefits, including the amortization of purchase accounting adjustments to record the inventory from certain acquisitions of$2.8 million for fiscal year 2020 as compared to$21.6 million for fiscal year 2019 and contingencies and non-cash tax matters, which increased cash provided by operating activities by$4.5 million for fiscal year 2020 as compared to decreasing cash provided by operating activities by$0.4 million for fiscal year 2019. The cash provided by continuing operations during fiscal year 2020 was partially offset by a net cash decrease in working capital of$433.7 million , deferred tax benefit of$29.1 million and change in fair value of contingent consideration of$8.8 million . Contributing to the net cash decrease in working capital for fiscal year 2020, excluding the effect of foreign exchange rate fluctuations, was an increase in accounts receivable of$373.9 million and an increase in inventory of$122.5 million , which were partially offset by an increase in accounts payable of$62.8 million . The increase in accounts receivable was a result of higher sales volume in our Diagnostics segment partially offset by a reduction in terms and improved linearity due to COVID-19 demand. The increase in inventory was primarily due to the ramp up of COVID-19 product offerings. The increase in accounts payable were primarily the result of term extensions and ramp-up in COVID-19 inventory. For fiscal year 2020,$13.3 million of contingent consideration payments were included in operating activities as compared to$20.9 million for fiscal year 2019. We paid stay bonuses associated with our acquisition ofTulip Diagnostics Private Limited ("Tulip") of$11.8 million for fiscal year 2019. During fiscal year 2020, we made contributions of$7.5 million , in the aggregate, to pension plans outside ofthe United States , as compared to$8.2 million during fiscal year 2019. Investing Activities. Net cash used in the investing activities of our continuing operations was$504.5 million for fiscal year 2020, as compared to$487.6 million for fiscal year 2019, an increase of$16.9 million . For fiscal year 2020, we used$411.5 million of net cash for acquisitions, as compared to$400.4 million used in fiscal year 2019. Capital expenditures for fiscal year 2020 were$77.5 million , primarily for manufacturing equipment and other capital equipment purchases, as compared to$76.3 million for fiscal year 2019. During fiscal year 2020, we purchased investments amounting to$20.1 million as compared to$6.4 million in fiscal year 2019. We made purchases of licenses of$5.0 million in fiscal year 2019. These items were partially offset by$4.3 million in proceeds from disposition of businesses and assets in fiscal year 2020 as compared to$0.6 million in proceeds from disposition of businesses and assets in fiscal year 2019. Proceeds from surrender of life insurance policies were$0.3 million in fiscal year 2020. Financing Activities. Net cash used in the financing activities of our continuing operations was$202.9 million for fiscal year 2020, as compared to net cash provided by the financing activities of our continuing operations of$150.1 million for fiscal year 2019, an increase of$353.0 million in net cash used in financing activities. The cash used in financing activities during fiscal year 2020 was principally a result of debt payments, net payments on other credit facilities, settlement of cash flow hedges, payments for acquisition-related contingent consideration, repurchases of our common stock pursuant to our equity incentive plans and payments of dividends. During fiscal year 2020, our debt payments totaled$897.7 million which were partially offset by debt borrowings of$714.7 million . This compares to debt payments of$1,692.5 million and payments of debt issuance costs of$9.9 million , which were partially offset by our debt borrowings of$1,599.4 million in fiscal year 2019. During fiscal year 2019, payments of our senior debt were$530.3 million , which were more than offset by proceeds from the issuance of the 2029 Notes which were$847.2 million . In addition, during fiscal year 2020, we had net payments on other credit facilities of$4.5 million as compared to$15.0 million in fiscal year 2019. During fiscal year 2020, we paid$4.6 million for settlement of forward foreign exchange contracts as compared to$1.3 million in fiscal year 2019. During fiscal year 2020, 37
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we paid$10.4 million for acquisition-related contingent consideration as compared to$29.9 million in fiscal year 2019. During fiscal year 2020, we repurchased 72,251 shares of our common stock to satisfy minimum statutory tax withholding obligations in connection with the vesting of restricted stock awards and restricted stock unit awards granted pursuant to our equity incentive plans and to satisfy obligations related to the exercise of stock options made pursuant to our equity incentive plans, for a total cost of$6.9 million . This compares to repurchases of 68,536 shares of our common stock pursuant to our equity incentive plans in fiscal year 2019, for a total cost of$6.3 million . During fiscal year 2020, we paid$31.2 million in dividends as compared to$31.1 million for fiscal year 2019. The cash used in financing activities during fiscal year 2020 was partially offset by proceeds from the issuance of common stock under stock plans of$37.7 million during fiscal year 2020, as compared to$19.7 million in fiscal year 2019.
Fiscal Year 2019 Compared to Fiscal Year 2018
For a discussion of our results of operations for fiscal year 2019 as compared to fiscal year 2018, see Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations in our annual report on Form 10-K for the fiscal year endedDecember 29, 2019 filed with theSecurities and Exchange Commission onFebruary 25, 2020 . Borrowing Arrangements Senior Unsecured Revolving Credit Facility. Our senior unsecured revolving credit facility provides for$1.0 billion of revolving loans that may be either US Dollar Base Rate loans or Eurocurrency Rate loans, as those terms are defined in the credit agreement, and has an initial maturity ofSeptember 17, 2024 . As ofJanuary 3, 2021 , undrawn letters of credit in the aggregate amount of$11.0 million were treated as issued and outstanding when calculating the borrowing availability under the senior unsecured revolving credit facility. As ofJanuary 3, 2021 , we had$830.4 million available for additional borrowing under the facility. We plan to use the senior unsecured revolving credit facility for general corporate purposes, which may include working capital, refinancing existing indebtedness, capital expenditures, share repurchases, acquisitions and strategic alliances. The interest rates on the Eurocurrency Rate loans are based on the Eurocurrency Rate at the time of borrowing, plus a percentage spread based on the credit rating of our debt. The interest rates on the US Dollar Base Rate loans are based on the US Dollar Base Rate at the time of borrowing, plus a percentage spread based on the credit rating of our debt. The base rate is the higher of (i) the Federal Funds Rate (as defined in the credit agreement) plus 50 basis points (ii) the rate of interest in effect for such day as publicly announced from time to time byBank of America as its "prime rate," or (iii) the Eurocurrency Rate plus 1.00%. The Eurocurrency margin as ofJanuary 3, 2021 was 101.5 basis points. The weighted average Eurocurrency interest rate as ofJanuary 3, 2021 was 0.02%, resulting in a weighted average effective Eurocurrency Rate, including the margin, of 1.04%, which was the interest applicable to the borrowings outstanding as ofJanuary 3, 2021 . As ofJanuary 3, 2021 , the senior unsecured revolving credit facility had outstanding borrowings of$158.6 million , and$2.6 million of unamortized debt issuance costs. As ofDecember 29, 2019 , the senior unsecured revolving credit facility had$325.4 million of outstanding borrowings, and$3.4 million of unamortized debt issuance costs. The credit agreement for the facility contains affirmative, negative and financial covenants and events of default. The financial covenants include a debt-to-capital ratio that remains applicable for so long as our debt is rated as investment grade. In the event that our debt is not rated as investment grade, the debt-to-capital ratio covenant is replaced with a maximum consolidated leverage ratio covenant and a minimum consolidated interest coverage ratio covenant. We were in compliance with all applicable debt covenants as ofJanuary 3, 2021 . 1.875% Senior Unsecured Notes due 2026. OnJuly 19, 2016 , we issued €500.0 million aggregate principal amount of senior unsecured notes due in 2026 (the "2026 Notes") in a registered public offering and received approximately €492.3 million of net proceeds from the issuance. The 2026 Notes were issued at 99.118% of the principal amount, which resulted in a discount of €4.4 million. The 2026 Notes mature inJuly 2026 and bear interest at an annual rate of 1.875%. Interest on the 2026 Notes is payable annually onJuly 19th each year. The proceeds from the 2026 Notes were used to pay in full the outstanding balance of our previous senior unsecured revolving credit facility. As ofJanuary 3, 2021 , the 2026 Notes had an aggregate carrying value of$604.7 million , net of$3.3 million of unamortized original issue discount and$2.8 million of unamortized debt issuance costs. As ofDecember 29, 2019 , the 2026 Notes had an aggregate carrying value of$552.2 million , net of$3.5 million of unamortized original issue discount and$3.3 million of unamortized debt issuance costs. Prior toApril 19, 2026 (three months prior to their maturity date), we may redeem the 2026 Notes in whole at any time or in part from time to time, at our option, at a redemption price equal to the greater of (i) 100% of the principal amount of the 2026 Notes to be redeemed, or (ii) the sum of the present values of the remaining scheduled payments of principal and interest in respect to the 2026 Notes being redeemed, discounted on an annual basis, at the applicable Comparable Government Bond Rate (as defined in the indenture governing the 2026 Notes) plus 35 basis points; plus, in each case, accrued and unpaid interest. In addition, at any time on or afterApril 19, 2026 (three months prior to their maturity date), we may redeem the 2026 Notes, at our option, at a redemption price equal to 100% of the principal amount of the 2026 Notes due to be redeemed plus accrued and unpaid interest. 38
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Upon a change of control (as defined in the indenture governing the 2026 Notes) and a contemporaneous downgrade of the 2026 Notes below investment grade, we will, in certain circumstances, make an offer to purchase the 2026 Notes at a price equal to 101% of their principal amount plus any accrued and unpaid interest. 0.6% Senior Unsecured Notes due in 2021. OnApril 11, 2018 , we issued €300.0 million aggregate principal amount of senior unsecured notes due in 2021 (the "2021 Notes") in a registered public offering and received approximately €298.7 million of net proceeds from the issuance. The 2021 Notes were issued at 99.95% of the principal amount, which resulted in a discount of €0.2 million. As ofJanuary 3, 2021 , the 2021 Notes had an aggregate carrying value of$366.2 million , net of$16,200 of unamortized original issue discount and$0.2 million of unamortized debt issuance costs. As ofDecember 29, 2019 , the 2021 Notes had an aggregate carrying value of$334.2 million , net of$0.1 million of unamortized original issue discount and$1.1 million of unamortized debt issuance costs. The 2021 Notes mature inApril 2021 and bear interest at an annual rate of 0.6%. Interest on the 2021 Notes is payable annually onApril 9th each year. Prior to the maturity date of the 2021 Notes, we may redeem them in whole at any time or in part from time to time, at our option, at a redemption price equal to the greater of (i) 100% of the principal amount of the 2021 Notes to be redeemed, or (ii) the sum of the present values of the remaining scheduled payments of principal and interest in respect to the 2021 Notes being redeemed, discounted on an annual basis, at the applicable Comparable Government Bond Rate (as defined in the indenture governing the 2021 Notes) plus 15 basis points; plus, in each case, accrued and unpaid interest. Upon a change of control (as defined in the indenture governing the 2021 Notes) and a contemporaneous downgrade of the 2021 Notes below investment grade, we will, in certain circumstances, make an offer to purchase the 2021 Notes at a price equal to 101% of their principal amount, plus accrued and unpaid interest. 3.3% Senior Unsecured Notes due in 2029. OnSeptember 12, 2019 , we issued$850.0 million aggregate principal amount of senior unsecured notes due in 2029 (the "2029 Notes") in a registered public offering and received$847.2 million of net proceeds from the issuance. The 2029 Notes were issued at 99.67% of the principal amount, which resulted in a discount of$2.8 million . As ofJanuary 3, 2021 , the 2029 Notes had an aggregate carrying value of$840.6 million , net of$2.5 million of unamortized original issue discount and$6.9 million of unamortized debt issuance costs. As ofDecember 29, 2019 , the 2029 Notes had an aggregate carrying value of$839.9 million , net of$2.7 million of unamortized original issue discount and$7.4 million of unamortized debt issuance costs. The 2029 Notes mature inSeptember 2029 and bear interest at an annual rate of 3.3%. Interest on the 2029 Notes is payable semi-annually onMarch 15th andSeptember 15th each year. Proceeds from the 2029 Notes were used to repay all outstanding borrowings under our previous senior unsecured revolving credit facility with the remaining proceeds used in the redemption of the 5% senior unsecured notes that were due inNovember 2021 . Prior toJune 15, 2029 (three months prior to their maturity date), we may redeem the 2029 Notes in whole or in part, at our option, at a redemption price equal to the greater of (i) 100% of the principal amount of the 2029 Notes to be redeemed, and (ii) the sum of the present values of the remaining scheduled payments of principal and interest in respect to the 2029 Notes being redeemed (not including any portion of such payments of interest accrued but unpaid as of the date of redemption) assuming that such 2029 Notes matured onJune 15, 2029 , discounted at the date of redemption on a semi-annual basis (assuming a 360-day year of twelve 30-day months), at the Treasury Rate (as defined in the indenture governing the 2029 Notes) plus 25 basis points, plus accrued and unpaid interest. At any time on or afterJune 15, 2029 (three months prior to their maturity date), we may redeem the 2029 Notes, at our option, at a redemption price equal to 100% of the principal amount of the 2029 Notes to be redeemed plus accrued and unpaid interest. Upon a change of control (as defined in the indenture governing the 2029 Notes) and a contemporaneous downgrade of the 2029 Notes below investment grade, each holder of 2029 Notes will have the right to require us to repurchase such holder's 2029 Notes for 101% of their principal amount, plus accrued and unpaid interest. Other Debt Facilities. Our other debt facilities include Euro-denominated bank loans with an aggregate carrying value of$17.0 million (or €13.9 million) and$23.8 million (or €21.3 million) as ofJanuary 3, 2021 andDecember 29, 2019 , respectively. These bank loans are primarily utilized for financing fixed assets and are required to be repaid in monthly or quarterly installments with maturity dates extending to 2028. Of these bank loans, loans in the aggregate amount of$17.0 million bear fixed interest rates between 1.1% and 4.3% and a loan in the amount of$0.1 million bears a variable interest rate based on the Euribor rate plus a margin of 1.5%. An aggregate amount of$4.8 million of the bank loans are secured by mortgages on real property and the remaining$12.2 million are unsecured. Certain credit agreements for the unsecured bank loans include financial covenants which are based on an equity ratio or an equity ratio and minimum interest coverage ratio. We were in compliance with all applicable debt covenants as ofJanuary 3, 2021 . 39
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In addition, we had secured bank loans in the aggregate amount of$6.1 million and$1.9 million as ofJanuary 3, 2021 andDecember 29, 2019 , respectively. The secured bank loans of$6.1 million bear fixed annual interest rates between 1.95% and 8.9% and are required to be repaid in monthly installments until 2027.
Dividends
Our Board declared a regular quarterly cash dividend of$0.07 per share in each quarter of fiscal years 2020 and 2019, resulting in an annual dividend rate of$0.28 per share. AtJanuary 3, 2021 , we had accrued$7.9 million for a dividend declared inOctober 2020 for the fourth quarter of fiscal year 2020 that was paid inFebruary 2021 . OnJanuary 28, 2021 , we announced that our Board had declared a quarterly dividend of$0.07 per share for the first quarter of fiscal year 2021 that will be payable inMay 2021 . In the future, our Board may determine to reduce or eliminate our common stock dividend in order to fund investments for growth, repurchase shares or conserve capital resources. Contractual Obligations The following table summarizes our contractual obligations atJanuary 3, 2021 for continuing and discontinued operations. Purchase commitments are minimal and have been excluded from this table: Senior Unsecured Revolving Credit Facility Employee Tax Act Operating Maturing Other Benefit Transition Tax Unrecognized Leases 2024(1) 2021 Notes(2) 2026 Notes(3) 2029 Notes(4) Debt Facilities(5) Payments(6) Liability Tax Benefits(7) Total (In thousands) 2021$ 48,986 $ -$ 367,060 $ 11,452 $ 28,050 $ 14,927$ 32,424 $ 6,575 $ -$ 509,474 2022 40,097 - - 11,452 28,050 4,199 32,532 12,328 - 128,658 2023 30,044 - - 11,452 28,050 2,511 33,003 16,438 - 121,498 2024 26,667 158,595 - 11,452 28,050 1,397 33,807 20,547 - 280,515 2025 24,847 - - 11,452 28,050 240 33,768 - - 98,357 2026 and thereafter 90,518 - - 616,948 953,801 293 165,888 - - 1,827,448 Total$ 261,159 $ 158,595 $ 367,060 $ 674,208 $ 1,094,051 $ 23,567$ 331,422 $ 55,888 $ -$ 2,965,950
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(1)The credit facility borrowings carry variable interest rates. As ofJanuary 3, 2021 , the senior unsecured revolving credit facility had a carrying value of$156.0 million . (2)The 2021 Notes include interest obligations of$0.6 million . As ofJanuary 3, 2021 , the 2021 Notes had a carrying value of$366.2 million . (3)The 2026 Notes include interest obligations of$63.5 million . As ofJanuary 3, 2021 , the 2026 Notes had a carrying value of$604.7 million . (4)The 2029 Notes include interest obligations of$244.1 million . As ofJanuary 3, 2021 , the 2029 Notes had a carrying value of$840.6 million . (5)The other debt facilities include interest obligations of$0.4 million . As ofJanuary 3, 2021 , the other debt facilities had a carrying value of$23.2 million . (6)Employee benefit payments only include obligations through fiscal year 2030. (7)We do not expect to cash settle any uncertain tax positions during fiscal year 2021. We have excluded$38.8 million related to uncertain tax positions, as we cannot make a reasonably reliable estimate of the amount and period of related future payments. As ofJanuary 3, 2021 , we may have to pay the former shareholders of certain of our acquisitions contingent consideration of up to$7.3 million . The table above does not reflect any of these obligations as the timing and amounts are uncertain. For further information related to our contingent consideration obligations, see Note 22 to our consolidated financial statements included in this annual report on Form 10-K. Capital Expenditures During fiscal year 2021, we expect to invest an amount for capital expenditures similar to that in fiscal year 2020, primarily to introduce new products, to improve our operating processes, to shift the production capacity to lower cost 40
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locations, and to develop information technology. We expect to use our available cash and internally generated funds to fund these expenditures. Other Potential Liquidity Considerations AtJanuary 3, 2021 , we had cash and cash equivalents of$402.0 million , of which$345.2 million was held by our non-U.S. subsidiaries, and we had$830.4 million of additional borrowing capacity available under a senior unsecured revolving credit facility. We had no other liquid investments atJanuary 3, 2021 . We utilize a variety of tax planning and financing strategies to ensure that our worldwide cash is available in the locations in which it is needed. We use our non-U.S. cash for needs outside of theU.S. including foreign operations, capital investments, acquisitions and repayment of debt. In addition, we also transfer cash to theU.S. using nontaxable returns of capital, distributions of previously taxed income, as well as dividends, where the related income tax cost is managed efficiently. We have accrued tax expense on the unremitted earnings of foreign subsidiaries as required by the Tax Cuts and Jobs Act of 2017 (the "Tax Act") and also where the foreign earnings are not considered permanently reinvested. In accordance with the Tax Act, we are making scheduled annual cash payments on our accrued transition tax. The tax cost and related tax payments are not expected to be material to the execution of our business, investment and acquisition strategies. OnJuly 23, 2018 , our Board of Directors (the "Board") authorized us to repurchase shares of common stock for an aggregate amount up to$250.0 million under a stock repurchase program (the "Repurchase Program"). The Repurchase Program expired onJuly 23, 2020 , and no shares remain available for repurchase under the Repurchase Program due to its expiration. OnJuly 31, 2020 , the Board authorized us to repurchase shares of common stock for an aggregate amount up to$250.0 million under a new stock repurchase program (the "New Repurchase Program"). The New Repurchase Program will expire onJuly 27, 2022 unless terminated earlier by the Board and may be suspended or discontinued at any time. During fiscal year 2020, we had no stock repurchases under either the Repurchase Program or the New Repurchase Program. As ofJanuary 3, 2021 ,$250.0 million remained available for aggregate repurchases of shares under the New Repurchase Program. Subsequent to fiscal year 2020, we repurchased 233,000 shares of common stock under the New Repurchase Program at an aggregate cost of$33.6 million . In addition, our Board has authorized us to repurchase shares of common stock to satisfy minimum statutory tax withholding obligations in connection with the vesting of restricted stock awards and restricted stock unit awards granted pursuant to our equity incentive plans and to satisfy obligations related to the exercise of stock options made pursuant to our equity incentive plans. During the fiscal year 2020, we repurchased 72,251 shares of common stock for this purpose at an aggregate cost of$6.9 million . During fiscal year 2019, we repurchased 68,536 shares of common stock for this purpose at an aggregate cost of$6.3 million . The repurchased shares have been reflected as additional authorized but unissued shares, with the payments reflected in common stock and capital in excess of par value. Any repurchased shares will be available for use in connection with corporate programs. If we continue to repurchase shares, the New Repurchase Program will be funded using our existing financial resources, including cash and cash equivalents, and our existing senior unsecured revolving credit facility. Subsequent to fiscal year 2020, we reached an agreement with Oxford Immunotec Global PLC ("Oxford Immunotec") on terms under which we agreed to acquire Oxford Immunotec. It is intended that the acquisition will be implemented by means of aU.K. High Court of Justice-sanctioned scheme of arrangement under Part 26 of theU.K. Companies Act 2006 between Oxford Immunotec and its shareholders (the "Scheme"). Under the terms of the acquisition, Oxford Immunotec shareholders will be entitled to receive$22 in cash for each outstanding ordinary share. The terms of the acquisition value Oxford Immunotec's entire issued and to be issued ordinary share capital at approximately$591.0 million . The Scheme has been approved by the shareholders of Oxford Immunotec. Subject to the satisfaction of other customary closing conditions, we currently anticipate that the transaction will close later this month. The acquisition will be funded using our existing financial resources, including cash and cash equivalents, and our existing senior unsecured revolving credit facility. Distressed global financial markets could adversely impact general economic conditions by reducing liquidity and credit availability, creating increased volatility in security prices, widening credit spreads and decreasing valuations of certain investments. The widening of credit spreads may create a less favorable environment for certain of our businesses and may affect the fair value of financial instruments that we issue or hold. Increases in credit spreads, as well as limitations on the availability of credit at rates we consider to be reasonable, could affect our ability to borrow under future potential facilities on a secured or unsecured basis, which may adversely affect our liquidity and results of operations. In difficult global financial markets, we may be forced to fund our operations at a higher cost, or we may be unable to raise as much funding as we need to support our business activities. 41
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Our pension plans have not experienced a material impact on liquidity or counterparty exposure due to the volatility and uncertainty in the credit markets. With respect to plans outside ofthe United States , we expect to contribute$7.6 million in the aggregate during fiscal year 2021. During fiscal years 2020 and 2019, we contributed$7.5 million and$8.2 million , in the aggregate, to pension plans outside ofthe United States , respectively. During fiscal year 2021, we contributed$20.0 million to our defined benefit pension plan inthe United States for the plan year 2019. We could potentially have to make additional funding payments in future periods for all pension plans. We expect to use existing cash and external sources to satisfy future contributions to our pension plans.
Effects of Recently Issued and Adopted Accounting Pronouncements See Note 1, Nature of Operations and Accounting Policies, in the Notes to Consolidated Financial Statements for a summary of recently adopted and issued accounting pronouncements.
Application of Critical Accounting Policies and Estimates The preparation of consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to revenue recognition, warranty costs, bad debts, inventories, accounting for business combinations and dispositions, long-lived assets, pensions and other postretirement benefits, restructuring, income taxes, contingencies and litigation. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We believe the following critical accounting policies affect our more significant judgments and estimates used in preparation of our consolidated financial statements. Revenue recognition. We enter into contracts that can include various combinations of products and services, which are generally capable of being distinct and accounted for as separate performance obligations. We recognize revenue in an amount that reflects the consideration we expect to receive in exchange for the promised products or services when a performance obligation is satisfied by transferring control of those products or services to customers. Taxes that are collected by us from a customer and assessed by a governmental authority, that are both imposed on and concurrent with a specific revenue-producing transaction, are excluded from revenue. The majority of our sales relate to specific manufactured products or units rather than long-term customized projects, therefore we generally do not experience significant changes in original estimates. Further, we have not experienced any significant refunds or promotional allowances that require significant estimation. Warranty costs. We provide for estimated warranty costs for products at the time of their sale. Warranty liabilities are estimated using expected future repair costs based on historical labor and material costs incurred during the warranty period. Allowances for doubtful accounts. Prior toDecember 30, 2019 , we maintained allowances for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. Beginning onDecember 30, 2019 , we maintain an allowance for current expected credit loss on trade receivables that, when deducted from the amortized cost basis of the trade receivables, presents the net amount expected to be collected on trade receivables. Under the new model, we segment our receivables and contract assets based on days past due and record an allowance for current expected credit losses using average rates applied against each account's applicable aggregate balance for each aging bucket. We establish the average rates based on consideration of the actual credit loss experience over the prior 3-year period, recent collection trends, current economic conditions and reasonable expectations of future payment delinquency. Therefore, if the economic conditions and financial condition of our customers were to deteriorate beyond our estimates, we may have to increase our allowance for current expected credit loss. This would reduce our earnings. Accounts are written-off only when all methods of recovery have been exhausted. Inventory valuation. We value inventory at the lower of cost or market. Inventories are accounted for using the first-in, first-out method. We periodically review these values to ascertain that market value of the inventory continues to exceed its recorded cost. Generally, reductions in value of inventory below cost are caused by our maintenance of stocks of products in excess of demand, or technological obsolescence of the inventory. We regularly review inventory quantities on hand and, when necessary, record provisions for excess and obsolete inventory based on either our estimated forecast of product demand and production requirements, or historical trailing usage of the product. If our sales do not materialize as planned or at historic 42
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levels, we may have to increase our reserve for excess and obsolete inventory. This would reduce our earnings. If actual market conditions are more favorable than anticipated, inventory previously written down may be sold, resulting in lower costs of sales and higher income from operations than expected in that period. Business combinations. Business combinations are accounted for at fair value. Acquisition costs are expensed as incurred and recorded in selling, general and administrative expenses; previously held equity interests are valued at fair value upon the acquisition of a controlling interest; IPR&D is recorded at fair value as an intangible asset at the acquisition date; restructuring costs associated with a business combination are expensed subsequent to the acquisition date; and changes in deferred tax asset valuation allowances and income tax uncertainties after the acquisition date affect income tax expense. Measurement period adjustments are made in the period in which the amounts are determined and the current period income effect of such adjustments will be calculated as if the adjustments had been completed as of the acquisition date. All changes that do not qualify as measurement period adjustments are also included in current period earnings. The accounting for business combinations requires estimates and judgment as to expectations for future cash flows of the acquired business, and the allocation of those cash flows to identifiable intangible assets, in determining the estimated fair value for assets acquired and liabilities assumed. The fair values assigned to tangible and intangible assets acquired and liabilities assumed, including contingent consideration, are based on management's estimates and assumptions, as well as other information compiled by management, including valuations that utilize customary valuation procedures and techniques. If the actual results differ from the estimates and judgments used in these estimates, the amounts recorded in the financial statements could result in a possible impairment of the intangible assets and goodwill, require acceleration of the amortization expense of finite-lived intangible assets, or the recognition of additional consideration which would be expensed. The fair value of contingent consideration is remeasured each period based on relevant information and changes to the fair value are included in the operating results for the period. Value of long-lived assets, including goodwill and other intangibles. We carry a variety of long-lived assets on our consolidated balance sheets including property and equipment, operating lease right of use assets, investments, identifiable intangible assets, and goodwill. We periodically review the carrying value of all of these assets based, in part, upon current estimated market values and our projections of anticipated future cash flows. We undertake this review (i) on an annual basis for assets such as goodwill and non-amortizing intangible assets and (ii) on a periodic basis for other long-lived assets when facts and circumstances suggest that cash flows related to those assets may be diminished. Any impairment charge that we record reduces our earnings. The test consists of the comparison of the fair value to the carrying value of the reporting unit to determine if the carrying value exceeds the fair value. If the carrying value of the reporting unit exceeds its fair value, an impairment loss in an amount equal to that excess is recognized up to the amount of goodwill. We perform the annual impairment assessment on the later ofJanuary 1 or the first day of each fiscal year. This same impairment test will be performed at other times during the course of the year should an event occur which suggests that the recoverability of goodwill should be reconsidered. We completed the annual goodwill impairment test using a measurement date ofJanuary 1, 2020 , and concluded that there was no goodwill impairment. AtJanuary 1, 2020 , the fair value exceeded the carrying value by more than 20.0% for each reporting unit, except for ourMeizheng Group reporting unit. The range of the long-term terminal growth rates for the reporting units was 3.0% to 5.0% for the fiscal year 2020 impairment analysis. The range for the discount rates for the reporting units was 9.0% to 14.5%. Keeping all other variables constant, a 10.0% change in any one of these input assumptions for the various reporting units, except for ourMeizheng Group reporting unit, would still allow us to conclude that there was no impairment of goodwill. The fair value of ourMeizheng Group reporting unit approximated its carrying value given that the reporting unit was a relatively new acquisition. AtJanuary 4, 2021 , our Tulip reporting unit, which had a goodwill balance of$77.8 million atJanuary 3, 2021 , had a fair value that was between 10% and 20% more than its carrying value. Tulip is at increased risk of an impairment charge given its ongoing weakness due to the impact of COVID-19. Despite the increased risk associated with this reporting unit, we do not believe there will be a significant change in the key estimates or assumptions driving the fair value of this reporting unit that would lead to a material impairment charge. We consistently employed the income approach to estimate the current fair value when testing for impairment of goodwill. A number of significant assumptions and estimates are involved in the application of the income approach to forecast operating cash flows, including markets and market share, sales volumes and prices, costs to produce, tax rates, capital spending, discount rates and working capital changes. Cash flow forecasts are based on approved business unit operating plans for the early years' cash flows and historical relationships in later years. The income approach is sensitive to changes in long-term terminal growth rates and the discount rates. The long-term terminal growth rates are consistent with our historical long-term terminal growth rates, as the current economic trends are not expected to affect our long-term terminal growth rates. We corroborate the income approach with a market approach. While we believe that our estimates of current value are reasonable, if actual results differ from the estimates and judgments used including such items as future cash flows and the volatility inherent in markets which we serve, impairment charges against the carrying value of those assets could be required in the future. Non-amortizing intangibles are also subject to an annual impairment test. We consistently employed the relief from royalty model to estimate the current fair value when testing for impairment of non-amortizing intangible asset. The impairment 43
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test consists of a comparison of the fair value of the non-amortizing intangible asset with its carrying amount. If the carrying amount of a non-amortizing intangible asset exceeds its fair value, an impairment loss in an amount equal to that excess is recognized up to the amount of the amortizing intangible asset. In addition, we evaluate the remaining useful life of our non-amortizing intangible asset at least annually to determine whether events or circumstances continue to support an indefinite useful life. If events or circumstances indicate that the useful life of our non-amortizing intangible asset is no longer indefinite, the asset will be tested for impairment. This intangible asset will then be amortized prospectively over their estimated remaining useful life and accounted for in the same manner as other intangible assets that are subject to amortization. We performed our annual impairment testing as ofJanuary 1, 2020 , and concluded that there was no impairment of the non-amortizing intangible asset. An assessment of the recoverability of amortizing intangible assets takes place when events have occurred that may give rise to an impairment. No such events occurred during fiscal year 2020. Employee compensation and benefits. We sponsor both funded and unfundedU.S. and non-U.S. defined benefit pension plans and other postretirement benefits. Retirement and postretirement benefit plans are a significant cost of doing business, and represent obligations that will be ultimately settled far in the future, and therefore are subject to estimation. Retirement and postretirement benefit plan expenses are allocated to cost of revenue, research and development, and selling, general and administrative expenses, in our consolidated statements of operations. We immediately recognize actuarial gains and losses in operating results in the year in which the gains and losses occur. Actuarial gains and losses are measured annually as of the calendar month-end that is closest to our fiscal year end and accordingly will be recorded in the fourth quarter, unless we are required to perform an interim remeasurement. We recognized losses of$18.0 million and$26.1 million in fiscal years 2020 and 2019, respectively, for our retirement and postretirement benefit plans, which include the charge or benefit for the mark-to-market adjustment for the postretirement benefit plans, which was recorded in the fourth quarter of each fiscal year. The loss or income related to the mark-to-market adjustment on postretirement benefit plans was a pre-tax loss of$25.4 million in fiscal year 2020 and$31.2 million in fiscal year 2019. We expect income of approximately$10.3 million in fiscal year 2021 for our retirement and postretirement benefit plans, excluding the charge for or benefit from the mark-to-market adjustment. It is difficult to reliably calculate and predict whether there will be a mark-to-market adjustment in fiscal year 2021. Mark-to-market adjustments are primarily driven by events and circumstances beyond our control, including changes in interest rates, the performance of the financial markets and mortality assumptions. To the extent the discount rates decrease or the value of our pension and postretirement investments decrease, mark-to market charges to operations will be recorded in fiscal year 2021. Conversely, to the extent the discount rates increase or the value of our pension and postretirement investments increase more than expected, mark-to market income will be recorded in fiscal year 2021. Pension accounting is intended to reflect the recognition of future benefit costs over the employee's approximate service period based on the terms of the plans and the investment and funding decisions made. We are required to make assumptions regarding such variables as the expected long-term rate of return on assets, the discount rate applied and mortality assumptions, to determine service cost and interest cost, in order to arrive at expected pension income or expense for the year. Beginning in fiscal year 2016, the approach we use to calculate the service and interest components of net periodic benefit cost for certain non-U.S. benefit plans was changed to provide a more precise measurement of service and interest costs. Prior to fiscal year 2016, we calculated these service and interest components utilizing a single weighted-average discount rate derived from a yield curve used to measure the benefit obligation at the beginning of the period. Beginning in fiscal year 2016, we have elected to utilize an approach that discounts the individual expected cash flows using the applicable spot rates derived from a yield curve over the projected cash flow period. As ofJanuary 3, 2021 , we estimate the expected long-term rate of return on assets in our pension and other postretirement benefit plans inthe United States to be 7.25% and to be 2.10% for all plans outsidethe United States . In addition, as ofJanuary 3, 2021 , we estimate the discount rate for our pension and other postretirement benefit plans inthe United States to be 2.21% and to be 0.92% for all plans outsidethe United States . During fiscal year 2019, theSociety of Actuaries issued an updated projection scale, MP-2019, which incorporated an additional year (2017) ofU.S. population data and reduced the life expectancy used to determine the projected benefit obligation. We adopted MP-2019 as ofDecember 30, 2019 . The adoption of MP-2019 resulted in a$4.4 million decrease to the projected benefit obligation atDecember 29, 2019 . During fiscal year 2020, theSociety of Actuaries issued an updated projection scale, MP-2020, which incorporated an additional year (2018) ofU.S. population data and made a few adjustments to the long-term rate of mortality improvement assumed. We adopted MP-2020 as ofJanuary 3, 2021 . The adoption of MP-2020 resulted in a$2.7 million decrease to the projected benefit obligation atJanuary 3, 2021 . The changes to the projected benefit obligations due to the adoption of the new projection scale are included within "Actuarial loss (gain)" in the Change in Benefit Obligations for fiscal years 2020 and 2019 above. We have analyzed the rates of return on assets used and determined that these rates are reasonable based on the plans' historical performance relative to the overall markets in the countries where we invest the assets, as well as our current expectations for long-term rates of returns for our pension and other postretirement benefit assets. Our management will continue to assess the expected long-term rate of return on plan assets assumptions for each plan based on relevant market conditions, and will make adjustments to the assumptions as appropriate. Discount rate assumptions have been, and continue to 44
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be, based on the prevailing market long-term interest rates corresponding with expected benefit payments at the measurement date. If any of our assumptions were to change as ofJanuary 3, 2021 , our pension plan expenses would also change. Increase (Decrease) at January 3, 2021 Percentage Point Change Non-U.S. U.S. Pension plans discount rate +0.25 (15,912) (8,220) -0.25 16,973 8,597 Rate of return on pension plan assets +1.00 (2,048) (2,687) -1.00 2,048 2,687 Postretirement medical plans discount rate +0.25 N/A (90) -0.25 N/A 94 Rate of return on postretirement medical plan assets +1.00 N/A (220) -1.00 N/A 220 We have reduced the volatility in our healthcare costs provided to our retirees by adopting a defined dollar plan feature in fiscal year 2001. Under the defined dollar plan feature, our total annual liability for healthcare costs to any one retiree is limited to a fixed dollar amount, regardless of the nature or cost of the healthcare needs of that retiree. Our maximum future liability, therefore, cannot be increased by future changes in the cost of healthcare. Restructuring activities. Our consolidated financial statements detail specific charges relating to restructuring activities as well as the actual spending that has occurred against the resulting accruals. Our pre-tax restructuring charges are estimates based on our preliminary assessments of (i) severance benefits to be granted to employees, based on known benefit formulas and contractual agreements, (ii) costs of terminating contracts in connection with certain disposal activities before the end of their terms and the costs that will continue to be incurred for the remaining terms without economic benefit to us, (iii) costs to relocate facilities and (iv) impairment of assets as discussed above under "Value of long-lived assets, including goodwill and other intangibles." Because these accruals are estimates, they are subject to change as a result of deviations from initial restructuring plans or subsequent information that may come to our attention. For example, actual severance costs may be less than anticipated if employees voluntarily leave prior to the time at which they would be entitled to severance, or if anticipated legal hurdles in foreign jurisdictions prove to be less onerous than expected. In addition, unanticipated successes or difficulties in terminating contractual obligations may lead to changes in estimates. When such changes in estimates occur, they are reflected in our consolidated financial statements on our consolidated statements of operations line entitled "restructuring and other costs, net." Dispositions. When we record the disposition of an asset or discontinuance of an operation, which meets the criteria to be reported as a discontinued operation, we make an estimate relative to the amount we expect to realize on the sale or disposition. This estimate is based on a variety of factors, including current interest in the market, alternative markets for the assets, and other relevant factors. If anticipated proceeds are less than the current carrying amount of the asset or operation, we record a loss. If anticipated proceeds are greater than the current carrying amount of the asset or operation, we recognize a gain net of expected contingencies when the transaction has been consummated. Accordingly, we may realize amounts different than were first estimated. Any such changes decrease or increase current earnings. During the fiscal year endedJanuary 3, 2021 , we had no disposition of discontinued operations. Income taxes. Our business operations are global in nature, and we are subject to taxes in numerous jurisdictions. Tax laws and tax rates vary substantially in these jurisdictions and are subject to change given the political and economic climate in those countries. We report and pay income tax based on operational results and applicable law. Our tax provision contemplates tax rates currently in effect to determine our current tax provision as well as enacted tax rates expected to apply to taxable income in the fiscal years in which those temporary differences are expected to be recovered or settled to determine our deferred tax provision. Any significant fluctuation in rates or changes in tax laws could cause our estimates of taxes we anticipate either paying or recovering in the future to change. Such changes could lead to either increases or decreases in our effective tax rate. The Tax Act made broad and complex changes to theU.S. Internal Revenue Code, which included reducing the corporate income tax rate from 35% to 21% and implementing a modified territorial tax system that includes a one-time transition tax on deemed repatriated earnings of foreign subsidiaries. The end of the measurement period for purposes of Staff 45
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Accounting Bulletin No. 118 wasDecember 22, 2018 . We have completed the analysis based on legislative updates relating to the Tax Act currently available and have recorded the impact in tax expense from continuing operations. We are subject to the Global Intangible Low Tax Income ("GILTI") tax rules that are part of the modified territorial tax system imposed by the Tax Act. UnderU.S. GAAP, we are allowed to make an accounting policy choice of either (1) treating taxes due on futureU.S. inclusions in taxable income related to GILTI as a current-period expense when incurred (the "period cost method") or (2) factoring such amounts into our measurement of deferred taxes (the "deferred method"). We adopted the period cost method and thus have not recorded any potential deferred tax effects related to GILTI in our financial statements for the fiscal year endedJanuary 3, 2021 . Significant judgment is required in determining our worldwide provision for income taxes and recording the related tax assets and liabilities. In the ordinary course of our business, there are operational decisions, transactions, facts and circumstances, and calculations for which the ultimate tax determination is not certain. Furthermore, our tax positions are periodically subject to challenge by taxing authorities throughout the world. Every quarter we review our tax positions in each significant taxing jurisdiction in the process of evaluating our unrecognized tax benefits. Adjustments are made to our unrecognized tax benefits when: (i) facts and circumstances regarding a tax position change, causing a change in our judgment regarding that tax position; (ii) a tax position is effectively settled with a tax authority at a differing amount; and/or (iii) the statute of limitations expires regarding a tax position. Any significant impact as a result of changes in underlying facts, law, tax rates, tax audit, or review could lead to adjustments to our income tax expense, our effective tax rate, or our cash flow. Additionally, we have established valuation allowances against a variety of deferred tax assets, including state net operating loss carryforwards, state income tax credit carryforwards, and certain foreign tax attributes. Valuation allowances take into consideration our ability to use these deferred tax assets and reduce the value of such items to the amount that is deemed more likely than not to be recoverable. In evaluating our ability to recover our deferred tax assets within the jurisdiction from which they arise, we consider all available positive and negative evidence, including reversals of deferred tax liabilities, projected future taxable income, tax planning strategies, and results of recent operations. In projecting future taxable income, we begin with historical results adjusted for the results of discontinued operations and incorporate assumptions about the future pretax operating income adjusted for items that do not have tax consequences. These assumptions about future taxable income require significant judgment and are consistent with the plans and estimates we are using to manage the underlying business. Changes in our assumptions regarding the appropriate amount for valuation allowances could result in the increase or decrease in the valuation allowance, with a corresponding charge or benefit to our tax provision. Prior to enactment of the Tax Act, we did not provide deferred income tax expense on the cumulative undistributed earnings of our international subsidiaries. The Tax Act required us to accrue a one-time transition tax on the unremitted earnings of foreign subsidiaries. AtDecember 31, 2017 , we recorded an income tax expense of$85.0 million in continuing operations in accordance with the Tax Act. TheU.S. Treasury issued regulations in 2019 and accordingly we refined our calculations of the one-time transition tax and recorded a tax expense (benefit) of$2.7 million and$(4.6) million during fiscal years 2019 and 2018, respectively. At the end of fiscal year 2020, we evaluated our undistributed foreign earnings and identified certain earnings that we no longer consider indefinitely reinvested and therefore recognized$1.6 million of income tax expense during the year. Our intent is to continue to reinvest the remaining undistributed earnings of our international subsidiaries indefinitely. No additional deferred income taxes have been provided for any remaining undistributed foreign earnings, or any additional outside basis difference inherent in these entities, as these amounts continue to be indefinitely reinvested. However, should we change our business plans in the future and decide to repatriate a portion of these earnings to one of ourU.S. subsidiaries, we will recognize additional income tax liabilities. As ofJanuary 3, 2021 , we have approximately$1.5 billion of foreign earnings that we have the intent and ability to keep invested outside theU.S. indefinitely and for which no additional incrementalU.S. tax cost has been provided. It is not practicable to calculate the unrecognized deferred tax liability related to such incremental tax costs on those earnings.
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